<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1998.
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
CEX HOLDINGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
COLORADO 5961 84-1347853
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
CORPORATE EXPRESS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
COLORADO 5961 84-0978360
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
(TABLE OF ADDITIONAL REGISTRANTS APPEARS ON FOLLOWING PAGE)
ONE ENVIRONMENTAL WAY
BROOMFIELD, COLORADO 80021-3416
(303) 664-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
JIRKA RYSAVY
CHIEF EXECUTIVE OFFICER
CORPORATE EXPRESS, INC.
ONE ENVIRONMENTAL WAY
BROOMFIELD, COLORADO 80021-3416
(303) 664-2000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
Copies to:
JUSTIN P. KLEIN, ESQ.
GERALD J. GUARCINI, ESQ.
BALLARD SPAHR ANDREWS & INGERSOLL
1735 MARKET STREET, 51ST FLOOR
PHILADELPHIA, PENNSYLVANIA 19103-7599
(215) 665-8500
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this Registration Statement.
---------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and are in compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
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9 5/8% Series B Senior
Subordinated Notes due 2008.... $350,000,000 100% $350,000,000 $103,250
Guarantees(2).................... $350,000,000 (2) (2) None
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Pursuant to Rule 457(n), no separate filing fee is required to be paid.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
<TABLE>
<CAPTION>
PRIMARY
STANDARD
INDUSTRIAL I.R.S. EMPLOYER
JURISDICTION OF CLASSIFIED IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS INCORPORATION CODE NUMBER NUMBER
------------------------------------ --------------- ----------- ---------------
<S> <C> <C> <C>
ASAP Software Express, Inc........................... Illinois 5961 36-3328437
Corporate Express Callcenter Services, Inc........... Delaware 5961 22-8292338
Sofco, Inc........................................... New York 5961 14-1550996
SQP, Inc............................................. New York 5961 14-1680132
Sofco of Ohio, Inc................................... New York 5961 34-1690942
S&O Property, Inc.................................... New York 5961 14-1499350
Epco Packaging Services.............................. Delaware 5961 04-2989953
Hermann Marketing, Inc............................... Missouri 5961 43-1540873
Distribution Resources Co............................ Colorado 5961 84-1015452
Corporate Express Real Estate, Inc................... Delaware 5961 84-1326952
Corporate Express of the East, Inc................... Delaware 5961 84-1248716
Corporate Express of Texas, Inc...................... Delaware 5961 74-1926921
Federal Sales Services, Inc.......................... Virginia 5961 54-1000288
Virginia Impressions Products Co., Inc............... Virginia 5961 54-0619020
Micromagnetic Systems, Inc........................... Virginia 5961 54-1092699
Corporate Express Delivery Systems, Inc.............. Delaware 5961 76-0424426
American Delivery System, Inc........................ Michigan 5961 38-2523356
Corporate Express Distribution Services, Inc......... Michigan 5961 38-1889687
New Delaware Delivery, Inc........................... Delaware 5961 51-0366092
Red Arrow Corporation................................ Missouri 5961 43-0678384
RAC, Inc............................................. Missouri 5961 43-1389320
Red Arrow Spotting Services, Inc..................... Missouri 5961 43-1622097
Red Arrow Trucking Co................................ Missouri 5961 43-1335313
Red Arrow Warehousing, Co............................ Missouri 5961 43-1344561
Rush Trucking, Inc................................... Illinois 5961 43-1409469
Corporate Express Delivery Systems-Intermountain,
Inc................................................ Delaware 5961 86-0809519
Corporate Express Delivery Leasing-Intermountain,
Inc................................................ Delaware 5961 86-0808518
Corporate Express Delivery Systems-Mid-Atlantic,
Inc................................................ Delaware 5961 52-1951978
Corporate Express Delivery Leasing-Mid-Atlantic,
Inc................................................ Delaware 5961 52-1951974
Corporate Express Delivery Systems-Mid-West, Inc..... Delaware 5961 36-4054055
Corporate Express Delivery Leasing-Mid-West, Inc..... Delaware 5961 36-4054057
Corporate Express Delivery Systems-New England,
Inc................................................ Delaware 5961 06-1441914
Corporate Express Delivery Leasing-New England,
Inc................................................ Delaware 5961 06-1441911
Corporate Express Delivery Systems-Northeast, Inc.... Delaware 5961 11-3295386
Corporate Express Delivery Leasing-Northeast, Inc.... Delaware 5961 11-3295385
Corporate Express Delivery Systems-Southeast, Inc.... Delaware 5961 56-1949066
Corporate Express Delivery Leasing-Southeast, Inc.... Delaware 5961 56-1949063
Air Courier Dispatch of New Jersey, Inc.............. Minnesota 5961 22-3096947
Sunbelt Courier, Inc................................. Arkansas 5961 71-0684115
Tricor America, Inc.................................. California 5961 94-2593523
Midnite Express International Courier, Inc........... California 5961 95-3796228
Corporate Express Delivery Systems-Southwest, Inc.... Delaware 5961 76-0486734
Corporate Express Delivery Leasing-Southwest, Inc.... Delaware 5961 76-0486733
Corporate Express Delivery Systems-West Coast,
Inc................................................ Delaware 5961 95-4560129
Corporate Express Delivery Leasing-West Coast,
Inc................................................ Delaware 5961 95-4556544
Corporate Express Delivery Systems-Expedited, Inc.... Delaware 5961 74-2854132
Corporate Express Delivery Leasing-Expedited, Inc.... Delaware 5961 76-0555266
Corporate Express Delivery Administration, Inc....... Nevada 5961 76-0465269
Corporate Express Delivery Management Business
Trust.............................................. Delaware* 5961 51-0363269
Corporate Express Delivery Systems-Air Division,
Inc. .............................................. Delaware 5961 76-0566357
</TABLE>
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* Business Trust
<PAGE> 3
CORPORATE EXPRESS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN PROSPECTUS
----------- ----------------------
<C> <S> <C>
A INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus............................................... Inside Front Cover Page;
Outside Back Cover Page
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information...................................... Summary; Risk Factors;
Selected Consolidated
Financial Data; Pro Forma
Consolidated Financial Data
4. Terms of the Transaction................................. Summary; The Exchange Offer;
Certain Federal Income Tax
Consequences; Description of
the Notes; Plan of
Distribution
5. Pro Forma Financial Information.......................... Summary; Capitalization; Pro
Forma Consolidated Financial
Data
6. Material Contacts with the Company Being Acquired........ *
7. Additional Information Required for Reoffering by Persons
and Parties Deemed to be Underwriters.................. *
8. Interests of Named Experts and Counsel................... *
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................. *
B INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.............. *
11. Incorporation of Certain Information by Reference........ Incorporation of Certain
Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants....... *
13. Incorporation of Certain Information by Reference........ Incorporation of Certain
Documents by Reference
14. Information with Respect to Registrants Other than S-3 or
S-2 Registrants........................................ *
C INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies................ *
16. Information with Respect to S-2 or S-3 Companies......... *
17. Information with Respect to Companies Other Than S-3 or
S-2 Companies.......................................... *
D VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations Are to
be Solicited........................................... *
19. Information if Proxies, Consents or Authorizations Are
Not to be Solicited or in an Exchange Offer............ *
</TABLE>
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* Inapplicable
<PAGE> 4
Information contained herein is subject to completion or amendment. These
securities may not be sold nor may offers to buy be accepted prior to the time a
final Offering Memorandum is delivered. This Preliminary Offering Memorandum
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be a sale of these securities in any jurisdiction in which such
offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
SUBJECT TO COMPLETION; DATED JULY 30, 1998
PROSPECTUS
, 1998
$350,000,000
CEX HOLDINGS, INC.
OFFER TO EXCHANGE ITS
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 5/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
---------------------
CEX Holdings, Inc. (the "Issuer"), a wholly-owned subsidiary of Corporate
Express, Inc. (the "Parent") hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to $350,000,000 aggregate principal amount of its 9 5/8% Series B Senior
Subordinated Notes due 2008 (the "New Notes") for a like principal amount of its
outstanding 9 5/8% Series A Senior Subordinated Notes due 2008 (the "Old Notes",
and together with the New Notes, the "Notes"), of which $350,000,000 aggregate
principal amount are outstanding. Unless the context requires otherwise,
references to the "Company" include the Issuer, the Parent and all their
respective domestic and foreign subsidiaries.
The New Notes are being offered in order to satisfy certain obligations of
the Issuer and the Guarantors (as defined herein) under the Registration Rights
Agreement, dated as of May 29, 1998 (the "Registration Rights Agreement"), among
the Issuer, the Guarantors and the Initial Purchasers (as defined herein). The
terms of the New Notes are identical in all material respects to the respective
terms of the Old Notes, except that (i) the New Notes have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and therefore
will not be subject to certain restrictions on transfer applicable to the Old
Notes and (ii) holders of the New Notes will generally not be entitled to
certain rights, including the payment of Liquidated Damages (as defined herein),
pursuant to the Registration Rights Agreement. In the event that the Exchange
Offer is consummated, any Old Notes which remain outstanding after consummation
of the Exchange Offer and the New Notes issued in the Exchange Offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage in outstanding principal amount thereof have taken certain
actions or exercised certain rights under the Indenture (as defined herein).
The New Notes will bear interest at the rate of 9 5/8% per annum, payable
semi-annually on June 1 and December 1 of each year, commencing on December 1,
1998. The New Notes will mature on June 1, 2008. Except as described below, the
New Notes will not be redeemable by the Issuer prior to June 1, 2003. On or
after that date, the New Notes may, subject to certain requirements, be redeemed
at the option of the Issuer, in whole or in part, at the redemption prices set
forth herein, together with accrued and unpaid interest to the date of
redemption. In addition, at any time on or prior to June 1, 2001, the Issuer may
redeem up to 35% of the original principal amount of Notes and any Additional
Notes (as defined herein) issued under the Indenture with the net cash proceeds
of one or more Public Equity Offerings (as defined herein) at a redemption price
equal to 109.625% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of redemption, provided
that not less than 65% of the aggregate principal amount of the Notes and any
Additional Notes issued under the Indenture is outstanding immediately after
giving effect to such redemption. Upon the occurrence of a Change of Control (as
defined herein), the Issuer will be required to make an offer to repurchase the
Notes at a purchase price equal to 101% of the principal amount thereof,
together with accrued and unpaid interest and Liquidated Damages, if any, to the
date of repurchase. See "Description of the Notes."
The New Notes will be guaranteed by the Parent and the Subsidiary
Guarantors (as defined herein) on a senior subordinated basis. The New Notes and
the guarantees thereof will be unsecured general obligations of the Issuer and
the Guarantors subordinated in right of payment to all Senior Debt (as defined
herein) of the Issuer and such Guarantors. As of May 2, 1998, on a pro forma
basis giving effect to the Share Repurchase (as defined herein), the New Credit
Facility (as defined herein) and the Old Note Offering (as defined herein) and
the application of the net proceeds therefrom, the Issuer and the Subsidiary
Guarantors would have had outstanding an aggregate principal amount of
approximately $396.7 million of Senior Debt which would rank senior in right of
payment to the New Notes and the guarantees, respectively, and the nonguarantor
subsidiaries would have had approximately $108.2 million of indebtedness which
would be effectively senior to the New Notes and the guarantees, respectively.
As of May 2, 1998, the Parent had no Senior Debt but had outstanding $325.0
million of Convertible Notes (as defined herein), which would rank pari passu
with the Parent's guarantee of the New Notes but which would be structurally
subordinated to the New Notes.
(continued on next page)
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD NOTES IN
THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 5
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Notes on , 1998.
The Issuer is making the Exchange Offer of the New Notes in reliance on the
position of the staff of the Division of Corporation Finance of the Securities
and Exchange Commission (the "Commission") as set forth in certain interpretive
letters addressed to third parties in other transactions. However, the Issuer
has not sought its own interpretive letter and there can be no assurance that
the staff of the Division of Corporation Finance of the Commission would make a
similar determination with respect to the Exchange Offer as it has in such
interpretive letters to third parties. Based on these interpretations by the
staff of the Division of Corporation Finance of the Commission, and subject to
the two immediately following sentences, the Company believes that New Notes
issued pursuant to this Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
"affiliate" of the Issuer or who intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Issuer to resell pursuant to Rule 144A under the Securities
Act ("Rule 144A") or any other available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or entitled to tender such Old
Notes in the Exchange Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
sale or other transfer of such Old Notes unless such sale is made pursuant to an
exemption from such requirements. In addition, as described below, if any
broker-dealer holds Old Notes acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Notes for New
Notes, then such broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of such New
Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Issuer, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
In addition, the Issuer may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Issuer (or
an agent thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) on behalf of whom such holder holds the Old Notes
to be exchanged in the Exchange Offer. Each broker-dealer that receives New
Notes for its own account pursuant to the Exchange Offer must acknowledge that
it acquired the Old Notes for its own account as the result of market-making
activities or other trading activities and must agree that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Based on the position taken by the staff of the Division of Corporation Finance
of the Commission in the interpretive letters referred to above, the Issuer
believes that broker-dealers who acquired Old Notes for their own accounts, as a
result of market-making activities or other trading activities ("Participating
Broker-Dealers"), may fulfill their prospectus delivery requirements with
respect to the New Notes received upon exchange of such Old Notes (other than
Old Notes which represent an unsold allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements of the Securities Act, which
may be the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such New
Notes. Accordingly, this Prospectus, as it may be amended or supplemented from
time to time, may be used by a Participating Broker-Dealer during the period
referred to below in connection with resales of New Notes received in exchange
for Old Notes where such Old Notes were acquired by such Participating
Broker-Dealer for its own account as a result of market-making or other trading
activities. Subject to certain provisions set forth in the Registration Rights
Agreement, the Issuer has agreed that this Prospectus, as it may be amended or
supplemented from time to time, may be used by a
<PAGE> 6
Participating Broker-Dealer in connection with resales of such New Notes for a
period ending one year after the Expiration Date (as defined herein) (subject to
extension under certain limited circumstances described below) or, if earlier,
when all such New Notes have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Notes received in exchange for Old Notes pursuant to the Exchange Offer
must notify the Issuer, or cause the Issuer to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or may
be delivered to the Exchange Agent (as defined herein) at one of the addresses
set forth herein under "The Exchange Offer -- Exchange Agent." Any Participating
Broker-Dealer who is an "affiliate" of the Issuer may not rely on such
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. See "The Exchange Offer -- Resales of New Notes."
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Issuer of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Issuer has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Issuer has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Issuer gives such notice to suspend the
sale of the New Notes, it shall extend the one-year period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the amended
or supplemented Prospectus necessary to permit resales of the New Notes or to
and including the date on which the Company has given notice that the sale of
New Notes may be resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Notes. The New Notes will be a new issue of
securities for which there currently is no market. Although the Initial
Purchasers have informed the Issuer that they currently intend to make a market
in the New Notes, they are not obligated to do so, and any such market making
may be discontinued at any time without notice. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Issuer currently does not intend to apply for listing of the New Notes on
any securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the same rights and will be subject to
the same limitations applicable thereto under the Indenture (except for those
rights which terminate upon consummation of the Exchange Offer). Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to all of the existing restrictions upon transfer thereof and the Issuer
will not have any further obligation to such holders (other than under certain
limited circumstances) to provide for registration under the Securities Act of
the Old Notes held by them. To the extent that Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes
could be adversely affected. See "Risk Factors -- Consequences of a Failure to
Exchange Old Notes."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York
City time, on , 1998 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Issuer (in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended). Tenders of Old Notes may
be withdrawn at any time
<PAGE> 7
on or prior to the Expiration Date. The Exchange Offer is not conditioned upon
any minimum principal amount of Old Notes being tendered for exchange. However,
the Exchange Offer is subject to certain events and conditions which may be
waived by the Issuer and to the terms and provisions of the Registration Rights
Agreement. Old Notes may be tendered in whole or in part in denominations of
$1,000 and integral multiples thereof. The Issuer has agreed to pay all expenses
of the Exchange Offer. See "The Exchange Offer -- Fees and Expenses." Holders of
the Old Notes whose Old Notes are accepted for exchange will not receive
interest on such Old Notes and will be deemed to have waived the right to
receive any interest on such Old Notes accrued from and after
, 1998. See "The Exchange Offer -- Interest on New Notes."
The Issuer will not receive any cash proceeds from the issuance of the New
Notes offered hereby. No dealer-manager is being used in connection with this
Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
THE SECRETARY, CORPORATE EXPRESS, INC., 1 ENVIRONMENTAL WAY, BROOMFIELD,
COLORADO 80021, TELEPHONE NUMBER (303) 664-2000. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,
1998.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS: THIS PROSPECTUS INCLUDES
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 (SECTION 27A OF THE SECURITIES ACT AND SECTION 21E
OF THE EXCHANGE ACT). THE COMPANY WISHES TO ENSURE THAT ALL SUCH FORWARD-LOOKING
STATEMENTS ARE ACCOMPANIED BY MEANINGFUL CAUTIONARY STATEMENTS PURSUANT TO THE
SAFE HARBOR ESTABLISHED IN SUCH ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF
HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION,
CERTAIN STATEMENTS UNDER "SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "THE BUSINESS," MAY
CONSTITUTE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS SENIOR
MANAGEMENT TEAM. ALL FORWARD-LOOKING STATEMENTS ARE INHERENTLY UNCERTAIN AS THEY
ARE BASED ON VARIOUS EXPECTATIONS AND ASSUMPTIONS CONCERNING FUTURE EVENTS AND
THEY ARE SUBJECT TO NUMEROUS KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES WHICH
COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED.
DUE TO THOSE UNCERTAINTIES AND RISKS, PROSPECTIVE PARTICIPANTS IN THE EXCHANGE
OFFER ARE URGED NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS
CONTAINED IN THIS PROSPECTUS. ALTHOUGH THE COMPANY BELIEVES THAT THE
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN
GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS
PROSPECTUS, INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK FACTORS."
ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS. THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE OR REVISE THIS "SAFE-HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING
STATEMENTS" TO REFLECT FUTURE DEVELOPMENTS.
The Company hereby identifies the following important factors, among
others, which could cause its results to differ from any results which might be
projected, forecasted or estimated in any such forward-looking statements: risks
associated with the substantial leverage of the Company, subordination of the
Notes, restrictive debt covenants, enforceability of guarantees, integration of
acquisitions, acceptance of the Company's expanded product and service
offerings, dependence on systems, dependence on acquisitions for additional
growth, international expansion, as well as other factors described elsewhere in
this Prospectus.
<PAGE> 8
SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus. This summary is qualified in its entirety by, and should be
read in conjunction with, the detailed information and financial statements,
including the notes thereto, appearing elsewhere in or incorporated by reference
in this Prospectus. Unless the context requires otherwise, references to the
"Company" include the Issuer, the Parent and all of their respective domestic
and foreign subsidiaries. References to "fiscal 1992," "fiscal 1993," "fiscal
1994," "fiscal 1995" and "fiscal 1996" shall refer to the Company's fiscal years
ended February 28, 1993, February 28, 1994, February 25, 1995, March 2, 1996 and
March 1, 1997, respectively. References to "fiscal 1997" shall refer to the
eleven month period ended January 31, 1998. The Company recently changed its
fiscal year end to end on the Saturday closest to January 31 of each year. The
Company's headquarters are located at 1 Environmental Way, Broomfield, Colorado
80021, and its telephone number is (303) 664-2000.
THE COMPANY
The Company is a leading global provider of non-production goods and
services to large corporations that value innovative procurement solutions. The
Company believes it has developed a unique "Corporate Supplier" model which
focuses on providing its customers with a broad array of non-production goods
and services while reducing the customer's overall procurement costs and
providing a high level of customer service. The products and services provided
by the Company include office supplies, computer and imaging supplies, computer
desktop software, office furniture, advertising specialties, custom business
forms, forms management services, printing, cleaning and service supplies,
same-day local delivery services and distribution logistics management. The
Company is increasing its focus on environmental friendly solutions.
The Company has grown internally and through strategic acquisitions to a
global enterprise with locations throughout the United States and in various
international markets. The Company's pro forma net sales for the twelve months
ended January 31, 1998 has increased to $4.1 billion from net sales of $1.1
billion for fiscal 1994.
The Company's target customers are large corporations which the Company
believes increasingly seek to reduce their cost of procuring non-production
goods and services, including the time and effort spent managing functions that
are not considered core to their operations. The Company believes that, as part
of such effort, corporations seek to reduce their number of suppliers in order
to eliminate the internal costs associated with complex and varied ordering
procedures, multiple invoices, multiple deliveries, uneven service levels and
inconsistent product availability. In addition, many large corporations operate
from multiple locations and benefit from selecting suppliers who can provide
service to their national and international locations. The Company markets its
products and services to existing and prospective customers through a direct
sales force and delivers its products and services utilizing approximately 700
world wide locations including over 90 distribution centers and a fleet of over
10,000 owned or contracted vehicles.
CORPORATE SUPPLIER STRATEGY
The Company's Corporate Supplier strategy is designed to reduce its
customers' total costs, including their internal costs incurred in managing the
procurement of non-production goods and services. The Company believes that
customers value the Company's broad product and service offerings, low cost
structure, extensive geographic coverage and delivery capabilities. The Company
also believes that its customers value the high level of service the Company
provides through its account relationship managers, same-day delivery,
customized pricing, product availability, electronic interfaces and customized
reporting.
The Company seeks to continually reduce its merchandise and operating
costs, enabling it to offer its customers competitive prices while increasing
its operating margins. The Company is able to reduce such costs primarily
through utilizing its increasing purchasing power and advanced information
systems. By purchasing most of its products directly from manufacturers in large
volumes and limiting the number of manufacturers represented in its proprietary,
full-color catalog, the Company is able to obtain increasing volume discounts
and allowances from its vendors. The Company believes its information systems
represent a key strategic advantage differentiating the Company from its
competitors while permitting it to achieve cost savings,
1
<PAGE> 9
provide unique capabilities to its customers, and centrally manage its
operations. The Company intends to continue improving and enhancing the
capabilities of its information systems which will enable the Company to further
differentiate its product and service offerings, while increasing its operating
margins.
GROWTH STRATEGY
The Company has historically grown primarily through strategic
acquisitions. The Company believes that it has substantially completed its
infrastructure and, accordingly, its growth strategy is now focused primarily on
internal growth combined with selective strategic acquisitions. The Company
plans to increase sales to existing customers by cross-selling its expanded
product and service offerings and by developing existing customers into
multi-regional, national or international accounts. The Company seeks to attract
new customers, including national and international accounts, through its
marketing efforts and the use of its direct sales force. The Company continues
to expand its product depth, while also expanding its geographic coverage
outside the United States and its sales efforts in all geographic regions.
OPERATING STRATEGY
The Company intends to continue to increase its revenues and profitability
through continued implementation of its Corporate Supplier and growth
strategies, including the following key elements:
Provide a Broad Offering of Products and Services. The Company believes
that large corporations are focused on minimizing their total procurement costs,
including internal costs, by reducing their total number of suppliers to a small
group of reliable and cost-efficient partners. The Company believes that its
broad product and service offerings and extensive distribution network provide
the Company with an important competitive advantage in servicing these large
corporations. Over the last several years, the Company has expanded its product
offerings to include forms printing and management, same-day local delivery
services, distribution logistics management, advertising specialties and
computer and imaging supplies. The Company's extensive product and service
offerings enable it to reduce customer procurement costs, including costs
associated with dealing with multiple vendors, such as multiple invoices,
deliveries, ordering procedures, uneven service levels and inconsistent product
availability, while also fulfilling its customers' broad service and delivery
requirements.
Focus on Large Corporations. The Company believes that its transition from
a regional contract stationer to a full service Corporate Supplier is
substantially complete in the United States and that the Company is positioned
to effectively and profitably service large, multi-location customers. Moreover,
the Company believes that these large customers value the Company's broad
product and service offerings, extensive geographic distribution network, high
customer service levels and sophisticated information systems. Larger customers
typically utilize many of the Company's capabilities, which enhances the
Company's purchasing power and economies of scale. Approximately 90% of the
Fortune 500 companies, including General Motors Corporation, Hewlett-Packard
Company, Oracle Corporation, AT&T Corporation, The Walt Disney Company, IBM
Corporation and Exxon Corporation, order goods or services from one or more of
the Company's business segments.
Provide Superior Customer Service. The Company believes that its customers
value the high level of customer service which the Company provides through its
experienced direct sales force, sophisticated information systems and highly
efficient global distribution network. The Company's Corporate Supplier model
enables it to differentiate itself from competitors by offering its customers
important services including reliable delivery, a broad product assortment,
national account service, electronic interfaces, customized reporting and other
customized services. A key element to providing these services is the Company's
advanced computer systems which, when installed or linked to a customer's
systems, provide significant cost savings for both the Company and the customer
and enhanced access to information.
Enhance and Utilize Purchasing Power. The Company believes that the large
volume of its purchases combined with its centralized purchasing and
merchandising operation provides the Company with an important competitive
advantage. The Company continually seeks to reduce its merchandise costs,
enabling it to offer its customers competitive prices while increasing its
margins. By purchasing most of its products directly from manufacturers in large
volumes and limiting the number of manufacturers represented in its
2
<PAGE> 10
catalogs, the Company is increasingly able to improve its vendor terms,
including earning increased volume discounts and allowances.
Consolidate and Upgrade Facilities. The Company has historically grown
internally and through numerous acquisitions of small office products and
service companies. The Company seeks to increase the sales, profitability and
asset productivity of its acquisitions by combining them with the Company's
existing operations, implementing the Company's business model, eliminating
redundant facilities and upgrading certain existing facilities. The process of
integrating acquisitions and consolidating facilities often has certain
short-term adverse effects on operations including, in certain cases, increased
operating costs associated with consolidation or relocation of facilities and a
reduction in sales as smaller, unprofitable accounts are discontinued. Once
completed, however, facility consolidations allow the Company to reduce its
operating costs, enhance its customer service and increase its revenues and
profitability as management's attention shifts from managing the consolidations
to increasing account penetration. Because the Company has completed a majority
of the planned facility consolidations in its domestic office products business
and in several of its international markets, the Company believes that it is now
well-positioned to expand its operating margins over the next several years.
Utilize Proprietary Computer Software and Systems. The Company believes
that its proprietary software and information systems represent key strategic
advantages which enable the Company to achieve cost savings, provide superior
customer service and centrally manage its operations. The Company has made
substantial investments in the development and enhancement of its proprietary
computer software applications and believes that its software and information
systems are the most sophisticated in the industry. During fiscal 1997, the
Company completed the development and implementation of its ISIS computer
software for its national account customers and successfully launched the
internet version of E-Way, its electronic commerce, ordering and fulfillment
system. The Company's proprietary ISIS system utilizes three-tier client/server
architecture that allows customers and suppliers to better communicate with the
Company while providing lower operating costs and streamlined operations.
RECENT DEVELOPMENTS
During April 1998, the Parent purchased 35,000,000 shares of its
outstanding common stock (the "Share Repurchase") at a price of $10.75 per share
pursuant to a Dutch Auction issuer tender offer. The Parent funded the Share
Repurchase through the Issuer's new $1.0 billion Senior Secured Credit Facility
(the "New Credit Facility"), which consists of a $750 million five-year
revolving credit facility and a $250 million seven-year term loan. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Description of the New Credit Facility."
On April 29, 1998, the Issuer commenced a tender offer (the "Tender Offer")
for all of its outstanding $90 million principal amount of 9 1/8% Senior
Subordinated Notes due 2004 (the "9 1/8% Notes"). The Issuer also solicited
consents (the "Consent Solicitation") to certain indenture amendments. The
Consent Solicitation expired on May 13, 1998. The Tender Offer expired on May
28, 1998. The Tender Offer payments, Consent Solicitation payments and related
expenses totalled approximately $94 million.
On May 29, 1998, the Company consummated the sale of $350,000,000 principal
amount of the Old Notes (the "Old Note Offering"). The proceeds of the sale of
the Old Notes were used to repay certain indebtedness under the New Credit
Facility and to fund the Tender Offer and the Consent Solicitation.
CORPORATE STRUCTURE
The Parent is a holding company which owns all of the outstanding capital
stock of the Issuer which, through all of its domestic and foreign subsidiaries,
conducts all of the business of the Company. The Issuer is the only material
first-tier subsidiary of the Parent.
3
<PAGE> 11
THE EXCHANGE OFFER
THE EXCHANGE OFFER......... Up to $350,000,000 aggregate principal amount of
New Notes are being offered in exchange for a like
aggregate principal amount of Old Notes. Old Notes
may be tendered for exchange in whole or in part in
denominations of $1,000 or any integral multiple
thereof. The Issuer is making the Exchange Offer in
order to satisfy its obligations under the
Registration Rights Agreement relating to the Old
Notes. For a description of the procedures for
tendering Old Notes, see "The Exchange
Offer -- Procedures for Tendering Old Notes."
EXPIRATION DATE............ 5:00 p.m., New York City time, on
, 1998, unless the Exchange
Offer is extended by the Issuer (in which case the
Expiration Date will be the latest date and time to
which the Exchange Offer is extended). See "The
Exchange Offer -- Terms of the Exchange Offer."
CONDITIONS TO THE EXCHANGE
OFFER.................... The Exchange Offer is subject to certain conditions
which may be waived by the Issuer in its sole
discretion. The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes
being tendered. See "The Exchange
Offer -- Conditions to the Exchange Offer."
OFFER...................... The Issuer reserves the right in its sole and
absolute discretion, subject to applicable law, at
any time and from time to time, (i) to delay the
acceptance of the Old Notes for exchange, (ii) to
terminate the Exchange Offer if certain specified
conditions have not been satisfied, (iii) to extend
the Expiration Date of the Exchange Offer and
retain all Old Notes tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Notes to withdraw their tendered Old
Notes, or (iv) to waive any condition or otherwise
amend the terms of the Exchange Offer in any
respect. See "The Exchange Offer -- Terms of the
Exchange Offer."
WITHDRAWAL RIGHTS.......... Tenders of Old Notes may be withdrawn at any time
on or prior to the Expiration Date by delivering a
written notice of such withdrawal to the Exchange
Agent in conformity with certain procedures set
forth below under "The Exchange Offer -- Withdrawal
Rights. "
PROCEDURES FOR TENDERING
OLD NOTES.................. Brokers, dealers, commercial banks, trust companies
and other nominees who hold Old Notes through DTC
(as defined herein) may effect tenders by
book-entry transfer in accordance with DTC's
Automated Tender Offer Program ("ATOP"). Holders of
such Old Notes registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee are urged to contact such person promptly
if they wish to tender Old Notes. In order for Old
Notes to be tendered by a means other than by book
entry transfer, a Letter of Transmittal must be
completed and signed in accordance with the
instructions contained herein. The Letter of
Transmittal and any other documents required by the
Letter of Transmittal must be delivered to the
Exchange Agent by mail, facsimile, hand delivery or
overnight carrier and either such Old Notes must be
delivered to the Exchange Agent or specified
procedures for guaranteed delivery must be complied
with. See "The Exchange Offer -- Procedures for
Tendering Old Notes."
4
<PAGE> 12
Letters of Transmittal and certificates
representing Old Notes should not be sent to the
Company. Such documents should only be sent to the
Exchange Agent. See "The Exchange Offer -- Exchange
Agent."
RESALES OF NEW NOTES....... The Issuer is making the Exchange Offer in reliance
on the position of the staff of the Division of
Corporation Finance of the Commission as set forth
in certain interpretive letters addressed to third
parties in other transactions. The Issuer has not
sought its own interpretive letter and there can be
no assurance that the staff of the Division of
Corporation Finance of the Commission would make a
similar determination with respect to the Exchange
Offer as it has in such interpretive letters to
third parties. Based on these interpretations by
the staff of the Division of Corporation Finance of
the Commission, and subject to the two immediately
following sentences, the Issuer believes that New
Notes issued pursuant to this Exchange Offer in
exchange for Old Notes may be offered for resale,
resold and otherwise transferred by a holder
thereof (other than a holder who is a
broker-dealer) without further compliance with the
registration and prospectus delivery requirements
of the Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder is not
participating, and has no arrangement or
understanding with any person to participate, in a
distribution (within the meaning of the Securities
Act) of such New Notes. However, any holder of Old
Notes who is an "affiliate" of the Issuer or who
intends to participate in the Exchange Offer for
the purpose of distributing the New Notes, or any
broker-dealer who purchased the Old Notes from the
Issuer to resell pursuant to Rule 144A or any other
available exemption under the Securities Act, (a)
will not be able to rely on the interpretations of
the staff of the Division of Corporation Finance of
the Commission set forth in the above-mentioned
interpretive letters, (b) will not be permitted or
entitled to tender such Old Notes in the Exchange
Offer and (c) must comply with the registration and
prospectus delivery requirements of the Securities
Act in connection with any sale or other transfer
of such Old Notes unless such sale is made pursuant
to an exemption from such requirements. In
addition, as described below, if any broker-dealer
holds Old Notes acquired for its own account as a
result of market-making or other trading activities
and exchanges such Old Notes for New Notes, then
such broker-dealer must deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of such New Notes. Each
holder of Old Notes who wishes to exchange Old
Notes for New Notes in the Exchange Offer will be
required to represent that (i) it is not an
"affiliate" of the Issuer, (ii) any New Notes to be
received by it are being acquired in the ordinary
course of its business, (iii) it has no arrangement
or understanding with any person to participate in
a distribution (within the meaning of the
Securities Act) of such New Notes, and (iv) if such
holder is not a broker-dealer, such holder is not
engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities
Act) of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it
acquired the Old Notes for its own account as the
result of market-making activities or other trading
activities and must agree that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
such
5
<PAGE> 13
New Notes. The Letter of Transmittal states that,
by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. Based on the position taken by the
staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to
above, the Issuer believes that Participating
Broker-Dealers who acquired Old Notes for their own
accounts as a result of market-making activities or
other trading activities may fulfill their
prospectus delivery requirements with respect to
the New Notes received upon exchange of such Old
Notes (other than Old Notes which represent an
unsold allotment from the original sale of the Old
Notes) with a prospectus meeting the requirements
of the Securities Act, which may be the prospectus
prepared for an exchange offer so long as it
contains a description of the plan of distribution
with respect to the resale of such New Notes.
Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of New Notes received in exchange for Old
Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as
a result of market-making or other trading
activities. Subject to certain provisions set forth
in the Registration Rights Agreement and to the
limitations described below under "The Exchange
Offer -- Resales of New Notes," the Issuer has
agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of such New Notes for a period ending one
year after the Expiration Date (subject to
extension under certain limited circumstances) or,
if earlier, when all such New Notes have been
disposed of by such Participating Broker-Dealer.
See "Plan of Distribution." Any Participating
Broker-Dealer who is an "affiliate" of the Issuer
may not rely on such interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer -- Resales of New Notes."
EXCHANGE AGENT............. The exchange agent with respect to the Exchange
Offer is The Bank of New York (the "Exchange
Agent"). The addresses, and telephone and facsimile
numbers, of the Exchange Agent are set forth in
"The Exchange Offer -- Exchange Agent" and in the
Letter of Transmittal.
USE OF PROCEEDS............ The Issuer will not receive any cash proceeds from
the issuance of the New Notes offered hereby. See
"Use of Proceeds."
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS........... Holders of Old Notes should review the information
set forth under "Certain Federal Income Tax
Consequences" prior to tendering Old Notes in the
Exchange Offer.
6
<PAGE> 14
THE OFFERING
ISSUER..................... CEX Holdings, Inc.
PARENT..................... Corporate Express, Inc.
COMPANY.................... The Parent, the Issuer and all of their respective
domestic and foreign Subsidiaries.
SECURITIES OFFERED......... $350,000,000 aggregate principal amount of Series B
9 5/8% Senior Subordinated Notes due 2008.
MATURITY DATE.............. June 1, 2008.
INTEREST RATE; PAYMENT
DATES...................... The New Notes will bear interest at the rate of
9 5/8% per annum from the date of issuance, payable
semi-annually on June 1 and December 1 of each
year, commencing December 1, 1998.
GUARANTEES................. The New Notes will be guaranteed by the Parent and
will be guaranteed by the Issuer's Subsidiaries and
any future Subsidiaries, other than Receivables
Subsidiaries, Finance Subsidiaries, Excluded
Subsidiaries, Foreign Subsidiaries and Unrestricted
Subsidiaries (each as defined herein) (such
guaranteeing Subsidiaries being referred to
collectively as the "Subsidiary Guarantors" and,
together with the Parent, the "Guarantors") on a
senior subordinated basis.
RANKING.................... The New Notes will be subordinated in right of
payment to existing and future Senior Debt of the
Issuer, including indebtedness incurred under the
New Credit Facility (as defined herein). The
guarantees of the Parent and the Subsidiary
Guarantors (the "Guarantees") will be subordinated
to the prior payment in full of all Senior Debt of
the Parent and the Subsidiary Guarantors. As of May
2, 1998 on a pro forma basis giving effect to the
Share Repurchase, the New Credit Facility and the
Old Note Offering and the application of the net
proceeds therefrom, the Issuer and the Subsidiary
Guarantors would have had outstanding aggregate
principal amount of approximately $396.7 million of
Senior Debt which would rank senior in right of
payment to the Notes and guarantees, respectively,
and the nonguarantor subsidiaries would have had
approximately $108.2 million of indebtedness which
would be effectively senior to the Notes and the
guarantees, respectively. As of May 2, 1998, the
Parent had no Senior Debt but had outstanding
$325.0 million of Convertible Notes which would
rank pari passu with the Parent's guarantee of the
New Notes, but which would be structurally
subordinated to the New Notes. See "Description of
the Notes -- Subordination."
OPTIONAL REDEMPTION........ Except as described below, the New Notes will not
be redeemable by the Issuer prior to June 1, 2003.
On or after that date, the New Notes may, subject
to certain requirements, be redeemed at the option
of the Issuer, in whole or in part, at the
redemption prices set forth herein, together with
accrued and unpaid interest to the date of
redemption. In addition, at any time on or before
June 1, 2001, the Issuer may redeem up to 35% of
the aggregate principal amount of the Notes and any
Additional Notes (as defined herein) issued under
the Indenture with the net cash proceeds of one or
more Public Equity Offerings (as defined herein) at
a redemption price equal to 109.625% of the
principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the
date
7
<PAGE> 15
of redemption, provided that not less than 65% of
the aggregate principal amount of the Notes and any
Additional Notes issued under the Indenture is
outstanding immediately after giving effect to such
redemption. See "Description of the
Notes -- Optional Redemption."
CHANGE OF CONTROL.......... Upon an occurrence of a Change of Control, the
Issuer will be required to make an offer to
repurchase the New Notes at a price equal to 101%
of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase. The
Issuer may be prohibited in certain circumstances
from making such repurchase. See "Risk
Factors -- Inability to Purchase Notes upon a
Change of Control" and "Description of
Notes -- Certain Covenants."
CERTAIN COVENANTS.......... The indenture governing the Notes (the "Indenture")
contains certain covenants that impose limitations
on, among other things: (i) the incurrence of
additional indebtedness; (ii) the issuance of
Disqualified Capital Stock (as defined herein) by
the Issuer and its subsidiaries; (iii) the making
of certain Restricted Payments (as defined herein);
(iv) the imposition of restrictions on the payments
of dividends and other payment restrictions
affecting subsidiaries; (v) the incurrence of
liens; (vi) transactions with affiliates; and (vii)
the consummation of certain mergers, consolidations
or sales of assets. See "Description of the
Notes -- Certain Covenants."
USE OF PROCEEDS............ The Issuer will not receive any cash proceeds in
the Exchange Offer. The Issuer used the net
proceeds of the offering of the Old Notes to repay
indebtedness under the New Credit Facility and to
fund the Tender Offer and the Consent Solicitation.
See "Use of Proceeds."
For more complete information regarding the New Notes, including
definitions of certain capitalized terms used above, see "Description of Notes."
RISK FACTORS
Holders should consider carefully the information set forth under the
caption "Risk Factors," and all other information set forth in this Prospectus
in deciding whether to tender their Old Notes in the Exchange Offer.
8
<PAGE> 16
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary consolidated historical and pro forma
financial data of the Company. The summary consolidated financial data for each
of fiscal years 1994, 1995 and 1996 and the eleven months ended January 31, 1998
has been derived from the audited consolidated financial statements of the
Company and the related notes thereto. The summary consolidated financial data
for the eleven months ended February 1, 1997 and the three month periods ended
May 3, 1997 and May 2, 1998 has been derived from the unaudited consolidated
financial statements of the Company. The Pro Forma As Adjusted financial data
for the twelve months ended January 31, 1998 and the Pro Forma financial data
for the three months ended May 2, 1998 has been derived from the Unaudited Pro
Forma Consolidated Financial Data and related notes thereto included elsewhere
herein. The data presented below should be read in conjunction with the
Company's Annual Report on Form 10-K, the Quarterly Report on Form 10-Q and the
Current Report on Form 8-K filed July 29, 1998, each incorporated by reference
herein, the Unaudited Pro Forma Consolidated Financial Data and the related
notes thereto included elsewhere herein, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
TWELVE MONTHS
ELEVEN MONTHS ENDED ENDED
FISCAL YEAR ------------------------- -------------
------------------------------------ FEBRUARY 1, JANUARY 31, JANUARY 31,
1994 1995 1996 1997(1) 1998 1998(2)
---------- ---------- ---------- ----------- ----------- -------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $1,145,151 $1,890,639 $3,196,056 $2,911,189 $3,573,311 $4,076,035
Gross profit.............. 289,790 467,321 778,310 705,830 840,003 968,943
Warehouse operating and
selling expenses........ 219,213 342,581 562,879 508,676 605,243 689,826
Corporate general and
administrative
expenses................ 29,624 49,742 95,101 87,793 105,055 120,580
Merger and other non-
recurring charges(4).... -- 36,838 19,840 19,841 14,890 10,400
Operating profit.......... 40,953 38,160 100,490 89,520 114,815 148,137
Interest expense, net..... 16,915 17,968 26,949 24,550 38,115 88,972
Income from continuing
operations.............. 16,237 6,776 41,996 35,708 44,404 35,013
Pro forma income per share
from continuing
operations -- Basic(5).... $ 0.20 $ 0.06 $ 0.33 $ 0.28 $ 0.34 $ 0.25
Pro forma income per share
from continuing
operations -- Diluted(5)... $ 0.19 $ 0.06 $ 0.31 $ 0.26 $ 0.32 $ 0.24
Weighted average common
shares outstanding:
Basic..................... 75,400 104,162 121,901 121,612 131,423 140,021
Diluted................... 79,026 110,408 130,029 129,749 137,858 146,707
<CAPTION>
PRO FORMA
THREE MONTHS
THREE MONTHS ENDED ENDED
--------------------- ------------
MAY 3, MAY 2, MAY 2,
1997(1) 1998(1) 1998(3)
-------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales................. $921,455 $1,108,061 $1,108,061
Gross profit.............. 217,805 257,770 257,770
Warehouse operating and
selling expenses........ 160,757 182,825 182,825
Corporate general and
administrative
expenses................ 29,098 33,102 33,102
Merger and other non-
recurring charges(4).... -- -- --
Operating profit.......... 27,950 41,843 41,843
Interest expense, net..... 9,245 13,078 22,593
Income from continuing
operations.............. 12,408 15,812 10,008
Pro forma income per share
from continuing
operations -- Basic(5).... $ 0.10 $ 0.12 $ 0.09
Pro forma income per share
from continuing
operations -- Diluted(5)... $ 0.09 $ 0.12 $ 0.09
Weighted average common
shares outstanding:
Basic..................... 126,067 134,410 107,872
Diluted................... 131,268 136,729 110,191
</TABLE>
<TABLE>
<CAPTION>
AT MAY 2, 1998
-------------------------
ACTUAL PRO FORMA(7)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 36,906 $ 36,906
Total assets.............................................. 2,428,921 2,436,012
Total Issuer debt(6)...................................... 878,021 892,767
Total debt................................................ 1,203,021 1,217,767
Total stockholders' equity................................ 575,296 570,821
</TABLE>
- ------------------------------
(1) The summary unaudited consolidated financial data for the three months ended
May 2, 1998 and May 3, 1997 and the eleven months ended February 1, 1997
have been prepared on the same basis as the audited consolidated financial
statements and, in the opinion of management, contain all adjustments,
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of operations for this period.
(2) Pro forma to give effect to (i) the results of Data Documents Incorporated
("DDI") for the period beginning February 2, 1997 and ending immediately
prior to the acquisition of DDI by the Company on November 26, 1997 and (ii)
the unaudited results of the Company for the one month period ended March 1,
1997; adjusted to reflect (a) the Share Repurchase and the New Credit
Facility and (b) the sale of the Old Notes and the anticipated application
of the net proceeds therefrom.
(3) Pro forma to give effect to the Share Repurchase, the New Credit Facility
and the sale of the Old Notes and the application of the net proceeds
therefrom as if they were completed at the beginning of the period. See "Use
of Proceeds."
(4) Merger and other non-recurring charges in the eleven months ended January
31, 1998 include acquisition costs incurred by DDI in connection with the
DDI acquisition, the continued integration of delivery services and certain
provisions for reductions in workforce and facility closures at other
locations. Merger and other non-recurring charges in prior periods relate
primarily to the mergers with Sofco, HMI, Nimsa and UT (each as defined
herein) in fiscal 1996 and Delivery and Young (each as defined herein) in
fiscal 1995 and include, among other things, costs to complete the
acquisitions, costs of merging and closing redundant facilities, and costs
associated with personnel reductions and centralizing certain administrative
functions.
(5) Pro forma income from continuing operations reflects the additional taxes
that would be incurred to treat a subchapter S acquisition as if the
acquired company was a C corporation. Pro forma income per share from
continuing operations is calculated by dividing pro forma income from
continuing operations, after preferred stock dividend requirements of Young
of $432,000 for fiscal 1994, by basic and diluted weighted common shares
outstanding.
(6) Excludes $325 million principal amount of the Parent's 4 1/2% Convertible
Notes due July 2000 (the "Convertible Notes").
(7) Adjusted to reflect the sale of the Old Notes and the application of the net
proceeds therefrom as if they were completed at the beginning of the period.
See "Use of Proceeds."
(8) EBITDA represents net income before net interest expense, income tax
expense, depreciation and amortization expense and merger and other non-
recurring charges. The Company has presented EBITDA because it is commonly
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance, leverage and liquidity and to determine
a company's ability to service debt. However, EBITDA should not be
considered in isolation or as a substitute for net income (loss), cash flow
from continuing operations or other data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity. EBITDA for the pro forma as adjusted twelve
months ended January 31, 1998, the three months ended May 3, 1997 and May 2,
1998 and the pro forma three months ended May 2, 1998 was $234,518,000,
$44,190,000, $60,854,000 and $60,854,000, respectively. For the pro forma as
adjusted twelve months ended January 31, 1998, the ratios of Issuer Debt to
EBITDA, Consolidated Net Debt to EBITDA and EBITDA to Net Interest Expense
were 3.8x, 5.0x and 2.6x, respectively. For the pro forma three months ended
May 2, 1998, the ratios of Issuer Debt to EBITDA, Consolidated Net Debt to
EBITDA and EBITDA to Net Interest Expense were 3.7x, 4.9x and 2.7x,
respectively. Consolidated EBITDA as defined in the Indenture for the pro
forma as adjusted twelve months ended January 31, 1998, the three months
ended May 3, 1997 and May 2, 1998 and the pro forma three months ended May
2, 1998 was $262,878,000, $50,772,000, $70,193,000 and $70,193,000,
respectively.
9
<PAGE> 17
RISK FACTORS
Prospective investors should consider carefully the specific factors set
forth below, as well as the other information included in this Prospectus,
before deciding to tender their Old Notes in the Exchange Offer.
Leverage. The Company has substantial indebtedness. As of May 2, 1998, on a
pro forma basis giving effect to the Share Repurchase, the New Credit Facility
and the Old Note Offering and the application of the net proceeds therefrom, the
Company would have had total consolidated indebtedness of approximately $1.2
billion. On a pro forma as adjusted basis (as described in the Unaudited Pro
Forma Consolidated Financial Data), the Company's ratio of earnings to fixed
charges would have been 1.6 to 1 for the latest three months ended May 2, 1998.
Subject to the restrictions in the New Credit Facility and the Indenture, the
Company and its subsidiaries may incur additional indebtedness from time to time
to finance capital expenditures and acquisitions and for other general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Description of the
New Credit Facility" and "Description of the Notes."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including: (i) the Company may be more
vulnerable to economic downturns and other adverse developments and more limited
in its ability to withstand competitive pressures than its competitors that are
not as leveraged; (ii) the possible limitation in the future on the Company's
ability to obtain additional financing for working capital, acquisitions,
capital expenditures, debt service requirements or other purposes; (iii) a
substantial portion of the Company's cash flow from operations will be dedicated
to the payment of the principal of and interest on its indebtedness, thereby
reducing funds available for operations and capital additions; (iv) certain of
the Company's borrowings, primarily the borrowings under the New Credit
Facility, will be at variable rates of interest which could cause the Company to
be vulnerable to increases in interest rates; (v) the Notes will mature after
substantially all of the Issuer's and the Parent's respective other
indebtedness, including all borrowings under the New Credit Facility and the
Convertible Notes; and (vi) the Company's leveraged status may affect its
ability to make acquisitions in the future.
The Company's ability to make scheduled payments of the principal of, or
interest on, or to refinance, its indebtedness, including the Notes, will depend
on its future operating performance and cash flow, which are subject to
prevailing economic conditions, prevailing interest rate levels, and financial,
competitive, business and other factors, many of which are beyond the Company's
control, as well as the availability of borrowings under the New Credit Facility
or successor facilities. However, based upon the current and anticipated level
of operations, the Company believes that its cash flow from operations, together
with amounts available under the New Credit Facility, will be adequate to meet
its anticipated cash requirements for working capital, capital expenditures,
interest payments and scheduled principal payments. There can be no assurance,
however, that the Company's business will continue to generate cash flow at or
above current levels. If the Company is unable to generate sufficient cash flow
from operations in the future to service its indebtedness, it may be required to
refinance all or a portion of its indebtedness, including the Notes, or to
obtain additional financing or to dispose of material assets or operations. The
New Credit Facility and the Indenture restrict the Company's ability to sell
assets and/or use the proceeds therefrom. There can be no assurance that any
such refinancing or asset sales would be possible under the Company's debt
instruments existing at such time, that the proceeds which the Company could
realize from such refinancing or asset sales would be sufficient to meet the
Company's obligations then due or that any additional financing could be
obtained.
Ranking; Foreign Subsidiaries. The Notes will be general unsecured
obligations of the Issuer and will be subordinated in right of payment to all
current and future Senior Debt of the Issuer. The Notes will be guaranteed by
the Parent and will be guaranteed by the Subsidiary Guarantors, which consist of
all of the Company's present and future Subsidiaries, other than Receivables
Subsidiaries, Finance Subsidiaries, Excluded Subsidiaries, Foreign Subsidiaries
and Unrestricted Subsidiaries. The Guarantees will be general unsecured
obligations of the Parent and the Subsidiary Guarantors, as the case may be, and
will be subordinated in right of payment to all current and future Senior Debt
of the Parent and the Subsidiary Guarantors. As of May 2, 1998, on a pro forma
basis giving effect to the Share Repurchase, the New Credit Facility and the Old
Note Offering and the application of the net proceeds therefrom, the Issuer and
the
10
<PAGE> 18
Subsidiary Guarantors would have approximately $396.7 million of Senior Debt
which would rank senior in right of payment to the Notes and guarantees,
respectively, and the nonguarantor subsidiaries would have had approximately
$108.2 million of indebtedness which would be effectively senior to the Notes
and the guarantees. As of May 2, 1998, the Parent had no Senior Debt but had
outstanding $325.0 million of Convertible Notes (as defined herein), which would
rank pari passu with the Notes, but which would be structurally subordinated to
the Notes. By reason of such subordination, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Parent, Issuer or any of the Subsidiary Guarantors, or upon a default in
payment with respect to, or the acceleration of, any Senior Debt, the holders of
such Senior Debt must be paid in full before the holders of the Notes may be
paid. Moreover, under certain circumstances, if any non-payment default exists
with respect to certain Senior Debt, the Issuer may not make any payment on the
Notes for a specified time, unless such default is cured or waived, any
acceleration of such Senior Debt has been rescinded or such Senior Debt has been
paid in full. See "Description of Notes -- Subordination." The approximately
$1.2 million principal amount of 9 1/8% Notes remaining outstanding after the
Tender Offer, and any additional pari passu debt that the Issuer may issue,
would be entitled to share ratably with the holders of the Notes in any proceeds
distributed in connection with any insolvency, liquidation, reorganization,
dissolution or other winding-up of the Issuer.
The Company conducts certain of its foreign operations through Foreign
Subsidiaries. The Foreign Subsidiaries will not, and future Foreign Subsidiaries
are not expected to, guarantee the Notes. Consequently, any right of the Company
or the Subsidiary Guarantors to receive the assets of any such Foreign
Subsidiary upon such Foreign Subsidiary's liquidation or reorganization (and the
consequent right of the holders of the Notes to participate in the distribution
of the proceeds of those assets) effectively will be subordinated by operation
of law to the claims of such Foreign Subsidiary's creditors (including trade
creditors) and holders of its preferred stock.
Rapid Expansion; Integration of Acquisitions. Through numerous acquisitions
completed since 1991, the Company significantly increased the scope of its
operations from a regional operation in Colorado to operations throughout the
United States, Canada, the United Kingdom, Australia, New Zealand, Germany,
France, Italy, Ireland and Switzerland. The majority of these acquisitions have
occurred since 1994. There can be no assurance that the Company's management and
financial controls, personnel, computer systems and other corporate support
systems will be adequate to manage the increase in the size and scope of the
Company's operations and acquisition activity.
An important part of the Company's strategy is to integrate its
acquisitions in North America into its operations. Such integration of
operations is an ongoing, continuous process for the Company and the Company has
not fully integrated all of its acquired businesses into existing operations.
There can be no assurance that the Company will successfully integrate recent
and future acquisitions into its existing operations. Recent acquisitions may
not achieve sales, profitability or asset productivity commensurate with the
Company's more mature regions. In addition, acquisitions involve a number of
special risks, including adverse short-term effects on the Company's reported
operating results, the diversion of management's attention, the dependence on
retention, hiring and training of key personnel, the amortization of acquired
intangible assets and risks associated with unanticipated problems or legal
liabilities, some or all of which could have a material adverse effect on the
Company's operations and financial performance.
International Expansion. To date, the Company has acquired or made
investments in companies in Canada, Australia, the United Kingdom, Germany,
France, New Zealand, Italy, Ireland and Switzerland. The Company anticipates
that such international expansion will continue in the future. The Company's
existing Foreign Subsidiaries are not, and future Foreign Subsidiaries will not
be, guarantors of the obligations under the Notes. Over time, the Company plans
to implement appropriate aspects of the Company's business model in its
international operations, including creating in-stock catalogs, consolidating
warehouses, upgrading information systems, acquiring companies offering
complementary products and services and focusing on larger customers and
national and international accounts. Expansion into international markets may
involve additional risks relating to implementing key aspects of the Company's
business model, as well as risks relating to fluctuations in currency exchange
rates, new and different legal, tax, accounting and regulatory requirements,
difficulties in staffing and managing foreign operations, operating difficulties
and other factors. In
11
<PAGE> 19
addition, the Company's results may be negatively affected by competitive or
operating difficulties arising out of the evolving integration of Europe into a
single economic unit.
Expanded Product and Service Offerings. The Company has significantly
expanded its product and service offerings through the acquisition of Richard
Young Journal, Inc. ("Young"), a computer products distributor, U.S. Delivery
Systems, Inc. ("Delivery") and United TransNet, Inc. ("UT"), same-day local
delivery companies, ASAP Software Express, Inc. ("ASAP"), a direct reseller of
computer software and provider of related services, Hermann Marketing, Inc.
("HMI"), an advertising specialties distributor, Sofco-Mead, Inc. ("Sofco"), a
janitorial and cleaning supplies distributor and DDI, a designer and provider of
custom business forms, pressure-sensitive label products and forms management
systems. Certain complementary products now offered by the Company, such as
computer software, have lower gross profit margins than the products
traditionally sold by the Company. The Company intends to continue to make
additions to its product and service offerings in the future. Moreover, the
addition by the Company to its product and service offerings presents certain
risks and uncertainties involving the Company's relative unfamiliarity with
these new products and services and the market for such new products and
services. There can be no assurance that the Company will be successful in
developing or integrating these or other additions, or that its existing
customers will accept such additions, to the products and services currently
offered by the Company. In addition, the Company's delivery services business
has experienced, and may continue to experience, significant fluctuations in
operating performance as it consolidates operations and introduces new systems,
procedures and controls in its efforts to stabilize and standardize operations.
This business sector has recently experienced significant changes in management
and there is no assurance that the new management will be successful in
improving operating performance or in maintaining current operating margins.
This business sector may become subject to unionization efforts or have its
existing relationships with independent contractors challenged or altered,
thereby potentially increasing the Company's operating costs with respect to
this business sector.
Dependence on Systems. The Company continues to develop its computer
software and has implemented its national accounts system. The Company's ISIS
software is being developed to incorporate three-tier client/server architecture
that is expected to permit customers and suppliers to better communicate with
the Company. ISIS is intended to give the Company the ability to more readily
customize its product offerings, operating procedures and customer services.
This is expected to give the Company the ability to integrate various product
and service offerings, enabling it to reduce procurement costs for its customers
and add value as a service provider. There can be no assurance that the
Company's goals with respect to the systems will be attained or that the
Company's existing systems (or systems acquired by the Company in connection
with business acquisitions) will not experience difficulties as a result of the
advent of the year 2000. See "Impact of the Year 2000." Pending full
introduction of the ISIS upgrades, which could take longer than expected,
various of the Company's operations will be dependent upon different hardware or
software operating systems which may be costly to maintain or integrate.
Further, the Company anticipates that ongoing modifications to its computer
systems such as the introduction of the new release of ISIS will continue to be
made in the future and such modifications may cause disruptions in operations,
delay the integration of acquisitions, or cost more to design, implement or
operate than currently budgeted. Any such disruptions, delays or costs could
have a material adverse effect on the Company's operations and financial
performance. Although the Company uses computers which have been reliable to
date, it does not currently have redundant computer systems or redundant
dedicated communication lines linking one of its computers to each regional
warehouse.
Impact of the Year 2000. The Company's ISIS computer software has been
designed with the Year 2000 issue in mind, and the Company believes that such
software is Year 2000 compliant. However, the Company utilizes many different
computer systems to process and summarize business transactions. The Company is
continuing the evaluation of its various operating systems and determining the
additional remediation efforts required to ensure its computer systems will
properly utilize dates beyond December 31, 1999. Preliminary results of this
assessment have revealed that remediation efforts required will vary from system
to system. The Company presently believes that with modifications to existing
software and conversion to new software for those sites which it believes may be
effected, the Year 2000 issue can be mitigated. However, if such
12
<PAGE> 20
modifications are not made, or are not timely completed, the Year 2000 issue
could have a material adverse effect on the operations of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Impact of the Year 2000."
Dependence on Acquisitions for Future Growth. An element of the Company's
business strategy is to pursue strategic acquisitions that either expand or
complement its business. Acquisitions have historically constituted a principal
component of growth in revenue and operating income. There can be no assurance
that the Company will be able to identify and acquire acceptable acquisition
candidates on terms favorable to it and in a timely manner to the extent
necessary to fulfill its expansion plans. A substantial portion of the Company's
capital resources could be used for these acquisitions. Consequently, the
Company may require additional debt or equity financing for future acquisitions,
which additional financing may not be available on favorable terms, if at all.
As the Company proceeds with its acquisition strategy, it will continue to
encounter the risks associated with the integration of acquisitions described
above.
Substantial Competition. The Company, in many of its product lines and
services, operates in a highly competitive environment. The Company's principal
competitors in North America for office supplies and computer products are
regional and national contract stationers, including the contract stationer
operations of office products superstores, large direct resellers,
privately-held companies that generally operate in only one location and
distributors of business software for personal computers. In Europe and
Australia, the Company's competitors include primarily local and regional
contract stationers and, to a limited extent, national and multi-country
contract stationers. In the delivery services sector, the Company has numerous
competitors, certain of which have service offerings which are similar to the
Company's and others which provide different types or levels of service. Each of
the Company's major product and service categories are within fragmented
industries which are currently experiencing a trend toward consolidation.
Certain of the Company's competitors have greater financial resources than the
Company. In addition, there may be increasing competition for acquisition
candidates and there can be no assurance that acquisitions will continue to be
available on favorable terms, if at all.
Effect of Price Fluctuations. Certain of the Company's product offerings,
including paper products, have been and are expected to continue to be subject
to significant price fluctuations due to inflationary and other market
conditions. The Company generally is able to pass such increased costs on to its
customers through price increases, although it may not be able to adjust its
prices immediately. Significant increases in paper, fuel and other costs in the
future could materially affect the Company's profitability if these costs cannot
be passed on to customers on a timely basis, if at all.
Dependence on Key Management. The Company's success will continue to depend
to a significant extent on its executive officers and other key management. The
Company has entered into employment agreements with certain executive officers.
There can be no assurance that the Company will be able to retain its executive
officers and key personnel or attract additional qualified members of management
in the future. In addition, the success of certain of the Company's acquisitions
may depend, in part, on the Company's ability to retain management personnel of
the acquired companies. The loss of the services of any key managers could have
a material adverse effect upon the Company's business.
Restrictive Debt Covenants. The Indenture and the New Credit Facility
contain a number of significant covenants that, among other things, restrict the
ability of the Company to dispose of assets, incur additional indebtedness or
amend certain debt instruments (including the Indenture), pay dividends, create
liens on assets, enter into sale and leaseback transactions, make investments,
loans or advances, make acquisitions, engage in mergers or consolidations,
change the business conducted by the Company or its subsidiaries, or engage in
certain transactions with affiliates and otherwise restrict certain corporate
activities. See "Description of the Notes." In addition, under the New Credit
Facility, the Company is required to comply with specified financial ratios and
tests, including minimum interest coverage ratios, leverage ratios below a
specified maximum, minimum net worth levels and minimum ratios of inventory to
senior debt. See "Description of the New Credit Facility."
13
<PAGE> 21
The Company's ability to comply with such agreements may be affected by
events beyond its control, including prevailing economic, financial and industry
conditions. The breach of any such covenants or restrictions could result in a
default under the New Credit Facility or the Indenture, which would permit the
senior lenders, or the holders of the Notes, or both, as the case may be, to
declare all amounts borrowed thereunder to be due and payable, together with
accrued and unpaid interest, and the commitments of the senior lenders to make
further extensions of credit under the New Credit Facility could be terminated.
If the Company is unable to repay its indebtedness to its senior lenders, such
lenders could proceed against the collateral securing such indebtedness.
The Guarantors and the Enforceability of the Guarantees. The Parent and the
Subsidiary Guarantors will guarantee the Issuer's obligations under the Notes.
The Guarantees will be limited to the extent necessary so as not to result in a
fraudulent conveyance. Nevertheless, the obligations of each Guarantor under its
Guarantee may be subject to review under state or federal fraudulent transfer
laws. Under such laws, if in a lawsuit by an unpaid creditor or representative
of creditors of a Guarantor (such as a trustee in bankruptcy for such Guarantor
as debtor in possession), a court were to find that, at the time such Guarantor
incurred its obligations under its Guarantee, it either (i) was insolvent, (ii)
was rendered insolvent, (iii) was engaged in a business or transaction for which
its remaining unencumbered assets constituted unreasonably small capital, or
(iv) intended to incur or believed that it would incur debts beyond its ability
to pay as such debts matured, such court could avoid such Guarantor's Guarantee
and its obligations thereunder, and direct the return of any amounts paid
thereunder to the Guarantor or to a fund for the benefit of its creditors.
Moreover, regardless of the factors identified in the foregoing clauses (i)
through (iv), the court could avoid the Guarantee and direct such repayment if
it found that the Guarantee was entered into with actual intent to hinder,
delay, or defraud the Guarantor's creditors. The measure of insolvency for
purposes of the foregoing will vary depending on the law of the jurisdiction
being applied. Generally, however, an entity would be considered insolvent if
the sum of its debts (including contingent or unliquidated debts) is greater
than all of its property at a fair valuation or if the present fair salable
value of its assets is less than the amount that will be required to pay its
liability on its existing debts as they become absolute and matured.
Inability to Purchase Notes Upon a Change of Control. Upon a Change of
Control, the Issuer will be required to offer to repurchase all outstanding
Notes at 101% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, to the date of repurchase. However, there can be
no assurance that sufficient funds will be available at the time of any Change
of Control to make any required repurchases of Notes tendered, or that
restrictions in the New Credit Facility or under the Company's debt instruments
existing at such time will allow the Issuer to make such required purchases.
Notwithstanding these provisions, the Issuer could enter into certain
transactions, including certain recapitalizations, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of the Notes -- Repurchase of Notes at the Option of the
Holder Upon a Change of Control."
Absence of Public Market for Notes. The Old Notes have not been registered
under the Securities Act or any state securities law and, unless so registered,
may not be offered or sold except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and any applicable state securities laws.
Although the New Notes may be resold or otherwise transferred by the
holders (who are not affiliates of the Company) without compliance with the
registration requirements under the Securities Act, they will be new securities
for which there is currently no established trading market. The Issuer does not
intend to apply for listing of the New Notes on a national securities exchange
or for quotation of the New Notes on an automated dealer quotation system.
Although the Initial Purchasers in the offering of the Old Notes have informed
the Issuer that they currently intend to make a market in the New Notes, they
are not obligated to do so, and any such market-making, if initiated, may be
discontinued at any time without notice. The liquidity of any market for the New
Notes will depend upon the number of holders of the Notes, the interest of
securities dealers in making a market in the New Notes and other factors.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the New Notes. If an active trading market for the New Notes does not
develop, the market price and liquidity of the New Notes may be adversely
affected.
14
<PAGE> 22
If the New Notes are traded, they may trade at a discount from their face value,
depending upon prevailing interest rates, the market for similar securities, the
performance of the Company and certain other factors. The liquidity of, and
trading markets for, the New Notes may also be adversely affected by general
declines in the market for non-investment grade debt. Such declines may
adversely affect the liquidity of, and trading markets for, the New Notes
independent of the financial performance of, or prospects for, the Company.
Notwithstanding the registration of the New Notes in the Exchange Offer,
holders who are "affiliates" (as defined under Rule 405 of the Securities Act)
of the Company may publicly offer for sale or resell the New Notes only in
compliance with provisions of Rule 144 under the Securities Act.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the New Notes. There can be no assurance that the market, if any, for
the New Notes will not be subject to similar disruptions. Any such disruptions
may have an adverse effect on the holders of the New Notes.
Consequences of a Failure to Exchange Old Notes. The Old Notes have not
been registered under the Securities Act or any state securities laws and
therefore may not be offered, sold or otherwise transferred except in compliance
with the registration requirements of the Securities Act and any other
applicable securities laws, or pursuant to an exemption therefrom or in a
transaction not subject thereto, and in each case in compliance with certain
other conditions and restrictions. Old Notes which remain outstanding after
consummation of the Exchange Offer will continue to bear a legend reflecting
such restrictions on transfer. In addition, upon consummation of the Exchange
Offer, holders of Old Notes which remain outstanding will not be entitled to any
rights to have such Old Notes registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Issuer does not intend to register under the Securities
Act any Old Notes which remain outstanding after consummation of the Exchange
Offer (subject to such limited exceptions, if applicable). To the extent that
Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Old Notes could be adversely affected.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding principal
amount thereof have taken certain actions or exercised certain rights under the
Indenture.
Exchange Offer Procedures. Subject to the conditions set forth under "The
Exchange Offer -- Conditions to the Exchange Offer," delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
(i) certificates for Old Notes or a book-entry confirmation of a book-entry
transfer of Old Notes into the Exchange Agent's account at DTC, including an
Agent's Message (as defined under "The Exchange Offer -- Acceptance for Exchange
and Issuance of New Notes") if the tendering holder does not deliver a Letter of
Transmittal, (ii) a completed and signed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message in lieu of the Letter of Transmittal, and (iii) any
other documents required by the Letter of Transmittal. Therefore, holders of Old
Notes desiring to tender such Old Notes in exchange for New Notes should allow
sufficient time to ensure timely delivery. The Company is not under a duty to
give notification of defects or irregularities with respect to the tenders of
Old Notes for exchange.
15
<PAGE> 23
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Issuer and the Guarantors
entered into the Registration Rights Agreement with the Initial Purchasers,
pursuant to which the Issuer and the Guarantors agreed to file and to use its
commercially reasonable efforts to cause to become effective with the Commission
a registration statement with respect to the exchange of the Old Notes for notes
with terms identical in all material respects to the terms of the Old Notes. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Issuer and the Guarantors under the Registration Rights Agreement. The form
and terms of the New Notes are the same as the form and terms of the Old Notes
except that the New Notes have been registered under the Securities Act and will
not provide for any increase in the interest rate thereon. In that regard, the
Old Notes provide, among other things, that if a registration statement relating
to the Exchange Offer has not been filed by , 1998 and
declared effective by , 1998, Liquidated Damages will be
payable on the Old Notes. Upon consummation of the Exchange Offer, holders of
Old Notes will not be entitled to any Liquidated Damages thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Old Notes" and "Description of Notes."
The Exchange Offer is not being made to, nor will the Company accept
tenders for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Notes are registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose Old Notes
are held of record by The Depository Trust Company ("DTC") who desires to
deliver such Old Notes by book-entry transfer at DTC.
TERMS OF THE EXCHANGE OFFER
The Issuer hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $350,000,000 aggregate principal amount of New Notes for a like
aggregate principal amount of Old Notes properly tendered on or prior to the
Expiration Date and not properly withdrawn in accordance with the procedures
described below. The Issuer will issue, promptly after the Expiration Date, an
aggregate principal amount of up to $350,000,000 of New Notes in exchange for a
like principal amount of outstanding Old Notes tendered and accepted in
connection with the Exchange Offer. Holders may tender their Old Notes in whole
or in part in denominations of $1,000 or any integral multiple thereof.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered. As of the date of this Prospectus, $350,000,000
aggregate principal amount of the Old Notes are outstanding.
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for or are
tendered but not accepted in connection with the Exchange Offer will remain
outstanding and be entitled to the benefits of the Indenture, but will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Risk Factors -- Consequences
of a Failure to Exchange Old Notes."
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof promptly after the Expiration
Date.
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Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
NEITHER THE COMPANY NOR THE BOARD OF DIRECTORS OF THE COMPANY MAKES ANY
RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM
TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS
OF OLD NOTES MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER BASED ON
SUCH HOLDERS OWN FINANCIAL POSITIONS AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1998 unless the Exchange Offer is extended by the Issuer
(in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended).
The Issuer expressly reserves the right in its sole and absolute
discretion, subject to applicable law, at any time and from time to time, (i) to
delay the acceptance of the Old Notes for exchange, (ii) to terminate the
Exchange Offer (whether or not any Old Notes have theretofore been accepted for
exchange) if the Issuer determines, in its reasonable judgment, that any of the
events or conditions referred to under "-- Conditions to the Exchange Offer"
have occurred or exist or have not been satisfied, (iii) to extend the
Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant
to the Exchange Offer, subject, however, to the right of holders of Old Notes to
withdraw their tendered Old Notes as described under "-- Withdrawal Rights," and
(iv) to waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Issuer to constitute a material change, or if the Issuer waives a material
condition of the Exchange Offer, the Issuer will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
holders of the Old Notes, and the Issuer will extend the Exchange Offer to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Issuer may choose to make any public announcement and
subject to applicable law, the Issuer shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
Issuer will exchange, and will issue to the Exchange Agent, New Notes for Old
Notes validly tendered and not withdrawn (pursuant to the withdrawal rights
described under "-- Withdrawal Rights") promptly after the Expiration Date.
Subject to the conditions set forth under "-- Conditions to the Exchange
Offer," delivery of New Notes in exchange for Old Notes tendered and accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of (i) certificates for Old Notes or a book-entry
confirmation of a book-entry transfer of Old Notes into the Exchange Agent's
account at DTC, including an Agent's Message if the tendering holder does not
deliver a Letter of Transmittal, (ii) a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or,
in the case of a book-entry transfer, an Agent's Message in lieu of the Letter
of Transmittal, and (iii) any other documents required by the Letter of
Transmittal. Accordingly, the delivery of New Notes might not be made to all
tendering holders at the same time, and will depend upon when certificates for
Old Notes, book-entry confirmations with respect to Old Notes and other required
documents are received by the Exchange Agent.
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<PAGE> 25
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. See
"-- Procedures for Tendering Old Notes -- Book-Entry Transfer." The term
"Agent's Message" means a message transmitted by DTC to and received by the
Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by the Letter of Transmittal and that the Issuer may enforce such Letter
of Transmittal against such participant.
Subject to the terms and conditions of the Exchange Offer, the Issuer will
be deemed to have accepted for exchange, and thereby exchanged, Old Notes
validly tendered and not withdrawn as, if and when the Issuer gives oral or
written notice to the Exchange Agent of the Issuer's acceptance of such Old
Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act
as agent for the Issuer for the purpose of receiving tenders of Old Notes,
Letters of Transmittal and related documents and as agent for tendering holders
for the purpose of receiving Old Notes, Letters of Transmittal and related
documents and transmitting New Notes to validly tendering holders. Such exchange
will be made promptly after the Expiration Date. If for any reason whatsoever,
acceptance for exchange or the exchange of any Old Notes tendered pursuant to
the Exchange Offer is delayed (whether before or after the Issuer's acceptance
for exchange of Old Notes) or the Issuer extends the Exchange Offer or is unable
to accept for exchange or exchange Old Notes tendered pursuant to the Exchange
Offer, then, without prejudice to the Issuer's rights set forth herein, the
Exchange Agent may, nevertheless, on behalf of the Issuer and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Notes and such Old Notes
may not be withdrawn except to the extent tendering holders are entitled to
withdrawal rights as described under "-- Withdrawal Rights."
Pursuant to the Letter of Transmittal, or the Agent's Message, as the case
may be, a holder of Old Notes will warrant and agree in the Letter of
Transmittal or pursuant to the Agent's Message that it has full power and
authority to tender, exchange, sell, assign and transfer Old Notes, that the
Issuer will acquire good, marketable and unencumbered title to the tendered Old
Notes, free and clear of all liens, restrictions, charges and encumbrances, and
the Old Notes tendered for exchange are not subject to any adverse claims or
proxies. The holder also will warrant and agree that it will, upon request,
execute and deliver any additional documents deemed by the Issuer or the
Exchange Agent to be necessary or desirable to complete the exchange, sale,
assignment, and transfer of the Old Notes tendered pursuant to the Exchange
Offer.
PROCEDURES FOR TENDERING OLD NOTES
Valid Tender
Except as set forth below, in order for Old Notes to be validly tendered by
book-entry transfer, an Agent's Message or a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
in either case any other documents required by the Letter of Transmittal, must
be delivered to the Exchange Agent by mail, facsimile, hand delivery or
overnight carrier at one of the Exchange Agent's addresses set forth under
"-- Exchange Agent" on or prior to the Expiration Date and either (i) such Old
Notes must be tendered pursuant to the procedures for book-entry transfer set
forth below or (ii) the guaranteed delivery procedures set forth below must be
complied with.
Except as set forth below, in order for Old Notes to be validly tendered by
a means other than by book-entry transfer, a completed and signed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other documents required by the Letter of Transmittal, must be delivered to
the Exchange Agent by mail, facsimile (Eligible Institutions (as defined below)
only), hand delivery or overnight carrier at one of the Exchange Agent's
addresses set forth under "-- Exchange Agent" on or prior to the Expiration Date
and either (i) such Old Notes must be delivered to the Exchange Agent on or
prior to the Expiration Date or (ii) the guaranteed delivery procedures
set-forth below must be complied with.
If less than all of the Old Notes are tendered, a tendering holder should
fill in the amount of Old Notes being tendered in the appropriate box on the
Letter of Transmittal. The entire amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated.
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<PAGE> 26
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY, SERVICE IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer
The Exchange Agent and DTC have confirmed that any Direct Participant (as
defined in "Description of Notes -- Depositary Procedures") in DTC's book-entry
transfer facility system may utilize DTC's ATOP procedures to tender Old Notes.
The Exchange Agent will establish an account with respect to the Old Notes at
DTC for purposes of the Exchange Offer within two business days after the date
of this Prospectus. Any Direct Participant may make a book-entry delivery of the
Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's
account at DTC in accordance with DTC's ATOP procedures for transfer. However,
although delivery of Old Notes may be effected through book-entry transfer into
the Exchange Agent's account at DTC, an Agent's Message or a completed and
signed Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other documents required by the Letter of Transmittal must in
any case be delivered to and received by the Exchange Agent at one of its
addresses set forth under "-- Exchange Agent" on or prior to the Expiration
Date, or the guaranteed delivery procedure set forth below must be complied
with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees
Certificates for the Old Notes need not be endorsed and signature
guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate
for the Old Notes is registered in a name other than that of the person
surrendering the certificate or (b) such holder completes the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" in the Letter
of Transmittal. In the case of (a) or (b) above, such certificates for Old Notes
must be duly endorsed or accompanied by a properly executed bond power, with the
endorsement or signature on the bond power and on the Letter of Transmittal
guaranteed by a firm or other entity identified in Rule 17Ad-15 under the
Exchange Act as an "eligible guarantor institution," including (as such terms
are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities
broker or dealer or government securities broker or dealer; (iii) a credit
union; (iv) a national securities exchange, registered securities association or
clearing agency; or (v) a savings association that is a participant in a
Securities Transfer Association (an "Eligible Institution"), unless surrendered
on behalf of such Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
Guaranteed Delivery
If a holder desires to tender Old Notes pursuant to the Exchange Offer and
the certificates for such Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent on or prior to the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, such Old Notes may nevertheless be tendered, provided that all
of the following guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
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<PAGE> 27
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Notes, in proper form for transfer, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
with any required signature guarantees and any other documents required by
the Letter of Transmittal, are received by the Exchange Agent within three
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Notes in
exchange for Old Notes tendered and accepted for exchange pursuant to the
Exchange Offer will in all cases be made only after timely receipt by the
Exchange Agent of Old Notes, or of a book-entry confirmation with respect to
such Old Notes, and a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees and any
other documents required by the Letter of Transmittal. Accordingly, the delivery
of New Notes might not be made to all tendering holders at the same time, and
will depend upon when Old Notes, book-entry confirmations with respect to Old
Notes and other required documents are received by the Exchange Agent.
The Company's acceptance for exchange of Old Notes tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering holder and the Issuer upon the terms and subject to the conditions
of the Exchange Offer.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered Old Notes will be
determined by the Issuer, in its sole discretion, whose determination shall be
final and binding on all parties. The Issuer reserves the absolute right, in its
sole and absolute discretion, to reject any and all tenders determined by it not
to be in proper form or the acceptance of which, or exchange for, may, in the
opinion of counsel to the Issuer, be unlawful. The Issuer also reserves the
absolute right, subject to applicable law, to waive any of the conditions of the
Exchange Offer as set forth under "-- Conditions to the Exchange Offer" or any
condition or irregularity in any tender of Old Notes of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The interpretation by the Issuer of the terms and conditions of the
Exchange Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding. No tender of Old Notes will be deemed to
have been validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Issuer, any affiliates or assigns of the
Issuer, the Exchange Agent nor any other person shall be under any duty to give
any notification of any irregularities in tenders or incur any liability for
failure to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the Issuer,
proper evidence satisfactory to the Issuer, in its sole discretion, of such
person's authority to so act must be submitted.
A beneficial owner of Old Notes that are held by or registered in the name
of a broker, dealer, commercial bank, trust company or other nominee or
custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW NOTES
The Issuer is making the Exchange Offer for the New Notes in reliance on
the position of the staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Issuer has not sought its own
interpretive letter and there can be no assurance that the staff of the Division
of Corporation Finance of the Commission would make a similar
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<PAGE> 28
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Issuer believes that New Notes issued
pursuant to this Exchange Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by a holder thereof (other than a
holder who is a broker-dealer) without further compliance with the registration
and prospectus delivery requirements of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and that
such holder is not participating, and has no arrangement or understanding with
any person to participate, in a distribution (within the meaning of the
Securities Act) of such New Notes. However, any holder of Old Notes who is an
"affiliate" of the Issuer or who intends to participate in the Exchange Offer
for the purpose of distributing New Notes, or any broker-dealer who purchased
Old Notes from the Issuer to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, (a) will not be able to rely on the
interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Notes in the Exchange Offer and (c)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or other transfer of such Old Notes
unless such sale is made pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer holds Old Notes acquired for
its own account as a result of market-making or other trading activities and
exchanges such Old Notes for New Notes, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Notes.
Each holder of Old Notes who wishes to exchange Old Notes for New Notes in
the Exchange Offer will be required to represent that (i) it is not an
"affiliate" of the Issuer, (ii) any New Notes to be received by it are being
acquired in the ordinary course of its business, (iii) it has no arrangement or
understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of such New Notes, and (iv) if such holder is not
a broker-dealer, such holder is not engaged in, and does not intend to engage
in, a distribution (within the meaning of the Securities Act) of such New Notes.
In addition, the Issuer may require such holder, as a condition to such holder's
eligibility to participate in the Exchange Offer, to furnish to the Issuer (or
an agent thereof) in writing information as to the number of "beneficial owners"
(within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom such
holder holds the Old Notes to be exchanged in the Exchange Offer. Each
broker-dealer that receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Issuer believes that Participating Broker-Dealers who
acquired Old Notes for their own accounts as a result of market-making
activities or other trading activities may fulfill their prospectus delivery
requirements with respect to the New Notes received upon exchange of such Old
Notes (other than Old Notes which represent an unsold allotment from the
original sale of the Old Notes) with a prospectus meeting the requirements of
the Securities Act, which may be the prospectus prepared for an exchange offer
so long as it contains a description of the plan of distribution with respect to
the resale of such New Notes. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer for its own account as a result of market-making or
other trading activities. Subject to certain provisions set forth in the
Registration Rights Agreement, the Issuer has agreed that this Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such New Notes for a period ending
one year after the Expiration Date (subject to extension under certain limited
circumstances described below) or, if earlier, when all such New Notes have been
disposed of by such Participating Broker-Dealer. See "Plan of Distribution."
However, a Participating Broker-Dealer who intends to use this Prospectus in
connection with the resale of New Notes received in exchange for Old Notes
pursuant to the Exchange Offer must notify the Issuer, or cause the Issuer to be
notified, on or prior to the
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<PAGE> 29
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or may
be delivered to the Exchange Agent at one of the addresses set forth herein
under "-- Exchange Agent." Any Participating Broker-Dealer who is an "affiliate"
of the Issuer may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Notes
pursuant to the Exchange Offer will be deemed to have agreed, by execution of
the Letter of Transmittal, that, upon receipt of notice from the Issuer of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in this Prospectus untrue in any material
respect or which causes this Prospectus to omit to state a material fact
necessary in order to make the statements contained or incorporated by reference
herein, in light of the circumstances under which they were made, not misleading
or of the occurrence of certain other events specified in the Registration
Rights Agreement, such Participating Broker-Dealer will suspend the sale of New
Notes pursuant to this Prospectus until the Issuer has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Issuer has given notice that the sale of the New Notes may
be resumed, as the case may be. If the Issuer gives such notice to suspend the
sale of the New Notes, it shall extend the one-year period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Notes by the number of days during the period
from and including the date of the giving of such notice to and including the
date when Participating Broker-Dealers shall have received copies of the amended
or supplemented Prospectus necessary to permit resales of the New Notes or to
and including the date on which the Issuer has given notice that the sale of New
Notes may be resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective a written or facsimile
transmission of such notice of withdrawal must be timely received by the
Exchange Agent at one of its addresses set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Notes to be withdrawn, the aggregate
principal amount of Old Notes to be withdrawn, and (if certificates for such Old
Notes have been tendered) the name of the registered holder of the Old Notes as
set forth on the Old Notes, if different from that of the person who tendered
such Old Notes. If Old Notes have been delivered or otherwise identified to the
Exchange Agent, then prior to the physical release of such Old Notes, the
tendering holder must submit the serial numbers shown on the particular Old
Notes to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution, except in the case of Old Notes tendered
for the account of an Eligible Institution. If Old Notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "-- Procedures
for Tendering Old Notes," the notice of withdrawal must specify the name and
number of the account at DTC to be credited with the withdrawal of Old Notes, in
which case a notice of withdrawal will be effective if delivered to the Exchange
Agent by written or facsimile transmission. Withdrawals of tenders of Old Notes
may not be rescinded. Old Notes properly withdrawn will not be deemed validly
tendered for purposes of the Exchange Offer, but may be retendered at any
subsequent time on or prior to the Expiration Date by following any of the
procedures described above under "-- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Issuer, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Issuer, any affiliate or assign of the Issuer, the Exchange Agent
nor any other person shall be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Old Notes which have been tendered but which are
withdrawn will be returned to the holder thereof promptly after withdrawal.
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<PAGE> 30
INTEREST ON NEW NOTES
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes and will be deemed to have waived the right
to receive any interest on such Old Notes accrued from and after ,
1998. Accordingly, such holders of Old Notes as of the record date for the
payment of interest on , 1998 will be entitled to receive interest
on the New Notes issued in exchange therefor accrued from and after
, 1998.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Issuer will not be required to accept for
exchange, or to exchange, any Old Notes for any New Notes, and, as described
below, may terminate the Exchange Offer (whether or not any Old Notes have
theretofore been accepted for exchange) or may waive any conditions to or amend
the Exchange Offer, if any of the following conditions have occurred or exists
or have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Division of Corporation Finance of the Commission which
permits the New Notes issued pursuant to the Exchange Offer in exchange for
Old Notes to be offered for resale, resold and otherwise transferred by
holders thereof (other than broker-dealers and any such holder which is an
"affiliate" of the Issuer within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders
have no arrangement or understanding with any person to participate in the
distribution of such New Notes; or
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Company, would reasonably be expected
to impair its ability to proceed with the Exchange Offer, or
(c) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Issuer, threatened for that purpose or any governmental approval has
not been obtained, which approval the Issuer shall, in its sole discretion,
deem necessary for the consummation of the Exchange Offer as contemplated
hereby.
If the Issuer determines in its reasonable judgement that any of the
foregoing events or conditions has occurred or exists or has not been satisfied,
it may, subject to applicable law, terminate the Exchange Offer (whether or not
any Old Notes have theretofore been accepted for exchange) or may waive any such
condition or otherwise amend the terms of the Exchange Offer in any respect. If
such waiver or amendment constitutes a material change to the Exchange Offer,
the Issuer will promptly disclose such waiver or amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
Old Notes and will extend the Exchange Offer to the extent required by Rule
14e-1 under the Exchange Act.
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<PAGE> 31
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offer. Delivery of the Letters of Transmittal and any other required documents,
questions, requests for assistance, and requests for additional copies of this
Prospectus or of the Letter of Transmittal should be directed to the Exchange
Agent as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand or Overnight Delivery
The Bank of New York The Bank of New York
101 Barclay Street, 7E 101 Barclay Street
New York, New York 10286 Corporate Trust Services Window
Attention: Reorganization Section Grand Level
Jackie Warren New York, New York 10286
Attention: Reorganization Section
Jackie Warren
</TABLE>
Confirm By Telephone:
(212) 815-5924
Facsimile Transmissions:
(Eligible Institutions Only)
(212) 815-6339
------------------------------------------------------
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Issuer has agreed to pay the Exchange Agent reasonable and customary
fees for its services and will reimburse it for its reasonable out-of-pocket
expenses in connection therewith. The Issuer will also pay brokerage houses and
other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus and related documents
to the beneficial owners of Old Notes, and in handling or tendering for their
customers.
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if a transfer tax is imposed for
any reason other than the exchange of Old Notes in connection with the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
The Issuer will not make any payment to brokers, dealers or other nominees
soliciting acceptances of the Exchange Offer.
24
<PAGE> 32
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
General
The following discussion summarizes certain United States Federal income
tax considerations associated with the exchange of Old Notes for New Notes and
the ownership and disposition of New Notes. This summary applies only to
beneficial owners of Old Notes who acquired such Old Notes at the initial
offering from Initial Purchasers for the original offering price therefor and
who acquire New Notes pursuant to the Exchange Offer. This summary is based upon
existing United States Federal income tax law, which is subject to change,
possibly with retroactive effect. This summary does not discuss all aspects of
United States Federal income taxation that may be relevant to particular holders
in the context of their specific investment circumstances or certain types of
holders subject to special treatment under such laws (including, for example,
financial institutions, insurance companies, broker-dealers, persons having a
functional currency other than the United States dollar, United States
expatriates, tax-exempt organizations, controlled foreign corporations related
to the Company through stock ownership and holders (whether actual or
constructive) of 10% or more of the total combined voting power of all classes
of stock of the Company). In addition, this summary does not discuss any
foreign, state or local tax considerations and assumes that holders of the New
Notes will hold the New Notes as "capital assets" (generally, property held for
investment). Prospective holders of New Notes should consult their tax advisors
regarding the United States Federal, state, local, and foreign income and other
tax considerations of the exchange of Old Notes for New Notes and the ownership
and disposition of the New Notes.
For purposes of this summary, a "United States holder" is an individual who
is a citizen or resident of the United States, a corporation or partnership
created or organized under the laws of the United States or any state or
political subdivision thereof, or a person or other entity who is otherwise
subject to United States Federal income taxation on a net income basis in
respect of income derived from the New Notes.
Exchange Offer
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not be treated as an exchange or other taxable event for United States Federal
income tax purposes because, under United States Treasury regulations, the New
Notes will not be considered to differ materially in kind or extent from the Old
Notes. As a result, the holders of Old Notes will not recognize taxable gain or
loss upon the exchange of such Old Notes for the New Notes, and any such holder
will have the same tax basis and holding period in the New Notes as it had in
the Old Notes immediately before the exchange.
United States Holders
Interest payable on the New Notes will be includible in the income of a
United States holder at the time accrued or received in accordance with such
holder's regular method of accounting for United States Federal income tax
purposes.
A United States holder will recognize a capital gain or loss upon the sale
or other disposition of a New Note in an amount equal to the difference between
the amount realized from such disposition (exclusive of any amount paid for
accrued interest not previously included in income, which amount will be taxable
as ordinary income) and the holder's adjusted tax basis in the New Note. Such
capital gain or loss will be long-term capital gain or loss if the holder has
held the New Note for more than one year at the time of disposition. Holders of
New Notes that are individuals are generally entitled to preferential treatment
for net long-term capital gains.
Non-United States Holders
An investment in the New Notes by a non-United States holder generally will
not give rise to any United States Federal income tax consequences, unless the
interest received or any gain recognized on the sale or
25
<PAGE> 33
other disposition of the New Notes by such holder is treated as effectively
connected with the conduct by such holder of trade or business in the United
States, or, in the case of gains derived by an individual, such individual is
present in the United States for 183 days or more and certain other requirements
are met.
In order to avoid back-up withholding of 31% on payments of interest and
principal made by United States payors, a non-United States holder of the New
Notes must generally complete, and provide the payor with, an Internal Revenue
Service Form W-8 ("Certificate of Foreign Status"), or other documentary
evidence, certifying that such holder is an exempt foreign person.
USE OF PROCEEDS
The Issuer will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes in exchange for
the Old Notes as described in the Prospectus, the Issuer will receive Old Notes
in like principal amount. The Old Notes surrendered in exchange for the New
Notes will be retired and canceled.
The gross proceeds from the offering of the Old Notes ($350,000,000), were
used to repay indebtedness under the New Credit Facility and to fund the Tender
Offer and the Consent Solicitation.
26
<PAGE> 34
CAPITALIZATION
The following table sets forth the historical consolidated capitalization
of the Company at May 2, 1998 and the "Pro Forma" column gives effect to the
sale of the Old Note Offering and the application of the net proceeds therefrom.
The following table should be read in conjunction with the Company's Annual
Report on Form 10-K, the Quarterly Report on Form 10-Q and the Current Report on
Form 8-K filed July 28, 1998, each incorporated by reference herein, the
Unaudited Pro Forma Consolidated Financial Data and related notes thereto
included elsewhere herein and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
AS OF MAY 2, 1998
------------------------
(DOLLARS IN THOUSANDS)
ACTUAL PRO FORMA
---------- ----------
<S> <C> <C>
Cash and cash equivalents................................... $ 36,906 $ 36,906
========== ==========
Total debt (including current portion):
New Credit Facility -- revolver........................... 393,106 146,652
New Credit Facility -- term loan.......................... 250,000 250,000
9 5/8% Series A Senior Subordinated Notes due 2008........ 350,000
9 1/8% Senior Subordinated Notes due 2004................. 90,000 1,200
Other indebtedness........................................ 130,713 130,713
Capital lease obligations................................. 14,202 14,202
---------- ----------
Total Issuer debt................................. $ 878,021 $ 892,767
4 1/2% Convertible Notes due 2000......................... 325,000 325,000
---------- ----------
Total debt........................................ 1,203,021 1,217,767
Total stockholders' equity.................................. 575,296 570,821
---------- ----------
Total capitalization.............................. $1,778,317 $1,788,588
========== ==========
</TABLE>
27
<PAGE> 35
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Financial Data has been
prepared by the Company's management and should be read in conjunction with the
notes thereto, the Company's Annual Report on Form 10-K, the Quarterly Report on
Form 10-Q and the Current Report on Form 8-K filed July 29, 1998, each
incorporated by reference herein, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Unaudited Pro Forma
Consolidated Statement of Operations for the twelve months ended January 31,
1998 combines the audited results of the Company for the eleven months ended
January 31, 1998, the unaudited results of the Company for the one month ended
March 1, 1997 and the unaudited results of DDI for the period beginning February
2, 1997 and ending immediately prior to the acquisition of DDI by the Company on
November 26, 1997. Results for DDI for the period from the date DDI was acquired
by the Company to January 31, 1998 are included in the Company's results for the
eleven months ended January 31, 1998 and for the three month period ended May 2,
1998. The Pro Forma As Adjusted data reflects adjustments to give effect to the
Share Repurchase and the New Credit Facility and the Old Notes Offering and the
application of the net proceeds therefrom as described under the caption "Use of
Proceeds" as if each of such had occurred at the beginning of the stated period.
The Unaudited Pro Forma Consolidated Financial Data are not necessarily
indicative of the Company's results of operations which would have been obtained
had the transactions actually occurred at the beginning of the period presented,
nor are they necessarily indicative of the results of future operations.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MAY 2, 1998
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
THREE MONTHS THREE MONTHS
ENDED ENDED
MAY 2, MAY 2,
1998(1) ADJUSTMENTS 1998
------------ ----------- ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $1,108,061 $ $1,108,061
Cost of sales........................................... 850,291 850,291
---------- ------- ----------
Gross profit.......................................... 257,770 -- 257,770
Warehouse operating and selling expenses................ 182,825 182,825
Corporate general and administrative expenses........... 33,102 33,102
---------- ----------
Operating profit...................................... 41,843 41,843
Interest expense, net................................... 13,078 9,515(2) 22,593
Other income............................................ 287 287
---------- ------- ----------
Income before income tax expense...................... 29,052 (9,515) 19,537
Income tax expense...................................... 13,044 (3,711)(3) 9,333
---------- ------- ----------
Income before minority interest income................ 16,008 (5,804) 10,204
Minority interest expense............................... 196 196
---------- ------- ----------
Income from continuing operations..................... $ 15,812 $(5,804) $ 10,008
========== ======= ==========
Income per share from continuing operations -- Basic.... $ 0.12 $ 0.09
Income per share from continuing
operations -- Diluted................................. $ 0.12 $ 0.09
Weighted average common shares outstanding:
Basic................................................. 134,410 107,872
Diluted............................................... 136,729 110,191
OTHER DATA:
Ratio of earnings to fixed charges...................... 1.6x
</TABLE>
28
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ENDED MAY 2,
1998
(1) The three month period ended May 2, 1998 includes the results of DDI for the
entire period and reflects the repurchase of 35,000,000 shares of common
stock pursuant to the Share Repurchase, and the repayment of the Old Credit
Facility (as defined herein) which occurred during the period.
(2) To reflect the net impact on interest expense of (i) the repurchase of
35,000,000 shares of common stock and the repayment of the Old Credit
Facility, both of which were funded using proceeds of the New Credit
Facility, and (ii) the sale of the Old Notes at an interest rate of 9 5/8%
and the application of the net proceeds therefrom to retire 9 1/8% Notes
pursuant to the Tender Offer and repay a portion of the New Credit Facility
as if all transactions were completed at the beginning of the period,
exclusive of the extraordinary loss of $1,810,000 ($1,104,000 net of tax)
related to the deferred financing costs of the Old Credit Facility recorded
during the three month period ended May 2, 1998 and an estimated $7,500,000
cost ($4,575,000 net of tax) related to the early retirement of 9 1/8% Notes
which will be recorded in fiscal 1998 as an extraordinary item.
(3) Tax effects of the pro forma adjustments.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
COMPANY DDI PRO FORMA AS ADJUSTED
------------------------- 298 TWELVE TWELVE
ELEVEN MONTHS ONE MONTH DAYS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED
JANUARY 31, MARCH 1, NOVEMBER 26, JANUARY 31, JANUARY 31,
1998 1997 1997 ADJUSTMENTS 1998 ADJUSTMENTS 1998
------------- --------- ------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales...................... $3,573,311 $284,867 $217,857 $ $4,076,035 $ $4,076,035
Cost of sales.................. 2,733,308 212,387 159,839 1,558(1) 3,107,092 3,107,092
---------- -------- -------- ------- ---------- -------- ----------
Gross profit................. 840,003 72,480 58,018 (1,558) 968,943 -- 968,943
Warehouse operating and selling
expenses..................... 605,243 54,203 29,794 586(2) 689,826 689,826
Corporate general and
administrative expenses...... 105,055 7,307 5,501 2,717(3) 120,580 120,580
Merger and other nonrecurring
charges(4)................... 14,890 -- -- (4,490)(5) 10,400 -- 10,400
---------- -------- -------- ------- ---------- -------- ----------
Operating profit............. 114,815 10,970 22,723 (371) 148,137 -- 148,137
Interest expense, net.......... 38,115 2,399 7,827 (4,078)(6) 44,263 44,709(8) 88,972
Other income................... 842 92 934 934
---------- -------- -------- ------- ---------- -------- ----------
Income before income tax
expense.................... 77,542 8,663 14,896 3,707 104,808 (44,709) 60,099
Income tax expense............. 34,457 2,921 6,256 754(7) 44,388 (17,437)(7) 26,951
---------- -------- -------- ------- ---------- -------- ----------
Income before minority
interest income............ 43,085 5,742 8,640 2,953 60,420 (27,272) 33,148
Minority interest income....... 1,319 546 -- 1,865 1,865
---------- -------- -------- ------- ---------- -------- ----------
Income from continuing
operations................. $ 44,404 $ 6,288 $ 8,640 $ 2,953 $ 62,285 $(27,272) $ 35,013
========== ======== ======== ======= ========== ======== ==========
Income per share from
continuing
operations -- Basic.......... $ 0.34 $ 0.80 $ 0.44 $ 0.25
Income per share from
continuing
operations -- Diluted........ $ 0.32 $ 0.78 $ 0.42 $ 0.24
Weighted average common shares
outstanding:
Basic........................ 131,423 10,740 140,021 140,021
Diluted...................... 137,858 11,018 146,707 146,707
OTHER DATA:
Ratio of earnings to fixed
charges...................... 1.5x
</TABLE>
29
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS ENDED JANUARY
31, 1998
(1) To conform DDI inventory from a LIFO basis valuation to a FIFO basis
valuation ($1,502,000) and to conform the accounting for spare parts to be
consistent with the Company's accounting policies and to record additional
depreciation related to the write-up of buildings to fair value.
(2) To record additional depreciation related to the write-up of equipment to
fair value.
(3) To record amortization of goodwill related to the DDI acquisition over a
40-year period. Total goodwill in connection with the DDI acquisition of
$130,438,000 includes transaction and other direct costs of such acquisition
of $1,672,000 and purchase accounting adjustments of $8,659,000, net of
related deferred taxes.
(4) Merger and other non-recurring charges include the acquisition costs
incurred by DDI, the continued integration of delivery services and certain
provisions for reductions in workforce and facility closures at other
locations.
(5) To adjust for the direct costs of the DDI acquisition. Such costs were paid
by DDI subsequent to the acquisition.
(6) To adjust for interest expense related to the revaluation of DDI debt to
fair value.
(7) Tax effects of the pro forma adjustments.
(8) To reflect the net impact on interest expense of (i) the repurchase of
35,000,000 shares of common stock pursuant to the Share Repurchase and the
repayment of the Old Credit Facility, both of which were funded using
proceeds from the New Credit Facility, (ii) the sale of the Old Notes at an
interest rate of 9 5/8% and the application of the net proceeds therefrom to
retire 9 1/8% Notes pursuant to the Tender Offer and repay a portion of the
New Credit Facility, exclusive of the extraordinary loss of $1,810,000
($1,104,000 net of tax) related to the deferred financing costs of the Old
Credit Facility recorded during the three month period ended May 2, 1998 and
an estimated $7,500,000 cost ($4,575,000 net of tax) related to the early
retirement of 9 1/8% Notes which will be recorded in fiscal 1998 as an
extraordinary item.
30
<PAGE> 38
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for fiscal 1994, 1995,
1996 and 1997 have been derived from the Company's consolidated financial
statements which have been audited by independent auditors. The Selected
Consolidated Financial Data for the three months ended May 2, 1998 and May 3,
1997, the eleven months ended February 1, 1997 and fiscal 1993 and 1992 is
derived from unaudited consolidated financial statements. The unaudited
consolidated financial statements have been prepared on the same basis as the
audited Consolidated Financial Statements and, in the opinion of management,
contain all adjustments, consisting of only normal recurring adjustments,
necessary for a fair presentation of the financial position and results of
operations for these periods. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company incorporated by reference herein. The Company has never paid a cash
dividend on its Common Stock and does not anticipate paying any cash dividends
on its Common Stock in the foreseeable future because it intends to retain its
earnings to finance the expansion of its business and for general corporate
purposes.
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- ---------- ---------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Net sales.................................... $420,030 $520,956 $1,145,151 $1,890,639 $3,196,056
Cost of sales(2)............................. 323,922 402,142 855,361 1,417,366 2,417,746
Merger related inventory provisions(3)....... -- 1,146 -- 5,952 --
-------- -------- ---------- ---------- ----------
Gross profit............................. 96,108 117,668 289,790 467,321 778,310
Warehouse operating and selling expenses..... 76,056 97,054 219,213 342,581 562,879
Corporate general and administrative
expenses................................... 12,408 13,063 29,624 49,742 95,101
Merger and other nonrecurring charges(4)..... 2,592 1,928 -- 36,838 19,840
-------- -------- ---------- ---------- ----------
Operating profit......................... 5,052 5,623 40,953 38,160 100,490
Interest expense, net........................ 4,972 5,014 16,915 17,968 26,949
Other income (expense)....................... (993) (104) 562 1,786 244
-------- -------- ---------- ---------- ----------
Income (loss) before income taxes........ (913) 505 24,600 21,978 73,785
Income tax expense........................... 1,567 2,316 8,294 13,766 33,649
-------- -------- ---------- ---------- ----------
Income (loss) before minority interest... (2,480) (1,811) 16,306 8,212 40,136
Minority interest (income) expense........... -- 152 69 1,436 (1,860)
-------- -------- ---------- ---------- ----------
Income (loss) from continuing
operations............................. (2,480) (1,963) 16,237 6,776 41,996
Loss from discontinued operations(5)......... 4,571 712 327 1,225 --
-------- -------- ---------- ---------- ----------
Income (loss) before extraordinary
item................................... (7,051) (2,675) 15,910 5,551 41,996
Extraordinary item(6)........................ -- (1,169) 586 -- --
-------- -------- ---------- ---------- ----------
Net income (loss)........................ $ (7,051) $ (3,844) $ 16,496 $ 5,551 $ 41,996
======== ======== ========== ========== ==========
Pro forma income (loss)(7)............... $ (7,390) $ (5,124) $ 15,769 $ 5,140 $ 40,281
======== ======== ========== ========== ==========
Pro forma net income (loss) per
share -- Basic:(8)
Continuing operations.................... $ (0.10) $ 0.20 $ 0.06 $ 0.33
Discontinued operations.................. (0.02) 0.00 (0.01) --
Extraordinary item....................... (0.02) 0.00 -- --
-------- ---------- ---------- ----------
Net income (loss).................... $ (0.14) $ 0.20 $ 0.05 $ 0.33
======== ========== ========== ==========
Pro forma net income (loss) per share --
Diluted:(8)
Continuing operations.................... $ (0.10) $ 0.19 $ 0.06 $ 0.31
Discontinued operations.................. (0.02) 0.00 (0.01) --
Extraordinary item....................... (0.02) 0.00 -- --
-------- ---------- ---------- ----------
Net income (loss).................... $ (0.14) $ 0.19 $ 0.05 $ 0.31
======== ========== ========== ==========
OTHER DATA:(1)
Ratio of earnings to fixed charges(9)........ -- 1.1x 2.1x 1.8x 2.4x
BALANCE SHEET DATA:(1)
Working capital.............................. $ 50,771 $ 96,880 $ 166,421 $ 253,693 $ 393,653
Total assets................................. 160,510 446,189 645,309 1,023,365 1,843,977
Long-term debt and capital lease
obligations................................ 52,375 177,523 188,340 163,399 633,250
Shareholders' equity and redeemable
preferred(10).............................. 39,584 116,363 259,325 521,776 693,607
Weighted average common shares outstanding:
Basic.................................... 47,740 75,400 104,162 121,901
Diluted.................................. 47,740 79,026 110,408 130,029
<CAPTION>
ELEVEN MONTHS ENDED THREE MONTHS ENDED
------------------------- -----------------------
FEBRUARY 1, JANUARY 31, MAY 3, MAY 2,
1997 1998 1997 1998
----------- ----------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:(1)
Net sales.................................... $2,911,189 $3,573,311 $ 921,455 $1,108,061
Cost of sales(2)............................. 2,205,359 2,733,308 703,650 850,291
Merger related inventory provisions(3)....... -- -- -- --
---------- ---------- ---------- ----------
Gross profit............................. 705,830 840,003 217,805 257,770
Warehouse operating and selling expenses..... 508,676 605,243 160,757 182,825
Corporate general and administrative
expenses................................... 87,793 105,055 29,098 33,102
Merger and other nonrecurring charges(4)..... 19,841 14,890 -- --
---------- ---------- ---------- ----------
Operating profit......................... 89,520 114,815 27,950 41,843
Interest expense, net........................ 24,550 38,115 9,245 13,078
Other income (expense)....................... 152 842 292 287
---------- ---------- ---------- ----------
Income (loss) before income taxes........ 65,122 77,542 18,997 29,052
Income tax expense........................... 30,728 34,457 7,500 13,044
---------- ---------- ---------- ----------
Income (loss) before minority interest... 34,394 43,085 11,497 16,008
Minority interest (income) expense........... (1,314) (1,319) (911) 196
---------- ---------- ---------- ----------
Income (loss) from continuing
operations............................. 35,708 44,404 12,408 15,812
Loss from discontinued operations(5)......... -- -- --
---------- ---------- ---------- ----------
Income (loss) before extraordinary
item................................... 35,708 44,404 12,408 15,812
Extraordinary item(6)........................ -- -- -- (1,104)
---------- ---------- ---------- ----------
Net income (loss)........................ $ 35,708 $ 44,404 $ 12,408 $ 14,708
========== ========== ========== ==========
Pro forma income (loss)(7)............... $ 33,993 $ 44,404 $ 12,408 $ 14,708
========== ========== ========== ==========
Pro forma net income (loss) per
share -- Basic:(8)
Continuing operations.................... $ 0.28 $ 0.34 $ 0.10 $ 0.12
Discontinued operations.................. -- -- -- --
Extraordinary item....................... -- -- -- (0.01)
---------- ---------- ---------- ----------
Net income (loss).................... $ 0.28 $ 0.34 $ 0.10 $ 0.11
========== ========== ========== ==========
Pro forma net income (loss) per share --
Diluted:(8)
Continuing operations.................... $ 0.26 $ 0.32 $ 0.09 $ 0.12
Discontinued operations.................. -- -- -- --
Extraordinary item....................... -- -- -- (0.01)
---------- ---------- ---------- ----------
Net income (loss).................... $ 0.26 $ 0.32 $ 0.09 $ 0.11
========== ========== ========== ==========
OTHER DATA:(1)
Ratio of earnings to fixed charges(9)........ 2.4x 2.2x 2.2x 2.2x
BALANCE SHEET DATA:(1)
Working capital.............................. $ 360,619 $ 517,476 $ 393,483 $ 526,321
Total assets................................. 1,816,434 2,349,659 1,845,531 2,428,921
Long-term debt and capital lease
obligations................................ 608,680 763,243 664,438 1,203,021
Shareholders' equity and redeemable
preferred(10).............................. 667,006 932,433 693,620 575,296
Weighted average common shares outstanding:
Basic.................................... 121,612 131,423 126,067 134,410
Diluted.................................. 129,749 137,858 131,268 136,729
</TABLE>
- ------------------------------
(1) The HMI acquisition (effective January 30, 1997), the Sofco acquisition
(effective January 24, 1997), the UT acquisition (effective November 8,
1996), the Nimsa acquisition (effective October 31, 1996), the Delivery
acquisition (effective March 1, 1996), the Young acquisition (effective
February 27, 1996) and
31
<PAGE> 39
the Lucas Bros., Inc. ("Lucas") acquisition (effective November 30, 1993)
were accounted for as poolings of interests and, accordingly, the HMI,
Sofco, UT, Nimsa, Delivery, Young and Lucas accounts and results are
included for all applicable periods.
(2) Cost of sales includes occupancy and delivery expenses.
(3) Reflects the write-down to fair market value of certain inventory which the
Company decided to eliminate from its product line.
(4) Merger and other non-recurring charges in fiscal 1997 include the
acquisition costs incurred by DDI, the continued integration of delivery
services and certain provisions for reductions in workforce and facility
closures at other locations. Merger and other nonrecurring charges in prior
fiscal years relate primarily to the mergers with Sofco, HMI, Nimsa and UT
in fiscal 1996, Delivery and Young in fiscal 1995 and Lucas in fiscal 1993
and include, among other things, costs to complete the acquisitions, costs
of merging and closing redundant facilities and costs associated with
personnel reductions and centralizing certain administrative functions.
(5) In fiscal 1995, Sofco adopted a plan to discontinue Sofco-Eastern, Inc; and
in February 1993, Lucas adopted a plan to discontinue its retail
operations.
(6) Reflects extraordinary loss related to a write-off of an unamortized
discount on debt in fiscal 1993, extraordinary gain related to the
repurchase by the Company of $10 million principal amount of the 9 1/8%
Notes in fiscal 1994 and an extraordinary loss related to the write-off of
deferred financing costs related to the terminated Old Credit Facility in
the three month period ended May 2, 1998.
(7) Pro forma net income reflects the additional taxes that would be incurred
to treat a subchapter S acquisition as if the acquired company was a C
corporation.
(8) Pro forma net income (loss) per share is calculated by dividing pro forma
income (loss), after preferred stock dividend requirements of Young of
$432,000 and $1,500,000 for fiscal 1994 and fiscal 1993, respectively, by
basic and diluted weighted common shares outstanding, respectively. Fiscal
1993 basic and diluted pro forma net loss per share includes preferred
shares as if they had been converted as of the beginning of the year. These
shares converted automatically upon the completion of the Company's initial
public offering in fiscal 1994.
(9) The ratio of earnings to fixed charges is calculated by dividing earnings,
defined as income from continuing operations before income taxes and
minority interest plus fixed charges less capitalized interest, by fixed
charges, defined as interest expense plus capitalized interest and the
interest portion of rent expense. Fiscal 1992 earnings were lower than
total fixed charges resulting in a less than one-to-one ratio of earnings
to fixed charges, consequently, additional earnings of $913,000 would have
been required to attain a ratio of one-to-one.
(10) Redeemable preferred was converted to common stock in fiscal 1994.
32
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes thereto contained in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended May 2,
1998, the Annual Report on Form 10-K for the transition period from March 2,
1997 to January 31, 1998 and the Current Report on Form 8-K filed July 28, 1998,
each incorporated by reference herein. Some of the information presented in this
Prospectus constitutes forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Although the Company believes
that its expectations are based on reasonable assumptions within the bounds of
the Company's knowledge of its business and operations, there can be no
assurance that actual results of the Company's operations and acquisition
activities and their effect on the Company's results of operations will not
differ materially from its expectations. See "Disclosure Regarding
Forward-Looking Statements."
GENERAL
The Company has grown primarily through a series of acquisitions including
the acquisition of HMI on January 30, 1997, Sofco on January 24, 1997, UT on
November 8, 1996, Nimsa on October 31, 1996, Delivery on March 1, 1996, and
Young on February 27, 1996, all of which were accounted for as pooling of
interests transactions. Accordingly, the Consolidated Financial Statements have
been restated to include the accounts and operations of Sofco, HMI, Nimsa,
Delivery and Young for all periods prior to the mergers. The accompanying
financial statements have been restated to include the operations of UT
effective March 3, 1996 and Nimsa effective from its formation in fiscal 1995.
Reference to fiscal 1997 refers to the eleven-month period ended January 31,
1998 for the Company. Reference to fiscal 1996 refers to the year ended March 1,
1997 for the Company and all pooled companies. Reference to fiscal 1995 refers
to the year ended March 2, 1996 for the Company, Delivery, Young, and Sofco, to
the year ended December 31, 1995 for HMI, and to the year ended June 30, 1996
for Nimsa. Reference to the fiscal year 1994 and prior fiscal years refers to
the February year end for the Company, to the December 31 year end for Delivery
and HMI, to the May 31 year end for Sofco, and to the September 30 year end for
Young. During fiscal 1997 the Company changed its fiscal year end from February
28 to January 31 in order to better align its fiscal year with its customers'
and competitors' fiscal calendars and to reduce the seasonality between
quarters. The fiscal 1997 period refers to the eleven months ended January 31,
1998.
During fiscal 1997, the Company continued to increase the scope of its
operations throughout the United States, Canada, Germany, and Italy, and entered
new markets with acquisitions in Ireland and Switzerland. Substantial emphasis
was placed in fiscal 1997 on expanding and improving international operations
and improving operations in the services segment. The Company continued to
execute its Corporate Supplier strategy and expanded the depth and breadth of
its product offerings as well as its geographic presence through 31 acquisitions
during fiscal 1997.
During fiscal 1998, the Company will place emphasis on internal growth
through continued implementation of the Corporate Supplier business model,
including increased sales of the Company's various products and services to
existing customers. The Company also plans to increase sales to existing
customers by cross-selling its expanded product and service offerings and
developing existing customers into international, national or multi-regional
accounts.
International markets historically have higher gross profit margins and
higher operating costs than the Company experiences domestically. Certain
products now offered by the Company, such as computer software, have lower gross
profit margins and lower operating costs than the products traditionally sold by
the Company. In addition, the acquisition of companies with break-even or
marginal operating results or the costs of consolidating acquired business units
with the Company may impact the operating margins and profitability of the
Company.
The Company currently operates in two main sectors: product distribution
(which includes office products, computer supplies, forms production and
management, desktop software, promotional products and
33
<PAGE> 41
cleaning and service supplies) and services (primarily same-day delivery), with
the majority of its revenue and cash flow attributable to the product
distribution business.
RESULTS OF OPERATIONS
The following table sets forth the percentages which the items in the
Company's Consolidated Statements of Operations bear to net sales for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ELEVEN MONTHS ENDED ENDED
FISCAL YEAR ------------------------- ---------------
--------------------- FEBRUARY 1, JANUARY 31, MAY 3, MAY 2,
1994 1995 1996 1997 1998 1997 1998
----- ----- ----- ----------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales......................... 74.7 75.0 75.6 75.8 76.5 76.4 76.7
Merger related inventory provisions... -- 0.3 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Gross profit........................ 25.3 24.7 24.4 24.2 23.5 23.6 23.3
Warehouse operating and selling
expenses............................ 19.1 18.1 17.6 17.5 17.0 17.4 16.5
Corporate general and administrative
expenses............................ 2.6 2.6 3.0 3.0 2.9 3.2 3.0
Merger and other nonrecurring
charges............................. -- 1.9 0.6 0.7 0.4 -- --
----- ----- ----- ----- ----- ----- -----
Operating profit.................... 3.6 2.1 3.2 3.0 3.2 3.0 3.8
Interest expense, net................. 1.5 1.0 0.8 0.8 1.0 1.0 1.2
Other income.......................... 0.0 0.1 0.0 0.0 0.0 0.0 0.0
----- ----- ----- ----- ----- ----- -----
Income before income taxes.......... 2.1 1.2 2.4 2.2 2.2 2.0 2.6
Income tax expense.................... 0.7 0.7 1.1 1.1 1.0 0.8 1.2
----- ----- ----- ----- ----- ----- -----
Income before minority interest..... 1.4 0.5 1.3 1.1 1.2 1.2 1.4
Minority interest (income) expense.... 0.0 0.1 (0.0) (0.1) (0.0) (0.1) 0.0
----- ----- ----- ----- ----- ----- -----
Income from continuing operations... 1.4 0.4 1.3 1.2 1.2 1.3 1.4
Loss from discontinued operations..... 0.0 0.1 -- -- -- -- --
----- ----- ----- ----- ----- ----- -----
Income before extraordinary item...... 1.4 0.3 1.3 1.2 1.2 1.3 1.4
Extraordinary (gain) loss............. (0.0) -- -- -- -- -- 0.1
----- ----- ----- ----- ----- ----- -----
Net income.......................... 1.4% 0.3% 1.3% 1.2% 1.2% 1.3% 1.3%
===== ===== ===== ===== ===== ===== =====
Pro forma net income (1)............ 1.4% 0.3% 1.3% 1.2% 1.2% 1.3% 1.3%
===== ===== ===== ===== ===== ===== =====
</TABLE>
- ------------------------------
(1) Pro forma net income reflects the tax impact for a subchapter S acquisition
as if the acquired company was a C corporation.
THREE MONTHS ENDED MAY 2, 1998 AND MAY 3, 1997
Net Sales. Consolidated net sales increased 20.3% to $1,108,061,000 in the
three months ended May 2, 1998 from $921,455,000 in the three months ended May
3, 1997. Net sales for the Company's product distribution segment increased
30.4% to $913,658,000 in the three months ended May 2, 1998 from $700,619,000 in
the three months ended May 3, 1997, while net sales in the services segment
decreased 12.0% to $194,403,000 in the three months ended May 2, 1998 from
$220,836,000 in the three months ended May 3, 1997. The overall increases were
primarily attributable to strong internal growth reflecting increased market
penetration in the Company's product distribution segment and to the acquisition
of DDI completed on November 26, 1997. The decline in the services segment
reflects the disposition of certain non-strategic businesses, the effect of
consolidating or closing facilities, and the elimination of low margin
customers.
International operations accounted for 20.0% of consolidated net sales, or
$221,927,000, in the three months ended May 2, 1998 and 19.0% of consolidated
net sales, or $174,690,000, in the three months ended May 3, 1997. This growth
is primarily attributable to expansion in Germany, Italy, Ireland, and
Switzerland and strong internal growth in Canada and France.
Gross Profit. Cost of sales includes merchandise, occupancy and delivery
costs. Consolidated gross profit as a percentage of net sales was 23.3% for the
three months ended May 2, 1998 and 23.6% for the three months ended May 3, 1997.
The slight decrease in the gross profit percentage is primarily attributable to
the services segment, which experienced reduced gross profit margins as a result
of consolidation costs, increases
34
<PAGE> 42
in driver and vehicle related costs, and reductions in pricing, partially offset
by better product distribution margins. Also affecting gross profit were lower
international gross margins and increased computer software license agreement
sales which typically have lower gross margins, all of which were partially
offset by increased vendor rebates as a result of improved programs.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating regional warehouses and sales offices, selling expenses including
commissions related to the Company's direct sales force, and warehouse
consolidation and relocation costs and expenses. Consolidated warehouse
operating and selling expenses as a percentage of net sales decreased to 16.5%
for the three months ended May 2, 1998 from 17.4% for the three months ended May
3, 1997. The improvement in operating expenses as a percentage of net sales
primarily reflects the Company's efforts to leverage and streamline its
operations, including the elimination of redundant facilities and positions.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses include the central expense incurred to provide
corporate oversight and support for regional operations, goodwill amortization
and certain depreciation. Consolidated corporate general and administrative
expenses decreased to 3.0% of net sales in the three months ended May 2, 1998
from 3.2% in the three months ended May 3, 1997. This decrease reflects the
Company's efforts to leverage these expenses over expanded operations, partially
offset by increased amortization of goodwill. Consolidated corporate general and
administrative expenses increased to $33,102,000 in the three months ended May
2, 1998 from $29,098,000 in the three months ended May 3, 1997, reflecting the
Company's expanded operations.
Operating Profit. Consolidated operating profit was $41,843,000, or 3.8% of
net sales, for the three months ended May 2, 1998 compared to consolidated
operating profit of $27,950,000, or 3.0% of net sales, for the three months
ended May 3, 1997. Operating profit for the product distribution segment
increased as a percentage of net sales to $39,898,000, or 4.4% of product
distribution net sales, in the three months ended May 2, 1998, from $21,779,000,
or 3.1% of product distribution net sales, in the three months ended May 3,
1997. The increase in operating profit as a percentage of net sales for the
product distribution segment primarily reflects successful consolidation of
operations which decreased expenses and improved focus on vendor support.
Operating profit for the services segment decreased to $1,945,000, or 1.0% of
services net sales, in the three months ended May 2, 1998 from $6,171,000, or
2.8% of services net sales, in the three months ended May 3, 1997. The decrease
in operating profit as a percentage of net sales for the services segment
reflects lower than expected performance at several delivery locations and
expenses related to integration projects, partially offset by cost savings from
the elimination of redundant personnel.
Operating profit for international operations increased to 2.6% of
international net sales in the three months ended May 2, 1998 from 0.9% in the
three months ended May 3, 1997 primarily reflecting improved performance in
Australia and Canada.
Interest Expense. Net interest expense of $12,791,000 in the three months
ended May 2, 1998 increased from $8,953,000 in the three months ended May 3,
1997 primarily due to increased borrowings under the senior credit facility
including the borrowings to finance the repurchase of 35,000,000 shares of the
Company's common stock. See "Liquidity and Capital Resources."
Minority Interest. Minority interest expense of $196,000 in the three
months ended May 2, 1998 compares to minority interest income of $911,000 in the
three months ended May 3, 1997. The minority interest expense for the three
months ended May 2, 1998 reflects a 47.6% minority interest in Corporate Express
Australia.
Extraordinary Item. The extraordinary loss of $1,104,000, net of tax of
$706,000, reflects the write-off of deferred financing costs related to the
terminated Senior Credit Facility.
Net Income. Net income of $14,708,000 in the three months ended May 2, 1998
increased 18.5% from net income of $12,408,000 for the three months ended May 3,
1997. This increase reflects increased profits from the Company's mature product
distribution operations and corporate expense leverage offset in part by higher
goodwill amortization, decreased services profits, a higher effective tax rate
and loss on extinguishment
35
<PAGE> 43
of debt. The increase in the effective tax rate primarily reflects increased
amortization of non-deductible goodwill and the absence of operating loss
carryforwards.
Other. Goodwill at May 2, 1998 of $860,357,000 increased from $847,544,000
at January 31, 1998 reflecting net additions from acquisitions offset by current
year amortization.
The inventory balance at May 2, 1998 of $275,453,000 increased $24,345,000
from $251,108,000 at January 31, 1998 as a result of inventory growth to support
increased sales and acquired inventories.
Accrued purchase costs at May 2, 1998 of $9,087,000 decreased by $291,000
from the January 31, 1998 balance of $9,378,000, reflecting acquisition
additions of $712,000 and usage of $1,003,000.
The accrued merger and related costs balance at May 2, 1998 of $12,846,000
decreased by $2,666,000, from the January 31, 1998 balance of $15,512,000,
reflecting current period usage.
ELEVEN MONTHS ENDED JANUARY 31, 1998 AND FEBRUARY 1, 1997
Net Sales. Consolidated net sales increased 22.7% to $3,573,311,000 in the
eleven months ended January 31, 1998 from $2,911,189,000 in the same
eleven-month period last year. Net sales for the Company's product distribution
segment increased 26.6% to $2,816,244,000 in the current eleven-month fiscal
period from $2,224,203,000 in the same eleven-month period last year while net
sales for its service segment increased 10.2% to $757,067,000 from $686,986,000
in the same periods. These increases were primarily attributable to 31
acquisitions in the eleven months ended January 31, 1998, the full year impact
of 100 acquisitions completed in fiscal 1996, and strong internal growth
reflecting increased market penetration in the Company's products distribution
business. This growth was partially offset by the elimination of low margin
customers, the effect of closing or consolidating facilities, and the
disposition of certain non-strategic businesses.
International operations accounted for 18.8% of total sales or $671,567,000
in the eleven months ended January 31, 1998 and 17.5% of total sales or
$509,734,000 in the same eleven-month period last year. The Company expanded its
international operations in Germany, Italy and Canada in the eleven months ended
January 31, 1998 and entered markets in Ireland and Switzerland.
Gross Profit. Cost of sales includes merchandise, occupancy and delivery
costs. Consolidated gross profit as a percentage of sales was 23.5% for the
eleven months ended January 31, 1998 compared to 24.2% for the same period in
the prior year. The gross profit percentage of sales for the product
distribution segment was 23.9% in the eleven months ended January 31, 1998 and
23.8% in the same eleven-month period last year. The gross profit percentage in
the services segment was 21.9% in the eleven months ended January 31, 1998
compared to 25.7% in the same eleven-month period last year. The decrease in the
gross profit percentage in the services segment is attributable to consolidation
costs, increases in driver and vehicle related costs, and pricing concessions.
Also affecting gross profit were lower international gross margins primarily as
a result of increased competitive pressures and increased computer software
sales (with lower gross margins), all of which were partially offset by
increased vendor rebates as a result of improved programs.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating regional warehouses and sales offices, selling expenses including
commissions related to the Company's direct sales force, and warehouse
consolidation and relocation costs and expenses. Warehouse operating and selling
expenses decreased as a percentage of sales to 17.0% in the eleven months ended
January 31, 1998 from 17.5% in the same eleven-month period last year. This
decrease is primarily attributable to the Company's efforts to leverage and
streamline its operations, including the elimination of redundant facilities and
positions.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses include the central expense incurred to provide
corporate oversight and support for regional operations, goodwill amortization
and depreciation. Corporate general and administrative expenses increased to
$105,055,000 in the eleven months ended January 31, 1998 from $87,793,000 in the
same eleven-month period last year reflecting the Company's expanded operations.
As a percentage of net sales, corporate general and administrative expenses
decreased to 2.9% in the current period from 3.0% in the prior period. This
decrease reflects the
36
<PAGE> 44
Company's efforts to leverage these expenses over expanded operations, partially
offset by increased goodwill amortization.
Merger and Other Nonrecurring Charges. During the eleven months ended
January 31, 1998, the Company recorded $14,890,000 in net merger and other
nonrecurring charges. The charge includes $4,485,000 of transaction costs
incurred by DDI in connection with its merger with the Company, costs related to
the continued integration of the delivery service business and certain
provisions for reductions in the workforce and facility closures at other
locations including the planned closure of 34 facilities and reduction of 722
employees. These exit plans are expected to be completed by the end of fiscal
1998.
Operating Profit. Consolidated operating profit increased 28.3% to
$114,815,000 or 3.2% of net sales for the eleven months ended January 31, 1998
compared to operating profit of $89,520,000 or 3.0% of net sales in the same
period last year. Before merger related and other nonrecurring charges,
operating profit increased to $129,705,000 in the current period from
$109,361,000 in the prior period due largely to internal growth and improved
operating efficiencies. Before merger related and other nonrecurring charges,
operating profit for the product distribution segment increased 42.0% to
$112,961,000 or 4.0% of net product distribution sales in the current fiscal
period from $79,549,000 or 3.6% of net sales in the same period last year.
Operating profit before nonrecurring charges for the services segment decreased
to $16,744,000 or 2.2% of net service sales in the current fiscal period from
$29,812,000 or 4.3% of net service sales in the prior fiscal period. The
decrease in operating profit for the services segment reflects poor performance
at several delivery locations and expenses related to integration projects,
partially offset by the cost savings from the elimination of redundant
personnel. Operating profit before nonrecurring charges for international
operations increased 114.0% to 2.0% of net international sales in the current
eleven-month fiscal period from 1.2% of net international sales in the prior
eleven-month fiscal period reflecting improved performance in Australia and
Canada, partially offset by decreased operating profits in the United Kingdom.
International operating profit before nonrecurring charges accounted for 11.7%
of total product distribution operating profit in the current fiscal period and
7.8% in the prior fiscal period.
Interest Expense. Net interest expense of $38,115,000 in the eleven months
ended January 31, 1998 increased from $24,550,000 in the prior eleven-month
fiscal period. This increase reflects increased borrowings under the Company's
previous credit facility (the "Old Credit Facility"), interest on acquired debt,
and the sale in June 1996 of $325,000,000 aggregate principal amount of the
Convertible Notes. The proceeds from the sale of the Convertible Notes and
borrowings under the Old Credit Facility were used to fund acquisitions and
provide the additional working capital required as a result of increased
business and for general corporate purposes.
Minority Interest. Minority interest income of $1,319,000 in the eleven
months ended January 31, 1998 compares to income of $1,314,000 in the prior
eleven-month fiscal period, reflecting a 47.6% minority interest in Corporate
Express Australia and a 49.0% minority interest in Corporate Express United
Kingdom through June 1997. The Company acquired a majority ownership interest in
Corporate Express Australia in May 1995 and a majority ownership interest in
Corporate Express United Kingdom in December 1995. In June 1997, the Company
acquired the remaining 49.0% ownership interest in Corporate Express United
Kingdom.
Net Income. Net income of $44,404,000 in the eleven months ended January
31, 1998 increased 24.4% from net income of $35,708,000 in the prior
eleven-month fiscal period. This increase reflects the increased profits from
the Company's mature product distribution operations, the lower merger and other
nonrecurring charges recorded in the current eleven-month fiscal period and
corporate expense leverage offset in part by higher goodwill amortization. The
Company experienced an effective tax rate of 44.4% in the fiscal 1997 period
compared to 47.2% in the fiscal 1996 period. The tax rate for both periods
reflects certain non-deductible merger costs and certain non-deductible
goodwill.
Other. The net accounts receivable balance at January 31, 1998 of
$616,574,000 increased $122,375,000 from $494,199,000 at March 1, 1997 primarily
as a result of acquired receivables and internal sales growth in existing
regions. The allowance for doubtful accounts as a percentage of consolidated
accounts receivable was 2.4% and 2.6% at the end of the fiscal 1997 and fiscal
1996 periods, respectively. The Company's historical bad debt write-offs have
been very low due to the high credit quality of its customers, resulting from
the
37
<PAGE> 45
Company's focus on large corporations, and the fact that in certain acquisitions
the seller guarantees acquired receivables.
The inventory balance at January 31, 1998 of $251,108,000 increased
$63,550,000 from $187,558,000 at March 1, 1997 primarily as a result of acquired
inventories and inventory growth to support increased sales.
Goodwill at January 31, 1998 of $847,544,000 increased $175,577,000 from
$671,967,000, reflecting additions from acquisitions of $197,250,000 (primarily
attributable to the DDI acquisition) offset by current year amortization of
$21,087,000 and reversals of $586,000.
The accounts payable trade balance at January 31, 1998 of $354,915,000
increased $62,874,000 from $292,041,000 at March 1, 1997 primarily as a result
of acquired trade payables and increased inventory purchases to support sales
growth.
Accrued purchase costs at January 31, 1998 of $9,378,000 decreased by
$3,510,000 from the March 1, 1997 balance of $12,888,000. This decrease reflects
acquisition additions of $6,365,000, payments of $9,289,000, and reversals of
$586,000 reducing previously recorded goodwill.
FISCAL YEARS 1996 AND 1995
Net Sales. Consolidated net sales increased 69.0% to $3,196,056,000 in
fiscal 1996 from $1,890,639,000 in fiscal 1995. Net sales for the Company's
product distribution segment increased 57.4% to $2,436,296,000 in fiscal 1996
from $1,548,175,000 in fiscal 1995 while net sales for its service segment
increased 121.9% to $759,760,000 from $342,464,000 in the same periods. These
increases were primarily attributable to 100 acquisitions in fiscal 1996 of
which 77 were product based companies (48 domestic and 29 international) and 23
were service based companies (21 domestic and two international) and the
acquisition of UT, which was accounted for as a pooling of interests with
operations from March 3, 1996 (prior year results were immaterial). Also
contributing to the sales increase was strong internal growth reflecting
increased market penetration in product distribution.
International operations accounted for 17.7% of total sales or $565,126,000
in fiscal 1996 and 12.6% of total sales or $238,201,000 in fiscal 1995. The
Company expanded its international operations in fiscal 1996 to include
operations in New Zealand, Germany, France, and Italy.
Gross Profit. Cost of sales includes merchandise, occupancy and delivery
costs. Consolidated gross profit as a percentage of sales was 24.4% for fiscal
1996 compared to 24.7% for fiscal 1995. Included in cost of sales in fiscal 1995
is a merger related inventory provision of $5,952,000, representing 0.3% of
sales. In fiscal 1995, the Company made the decision to expand to new product
categories, while discontinuing certain low-end products, to standardize core
product lines and to eliminate certain inventory historically maintained for
specific customers and wrote certain inventory down to its fair market value.
Impacting the declining gross profit percentage in fiscal 1996 was the addition
of a desktop software line of products which has substantially lower gross
profit margins, and decreased gross margins in the delivery business.
The gross profit percentage of sales for the product distribution segment
was 24.0% in fiscal 1996 and 23.8% in fiscal 1995 (excluding the merger related
inventory provision). The increase reflects gross margin improvement in all of
the domestic office product distribution operations which was partially offset
by lower margin sales from an acquired desktop software distributor. The
improvement in domestic office product distribution gross profit is due, in
part, to the expanded usage of the Company's proprietary, full color catalog
resulting in fewer wholesaler purchases and increased vendor rebates. The gross
profit percentage in the services segment was 25.5% in fiscal 1996 compared to
30.8% in fiscal 1995. The decrease in the gross profit percentage in the service
segment is primarily attributable to the acquisition of UT which had lower gross
profit margins than other delivery services operations.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses primarily include labor and administrative costs associated with
operating regional warehouses and sales offices, selling expenses and
commissions related to the Company's direct sales force, and warehouse
assimilation costs. Warehouse operating and selling expenses decreased as a
percentage of sales to 17.6% in fiscal 1996 from 18.1% in fiscal
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<PAGE> 46
1995. This decrease is primarily attributable to the Company's efforts to
leverage and streamline its operations and to the software distribution
operation and UT, both of which have lower operating expenses as a percentage of
sales.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased to $95,101,000 in fiscal 1996 from $49,742,000
in fiscal 1995, reflecting the Company's expanded operations. As a percentage of
net sales, corporate general and administrative expenses increased to 3.0% in
fiscal 1996 from 2.6% in fiscal 1995. This increase reflects increased goodwill
amortization resulting from purchase acquisitions in fiscal 1995 and fiscal 1996
and costs associated with developing a larger corporate staff to support
acquisition efforts and expanded operations, including an expanded information
system staff.
Merger and Other Nonrecurring Charges. During fiscal 1996, the Company
recorded $19,840,000 in net merger and other non-recurring charges primarily in
conjunction with the acquisitions of Nimsa, UT, Sofco and HMI. Of the total
charge, a net $12,366,000 was recorded in the third quarter and $7,474,000 was
recorded in the fourth quarter of fiscal 1996. The third quarter charge is
comprised of merger and other nonrecurring charges primarily in conjunction with
the acquisitions of UT and Nimsa, offset by $7,571,000 in adjustments to the
merger and other nonrecurring charge established in the fourth quarter of fiscal
1995. The fiscal 1995 charge included an exit plan for the integration of the
newly acquired delivery business into the Company's core product distribution
business. In the third quarter of fiscal 1996, nine months after the creation of
the original exit plan, the Company acquired UT, approximately doubling its
delivery services capacity. At that time, the Company adopted a new plan to
integrate the delivery services business separate from the core product
distribution business. In connection with the new exit plan, the Company
evaluated its facility and personnel requirements and identified duplicate
facilities consistent with the new plan. As a result of this new plan, the
closure of thirteen delivery facilities and five distribution facilities,
incorporated in the original fiscal 1995 plan, was superseded. The third quarter
fiscal 1996 charge includes the planned closure of 115 facilities and reduction
of approximately 485 employees. The fourth quarter fiscal 1996 charge primarily
reflects the actual costs of completing the acquisitions of Sofco and HMI. (See
Note 4 to the Consolidated Financial Statements).
Operating Profit. Consolidated operating profit was $100,490,000, or 3.2%
of net sales, in fiscal 1996, compared to operating profit of $38,160,000, or
2.1% of net sales, in fiscal 1995. Before merger related and other nonrecurring
charges, operating profit increased 48.6% to $120,330,000 in fiscal 1996 from
$80,950,000 in fiscal 1995, reflecting increased acquisitions, internal growth
and improved operating efficiencies. Before merger related and other
nonrecurring charges, operating profit for the product distribution segment
increased 52.1% to $88,802,000, or 3.6% of net sales, in fiscal 1996 from fiscal
1995 operating profit of $58,394,000 or 3.8% of net sales. Operating profit
before nonrecurring charges for the service segment increased 39.8% to
$31,528,000, or 4.1% of net sales, in fiscal 1996 from $22,556,000, or 6.6% of
net sales, in fiscal 1995. The decrease in operating profit for the service
segment as a percentage of sales reflects the results of UT which had lower
operating margins, poor performance at several delivery locations and expenses
related to consolidation projects. Operating profit before nonrecurring charges
for international operations decreased to 1.1% of net international sales in
fiscal 1996 from 3.9% of net international sales in fiscal 1995 reflecting
operating losses in Australia related to warehouse consolidation projects and
expansion to new European markets, partially offset by increased operating
profits in Canada. International operating profit before nonrecurring charges
accounted for 6.8% of total office products operating profit in fiscal 1996 and
15.8% of total office products operating profit in fiscal 1995.
Interest Expense. Net interest expense of $26,949,000 in fiscal 1996
increased from $17,968,000 in fiscal 1995. This increase reflects increased
borrowings under the Old Credit Facility and the sale of $325,000,000 aggregate
principal amount of the Convertible Notes. The proceeds from the sale of the
Convertible Notes were used to fund acquisitions and provide the additional
working capital required as a result of increased business and general corporate
purposes.
Minority Interest. Minority interest income of $1,860,000 in fiscal 1996
compares to an expense of $1,436,000 in fiscal 1995, reflecting a 47.6% minority
interest in the operating losses at Corporate Express
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Australia partially offset by a 49.0% minority interest in operating profits in
Corporate Express United Kingdom.
Net Income. Net income of $41,996,000 in fiscal 1996 compares to net income
of $5,551,000 in fiscal 1995. This increase reflects the increased profits from
the Company's more mature operations, the lower merger and other nonrecurring
charges recorded in fiscal 1996 and the purchase acquisitions. The Company
experienced an effective tax rate of 45.6% in fiscal 1996 compared to 62.6% in
fiscal 1995. The fiscal 1995 tax rate reflects certain non-deductible merger
costs, the utilization of certain net operating losses ("NOLs"), and certain
non-deductible goodwill. The fiscal 1996 tax rate reflects certain
non-deductible merger costs and certain non-deductible goodwill. The principal
reason the 1995 effective tax rate exceeds the 1996 rate is the higher level of
non-deductible merger costs in fiscal 1995.
FISCAL YEARS 1995 AND 1994
Net Sales. Net sales increased 65.1% to $1,890,639,000 in fiscal 1995 from
$1,145,151,000 in fiscal 1994. Net sales in the product distribution segment
increased 67.4% to $1,548,175,000 in fiscal 1995 from $924,886,000 in fiscal
1994, while the service segment increased 55.5% to $342,464,000 from
$220,265,000 in the same periods. These increases were primarily attributable to
51 acquisitions, of which 28 were product based companies (17 domestic and 11
international), seven were repurchases of computer product franchises by Young,
and 16 were service based companies principally in the delivery services
business (all domestic). Also contributing to the sales increase was the
inclusion of the results of operations of acquisitions accounted for as
purchases during fiscal 1995 and internal growth.
Gross Profit. Consolidated gross profit as a percentage of sales was 24.7%
for fiscal 1995 compared to 25.3% for fiscal 1994. Included in cost of sales for
fiscal 1995 is a merger related inventory provision of $5,952,000. The gross
profit percentage, excluding the merger related inventory provision was 25.0% in
fiscal 1995. The gross profit percentage in product distribution, excluding the
merger related inventory provision was 23.8% in fiscal 1995 compared to 23.9% in
fiscal 1994 and services segment gross profit percentage was 30.8% in fiscal
1995 compared to 31.3% in fiscal 1994. Decreases in services are primarily
attributable to increased delivery costs resulting from unusually severe weather
in the Northeast.
Warehouse Operating and Selling Expenses. Warehouse operating and selling
expenses decreased as a percentage of sales to 18.1% in fiscal 1995 from 19.1%
in fiscal 1994. This decrease reflects cost savings as a result of the
implementation of the Corporate Express business model at certain regional
warehouses, which includes centralizing certain administrative functions. Also
contributing to this decrease is a reduction of approximately $3,100,000 in
Delivery compensation expense which was eliminated in fiscal 1995 pursuant to
agreements made in connection with companies acquired in poolings of interest
acquisitions.
Corporate General and Administrative Expenses. As a percentage of net
sales, corporate general and administrative expenses were 2.6% in both fiscal
1995 and fiscal 1994. Expenses increased to $49,742,000 in fiscal 1995 from
$29,624,000 in fiscal 1994, reflecting the Company's expanded operations.
Merger and Other Nonrecurring Charges. During the fourth quarter of fiscal
1995, the Company recorded $36,838,000 in merger and other nonrecurring charges
(in addition to $5,952,000 in merger related inventory provisions) primarily in
conjunction with the acquisitions of Delivery and Young. The charges include the
actual costs of completing the acquisitions and additional costs associated with
a plan to integrate the combined companies' operations. The major activities
associated with the plan include merging various Delivery and Young facilities
into Company locations, closing duplicate facilities and centralizing certain
administrative functions. These merger and other nonrecurring charges include
merger transaction related costs of $13,273,000; severance and employee
termination costs of $7,457,000 (representing approximately 760 employees);
facility closure and consolidation costs of $9,693,000; and other asset
write-downs and costs of $6,415,000. Of the $36,838,000 charges, $7,724,000 are
non-cash charges.
Operating Profit. Operating profit of $38,160,000 in fiscal 1995 compares
to operating profit of $40,953,000 in fiscal 1994. Operating profit before
nonrecurring charges for product distribution increased to $58,394,000 in fiscal
1995 from $29,811,000 in fiscal 1994. This increase reflects the contribution of
acquired
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companies and increased regional operating profits at the Company's other
regional operations. Operating profit before nonrecurring charges for services
increased to $22,556,000, or 6.6% of net sales, in fiscal 1995 from $11,142,000,
or 5.1% of net sales, in fiscal 1994.
Interest Expense. Net interest expense increased to $17,968,000 in fiscal
1995 from $16,915,000 in fiscal 1994. Increases due to the elimination of the
0.5% per annum additional illiquidity payment of the 9 1/8% Notes effective upon
completion of a registered exchange offer in March 1995 and principal reductions
on the line of credit using funds from the public offerings of Common Stock
completed in March 1995 and September 1995 were offset by higher levels of
Delivery, Young and HMI debt outstanding as a result of their increased
borrowings to fund acquisitions and to provide the additional working capital
required as a result of increased business. On February 27, 1996, the Company
borrowed on its line of credit and repaid in full, as required under its terms,
the Young revolving line of credit balance of $10,809,000 which bore interest at
prime plus 1.25%, the Young subordinated debt of $11,930,000 which bore interest
at 17.5% and debt payable to the selling shareholders of $10,834,000 which bore
interest at 9.75%. The Delivery bank credit facility became due as of the
acquisition date due to a change of control provision. This facility was amended
to expire on May 31, 1996 to provide time for the Company to renegotiate its
primary bank revolver, which has been completed and the Delivery credit facility
has been repaid. See "Liquidity and Capital Resources."
Extraordinary Item. The extraordinary gain of $586,000, net of tax, in the
second quarter of fiscal 1994 related to the repurchase of $10,000,000 principal
amount of the 9 1/8% Notes.
Net Income. Net income of $5,551,000 in fiscal 1995 decreased compared to a
net income of $16,496,000 in fiscal 1994. This decrease reflects the merger and
other nonrecurring charges recorded in fiscal 1995 offset by contributions from
purchase acquisitions and increased profits from the Company's more mature
operations. The pre-tax profitability is reduced by an increase in the effective
tax rate to 62.6% in fiscal 1995 from 33.7% in fiscal 1994. The fiscal 1995 tax
rate reflects certain non-deductible merger costs, international tax rates, the
utilization of certain NOLs, and certain non-deductible goodwill. The fiscal
1994 tax rate included the utilization of certain NOLs and certain
non-deductible goodwill. The principal reason the 1995 effective tax rate
exceeds the 1994 effective tax rate is the non-deductibility of certain merger
costs. The fiscal 1994 period included in net income an extraordinary gain of
$586,000, net of tax, related to the repurchase of $10,000,000 principal amount
of the 9 1/8% Notes.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations through internally
generated funds and borrowings from commercial banks and has financed its
acquisitions through the use of such funds and the issuance of equity and debt
securities.
On February 5, 1998 the Company announced a Dutch Auction issuer tender
offer to purchase for cash up to 35,000,000 shares of its issued and outstanding
common stock, par value $.0002 per share. The terms of the tender offer invited
the Company's shareholders to tender up to 35,000,000 shares of the Company's
common stock to the Company at prices not greater than $11.50 nor less than
$10.00 per share, as specified by the tendering shareholders. On April 10, 1998,
the Company closed the tender offer and purchased 35,000,000 shares tendered at
a price of $10.75 per share. Shares tendered at prices in excess of the purchase
price and shares not purchased because of proration were returned to
shareholders. The Company funded the purchase of such shares and the payment of
related fees and expenses through the New Credit Facility. The New Credit
Facility consists of a $250,000,000 seven-year term loan and a $750,000,000
five-year revolving credit facility. The New Credit Facility is guaranteed by
substantially all domestic subsidiaries of the Company and is collateralized by
all tangible and intangible property of the guarantors including inventory and
accounts receivables. At the borrower's option interest rates are at a base rate
or a Eurodollar rate plus an applicable margin determined by a leverage ratio as
defined in the loan agreements. The term loan's interest rate ranges from 0.25%
to 0.75% above the revolving loan interest rate. The Company is subject to usual
covenants customary for this type of facility including financial covenants. The
available funds may be used for general corporate purposes, including permitted
acquisitions and permitted share repurchases including the Share
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Repurchase and other share repurchases. As of July 17, 1998, the Company had
$482,391,000 outstanding (which includes outstanding Letters of Credit) under
the New Credit Facility and an unused borrowing capacity of $517,609,000.
The Company Board of Directors has recently authorized the repurchase of
shares of common stock from time to time in open market transactions, block
purchases, privately negotiated transactions and otherwise, at prevailing
prices. Financing for such purchases is available through the New Credit
Facility, as well as from cash flow from operations. As of the date of this
Prospectus, no such share repurchases have occurred.
On April 22, 1998 the Company's Old Credit Facility was replaced and paid
in full with proceeds from the New Credit Facility. Approximately $1,810,000 of
deferred financing costs related to the Old Credit Facility were expensed in the
first quarter of fiscal 1998 and are shown as an extraordinary item of
$1,104,000, net of tax of $706,000.
On May 29, 1998 the Company issued $350,000,000 principal amount of the Old
Notes. The Old Notes are guaranteed by all material domestic subsidiaries of the
Company and are subordinated in right of payment to all senior debt. On or after
June 1, 2003 through maturity the Old Notes may be redeemed at the option of the
Company, in whole or in part, at redemption rates ranging from 104.813% to 100%.
At any time on or before June 1, 2001 the Company may redeem up to 35% of the
notes with the net cash proceeds of one or more Public Equity Offerings at a
redemption price equal to 109.625% of the principal amount thereof, subject to
certain restrictions. Semi-annual interest payments are due on June 1 and
December 1 commencing on December 1, 1998. A portion of the proceeds from the
sale of the Old Notes was used to fund the Tender Offer and the Consent
Solicitation and to repay a portion of the New Credit Facility. As a result, the
Company will incur a pre-tax extraordinary loss of approximately $7.5 million
(including unamortized deferred financing fees). The Company settled an interest
rate hedging contract based on $300,000,000 of U.S. Treasury notes related to
the completed Old Note Offering. The cost of the settlement of the contract will
be amortized over the ten-year term of the Notes as an adjustment to the
effective interest rate of the debt agreement.
During the eleven months ended January 31, 1998, the Company invested
$24,572,000 net cash and approximately 14,895,000 shares of common stock in its
acquisition program. Total liabilities assumed in connection with these
acquisitions were $171,928,000. In addition, the Company made payments of
approximately $8,797,000 and issued approximately 252,000 shares of common stock
related to acquisitions completed in prior fiscal years.
During the three months ended May 2, 1998 and the eleven months ended
January 31, 1998, the Company had capital expenditures of $21,501,000 and
$82,959,000, respectively, for warehouse reconfigurations, computer systems and
software, telecommunications equipment, delivery vehicles, leasehold
improvements and investments in facilities. The Company continues to invest in
advanced facilities, the development of its proprietary computer software, and
the upgrade of its computer systems.
Significant uses of cash in the three months ended May 2, 1998 were as
follows: repurchase of common stock of $379,250,000, capital expenditures of
$21,501,000, cash paid for acquisitions of $21,047,000, debt issuance costs of
$15,150,000 and other uses of $430,000, partially offset by net proceeds from
debt of $244,356,000, cash provided by net borrowings on lines of credit of
$153,752,000 and operating activities of $31,814,000. Significant uses of cash
in the eleven months ended January 31, 1998 were as follows: capital
expenditures of $82,959,000, cash paid for acquisitions of $33,369,000, net debt
repayments of $10,393,000, retirement of DDI bonds of $62,178,000, and net other
uses of $2,168,000, partially offset by cash provided by net borrowings on lines
of credit of $122,376,000, operating activities of $26,916,000, proceeds from
the sale of assets of $21,100,000, issuance of common stock of $8,104,000, and
issuance of subsidiary common stock of $2,434,000.
The Company expects net capital expenditures for fiscal 1998 of
approximately $80,000,000 comprised of approximately $59,000,000 to be used for
upgrading and enhancing its information systems and telecommunications equipment
and approximately $21,000,000 for warehouse reconfiguration and equipment.
Actual capital expenditures for fiscal 1998 may be greater or less than budgeted
amounts.
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During fiscal 1996, the Company acquired, for a net cash purchase price of
$241,846,000 and 5,542,000 shares of common stock, 77 office products
distributors and 23 service companies. Of these 100 acquisitions, 86 were
accounted for as purchases and 14 were accounted for as immaterial poolings of
interest. In addition, the Company acquired UT, which was accounted for as a
pooling of interests with financial results included from March 3, 1996 for
6,332,000 shares of common stock. Total liabilities assumed in connection with
these acquisitions were $282,777,000 (including accounts payable and assumed
debt). In addition, the Company made payments of approximately $13,984,000
related to prior acquisitions. Included in the net cash purchase price of
$241,846,000 is the purchase of ASAP, a computer software distribution company,
in May 1996 for approximately $98,000,000 in cash offset by cash acquired of
approximately $14,000,000.
On June 24, 1996, the Parent issued $325,000,000 aggregate principal amount
of Convertible Notes which are structurally subordinated to the Notes. The notes
are convertible into the Parent's common stock at a conversion price of $33.33
per share, subject to adjustments under certain conditions. A portion of the
proceeds from the sale of the Convertible Notes was used to repay a previous
credit facility and an acquisition note payable with the remaining proceeds
being used to fund acquisitions and for other general corporate purposes.
Cash and cash equivalents increased by $24,686,000 in fiscal 1996. This
increase reflects proceeds of $325,000,000 from issuance of the Convertible
Notes, net borrowings on lines of credit of $104,382,000 and cash from
operations of $25,753,000, offset by capital expenditures of $119,639,000,
payments for acquisitions of $255,830,000, repayment of debt of $64,893,000 and
net other additions of $9,913,000. Net cash provided by operating activities of
$25,753,000 reflects cash generated by net income plus non-cash expenses,
primarily depreciation and amortization, offset by an increase in accounts
receivable, inventories, and accrued liabilities reflecting increased sales. The
repayment of debt is primarily debt of acquired operations.
During fiscal 1995, the Company purchased 45 companies for a net cash
purchase price of $96,971,000 and newly issued securities representing a 52.5%
interest in Corporate Express Australia for a net cash outlay of $98,000
($16,785,000 purchase price less cash acquired of $16,687,000). The Company also
repurchased seven computer product franchises for $21,187,000. Total liabilities
assumed in connection with these acquisitions were $118,447,000 (including
accounts payable and assumed debt). In addition, the Company made payments of
approximately $6,044,000 related to acquisitions completed in fiscal 1994.
During fiscal 1995, the Company sold its high-end furniture business for
$4,362,000, which was acquired as part of the acquisition of Joyce
International, Inc.'s office products division ("Joyce"). The sale was
contemplated at the time of the Joyce acquisition and was reflected in the
financial statements accordingly.
Cash and cash equivalents increased by $14,314,000 in fiscal 1995. This
increase reflects net proceeds from the sale of common stock of $449,288,000
(primarily from the March and September 1995 public offerings) offset by the
purchase of common stock held by OfficeMax, Inc. for $195,831,000, net payments
on the line of credit of $18,871,000, payments for capital expenditures during
fiscal 1995 of $53,124,000, cash paid for acquisitions of $124,300,000, cash
used in operating activities and repayment of debt of $99,838,000 and net other
additions of $56,990,000. Net cash used in operating activities of $16,433,000
reflects cash generated by net income plus non-cash expenses offset by an
increased investment in accounts receivable and inventories reflecting increased
sales and the introduction of the Company's catalog into acquired operations.
The repayment of debt includes the repayment of debt of acquired companies.
The Parent and each of the Subsidiary Guarantors have fully and
unconditionally guaranteed, on a joint and several basis, the obligation to pay
principal and interest on the Notes. These guarantees are expressly subordinate
to all Senior Debt of the Issuer, the Parent and the guarantor subsidiaries,
including the New Credit Facility. Substantially all of the Issuer's income and
cash flow is generated by it's subsidiaries. As a result, funds necessary to
meet the Issuer's debt service obligations are provided in large part by
distributions or advances from its subsidiaries. Under certain circumstances,
contractual and legal restrictions, as well as the financial condition and
operating requirements of the Issuer's subsidiaries, could limit the Issuer's
ability to obtain cash from its subsidiaries for the purpose of meeting its debt
service obligations, including the payment of principal and interest on the
Notes. In addition, certain of the Issuer's subsidiaries are not included among
the guarantor subsidiaries and such subsidiaries will not be obligated with
respect to the Notes. As a
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result, the claims of creditors of such non-guarantor subsidiaries will
effectively have priority with respect to the assets and earnings of such
companies over the claims of creditors of the Issuer, including holders of the
Notes.
The Company believes that the borrowing capacity under the New Credit
Facility, together with proceeds from future debt and equity financings, in
addition to the Company's cash on hand, capital resources and cash flows from
operations, will be sufficient to fund the Company's ongoing operations,
anticipated capital expenditures and acquisition activity for the next twelve
months. However, actual capital needs may change, particularly in connection
with acquisitions which the Company may complete in the future.
INFLATION
Certain of the Company's product offerings, particularly paper products,
have been and are expected to continue to be subject to significant price
fluctuations due to inflationary and other market conditions. The Company
generally is able to pass such increased costs on to its customers through price
increases, although it may not be able to adjust its prices immediately.
Significant increases in paper, fuel and other costs in the future could
materially affect the Company's profitability if these costs cannot be passed on
to customers. In general, the Company does not believe that inflation has had a
material effect on its results of operations in recent years. However, there can
be no assurance that the Company's business will not be affected by inflation in
the future.
SEASONALITY AND QUARTERLY RESULTS
The Company's product distribution business is subject to seasonal
influences. In particular, net sales and profits in the United States, Canada
and Europe are typically lower in the summer months due to lower levels of
business activity. Because cost of sales includes delivery and occupancy
expenses, gross profit as a percentage of net sales may be impacted by seasonal
fluctuations in net sales, higher delivery costs during inclement weather, and
the acquisition of less efficient operations. Quarterly results may be
materially affected by the timing of acquisitions and the timing and magnitude
of acquisition integration costs. Therefore, the operating results for any three
month period are not necessarily indicative of the results that may be achieved
for any subsequent fiscal quarter or for a full fiscal year.
Revenues and profit margins from the Company's local delivery services are
subject to seasonal variations. Prolonged inclement weather can have an adverse
impact on the Company's business to the extent that transportation and
distribution channels are disrupted.
ACCOUNTING STANDARDS
The Company is required to adopt SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," in the fourth quarter of fiscal 1998.
SFAS No. 131 will supersede the business segment disclosure requirements
currently in effect under SFAS No. 14. SFAS No. 131, among other things,
establishes standards regarding the information a company is required to
disclose about its operating segments and provides guidance regarding what
constitutes a reportable operating segment. The Company is currently evaluating
disclosures under SFAS No. 131 compared to current disclosures.
The Company is required to adopt the disclosure requirements of SFAS No.
132, "Employer's Disclosures about Pensions and Other Postretirement Benefits,"
in the fourth quarter of fiscal 1998. SFAS No. 132 revises disclosure
requirements for such pension and postretirement benefit plans to, among other
things, standardize certain disclosures and eliminate certain other disclosures
no longer deemed useful. SFAS No. 132 does not change the measurement or
recognition criteria for such plans.
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (February 1,
2000 for the Company). FAS 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value of
derivatives are recorded each period in current earnings or other comprehensive
income, depending on whether a derivative is designated as part of a hedge
transaction and, if it is, the type of hedge transaction. Management of the
Company anticipates that, due to its limited use of
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derivative instruments, the adoption of FAS 133 will not have a significant
effect on the Company's results of operations or its financial position.
On March 4, 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1 providing guidance on accounting for the
costs of computer software developed or obtained for internal use. The effective
date of this pronouncement is for fiscal years beginning after December 15,
1998. The Company is in the process of reviewing its current policies of
accounting for costs associated with internal software development projects and
how they may be affected by SOP 98-1. The Company believes its current policies
are materially consistent with the SOP, however, the ultimate impact on the
Company's future results of operations has not yet been determined.
IMPACT OF THE YEAR 2000
The Year 2000 issue is a result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a
system/job failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar business activities.
The Company's ISIS computer software has been designed with the Year 2000
issue in mind, and the Company believes it is Year 2000 compliant; however, the
Company utilizes many different systems and software programs to process and
summarize business transactions. The Company is continuing the evaluation of its
various operating systems and determining the additional remediation efforts
required to ensure its computer systems will properly utilize dates beyond
December 31, 1999. Preliminary results of this assessment have revealed that
remediation efforts required will vary from system to system. For example, it
appears some systems will not require any additional programming efforts, while
others may require significant programming changes.
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issue. However, there can be no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
For those systems identified as non-compliant, the Company has begun and,
in certain cases, completed remediation efforts. The Company will utilize both
internal and external resources to reprogram, or replace, and test the software
for Year 2000 modifications. The Company plans to complete the Year 2000 project
before January 31, 1999. The total estimated cost of the Year 2000 project is
estimated to be between $6,000,000 and $8,000,000 and is being funded through
operating cash flows. These costs are not expected to be material to the
Company's consolidated results of operations. Of the total project cost,
approximately $2,000,000 is attributable to the purchase of new software or
equipment which will be capitalized. The remaining $4,000,000 to $6,000,000 will
be expensed as incurred. In a number of instances, the Company may decide to
install new software or upgraded versions of current software programs which are
Year 2000 compliant. In these instances, the Company may capitalize certain
costs of the new system in accordance with current accounting guidelines.
The Company presently believes that with modifications to existing software
and conversions to new software for those sites which it believes may be
effected, the Year 2000 issue can be mitigated. However, if such modifications
and conversions are not made, or are not completed timely, the Year 2000 issue
could have a material adverse effect on the operations of the Company.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include,
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but are not limited to, the availability and cost of personnel trained in this
area, the ability to locate and correct all relevant computer codes, and similar
uncertainties.
MARKET RISK
The Company is primarily exposed to currency exchange-rate risk with
respect to its transactions and net assets denominated in Canadian and
Australian Dollars, U.K. Pound Sterling, French Francs, German Marks, Irish
Pounds, Swiss Francs and Italian Lira. Business activities in various currencies
expose the Company to the risk that the eventual net dollar cash inflows
resulting from transactions with foreign customers and suppliers denominated in
foreign currencies may be adversely affected by changes in currency exchange
rates.
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BUSINESS
OVERVIEW
The Company is a leading global provider of non-production goods and
services to large corporations that value innovative procurement solutions. The
Company believes it has developed a unique "Corporate Supplier" model which
focuses on providing its customers with a broad array of non-production goods
and services while reducing the customer's overall procurement costs and
providing a high level of customer service. The products and services provided
by the Company include office supplies, computer and imaging supplies, computer
desktop software, office furniture, advertising specialties, custom business
forms, forms management services, printing, cleaning and service supplies,
same-day local delivery services and distribution logistics management.
The Company has grown internally and through strategic acquisitions to a
global enterprise with locations throughout the United States and in various
international markets. The Company's pro forma net sales for the twelve months
ended January 31, 1998 has increased to $4.1 billion from net sales of $1.1
billion for fiscal 1994.
The Company's target customers are large corporations which the Company
believes increasingly seek to reduce their cost of procuring non-production
goods and services, including the time and effort spent managing functions that
are not considered core to their operations. The Company believes that, as part
of such effort, corporations seek to reduce their number of suppliers in order
to eliminate the internal costs associated with complex and varied ordering
procedures, multiple invoices, multiple deliveries, uneven service levels and
inconsistent product availability. In addition, many large corporations operate
from multiple locations and benefit from selecting suppliers who can provide
service to their national and international locations. The Company markets its
products and services to existing and prospective customers through a direct
sales force and delivers its products and services utilizing approximately 700
world wide locations including over 90 distribution centers and a fleet of over
10,000 owned or contracted vehicles.
CORPORATE SUPPLIER STRATEGY
The Company's Corporate Supplier strategy is designed to reduce its
customers' total costs, including their internal costs incurred in managing the
procurement of non-production goods and services. The Company believes that
customers value the Company's broad product and service offerings, low cost
structure, extensive geographic coverage and delivery capabilities. The Company
also believes that its customers value the high level of service the Company
provides through its account relationship managers, same-day delivery,
customized pricing, product availability, electronic interfaces and customized
reporting.
The Company seeks to continually reduce its merchandise and operating
costs, enabling it to offer its customers competitive prices while increasing
its operating margins. The Company is able to reduce such costs primarily
through utilizing its increasing purchasing power and advanced information
systems. By purchasing most of its products directly from manufacturers in large
volumes and limiting the number of manufacturers represented in its proprietary,
full-color catalog, the Company is able to obtain increasing volume discounts
and allowances from its vendors. The Company believes its information systems
represent a key strategic advantage differentiating the Company from its
competitors while permitting it to achieve cost savings, provide unique
capabilities to its customers, and centrally manage its operations. The Company
intends to continue improving and enhancing the capabilities of its information
systems which will enable the Company to further differentiate its product and
service offerings, while increasing its operating margins.
GROWTH STRATEGY
The Company has historically grown primarily through strategic
acquisitions. The Company believes that it has substantially completed its
infrastructure and, accordingly, its growth strategy is now focused primarily on
internal growth combined with selective strategic acquisitions. The Company
plans to increase sales to existing customers by cross-selling its expanded
product and service offerings and by developing existing customers into
multi-regional, national or international accounts. The Company seeks to attract
new customers, including national and international accounts, through its
marketing efforts and the use of its direct
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sales force. The Company continues to expand its product depth, while also
expanding its geographic coverage outside the United States and its sales
efforts in all geographic regions.
OPERATING STRATEGY
The Company intends to continue to increase its revenues and profitability
through continued implementation of its Corporate Supplier and growth
strategies, including the following key elements:
Provide a Broad Offering of Products and Services. The Company believes
that large corporations are focused on minimizing their total procurement costs,
including internal costs, by reducing their total number of suppliers to a small
group of reliable and cost-efficient partners. The Company believes that its
broad product and service offerings and extensive distribution network provide
the Company with an important competitive advantage in servicing these large
corporations. Over the last several years, the Company has expanded its product
offerings to include forms printing and management, same-day local delivery
services, distribution logistics management, advertising specialties and
computer and imaging supplies. The Company's extensive product and service
offerings enable it to reduce customer procurement costs, including costs
associated with dealing with multiple vendors, such as multiple invoices,
deliveries, ordering procedures, uneven service levels and inconsistent product
availability, while also fulfilling its customers' broad service and delivery
requirements.
Focus on Large Corporations. The Company believes that its transition from
a regional contract stationer to a full service Corporate Supplier is
substantially complete in the United States and that the Company is positioned
to effectively and profitably service large, multi-location customers. Moreover,
the Company believes that these large customers value the Company's broad
product and service offerings, extensive geographic distribution network, high
customer service levels and sophisticated information systems. Larger customers
typically utilize many of the Company's capabilities, which enhances the
Company's purchasing power and economies of scale. Approximately 90% of the
Fortune 500 companies, including General Motors Corporation, Hewlett-Packard
Company, Oracle Corporation, AT&T Corporation, The Walt Disney Company, IBM
Corporation and Exxon Corporation, order goods or services from one or more of
the Company's business segments.
Provide Superior Customer Service. The Company believes that its customers
value the high level of customer service which the Company provides through its
experienced direct sales force, sophisticated information systems and highly
efficient global distribution network. The Company's Corporate Supplier model
enables it to differentiate itself from competitors by offering its customers
important services including reliable delivery, a broad product assortment,
national account service, electronic interfaces, customized reporting and other
customized services. A key element to providing these services is the Company's
advanced computer systems which, when installed or linked to a customer's
systems, provide significant cost savings for both the Company and the customer
and enhanced access to information.
Enhance and Utilize Purchasing Power. The Company believes that the large
volume of its purchases combined with its centralized purchasing and
merchandising operation provides the Company with an important competitive
advantage. The Company continually seeks to reduce its merchandise costs,
enabling it to offer its customers competitive prices while increasing its
margins. By purchasing most of its products directly from manufacturers in large
volumes and limiting the number of manufacturers represented in its catalogs,
the Company is increasingly able to improve its vendor terms, including earning
increased volume discounts and allowances.
Consolidate and Upgrade Facilities. The Company has historically grown
internally and through numerous acquisitions of small office products and
service companies. The Company seeks to increase the sales, profitability and
asset productivity of its acquisitions by combining them with the Company's
existing operations, implementing the Company's business model, eliminating
redundant facilities and upgrading certain existing facilities. The process of
integrating acquisitions and consolidating facilities often has certain
short-term adverse effects on operations including, in certain cases, increased
operating costs associated with consolidation or relocation of facilities and a
reduction in sales as smaller, unprofitable accounts are discontinued. Once
completed, however, facility consolidations allow the Company to reduce its
operating
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<PAGE> 56
costs, enhance its customer service and increase its revenues and profitability
as management's attention shifts from managing the consolidations to increasing
account penetration. Because the Company has completed a majority of the planned
facility consolidations in its domestic office products business and in several
of its international markets, the Company believes that it is well-positioned to
expand its operating margins over the next several years.
Utilize Proprietary Computer Software and Systems. The Company believes
that its proprietary software and information systems represent key strategic
advantages which enable the Company to achieve cost savings, provide superior
customer service and centrally manage its operations. The Company has made
substantial investments in the development and enhancement of its proprietary
computer software applications and believes that its software and information
systems are the most sophisticated in the industry. During fiscal 1997, the
Company completed the development and implementation of its ISIS computer
software for its national account customers and successfully launched the
internet version of E-Way, its electronic commerce, ordering and fulfillment
system. The Company's proprietary ISIS system utilizes three-tier client/server
architecture that allows customers and suppliers to better communicate with the
Company while providing lower operating costs and streamlined operations.
INDUSTRY OVERVIEW
In many non-production goods and services business sectors, including
office products and same-day local delivery, competition is fragmented and
includes many small local or regional providers. The Company believes that the
desire of large corporations to reduce their procurement costs by decreasing
their number of suppliers to a small group of reliable and cost-effective
partners will continue to cause the consolidation of many currently fragmented
product segments, as well as consolidation between separate sectors where the
key differentiation among suppliers will be their relative ability to fulfill
customer needs, rather than their ability to supply an individual product or
service. The Company believes that it is well positioned to capitalize on these
industry trends.
The Company currently operates in two main sectors: product distribution
(which includes office products, computer supplies, forms production and
management, desktop software, promotional products and cleaning and service
supplies) and services (primarily same-day delivery), with the majority of its
revenue and cash flow attributable to the product distribution business.
PRODUCT DISTRIBUTION
The office products distribution industry in the U.S. is consolidating
rapidly and undergoing other significant changes. As a result of consolidation,
the number of independent, midsize office products contract distribution
companies (those with annual sales of more than $15 million) has declined
significantly. Large companies (including the Company) serving a broad range of
customers have acquired many of these smaller businesses. As the office products
industry continues to consolidate, the Company believes that many of the
remaining smaller office products distribution companies will be unable to
compete due, in part, to their inability to purchase products at favorable
prices or provide all of the services customers require. The Company expects
that these independent businesses will be acquired by larger companies or will
close.
The office products industry consists primarily of companies that operate
in one or more of three broad sales channels: contract distribution, direct
mail-order marketing and retail. Contract distributors typically serve large and
medium-sized business customers through the use of a product catalog and a
direct sales organization and typically stock these products in distribution
centers and deliver such products to customers on the next business day. The
major contract distributors carry a significant proportion of their merchandise
in-stock, relying only upon wholesaler intermediaries for inventory backup and
increased product breadth, while smaller contract distributors carry a much
smaller portion of their merchandise in stock. Direct mail-order marketers of
office products typically target small business customers and home offices.
While their procurement and order fulfillment functions are similar to contract
distributors, direct mail-order marketers rely almost exclusively on catalogs
and other direct marketing programs, rather than direct sales forces, to sell
their products, and generally use third parties to deliver such products. Office
product retailers typically serve
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<PAGE> 57
smaller businesses, home office and individuals. Over the last decade, the
retail channel has undergone significant change, primarily as the result of the
emergence of office products superstores. The Company believes that every major
metropolitan area in the U.S. is now served by at least one office product
superstore.
Also included in the Company's product distribution sector are desktop
software, forms production and management, advertising specialties, promotional
products and cleaning and service supplies. Companies in the desktop software
industry provide corporate clients with a wide array of personal computer and
network software titles on a shrink-wrapped and volume license basis. Net
revenue includes the sale of shrink-wrapped product and the sale of licenses for
the use of software produced by major software publishers. The Company's other
product distribution business lines are also large markets served by many large
and small competitors.
SERVICES
The services segment consists primarily of delivery and logistics services
along with certain call center services. The delivery industry offers a variety
of customized distribution services for corporate customers with time-sensitive
pickup and delivery requirements. Services include regularly scheduled core
replenishment deliveries, individual special orders and door-to-door courier
deliveries. Through both ground and air divisions, the Company provides same-day
delivery fulfillment and next flight out services to its corporate clients.
PRODUCTS, SERVICES AND REGIONS OF OPERATION
The Company provides a broad range of non-production goods and services to
large corporations throughout North America as well as Europe and the Southern
Pacific. The Company's product and service offerings include office products,
computer supplies, forms production and management, desktop software,
promotional products, cleaning and service supplies and services (primarily
same-day delivery). Name brands offered by the Company include such brands as
3M, Microsoft and Hewlett-Packard, as well as the Company's own "EXP" private
label. The approximate percentages of the Company's net sales by product and
service category and by geographical segments are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INDUSTRY SEGMENTS:
Product Distribution(1)................................... 81% 82% 76% 79%
Delivery Services......................................... 19% 18% 24% 21%
GEOGRAPHICAL SEGMENTS:
Domestic (U.S. only)...................................... 100% 87% 82% 81%
International............................................. 0% 13% 18% 19%
</TABLE>
- ------------------------------
(1) Included in the product distribution segment is office products, computer
supplies, forms production and management, desktop software, promotional
products and cleaning and service supplies.
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<PAGE> 58
SUMMARY DESCRIPTION OF PRODUCT AND SERVICE OFFERINGS
The Company currently operates in two main sectors: product distribution
and services. The following describes the products and services offered in each
of these sectors:
PRODUCT DISTRIBUTION SECTOR
<TABLE>
<CAPTION>
<S> <C>
Office Products, Computer Supplies and Forms
Production and Management.....................
The Company offers its customers a full range of
office products, including traditional office
supplies, computer and imaging supplies and
furniture, offering next-day delivery. The
Company also offers forms production and forms
management capabilities, including custom
business forms, electronic forms,
pressure-sensitive label products and forms
management systems.
Specialty Products...............................
The Company offers its customers desktop
software, promotional products, advertising
specialties, and cleaning and service supplies.
The Company's desktop software product offerings
include major business programs for word
processing, spreadsheets, electronic mail,
suites/offices, databases, graphics, operating
systems, utilities and languages.
SERVICES SECTOR
Services.........................................
In addition to delivering its own products, the
Company provides, through a separate business
unit, same-day local delivery service including
both prescheduled and on-demand delivery
services, core replenishment services and
distribution logistics management.
</TABLE>
EXPANSION OF PRODUCT AND SERVICE OFFERINGS
The Company believes that its domestic and international network of
centrally-managed distribution centers, delivery fleet, computer systems and
direct sales force provides the infrastructure to efficiently supply corporate
customers with a broad range of non-production goods and services. To capitalize
on this competitive advantage, the Company has added through acquisitions the
following major product and service categories since 1994: forms printing and
management, same-day local delivery services, distribution logistics management,
computer and imaging supplies, desktop software, advertising specialties,
janitorial and cleaning supplies, business forms and pressure sensitive labels.
The Company may add additional product and service categories through
acquisitions or product line expansion. Following the acquisition of a company
whose product and service offerings are complementary to the Company's existing
offerings, the Company's initial integration efforts are focused on cross
selling its products and services and those of the acquired operations to each
respective customer base.
MERCHANDISING STRATEGY
The Company's domestic office products merchandising strategy is based
primarily on offering its customer's products featured the Company's
proprietary, full-color catalog. This catalog provides a comprehensive selection
and variety of the best-selling items in the core office products categories
which the Company typically maintains in inventory in its regional warehouses
for next-day delivery. The Company is currently expanding the assortment of
products featured in its office products catalog to include a broader assortment
of products. This merchandising strategy differs from that of traditional
contract stationers which typically provide their customers with
wholesaler-produced catalogs and typically maintain less then half of that
product assortment on hand. The Company has introduced its office products
catalog in all of its United States regions and has introduced a similar
country-specific catalog in Canada, Australia and the United Kingdom. Most of
the products featured in the Company's office products catalog are purchased by
the
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<PAGE> 59
Company directly from the manufacturer, eliminating the wholesaler's mark-up.
The number of items found in the Company's office products catalog is generally
comparable to that found in a typical office products superstore, although the
merchandise mix differs substantially. The Company also offers various
electronic versions of the office products catalog, complete with pictures and
custom pricing.
In addition to its office products catalog, the Company produces specialty
catalogs for complementary products and services, including additional computer
and imaging products, office furniture, promotional products and advertising
specialties. Products are selected for each of the Company's catalogs utilizing
computerized sales trend analyses which determine the best-selling items and
needs of the large corporate customer. The office products catalog is updated
annually to account for new sales trends, new product introductions and changes
in manufacturer's list prices, while the other catalogs are updated as
appropriate. The Company's catalogs generally include a full-color photograph of
each item, a narrative product description that emphasizes the particular
benefits and features of each item and a bar code to permit scanning order
entry.
DISTRIBUTION FACILITIES
The Company's distribution network consists of over 90 distribution centers
that maintain significant inventory for resale and approximately 600
distribution breakpoints and satellite sales offices which extend the Company's
geographic coverage. In its office product business, the Company generally
operates from a single regional distribution center which supports multiple
distribution breakpoints and satellite sales offices. Items stocked in these
regional office products' distribution centers generally consist of the most
commonly ordered items for which customers generally demand next-day delivery
through Company vehicles.
PROPRIETARY COMPUTER SOFTWARE APPLICATIONS
The Company continues to make substantial investments in the development
and enhancement of its proprietary computer software applications. During fiscal
1997, the Company completed the development and implementation of its ISIS
computer software for its national account customers and successfully launched
the internet version of E-Way, its electronic commerce, ordering and fulfillment
system. The integrated multi-divisional version of the ISIS software continues
to be developed and enhanced and is currently in beta test mode at two operating
divisions.
Key features of the ISIS system are the use of three-tier client/server
architecture that allows customers and suppliers to better communicate with the
Company, object oriented design techniques and a relational database designed to
handle customer inquiry, data warehouse and management information applications.
Through the implementation of these enhanced systems, the Company plans to make
its products and services available to a broader range of customers through its
Corporate Supplier business model and to further customize customer services and
account information while lowering the customer's overall procurement cost. In
addition, the new systems are expected to allow the Company to more effectively
integrate acquisitions and streamline operations by providing greater electronic
access to information between the Company, its customers and its suppliers.
MARKETING
The Company markets its various products and services directly to
individual customers by designing and offering customized merchandise and
service packages tailored to each customer's specific needs. The Company
generally offers discounts from the manufacturer's suggested list prices on many
products. Prices for some high volume items are often established by competitive
bidding. A substantial portion of the Company's revenues from its service
segment are derived from customers who have entered into contracts with the
Company. The Company has a broad customer base and believes that no single
customer accounted for more than one percent of total sales during fiscal 1997.
The Company markets its products and services through a combination of
national account sales teams, a local sales force and account managers. The
national account sales teams take primary responsibility for maintaining and
increasing sales of the Company's wide array of products and services to
multi-location
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<PAGE> 60
customers. These efforts are supported through proprietary information
technology resources dedicated to the national account teams. The Company's
local sales force is generally commission-based and is organized within each of
the Company's major product and service categories. The Company believes that
this structure maximizes the productivity as well as the product and service
knowledge of its sales force. Each customer is assigned an account manager who
maintains regular contact with the customer. Account managers share in the
responsibility of maintaining customer satisfaction, resolving any potential
customer issues and increasing the Company's sales to each account. Account
managers are also assigned a list of prospective customers for whom the account
manager takes responsibility in directing all marketing efforts. Additional
responsibilities of the account managers include designing and implementing
customized merchandise and service packages for each of their accounts as well
as responding to all special service requests.
STRUCTURE AND INTEGRATION OF ACQUISITIONS
The Company has historically grown through numerous acquisitions of small
office products and service companies which generally have annual sales of less
than $30 million. The Company intends to continue to grow in the future, through
internal growth coupled with selective strategic acquisitions. The Company plans
to increase sales to existing customers by cross-selling its expanded product
and service offerings and developing existing customers into multi-regional,
national or international accounts. The Company seeks to attract new customers,
including national and international accounts, through the marketing efforts of
its direct sales force.
Additionally, the Company generally seeks to increase the sales,
profitability and asset productivity of its acquisitions by combining them with
the Company's existing operations, implementing the Company's business model and
eliminating redundant facilities. Integration of acquisitions is often a complex
process which may entail material nonrecurring expenditures, including facility
closing costs, warehouse consolidation expenses, asset write downs and severance
payments. Integration of acquisitions generally involves the following elements:
- Elimination of Redundant Facilities and Services. In cases where acquired
companies have facilities, systems and administrative functions in the
Company's existing markets, these operations are generally eliminated or
consolidated with the Company's existing operations.
- Upgrading of Facilities. In addition to eliminating redundant facilities,
the Company has undertaken a program to upgrade certain of its existing
facilities to enable these facilities to handle higher sales volumes
resulting from its internal growth and acquisition activity. These
upgrades include modernization of equipment and computer systems, phone
system and wide area network standardization and improved material
handling including a reconfiguration of inventory within the warehouse.
The Company will also, where appropriate, construct or lease new
distribution facilities into which existing, outdated facilities will be
combined.
- Consolidation of Purchasing Power. As part of its integration of
acquisitions, the Company takes advantage of its volume purchasing power
and seeks to negotiate better prices and terms from suppliers.
- Implementation of Proprietary Computer Software. Acquired product
distribution companies are generally incorporated into the Company's
proprietary computer software environment, including EDI, common master
information files, national accounts software and customer ordering and
inventory management software. Certain elements of these implementations
will be timed to coincide with introduction of the Company's next
generation of computer software.
INTERNATIONAL ACQUISITIONS
The Company has made acquisitions and established operations in Canada,
Australia, New Zealand, the United Kingdom, Germany, France, Italy, Ireland and
Switzerland, and the Company may enter additional international markets in the
future. The Company has typically retained existing management and information
systems in its international acquisitions. The Company has and will continue to
implement appropriate aspects
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<PAGE> 61
of the Corporate Supplier business model in its international operations,
including creating in-stock catalogs, consolidating warehouses, upgrading
information systems, acquiring companies offering complementary products and
services, while focusing on larger customers and developing national and
international accounts. Portions of the Corporate Supplier business model have
been implemented in Canada, Australia and the United Kingdom.
COMPETITION
The Company operates in a highly competitive environment. The Company's
principal competitors in North America for office supplies and computer products
include both regional and national contract stationers (including the contract
stationer operations of office products superstores), large direct resellers,
privately-held companies that generally operate in only one location, and
distributors of business software and supplies for personal computers. In
certain of its business segments the Company may have various other large and
small competitors. In Europe and Australia, the Company's competitors include
primarily local and regional contract stationers and, to a limited extent,
national and multi-country contract stationers. In the delivery services sector
the Company has numerous competitors in each market, certain of which have
service capabilities which are similar to the Company's and others which provide
different types or levels of service.
Each of the Company's major product and service categories are a part of
fragmented industries which are currently experiencing a trend toward
consolidation. Although the Company believes its pricing is competitive with its
competitors, the Company also seeks to differentiate itself from its competitors
in each of its major product and service categories through its systems, product
assortment, service offerings and breadth of capabilities. Certain of the
Company's competitors have greater financial resources than the Company.
However, the Company believes that its Corporate Supplier business model
differentiates the Company from its competitors by offering, through a single
source, a unique selection of products and services for large corporate
customers.
EMPLOYEES
As of May 30, 1998, the Company had approximately 27,000 full-time
employees, 6,800 of whom were primarily employed in management and
administration, 14,900 in regional warehouse, delivery and distribution
operations and 5,300 in sales and marketing, order processing and customer
service. Approximately 87% of these employees are in the U.S., 6% in Europe, 3%
in Canada and 4% in the Southern Pacific. As of May 30, 1998, approximately 390
of the Company's employees were members of labor unions.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water as well as handling
and disposal practices for solid and hazardous wastes, or (ii) impose liability
for the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Certain of the
Company's subsidiaries operate printing facilities which may generate, or may
have generated in the past, hazardous wastes, and the Company operates a fleet
of vehicles, the maintenance or fueling of which may generate hazardous waste.
The Company is currently not aware of any environmental conditions relating
to present or past waste generation at or from these facilities, or any other of
the Company's facilities or operations, that would be likely to have a material
adverse effect on the financial condition or results of operations of the
Company. However, there can be no assurance that environmental liabilities in
the future will not have a material adverse effect on the financial condition or
results of operations of the Company.
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<PAGE> 62
PROPERTIES
As of July 20, 1998, the Company owned 46 facilities and leased 645
facilities. Of these 691 facilities, one was the corporate headquarters in
Broomfield, Colorado, 92 were product distribution warehouses and contiguous
administrative offices and 598 were separate sales or administrative offices,
delivery facilities or breakpoints. The Company's principal properties are
summarized as follows:
<TABLE>
<CAPTION>
SALES, SERVICE
DISTRIBUTION & CORPORATE TOTAL
CENTERS FACILITIES FACILITIES
------------ -------------- ----------
<S> <C> <C> <C>
United States..................................... 51 549 600
Australia......................................... 8 3 11
New Zealand....................................... 6 -- 6
Canada............................................ 6 10 16
United Kingdom.................................... 5 17 22
France............................................ 1 1 2
Italy............................................. 3 4 7
Switzerland....................................... 2 -- 2
Ireland........................................... 1 -- 1
Germany........................................... 9 15 24
-- --- ---
Total................................... 92 599 691
== === ===
</TABLE>
The Company periodically evaluates the location and efficiency of its
facilities to maximize customer satisfaction and increase economies of scale.
The Company plans to eliminate redundant facilities such that it typically will
operate office and computer supply product distribution from a single regional
warehouse with satellite sales offices and distribution breakpoints in each of
its regions. The Company also may close, consolidate or relocate regional
warehouses, satellite sales offices and distribution breakpoints from time to
time.
LEGAL PROCEEDINGS
The Company is involved in routine legal proceedings incidental to the
conduct of its business. Management believes that none of these legal
proceedings will have a material adverse effect on the financial condition or
results of operations of the Company. The Company has a dispute with a former
shareholder of a company acquired by the Company in fiscal 1996. No legal
proceedings have been commenced by the shareholder, and the Company cannot
determine if any legal action will be initiated, or the results or materiality
of any such action. The Company maintains general liability and business
interruption insurance coverage in amounts which it believes to be adequate.
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MANAGEMENT
The executive officers and directors of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jirka Rysavy............. 44 Chairman of the Board and Chief Executive Officer
Robert L. King........... 47 President, Chief Operating Officer and Director
Gary M. Jacobs........... 51 Executive Vice President and Secretary
Sam R. Leno.............. 52 Executive Vice President and Chief Financial Officer
Mark Hoffman............. 45 President--North American Operations
Thomas E. Frank.......... 59 President--International Operations
Janet A. Hickey.......... 53 Director
Mo Siegel................ 48 Director
James P. Argyropoulos.... 54 Director
</TABLE>
Mr. Rysavy has been Chairman of the Board and Chief Executive Officer since
1986. In addition to founding the Company's business in 1986, Mr. Rysavy has
been responsible for the Company's strategic vision, planning and direction.
Mr. King joined the Company in August 1993 as President, Chief Operating
Officer and a director. During the previous ten years, Mr. King held various
executive positions with Foxmeyer Corporation, a distributor of pharmaceuticals
and healthcare products, serving as its President and Chief Executive Officer
from 1989 to 1993. Prior to 1983, Mr. King served as Executive Vice President of
Narco Drug Co. and Vice President of computer services for Fox-Vliet Drug Co.
Mr. King serves as a director of Investment Technology Group, Inc.
Mr. Jacobs joined the Company in November 1992 as Executive Vice President
and Chief Financial Officer, and currently serves as Executive Vice President
and Secretary of the Company. Mr. Jacobs previously served the Company as a
director from August 1988 through September 1990. From 1990 to 1992, Mr. Jacobs
served as the Chief Executive Officer of Boulder Retail Finance Corporation, an
investment firm controlled by Mr. Jacobs. From 1978 through mid-1990, he served
as Executive Vice President of Capital Associates, Inc., a public equipment
leasing company. Mr. Jacobs also served as a director of Capital Associates,
Inc. from 1978 to 1991 and from 1994 to present. Prior to joining Capital
Associates, Inc., Mr. Jacobs served as a director of finance for Storage
Technology Corporation, a public company which manufactures computer peripheral
devices.
Mr. Leno joined the Company as Executive Vice President and Chief Financial
Officer in July 1995. From July 1994 until July 1995, Mr. Leno was the Chief
Financial Officer of Coram Healthcare. Prior thereto, for 23 years, Mr. Leno
served in various management positions with Baxter International, a
manufacturing and multinational distribution company, including Vice President
of Finance and Information Technology.
Mr. Hoffman joined the Company as President -- North American Office
Product Operations during April 1997. Mr. Hoffman previously served as
President, Chief Executive Officer and a director of APS Holdings, Inc. from
August 1992 to March 1997. Mr. Hoffman was Vice President, Planning and
Development at W. W. Grainger, Inc., from April 1991 to July 1992. From 1987 to
April 1991, he was with TRW, Inc., a manufacturer of automotive parts and other
products and a provider of information system services, in various executive
capacities, including Vice President and General Manager of TRW, Inc.'s Asia
Pacific steering and suspension operations and Managing Director, TRW Products,
Ltd.
Mr. Frank joined the Company as President -- International Operations
during May 1997. Mr. Frank previously served as President and Chief Executive
Officer of Hickory Farms Incorporated from 1988 to 1996. From 1972 to 1986, he
served in various management positions with Kentucky Fried Chicken, including
Senior Vice President and Managing Director of KFC International leading the
operations in Great Britain,
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<PAGE> 64
Continental Europe, South Africa and the Middle East. From 1996 to 1997, Mr.
Frank was a marketing professor at the University of Michigan Graduate School of
Business.
Ms. Hickey has served as a director of the Company since December 1991. Ms.
Hickey is a General Partner of the Sprout Group and a Senior Vice President of
DLJ Capital Corporation. The Sprout Group is a division of DLJ Capital
Corporation, which is a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette,
Inc. Prior to joining the Sprout Group in 1985, Ms. Hickey was with the General
Electric Company for fifteen years in a variety of positions, most recently as
Senior Vice President-Venture Investments of the General Electric Investment
Corporation and as a Trustee of the General Electric Pension Trust. Ms. Hickey
also serves as a director of Loehmann's Holdings, Inc., as well as several
private companies, and is a Trustee of Mt. Holyoke College.
Mr. Siegel has been a director of the Company since June 1996. In 1970, Mr.
Siegel founded Celestial Seasonings, Inc., the largest manufacturer and marketer
of herb teas in the United States, and was President and Chairman of the Board
of Celestial Seasonings until 1986. From 1986 until 1991, Mr. Siegel was
involved in private investments and not-for-profit activities. He served as
Chief Executive Officer of Celestial Seasonings from 1991 to 1997 and has served
as a director since 1988 and as Chairman of the Board since 1991. Mr. Siegel
also serves on numerous other boards.
Mr. Argyropoulos has been a director of the Company since June 1997. Mr.
Argyropoulos was previously a director of the Company until October 1993. A
private investor, Mr. Argyropoulos is the founder, Chairman and Chief Executive
Officer of The Walking Company, a lifestyle specialty retailer, and serves on
the Board of Earthshell, a concrete packaging business. Mr. Argyropoulos
previously served as Chairman of the Board and Chief Executive Officer of The
Cherokee Group Inc. between 1972 and 1989, a shoe manufacturing and apparel
business he founded in 1972.
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DESCRIPTION OF THE NEW CREDIT FACILITY
On April 22, 1998, the Issuer and the Parent entered into the New Credit
Facility, dated as of April 17, 1998, with various banks, The First National
Bank of Chicago, as Syndication Agent, The Bank of New York, as Co-Documentation
Agent, DLJ Capital Funding, Inc. as Co-Documentation Agent and Bankers Trust
Company, as Administrative Agent (collectively, the "Banks"). The following is a
summary description of the principal terms of the New Credit Facility. The
description set forth below does not purport to be complete and is qualified in
its entirety by reference to the agreements setting forth the principal terms
and conditions of the New Credit Facility, which are available upon request from
the Company.
STRUCTURE
The New Credit Facility provides for a $250,000,000 term loan facility (the
"Term Loan Facility") and up to $750.0 million of revolving loans under a
revolving credit facility (the "Revolving Loan Facility"). The Term Loan
Facility was fully drawn on the closing of the New Credit Facility.
As of July 17, 1998, the Company had $250,000,000 outstanding under the
Term Loan Facility, $232,391,000 outstanding (which includes outstanding Letters
of Credit) under the Revolving Loan Facility of the New Credit Facility and an
unused borrowing capacity of $517,609,000. The Revolving Loan Facility may be
utilized to fund the Company's working capital requirements, including issuance
of stand-by and trade letters of credit, and for other general corporate
purposes.
The Term Loan Facility is comprised of a single tranche, seven-year term
facility of $250,000,000. Loans and letters of credit under the Revolving Loan
Facility will be available at any time during its five-year term subject to the
fulfillment of customary conditions precedent, including the absence of a
default under the New Credit Facility.
The Issuer will be required to repay loans outstanding under the Term Loan
Facility in accordance with the following amortization schedule:
<TABLE>
<CAPTION>
TERM LOANS
FISCAL YEAR AMOUNT AMORTIZED
----------- ----------------
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 1,250
1999........................................................ 2,500
2000........................................................ 2,500
2001........................................................ 2,500
2002........................................................ 2,500
2003........................................................ 60,625
2004........................................................ 118,750
2005........................................................ 59,375
--------
Total............................................. $250,000
========
</TABLE>
SECURITY; GUARANTY
The obligations under the New Credit Facility are guaranteed by each of the
Parent's and the Issuer's direct and indirect material domestic subsidiaries
with certain limited exceptions. The New Credit Facility and the guarantees
thereof are, subject to certain exceptions, secured by (i) a first priority
perfected lien on all the property and assets (tangible and intangible) of the
Parent, the Issuer and each of the subsidiary guarantors, (ii) all of the
capital stock of the Issuer and (iii) all of the capital stock (or similar
equity interests) of the Issuer's and the Parent's existing and future direct
and indirect material domestic subsidiaries.
INTEREST RATE; MATURITY
At the Issuer's option, borrowings under the New Credit Facility will bear
interest at (i) the base rate ("BR") or (ii) a Eurodollar rate specified in the
New Credit Facility, plus applicable margins, which vary
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<PAGE> 66
based on leverage. On the Issue Date, the applicable margins shall be (i) for
the Revolving Loan Facility, 150 basis points (in the case of Eurodollar loans)
or 25 basis points (in the case of BR loans) and (ii) for the Term Loan Facility
175 basis points (in the case of Eurodollar loans) and 50 basis points (in the
case of BR loans). The Term Loan Facility matures on April 25, 2005 and the
Revolving Loan Facility will terminate on April 25, 2003.
FEES
The Issuer is required to pay the Banks a commitment fee based on the daily
average unused portion of the Revolving Loan Facility which accrues from the
closing date under the New Credit Facility. The Issuer is also obligated to pay
letter of credit fees on the aggregate stated amount of outstanding letters of
credit.
COVENANTS
The New Credit Facility contains a number of covenants (in addition to the
financial covenants) that, among other things, restrict the ability of the
Company to dispose of assets, incur additional indebtedness, prepay other
indebtedness (including the Notes) or amend certain debt instruments (including
the Indenture), pay dividends, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
make investments, engage in mergers or consolidations, change the business
conducted by the Company or its subsidiaries, make capital expenditures or
engage in certain transactions with affiliates and otherwise restrict certain
corporate activities. In addition, the New Credit Facility contains financial
covenants that require the Issuer to maintain, on a consolidated basis,
specified financial ratios and tests, including minimum interest coverage and
fixed charge coverage ratios, and maximum leverage ratios.
EVENTS OF DEFAULT
The New Credit Facility contains customary events of default, including
nonpayment of principal, interest or fees, material inaccuracy of
representations and warranties, violation of covenants, cross-defaults to
certain other indebtedness, certain events of bankruptcy and insolvency, certain
ERISA matters, material judgments, invalidity of any guarantee or security
interest and a change of control of the Issuer or the Parent in certain
circumstances as set forth therein.
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<PAGE> 67
DESCRIPTION OF THE NOTES
Set forth below is a summary of certain provisions of the Notes. The Old
Notes were and the New Notes will be issued pursuant to an indenture (the
"Indenture") dated as of May 29, 1998, by and among CEX Holdings, Inc. (the
"Issuer"), Corporate Express, Inc. (the "Parent"), the Subsidiary Guarantors and
The Bank of New York, as trustee (the "Trustee"). The terms of the New Notes are
identical in all material respects to the respective terms of the Old Notes,
except that (i) the New Notes have been registered under the Securities Act, and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Notes and (ii) holders of the new Notes will generally not be entitled
to certain rights, including the payment of Liquidated Damages (as defined),
pursuant to the Registration Rights Agreement. The terms of the New Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
New Notes are subject to all such terms, and Holders of New Notes are referred
to the Indenture and the Trust Indenture Act for a statement thereof. In the
event that the Exchange Offer is consummated, any Old Notes which remain
outstanding after consummation of the Exchange Offer and the New Notes issued in
the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage in outstanding principal
amount thereof have taken certain actions or exercised certain rights under the
Indenture. The following summary of the material provisions of the Indenture and
the Registration Rights Agreement does not purport to be complete and is
qualified in its entirety by reference to the Indenture and the Registration
Rights Agreement, including the definitions therein of certain terms used below.
Copies of the Indenture and Registration Rights Agreement are available as set
forth below under "-- Additional Information." The definitions of certain terms
used in the following summary are set forth below under "-- Certain
Definitions."
GENERAL
The Old Notes are and the New Notes will be senior subordinated, unsecured,
general obligations of the Issuer. The Indenture provides, in addition to the
$350.0 million aggregate principal amount of Old Notes issued on the Issue Date,
for the issuance of additional Notes having identical terms and conditions to
the Old Notes (the "Additional Notes"). The aggregate principal amount of Old
Notes, New Notes and Additional Notes will be limited to the sum of $550.0
million. Interest will accrue on the Additional Notes issued pursuant to the
Indenture from and including the date of issuance of such Additional Notes. Any
such Additional Notes will be issued on the same terms as the Old Notes and New
Notes and will constitute part of the same series of securities as the Old Notes
and New Notes and will vote together as one series on all matters with respect
to the Old Notes and New Notes. All references to Notes herein includes the Old
Notes, the New Notes and the Additional Notes.
The Notes will be subordinate in right of payment to certain other debt
obligations of the Issuer. The Notes will be jointly and severally guaranteed on
a senior subordinated basis by Parent and each of the Subsidiary Guarantors,
which consist of all the Issuer's Subsidiaries other than the Receivables
Subsidiaries, Finance Subsidiaries, Excluded Subsidiaries and Foreign
Subsidiaries, provided that DDI and its subsidiaries shall not be required to
become Guarantors until 120 days after the Issue Date. The obligations of each
Guarantor under its guarantee, however, will be limited in a manner intended to
avoid it being deemed a fraudulent conveyance under applicable law. See
"Guarantees" below. The Notes will be issued only in fully registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.
The Notes will mature on June 1, 2008. The Notes will bear interest at the
rate per annum stated on the cover page hereof from the date of issuance or from
the most recent Interest Payment Date to which interest has been paid or
provided for, payable semi-annually on June 1 and December 1 of each year,
commencing December 1, 1998 to the persons in whose names such Notes are
registered at the close of business on the May 15 or November 15 immediately
preceding such Interest Payment Date. Interest will be calculated on the basis
of a 360-day year consisting of twelve 30-day months.
Principal of, premium, if any, and interest and liquidated damages under
the Registration Rights Agreement (the "Liquidated Damages"), if any, on the
Notes will be payable, and the Notes may be presented for registration of
transfer or exchange, at the office or agency of the Issuer maintained for such
purpose, which office or agency shall be maintained in the Borough of Manhattan,
The City of New York.
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<PAGE> 68
Except as set forth below, at the option of the Issuer, payment of interest may
be made by check mailed to the Holders of the Notes at the addresses set forth
upon the registry books of the Issuer. No service charge will be made for any
registration of transfer or exchange of Notes, but the Issuer may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Until otherwise designated by the Issuer, the
Issuer's office or agency will be the corporate trust office of the Trustee
presently located at the office of the Trustee in the Borough of Manhattan, The
City of New York.
The term "Subsidiaries" as used in this Description of Notes does not
include Unrestricted Subsidiaries. As of the Expiration Date of the Exchange
Offer, none of the Issuer's Subsidiaries will be Unrestricted Subsidiaries.
However, under certain circumstances, the Issuer will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to the restrictive covenants set forth in the
Indenture.
SUBORDINATION
The Notes and the Guarantees will be general, unsecured obligations of the
Issuer, the Parent and the Subsidiary Guarantors, respectively, subordinated in
right of payment to all Senior Debt of the Issuer, the Parent and the Subsidiary
Guarantors, as applicable. As of May 2, 1998, on a pro forma basis after giving
effect to the Share Repurchase, the New Credit Facility and the Old Note
Offering and the application of the net proceeds therefrom, the Issuer and the
Subsidiary Guarantors would have had outstanding an aggregate principal amount
of approximately $396.7 million of Senior Debt which would rank senior in right
of payment to the Notes and the guarantees, respectively, and the nonguarantor
subsidiaries would have had approximately $108.2 million of indebtedness which
would be effectively senior to the Notes and the guarantees, respectively. As of
May 2, 1998, the Parent had no Senior Debt but had outstanding $325.0 million of
Convertible Notes which would rank pari passu with the Parent's guarantee of the
Notes but which would be structurally subordinated to the Notes.
The Indenture will provide that no payment (by set-off or otherwise) may be
made by or on behalf of the Issuer or a Guarantor, as applicable, on account of
the principal of, premium, if any, or interest on, the Notes (including any
repurchases of any of the Notes), or any Obligation (and Claim, but only in the
case of Senior Debt under the New Credit Facility) in respect of the Notes,
including for cash or property (other than Junior Securities), or on account of
the redemption provisions of the Notes (or Liquidated Damages), (i) upon the
maturity of any Senior Debt of the Issuer or such Guarantor by lapse of time,
acceleration (unless waived) or otherwise, unless and until all principal of,
premium, if any, and the interest on such Senior Debt (and in the case of Senior
Debt under the New Credit Facility, all other monetary obligations in respect
thereof) are first paid in full in cash or Cash Equivalents (or such payment is
duly provided for) or otherwise to the extent holders accept satisfaction of
amounts due by settlement in other than cash or Cash Equivalents, or (ii) in the
event of default in the payment of any principal of, premium, if any, or
interest on Senior Debt of the Issuer or such Guarantor (and, in the case of
Senior Debt under the New Credit Facility, any other monetary obligation in
respect thereof) when it becomes due and payable, whether at maturity, a
scheduled payment date, or at a date fixed for prepayment or by declaration or
otherwise (a "Payment Default"), unless and until such Payment Default has been
cured or waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default (other than a Payment
Default) that permits the holders of Senior Debt (or a trustee or agent on
behalf of such holders) to declare such Senior Debt to be due and payable (or,
in the case of letters of credit, require cash collateralization thereof) and
(ii) written notice of such event of default being given to the Trustee by the
holders (or a trustee, agent or other representative of such holders) of
Designated Senior Debt (a "Payment Notice"), then, unless and until such event
of default has been cured or waived or otherwise has ceased to exist, no payment
(by set-off or otherwise) may be made by or on behalf of the Issuer or any
Guarantor which is an obligor under such Senior Debt on account of any
Obligation (and Claims, but only in the case of Senior Debt under the New Credit
Facility) in respect of the Notes, including the principal of, premium, if any,
or interest on the Notes, or to repurchase any of the Notes, or on account of
the redemption provisions of the Notes, in any such case, other than payments
made with Junior Securities. Notwithstanding the foregoing, unless the Senior
Debt in respect of which such event of default exists has been declared due and
payable in its entirety within 179 days after the Payment Notice is
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<PAGE> 69
delivered as set forth above (the "Payment Blockage Period") (and such
declaration has not been rescinded or waived), at the end of the Payment
Blockage Period (but subject to the preceding and following paragraphs), the
Issuer and the Guarantors shall be required to pay all sums not paid to the
Holders of the Notes during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Notes. Any
number of Payment Notices may be given; provided, however, that (i) not more
than one Payment Notice shall be given within a period of any 360 consecutive
days, and (ii) no default that existed upon the date of such Payment Notice or
the commencement of such Payment Blockage Period (whether or not such event of
default relates to the same issue of Senior Debt) shall be made the basis for
the commencement of any other Payment Blockage Period unless such other Payment
Blockage Period is commenced by a Payment Notice from the representative under
the New Credit Facility and such event of default shall have been cured or
waived for a period of at least 90 consecutive days.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Issuer or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the foregoing provisions, such payment
or distribution shall be held in trust for the benefit of the holders of such
Senior Debt, and shall be paid or delivered by the Trustee or such Holders, as
the case may be, to the holders of such Senior Debt remaining unpaid (or
unprovided for) or to their representative or representatives, or to the trustee
or trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Debt may have been issued, ratably according to the aggregate
principal amounts remaining unpaid on account of such Senior Debt held or
represented by each, for application to the payment of all such Senior Debt
remaining unpaid, to the extent necessary to pay all such Senior Debt in full in
cash or U.S. Legal Tender Equivalents or otherwise to the extent holders accept
satisfaction of amounts due by settlement in other than cash or U.S. Legal
Tender Equivalents after giving effect to any concurrent payment or distribution
to the holders of such Senior Debt.
Upon any distribution of assets of the Issuer or any Guarantor upon any
dissolution, winding up, total or partial liquidation or reorganization of the
Issuer or a Guarantor, whether voluntary or involuntary, in bankruptcy,
insolvency, receivership or a similar proceeding or upon assignment for the
benefit of creditors or any marshalling of assets or liabilities, (i) the
holders of all Senior Debt of the Issuer or such Guarantor, as applicable, will
first be entitled to receive payment in full in cash or U.S. Legal Tender
Equivalents or otherwise to the extent holders accept satisfaction of amounts
due by settlement in other than cash or U.S. Legal Tender Equivalents (or have
such payment duly provided for) before the Holders are entitled to receive any
payment on account of any Obligation (and Claims, but only in the case of Senior
Debt under the New Credit Facility) in respect of the Notes, including the
principal of, premium, if any, and interest on the Notes (and Liquidated Damages
pursuant to the Registration Rights Agreement) and (ii) any payment or
distribution of assets of the Issuer or such Guarantor of any kind or character
from any source, whether in cash, property or securities (other than Junior
Securities) to which the Holders or the Trustee on behalf of the Holders would
be entitled (by set-off or otherwise), except for the subordination provisions
contained in the Indenture, will be paid by the liquidating trustee or agent or
other Person making such a payment or distribution directly to the holders of
such Senior Debt or their representative to the extent necessary to make payment
in full in cash or Cash Equivalents (or have such payment duly provided for) on
all such Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.
No provision contained in the Indenture or the Notes will affect the
obligation of the Issuer and the Guarantors, which is absolute and
unconditional, to pay, when due, principal of, premium, if any, and interest and
Liquidated Damages, if any, on the Notes. The subordination provisions of the
Indenture and the Notes will not prevent the occurrence of any Default or Event
of Default under the Indenture or limit the rights of the Trustee or any Holder
to pursue any other rights or remedies with respect to the Notes.
As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Issuer or
any Guarantor or a marshalling of assets or liabilities of the Issuer or any
Guarantor, Holders of the Notes may receive ratably less than other creditors.
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<PAGE> 70
GUARANTEES
The Parent is a holding company, conducting substantially all of its
business through Subsidiaries including the Issuer. The Issuer's payment
obligations under the Notes will be jointly and severally guaranteed by the
Parent and each of the Subsidiary Guarantors. The Subsidiary Guarantors consist
of all of the Issuer's Subsidiaries other than any Receivables Subsidiaries,
Excluded Subsidiaries, Finance Subsidiaries and Foreign Subsidiaries, provided
that DDI and its subsidiaries shall not be required to become Guarantors until
120 days after the Issue Date. The Guarantees will be general unsecured
obligations of the Parent and the Subsidiary Guarantors, as the case may be, and
each of the Guarantees will be subordinated in right of payment to all Senior
Debt of the Parent or the Subsidiary Guarantor, as applicable, including the
indebtedness under the New Credit Facility. The Subsidiary Guarantees will rank
pari passu in right of payment with all current and future senior subordinated
Indebtedness of the Guarantors, including the guarantees by the Subsidiary
Guarantors of obligations under the 9 1/8% Notes and the Parent's obligations
under the Parent Convertible Notes. Holders of the Notes will be direct
creditors of each Guarantor by virtue of their Guarantees. In the event of the
bankruptcy or financial difficulty of a Guarantor, such Guarantor's obligations
under its Guarantee may be subject to review and avoidance under state and
federal fraudulent transfer laws. Among other things, such obligations may be
avoided if a court concludes that such obligations were incurred for less than
reasonably equivalent value or fair consideration at a time when the Guarantor
was insolvent, was rendered insolvent, or was left with inadequate capital to
conduct its business. A court would likely conclude that a Guarantor did not
receive reasonably equivalent value or fair consideration to the extent that the
aggregate amount of its liability on its guarantee exceeds the economic benefits
it receives in the Offering. The obligations of each Guarantor under its
guarantee will be limited in a manner intended to cause it not to be a
fraudulent conveyance under applicable law, although no assurance can be given
that a court would give the holder the benefit of such provision. See "Risk
Factors -- The Guarantors and the Enforceability of the Guarantees."
If the obligations of a Guarantor under its Guarantee were avoided, Holders
of Notes would have to look to the remaining Guarantors for payment. There can
be no assurance in that such remaining Guarantors would have the ability and
resources to pay the outstanding principal and interest on the Notes. See, "Risk
Factors -- The Guarantors and the Enforceability of the Guarantees."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into another Person unless such Subsidiary Guarantor complies with
the provisions of the covenant entitled "Limitation on Merger of Subsidiary
Guarantors and Release of Subsidiary Guarantors."
The Issuer conducts certain of its foreign operations through Foreign
Subsidiaries. Accordingly, the Issuer's ability to meet its cash obligations may
in part depend upon the ability of such Foreign Subsidiaries and any future
Foreign Subsidiaries to make cash distributions to the Issuer and the Subsidiary
Guarantors. Furthermore, any right of the Issuer and the Subsidiary Guarantors
to receive the assets of any such Foreign Subsidiary upon such Foreign
Subsidiary's liquidation or reorganization (and the consequent right of the
Holders of the Notes to participate in the distribution of the proceeds of those
assets) effectively will be subordinated by operation of law to the claims of
such Foreign Subsidiary's creditors (including trade creditors) and holders of
its preferred stock, except to the extent that the Issuer or the Subsidiary
Guarantors are recognized as creditors or preferred stockholders of such Foreign
Subsidiary, in which case the claims of the Issuer or the Subsidiary Guarantors
would still be subordinate to any indebtedness or preferred stock of such
Foreign Subsidiaries.
OPTIONAL REDEMPTION
The Issuer will not have the right to redeem any Notes prior to June 1,
2003, other than as provided in the next paragraph. The Notes will be redeemable
for cash at the option of the Issuer, in whole or in part, at any time on or
after June 1, 2003, upon not less than 30 days' nor more than 60 days' notice to
each Holder of Notes, at the following redemption prices (expressed as
percentages of the principal amount) if redeemed during the 12-month period
commencing on June 1 of the years indicated below, in each case (subject to the
right of Holders of record on a Record Date to receive the corresponding
interest due (and the corresponding
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<PAGE> 71
Liquidated Damages due, if any) on an Interest Payment Date corresponding to
such Record Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003...................................................... 104.813%
2004...................................................... 103.208%
2005...................................................... 101.604%
2006 and thereafter....................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to June 1, 2001, the
Issuer may redeem, on one or more occasions, up to an aggregate of 35% of the
aggregate principal amount of the Notes originally issued under the Indenture at
a redemption price equal to 109.625% of the principal amount thereof (subject to
the right of Holders of record on a Record Date to receive interest due on an
Interest Payment Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption, with cash from the Net Cash Proceeds to the Issuer of one or more
Public Equity Offerings; provided, that at least 65% of the aggregate principal
amount of the Notes issued under the Indenture remain outstanding immediately
after the occurrence of each such redemption; provided, further, that such
notice of redemption shall be sent within 30 days after the date of closing of
any such Public Equity Offering, and such redemption shall occur within 60 days
after the date such notice is sent.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
The Notes will not have the benefit of any sinking fund.
Notice of any redemption will be sent, by first class mail, at least 30
days and not more than 60 days prior to the date fixed for redemption to the
Holder of each Note to be redeemed to such Holder's last address as then shown
upon the registry books of the Registrar. Any notice which relates to a Note to
be redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after the
date of redemption, interest will cease to accrue on the Notes or portions
thereof called for redemption, unless the Issuer defaults in the payment
thereof.
CERTAIN COVENANTS
Repurchase of Notes at the Option of the Holder Upon a Change of Control
The Indenture provides that in the event that a Change of Control has
occurred (subject to the provisions of the immediately succeeding paragraph),
each Holder of Notes will have the right, at such Holder's option, pursuant to
an offer (subject only to conditions required by applicable law, if any) by the
Issuer (the "Change of Control Offer"), to require the Issuer to repurchase all
or any part of such Holder's Notes (provided, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of
Control Purchase Date") that shall be no later than 40 Business Days after the
occurrence of such Change of Control, at a cash price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof, together with
accrued and unpaid interest and Liquidated Damages, if any, to the Change of
Control Purchase Date. The Change of Control Offer shall be made within 35 days
following a Change of Control and shall remain open for 20 Business Days
following its commencement or such longer period as may be required by
applicable law (the "Change of Control Offer Period").
The Indenture requires that if a New Credit Facility is in effect, or any
amounts are owing thereunder, at the time of the occurrence of a Change of
Control, prior to the mailing of the notice to Holders described in the
preceding paragraph, but in any event within thirty days following any Change of
Control, the Issuer covenants to (i) repay in full all Obligations under the New
Credit Facility or offer to repay in full all
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<PAGE> 72
Obligations under the New Credit Facility and repay the Obligations under the
New Credit Facility of each lender who has accepted such offer or (ii) obtain
the requisite consent under the New Credit Facility to permit the repurchase of
Notes as described above. The Issuer must first comply with the covenant
described in the preceding sentence before it shall be required to purchase
Notes in the event of a Change of Control; provided that the Issuer's failure to
comply with the covenant described in the preceding sentence shall constitute an
Event of Default described in clause (iii) under "Events of Default" below if
not cured within thirty days after the notice required by such clause. As a
result of the foregoing, a Holder of the Notes may not be able to compel the
Issuer to purchase the Notes unless the Issuer is able at the time to refinance
all of the New Credit Facility or obtain requisite consents under the New Credit
Facility.
As used herein, a "Change of Control" means (i) any merger or consolidation
of the Issuer or Parent with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Issuer or Parent, on a consolidated basis, in one transaction or a
series of related transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election of
directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities, (ii) any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) is or becomes the "beneficial owner," directly or indirectly, of
more than 50% of the total voting power in the aggregate of all classes of
Capital Stock of the Issuer (other than the Parent so long as the Parent owns
100% of such voting power) or Parent then outstanding normally entitled to vote
in elections of directors, (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of either the Issuer or Parent
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Issuer or Parent, as
applicable, was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the merger,
consolidation or sale, transfer or other conveyance, of all or substantially all
of the assets of the Issuer or the Parent, if such agreement was approved by a
vote of such majority of directors) cease for any reason to constitute a
majority of the Board of Directors of the Issuer or Parent then in office, as
applicable, or (iv) Parent ceases to own 100% of the Equity Interests of the
Issuer.
On or before the Change of Control Purchase Date, the Issuer will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any), of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officer's Certificate
listing the Notes or portions thereof being purchased by the Issuer. The Paying
Agent promptly will pay the Holders of Notes so accepted an amount equal to the
Change of Control Purchase Price (together with accrued and unpaid interest and
Liquidated Damages, if any), and the Trustee promptly will authenticate and
deliver to such Holders a new Note equal in principal amount to any unpurchased
portion of the Note surrendered. Any Notes not so accepted will be delivered
promptly by the Issuer to the Holder thereof. The Issuer publicly will announce
the results of the Change of Control Offer on or as soon as practicable after
the Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Issuer, and, thus, the removal of incumbent
management.
The phrase "all or substantially all" of the assets of the Issuer or Parent
will likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or substantially
all" of the assets of the Issuer or Parent has occurred. In addition, no
assurances can be given that the Issuer will be able to acquire Notes tendered
upon the occurrence of a Change of Control.
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<PAGE> 73
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under the
Exchange Act and the rules thereunder and all other applicable Federal and state
securities laws. To the extent that the provisions of any securities laws or
regulations conflict with the provisions of this covenant, compliance by the
Issuer or any of the Guarantors with such laws and regulations shall not in and
of itself cause a breach of its obligations under such covenant.
If the Change of Control Purchase Date hereunder is on or after an interest
payment Record Date and on or before the associated Interest Payment Date, any
accrued and unpaid interest (and Liquidated Damages, if any, due on such
Interest Payment Date) will be paid to the Person in whose name a Note is
registered at the close of business on such Record Date, and such interest (and
Liquidated Damages, if applicable) will not be payable to Holders who tender the
Notes pursuant to the Change of Control Offer.
Limitation on Restricted Payments
The Indenture provides that the Issuer and the Subsidiary Guarantors will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
make any Restricted Payment if, after giving effect to such Restricted Payment
on a pro forma basis, (1) a Default or an Event of Default shall have occurred
and be continuing, (2) the Issuer is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in paragraph (a)
of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," or (3) the aggregate amount of all Restricted
Payments made by the Issuer and its Subsidiaries, including after giving effect
to such proposed Restricted Payment, from and after the Issue Date, would exceed
the sum of, without duplication, (a) $15.0 million, plus (b) 50% of the
aggregate Consolidated Net Income of the Issuer and its Consolidated
Subsidiaries for the period (taken as one accounting period), commencing on the
first day of the first full fiscal quarter commencing after the Issue Date, to
and including the last day of the fiscal quarter ended immediately prior to the
date of each such calculation (or, in the event Consolidated Net Income for such
period is a deficit, then minus 100% of such deficit), plus (c) to the extent
not included in the amount described in clause (b) above, (i) 100% of the
aggregate Net Cash Proceeds received after the Issue Date by the Issuer from the
issue or sale of, or from Capital Contributions in respect of, Equity Interests
of the Issuer or of debt securities of the Issuer or any Subsidiary Guarantor
that have been converted into, or cancelled in exchange for, Equity Interests of
the Issuer (other than Equity Interests (or convertible debt securities) sold to
a Subsidiary of the Issuer and other than Disqualified Capital Stock or debt
securities that have been converted into or exchanged for Disqualified Capital
Stock), plus (ii) 100% of any dividends or other distributions received by the
Issuer or a Subsidiary of the Issuer after the Issue Date from an Unrestricted
Subsidiary of the Issuer, plus (iii) 100% of the cash proceeds (or Cash
Equivalents) realized upon the sale of any Unrestricted Subsidiary (less the
amount of any reserve established for purchase price adjustments and less the
maximum amount of any indemnification or similar contingent obligation for the
benefit of the purchaser, any of its Affiliates or any other third party in such
sale, in each case as adjusted for any permanent reduction in any such amount on
or after the date of such sale, other than by virtue of a payment made to such
Person) following the Issue Date, plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash (or Cash
Equivalents) or otherwise liquidated or repaid for cash (or Cash Equivalents),
at the Issuer's option the amount of cash proceeds (or Cash Equivalents)
received by the Issuer or any Subsidiary Guarantor with respect to such
Restricted Investment plus, (v) upon the redesignation of an Unrestricted
Subsidiary as a Subsidiary, the lesser of (x) the fair market value of such
Subsidiary or (y) the aggregate amount of all Investments made in such
Subsidiary subsequent to the Issue Date by the Issuer and its Subsidiaries.
The foregoing clauses (2) and (3) of the immediately preceding paragraph,
however, will not prohibit (s) Restricted Investments, provided, that after
giving pro forma effect to such Restricted Investments, the aggregate amount of
all such Restricted Investments made on or after the Issue Date that are
outstanding (after reducing such aggregate amount by (A) the net cash proceeds
received by the Issuer or any Subsidiary Guarantor from any Restricted
Investments made after the Issue Date that are sold or otherwise liquidated or
repaid to the Issuer or its Subsidiary Guarantors, other than amounts credited,
at the option of the Issuer, under clause (iv) of the immediately preceding
paragraph, and (B) the amount of all Restricted Investments made after the Issue
Date that have become Permitted Investments, valued at the lesser of (x) the
fair market
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value thereof on the date that such Investments became Permitted Investments or
(y) the aggregate amount of such prior Investments) does not exceed the sum of
(A) $50.0 million plus (B) the aggregate amount of any Investments that, but for
the fact that such Investments were made prior to the Issue Date, would be
Restricted Investments ("Existing Restricted Investments"); provided, however,
the aggregate of (B) shall not exceed $65.5 million, less the amount by which
the net cash proceeds received by the Issuer and its Subsidiary Guarantors upon
the sale, liquidation or repayment of Existing Restricted Investments is less
than the original amount of such Existing Restricted Investments; (t) pro rata
dividends and other distributions on the Equity Interests of any Subsidiary of
the Issuer by such Subsidiary; (u) payments in lieu of fractional shares in an
amount not to exceed $50,000 in the aggregate; (v) repurchases of Capital Stock
from employees of the Parent, the Issuer or Subsidiaries of the Issuer pursuant
to any management agreement or stock option agreement or upon their death or
disability or the termination of their employment in an aggregate amount to all
employees not to exceed $5.0 million per year plus the net cash proceeds
received by the Issuer of Capital Stock (other than Disqualified Capital Stock)
of the Parent sold to directors, executive officers, members of the management
or employees of the Parent, the Issuer and its Subsidiaries in such year on and
after the Issue Date, (w) the acquisition by a Receivables Subsidiary in
connection with a Qualified Receivables Transaction of Equity Interests of a
trust or other Person established by such Receivables Subsidiary to effect such
Qualified Receivables Transaction, and the provisions of the immediately
preceding paragraph will not prohibit, (x) Permitted Payments to Parent, (y) a
Qualified Exchange, or (z) the payment of any dividend on Qualified Capital
Stock within 60 days after the date of its declaration if such dividend could
have been made on the date of such declaration in compliance with the foregoing
provisions. The full amount of any Restricted Payment made pursuant to the
foregoing clauses (t), (u), (w) and (z) (but not pursuant to clauses (s), (v),
(x) and (y), of the immediately preceding sentence, however, will be deducted in
the calculation of the aggregate amount of Restricted Payments available to be
made referred to in clause (3) of the immediately preceding paragraph.
Additionally, (a) the foregoing clauses (2) and (3) of the first paragraph
of this covenant will not prohibit any payment of cash dividends to Parent,
which dividends are used by Parent (x) to make the next scheduled interest
payment, or, at the final scheduled maturity of July 1, 2000, the then
outstanding principal due (but in no event to exceed $325.0 million), on the
Parent Convertible Notes as required by the terms of the Parent Convertible
Notes in effect on the Issue Date or (y) to pay the next scheduled interest
payment on Refinanced Parent Convertible Notes (but in no event to exceed an
aggregate of $325.0 million, less amounts, if any, used to repay the Parent
Convertible Notes) and (b) the forgoing clause (3) of the first paragraph of
this covenant will not prohibit repurchases of Capital Stock (other than
Disqualified Capital Stock) of the Parent in an aggregate amount not to exceed
$100.0 million and, provided the Parent Consolidated Leverage Ratio for the most
recent four consecutive fiscal quarters ending on or prior to the date of any
such repurchase would be no more than 4.5 to 1, an additional $50.0 million in
the aggregate; provided, that the aggregate amount of all payments made pursuant
to clauses (a) and (b) of this paragraph (excluding payments of interest on the
Parent Convertible Notes and Refinanced Parent Convertible Notes paid in
accordance with clause (a)(x) and (a)(y)) shall not exceed $400.0 million. Any
Restricted Payment made pursuant to this paragraph shall be counted in the
calculation of the aggregate amount of Restricted Payments available to be made
pursuant to clause (3) of the first paragraph of this covenant except that any
such amount that is substantially concurrently used by Parent to pay interest on
or retire Parent Convertible Notes in accordance with clause (a)(x) or to pay
interest on Refinanced Parent Convertible Notes in accordance with clause (a)(y)
will not be counted in such calculation. Notwithstanding anything herein to the
contrary, in no event shall any proceeds from any debt ranking senior to or pari
passu with any of the Notes or Guarantees, as applicable, of the Issuer or any
of its Subsidiaries (excluding Indebtedness of any Foreign Subsidiary that is
non-recourse to the Issuer and its other Subsidiaries) be used (directly or
indirectly) to make any principal payments in respect of the Parent Convertible
Notes unless on the date of such incurrence of any such debt ranking senior to
or pari passu with any of the Notes or Guarantees, the Consolidated Leverage
Ratio for the most recent four consecutive fiscal quarters ending on or prior to
the date of such incurrence, after giving effect, on a pro forma basis, to such
incurrence of any senior or pari passu Indebtedness would be less than 4.5 to 1.
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For purposes of this covenant, the amount of any Restricted Payment, if
other than in cash, shall be the fair market value thereof, as determined by the
Issuer and set forth in an Officer's Certificate delivered to the Trustee
pursuant to the next sentence. Additionally, on the date of each Restricted
Payment in excess of $10.0 million, the Issuer shall deliver an Officer's
Certificate to the Trustee describing in reasonable detail the nature of such
Restricted Payment, stating the amount of such Restricted Payment, stating in
reasonable detail the provisions of the Indenture pursuant to which such
Restricted Payment was made and certifying that such Restricted Payment was made
in compliance with the terms of the Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture provides that the Issuer and the Subsidiary Guarantors will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
create, assume or suffer to exist any consensual restriction on the ability of
any Subsidiary of the Issuer to pay dividends or make other distributions to or
on behalf of, or to pay any obligation to or on behalf of, or otherwise to
transfer assets or property to or on behalf of, or make or pay loans or advances
to or on behalf of, the Issuer or any Subsidiary of the Issuer, except (a)
restrictions imposed by the Notes or the Indenture or by other indebtedness of
the Issuer or any of the Subsidiary Guarantors ranking pari passu with the Notes
or the Guarantees, as applicable, provided such restrictions are no more
restrictive taken as a whole than those imposed by the Indenture and the Notes,
(b) restrictions imposed by applicable law, (c) existing restrictions under
Indebtedness outstanding on the Issue Date and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings of such Indebtedness, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive taken as a whole with respect to dividend
and other payment restrictions than those contained in the applicable existing
Indebtedness, (d) restrictions under any Acquired Indebtedness not incurred in
violation of the Indenture or any agreement relating to any property, asset, or
business acquired by the Issuer or any of its Subsidiaries, which restrictions
existed at the time of acquisition, were not put in place in connection with or
in anticipation of such acquisition and are not applicable to any Person, other
than the Person acquired, or to any property, asset or business, other than the
property, assets and business so acquired, (e) any such restriction or
requirement imposed by any Senior Debt incurred under the covenant "Limitation
on Incurrence of Additional Indebtedness and Disqualified Capital Stock,"
provided such restriction or requirement is no more restrictive than that
imposed by the New Credit Facility as of the Issue Date, (f) restrictions with
respect solely to a Subsidiary of the Issuer imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of all or
substantially all of the Equity Interests or assets of such Subsidiary, provided
such restrictions apply solely to the Equity Interests or assets of such
Subsidiary, (g) restrictions on transfer contained in Purchase Money
Indebtedness incurred pursuant to paragraph (c) of the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," provided
such restrictions relate only to the transfer of the property acquired with the
proceeds of such Purchase Money Indebtedness, (h) restrictions contained in
Indebtedness or other contractual requirements of a Receivables Subsidiary in
connection with a Qualified Receivables Transaction, provided that such
restrictions apply only to such Receivables Subsidiary, (i) restrictions
contained in Indebtedness incurred by a Foreign Subsidiary in accordance with
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock," provided such restrictions relate only to one or
more Foreign Subsidiaries, (j) any asset subject to a Lien which is not
prohibited to exist with respect to such asset pursuant to the terms of the
Indenture may be subject to restrictions on the transfer or disposition thereof
or (k) in connection with and pursuant to permitted Refinancings, replacements
of restrictions imposed pursuant to clauses (a), (c) or (d) of this paragraph
that are not more restrictive than those being replaced and do not apply to any
other person or assets than those that would have been covered by the
restrictions in the Indebtedness so refinanced. Notwithstanding the foregoing,
neither (a) customary provisions restricting subletting or assignment of any
lease entered into in the ordinary course of business, consistent with industry
practice, nor (b) Liens permitted under the terms of the Indenture on assets
securing Senior Debt or Purchase Money Indebtedness incurred in accordance with
the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" shall in and of themselves be considered a
restriction on the ability of the applicable Subsidiary to transfer such
agreement or assets, as the case may be.
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Limitations on Layering Indebtedness
The Indenture provides that the Issuer and the Subsidiary Guarantors will
not, and will not permit any of their Subsidiaries to, directly or indirectly,
incur, or suffer to exist any Indebtedness (other than the Notes and any
Acquired Indebtedness not incurred in connection with or in contemplation of
such Acquisition by the Company or a Subsidiary of the Company) that is
subordinate in right of payment to any other Indebtedness of the Issuer or a
Subsidiary Guarantor unless, by its terms, such Indebtedness is subordinate in
right of payment to, or ranks pari passu with, the Notes or the Guarantee, as
applicable.
Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock
The Indenture provides that, except as set forth below in this covenant,
the Issuer and the Subsidiary Guarantors will not, and will not permit any of
their Subsidiaries to, directly or indirectly, issue, assume, guarantee, incur,
become directly or indirectly liable with respect to, extend the maturity of, or
otherwise become responsible for, contingently or otherwise (individually and
collectively, to "incur" or, as appropriate, an "incurrence"), any Indebtedness
(including Acquisition Indebtedness) or any Disqualified Capital Stock from and
after the Issue Date. Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness or Disqualified Capital
Stock and (ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of the Issuer for the Reference Period
immediately preceding the Incurrence Date, after giving effect on a pro
forma basis to such incurrence of such Indebtedness or Disqualified Capital
Stock and, to the extent set forth in the definition of Consolidated
Coverage Ratio, the use of proceeds thereof, would be at least 2.0 to 1
(the "Debt Incurrence Ratio"), then the Issuer may incur such Indebtedness
or Disqualified Capital Stock and the Subsidiary Guarantors may incur such
Indebtedness provided that no Guarantee may be incurred pursuant to this
paragraph unless the guaranteed Indebtedness is incurred by the Company or
a Subsidiary Guarantor pursuant to this paragraph;
(b) the Issuer and the Subsidiary Guarantors may incur Indebtedness
evidenced by the Notes (and any related Guarantees) issued as of the
original Issue Date and the Exchange Notes (and any related Guarantees)
issued in exchange therefor;
(c) the Issuer and the Subsidiary Guarantors may incur Purchase Money
Indebtedness on or after the Issue Date, provided, that (i) the aggregate
amount of such Indebtedness incurred on or after the Issue Date and
outstanding at any time pursuant to this paragraph (c) (including any
Indebtedness issued to refinance, replace, defease or refund such
Indebtedness) shall not exceed (A) $35.0 million plus (B) Purchase Money
Indebtedness existing on the Issue Date; provided, however, (B) shall not
exceed $29.2 million and (ii) in each case, such Indebtedness shall not
constitute more than 100% of the cost (determined in accordance with GAAP)
to the Issuer or such Subsidiary Guarantor, as applicable, of the property
so purchased or leased;
(d) the Issuer, the Subsidiary Guarantors and the Foreign
Subsidiaries, as applicable, may incur permitted Refinancing Indebtedness
with respect to any Existing Indebtedness and Indebtedness or Disqualified
Capital Stock, as applicable, incurred in accordance with this covenant so
long as, in the case of Indebtedness used to refinance, replace, defease or
refund secured Indebtedness, such Refinancing Indebtedness is secured only
by the assets that secured the Indebtedness so refinanced;
(e) the Issuer and the Subsidiary Guarantors and the Foreign
Subsidiaries, as applicable, may incur Permitted Indebtedness;
(f) the Issuer, the Subsidiary Guarantors and the Foreign Subsidiaries
may incur Indebtedness in an aggregate amount outstanding at any time
pursuant to this clause (f) (including any Indebtedness issued to
refinance, replace, defease or refund such Indebtedness) of up to $50.0
million, minus the amount of any such Indebtedness retired (including, in
the case of a revolver or a similar arrangement, to the extent permanently
retired) with Net Cash Proceeds from any Asset Sale (other than a sale of
Assets to Be Disposed of) or assumed by a transferee in an Asset Sale;
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(g) the Issuer and the Subsidiary Guarantors may incur Indebtedness
pursuant to the New Credit Facility up to an aggregate amount outstanding
at any time pursuant to this clause (g) (including any Indebtedness issued
to refinance, replace, defease or refund such Indebtedness) at any time of
$1.0 billion, minus the amount of any such Indebtedness retired (including,
in the case of a revolver or a similar arrangement, to the extent
permanently retired) with Net Cash Proceeds from any Asset Sale (other than
a sale of Assets to Be Disposed of) or assumed by a transferee in an Asset
Sale;
(h) the Foreign Subsidiaries may incur Indebtedness (and the Issuer
and the Subsidiary Guarantors may guarantee such Indebtedness of the
Foreign Subsidiaries) in an aggregate amount outstanding at any time
pursuant to this clause (h) (including any Indebtedness used to refinance,
replace or refund such Indebtedness) of up to (A) $50.0 million plus (B)
the amount of Foreign Subsidiary Indebtedness outstanding on the Issue
Date; provided, however, the aggregate of (B) shall not exceed $71.1
million, minus the amount of any such Indebtedness retired (including, in
the case of a revolver or a similar arrangement, to the extent permanently
retired) with the Net Cash Proceeds from any Asset Sale (other than a sale
of Assets to Be Disposed of) or assumed by a transferee in an Asset Sale;
and
(i) the Finance Subsidiary may incur Finance Subsidiary Indebtedness.
Indebtedness or Disqualified Capital Stock of any Person which is
outstanding at the time such Person becomes a Subsidiary of the Issuer
(including, without limitation, upon designation of any subsidiary or other
Person as a Subsidiary and upon the contribution of the Equity Interests thereof
to the Issuer) or is merged with or into or consolidated with the Issuer or a
Subsidiary of the Issuer shall be deemed to have been incurred at the time such
Person becomes such a Subsidiary of the Issuer or is merged with or into or
consolidated with the Issuer or a Subsidiary of the Issuer, as applicable.
Limitation on Liens Securing Indebtedness
The Issuer and the Subsidiary Guarantors will not, and will not permit any
of their Subsidiaries to, create, incur, assume or suffer to exist any Lien of
any kind, other than Permitted Liens, upon any of their respective assets now
owned or acquired on or after the date of the Indenture.
Limitation on Sale of Assets and Subsidiary Stock
The Indenture provides that the Issuer and the Subsidiary Guarantors will
not, and will not permit any of their Subsidiaries to, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of its property, business or assets, including by
merger or consolidation (in the case of a Subsidiary of the Issuer), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Issuer, whether by the Issuer or a Subsidiary of either or
through the issuance, sale or transfer of any Equity Interest by a Subsidiary of
the Issuer (any of the foregoing, an "Asset Sale"), unless (1)(a) the Net Cash
Proceeds therefrom (the "Asset Sale Offer Amount") are applied (i) within 330
days after the date of each such Asset Sale, to the optional redemption of the
Notes in accordance with the terms of the Indenture and, at the Issuer's option,
other Indebtedness of the Issuer ranking on a parity with the Notes from time to
time outstanding with similar provisions requiring the Issuer to make an offer
to purchase or to redeem such Indebtedness with the proceeds from asset sales,
pro rata in proportion to the respective principal amounts (or accreted values
in the case of Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding or (ii) within 360 days after the
date of each such Asset Sale, to the repurchase of the Notes pursuant to a cash
offer to repurchase Notes and, at the Issuer's option, other Indebtedness of the
Issuer ranking on a parity with the Notes from time to time outstanding with
similar provisions requiring the Issuer to make an offer to purchase or to
redeem such Indebtedness with the proceeds from asset sales, pro rata in
proportion to the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) of the Notes and such
other Indebtedness then outstanding (the "Asset Sale Offer") at a purchase price
of 100% of principal amount (or accreted value in the case of Indebtedness
issued with an original issue discount) (the "Asset Sale Offer Price") together
with accrued and unpaid interest and Liquidated Damages, if any, to the date of
payment, made within 330 days of such Asset Sale, or (b) within 330 days
following such Asset Sale, the Asset Sale Offer Amount is (i) used to
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make a Permitted Investment (other than pursuant to clause (i) thereof) or
otherwise invested (or committed, pursuant to a binding commitment subject only
to reasonable, customary closing conditions, to be invested, and in fact is so
invested, within an additional 90 days) in assets and property which in the good
faith reasonable judgment of the Issuer will immediately constitute or be a part
of a Related Business of the Issuer or such Subsidiary (if it continues to be a
Subsidiary) immediately following such transaction, except that no proceeds from
an Asset Sale of Existing Assets or assets acquired (directly or indirectly)
from the proceeds of an Asset Sale of Existing Assets may be invested in or used
to acquire assets or property for a Foreign Subsidiary or (ii) used to retire
Purchase Money Indebtedness or other Senior Debt in accordance with any
provisions therein requiring the Issuer to repurchase, redeem, or otherwise
retire such Indebtedness with the proceeds from such Asset Sale, Indebtedness
outstanding under the New Credit Facility and, except with respect to the use of
proceeds from the sale of Assets to Be Disposed of, to permanently reduce (in
the case of Senior Debt that is not Purchase Money Indebtedness) the amount of
such Indebtedness outstanding on the Issue Date, any amount outstanding under
the New Credit Facility or Indebtedness permitted pursuant to paragraph (c), (f)
or (g) of the covenant "Limitation on Incurrence of Additional Indebtedness and
Disqualified Capital Stock" (including that in the case of a revolver or similar
arrangement that makes credit available, such commitment is permanently so
reduced by such amount), except that no proceeds from an Asset Sale of Existing
Assets or assets acquired from the proceeds or Asset Sale of Existing Assets may
be used to retire Indebtedness of a Foreign Subsidiary (unless such Existing
Assets were assets of such Foreign Subsidiary on the Issue Date), (2) with
respect to any transaction or related series of transactions of securities,
property or assets with an aggregate fair market value in excess of $3.0
million, at least 75% of the consideration for such Asset Sale (excluding (a)
Senior Debt assumed by a transferee which assumption permanently reduces the
amount of Indebtedness outstanding on the Issue Date or permitted pursuant to
paragraph (c), (f) or (g) of the covenant "Limitation on Incurrence of
Additional Indebtedness and Disqualified Capital Stock" (including that in the
case of a revolver or similar arrangement that makes credit available, such
commitment is permanently so reduced by such amount), (b) Purchase Money
Indebtedness assumed by a transferee and (c) property that within 30 days of
such Asset Sale is converted into cash or Cash Equivalents) consists of Cash or
Cash Equivalents which is applied as set forth above or consists of Restricted
Investments, (3) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro forma
basis, to, such Asset Sale, and (4) the Issuer determines in good faith that the
Issuer or such Subsidiary, as applicable, receives fair market value for such
Asset Sale.
The Indenture provides that an Asset Sale Offer may be deferred until the
accumulated Net Cash Proceeds from Asset Sales not applied to the uses set forth
in clauses (1)(a)(i) or 1(b) above (the "Excess Proceeds") exceeds $20.0 million
and that each Asset Sale Offer shall remain open for 20 Business Days following
its commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Issuer shall apply the Asset Sale Offer Amount plus an
amount equal to accrued and unpaid interest and Liquidated Damages, if any, to
the purchase of all Indebtedness properly tendered pursuant to the Asset Sale
Offer (on a pro rata basis (in $1,000 increments) if the Asset Sale Offer Amount
is insufficient to purchase all Indebtedness so tendered) at the Asset Sale
Offer Price (together with accrued interest and Liquidated Damages, if any). To
the extent that the aggregate amount of Indebtedness tendered pursuant to an
Asset Sale Offer is less than the Asset Sale Offer Amount, the Issuer may use
any remaining Net Cash Proceeds for general corporate purposes as otherwise
permitted by the Indenture and following each Asset Sale Offer the Excess
Proceeds amount shall be reset to zero.
Notwithstanding, and without complying with, the foregoing provisions of
the two immediately prior paragraphs: (i) the Issuer and its Subsidiaries may,
in the ordinary course of business, convey, sell, transfer, assign or otherwise
dispose of (x) assets or series of related assets with an aggregate fair market
value not in excess of $1.0 million, but in any case limited in the aggregate to
not more than $5.0 million for any fiscal year and (y) inventory and other
assets acquired and held for resale in the ordinary course of business; (ii) the
Issuer and its Subsidiaries may convey, sell, transfer, assign or otherwise
dispose of assets pursuant to and in accordance with the limitation on mergers,
sales or consolidations provisions in the Indenture; (iii) the Issuer and its
Subsidiaries may sell or dispose of damaged, worn out or other obsolete property
in the ordinary course of business so long as such property is no longer
necessary for the proper conduct of the business of the Issuer or such
Subsidiary, as applicable; (iv) the Issuer and the Subsidiary Guarantors may
convey, sell, transfer,
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assign or otherwise dispose of assets to the Issuer or any of the Subsidiary
Guarantors; (v) the Issuer and its Subsidiaries may surrender or waive contract
rights or the settlement, release or surrender of contract, tort or other claims
of any kind; (vi) the Issuer and its Subsidiaries may grant Liens not prohibited
by the Indenture; (vii) the Issuer and each of the Subsidiaries may liquidate
Cash Equivalents in the ordinary course of business; (viii) the Issuer and each
of the Subsidiaries may sell sales of accounts receivable and related assets of
the type specified in the definition of Qualified Receivables Transaction to a
Receivables Subsidiary for the fair market value thereof, including cash in an
amount at least equal to 75% of the book value thereof as determined in
accordance with GAAP, and transfers of accounts receivable and related assets of
the type specified in the definition of Qualified Receivables Transaction (or a
fractional undivided interest therein) by a Receivables Subsidiary in a
Qualified Receivables Transaction; (ix) Foreign Subsidiaries may convey, sell,
transfer, assign or otherwise dispose of assets to the Issuer, any of the
Subsidiary Guarantors, or any other Foreign Subsidiary; and (x) the Issuer and
its Subsidiaries may make Permitted Investments (excluding clauses (b) and (1)
in the definition thereof) and Restricted Investments made under clause (s) of
the third paragraph under "Limitation on Restricted Payments."
Notwithstanding anything herein to the contrary, other than as provided in
the following sentence, the Issuer and its Subsidiaries may sell (including by
merger, consolidation or issuance), transfer, assign, license, sublicense or
otherwise dispose of (collectively "Transfer") any software, trademark or other
intellectual property, or any interest (including any Equity Interest) in any
entity which has as its principal assets such property or rights, and such
Transfer shall not be treated as an Asset Sale hereunder, if (a) the Issuer and
its Subsidiary Guarantors thereafter have unfettered access to and use of such
property or rights at a cost to the Issuer and its Subsidiaries which is not in
excess of the aggregate normal operating costs and third party license fees
which have been incurred by the Issuer and its Subsidiaries prior to any such
Transfer, and (b) any proceeds from any Transfer of any such property, rights or
interests (including Equity Interests) are used (i) solely for the purpose of
the development or installation or implementation of such property or rights (or
similar property or rights) or (ii) otherwise in accordance with the provisions
of the first paragraph of this covenant. Notwithstanding the preceding sentence
or any other provision of this covenant to the contrary, the Issuer and its
Subsidiaries may not Transfer the internally developed product distribution
software used by the Issuer and its Subsidiaries ("Core Operating Software") or
intellectual property rights therein or any interests (including any Equity
Interests) in any entity which has as its principal assets such Core Operating
Software or rights therein, unless the Issuer and its Subsidiary Guarantors
comply with clauses (a) and (b) of the preceding sentence in connection with
such Transfer.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the Exchange
Act and the rules and regulations thereunder and all other applicable Federal
and state securities laws. To the extent that the provisions of any securities
laws or regulations conflict with the provisions of this covenant, compliance by
the Issuer or any of its Subsidiaries with such laws and regulations shall not
in and of itself cause a breach of its obligations under such covenant.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment Record Date and on or before the associated
Interest Payment Date, any accrued and unpaid interest (and Liquidated Damages
due on such Interest Payment Date, if any) will be paid to the Person in whose
name a Note is registered at the close of business on such Record Date, and such
interest (and Liquidated Damages, if applicable) will not be payable to Holders
who tender Notes pursuant to such Asset Sale Offer.
Limitation on Transactions with Affiliates
The Indenture provides that neither the Issuer nor any Subsidiary of the
Issuer will be permitted on or after the Issue Date to enter into any contract,
agreement, arrangement or transaction with any Affiliate (an "Affiliate
Transaction"), or any series of related Affiliate Transactions, other than
Exempted Affiliate Transactions, (1) involving consideration to either party in
excess of $5.0 million unless such transaction is evidenced by an Officer's
Certificate addressed and delivered to the Trustee stating that the terms of
such Affiliate Transaction are fair and reasonable to the Issuer or such
Subsidiary, as the case may be, and no less favorable to the Issuer or such
Subsidiary, as the case may be, than could have been obtained in an arm's length
transaction with a non-Affiliate, and (2) involving consideration to either
party in excess of
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$10.0 million, unless the Issuer, prior to the consummation thereof, obtains a
written favorable opinion as to the fairness of such transaction to the Issuer
from a financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such investment
banking firms do not customarily render such opinions, an appraisal or valuation
firm of national reputation.
Limitation on Merger, Sale or Consolidation
The Indenture provides that neither the Issuer nor Parent will consolidate
with or merge with or into another Person or, directly or indirectly, sell,
lease, convey or transfer all or substantially all of its assets (computed on a
consolidated basis), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons, unless (i)
either (a) the Issuer or Parent, as applicable, is the continuing entity or (b)
the resulting, surviving or transferee entity is a corporation organized under
the laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the Issuer
or Parent, as applicable, in connection with the Notes and the Indenture; (ii)
no Default or Event of Default shall exist or shall occur immediately after
giving effect on a pro forma basis to such transaction; (iii) except in the case
of a transaction involving only the Parent, immediately after giving effect to
such transaction on a pro forma basis, the consolidated resulting, surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Debt Incurrence Ratio set forth
in paragraph (a) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock;" and (iv) the Company will have
delivered to the Trustee an Officer's Certificate addressed to the Trustee,
stating that such consolidation, merger, sale, assignment, transfer, lease,
conveyance or disposition and such supplemental indenture, if any, comply with
the Indenture and that the supplemental indenture is enforceable.
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of the Issuer or Parent, as applicable, in accordance with the
foregoing, the successor corporation formed by such consolidation or into which
the Issuer or Parent, as applicable, is merged or to which such transfer is made
shall succeed to, and (except in case of a lease) be substituted for, and may
exercise every right and power of, the Issuer or Parent, as applicable, under
the Indenture with the same effect as if such successor corporation had been
named therein as the Issuer or Parent, as applicable, and (except in case of a
lease) the Issuer or Parent, as applicable, shall be released from the
obligations under the Notes and the Indenture except with respect to any
obligations that arise from, or are related to, such transaction.
Future Subsidiary Guarantors
The Indenture provides that all present and future Subsidiaries of the
Issuer (other than Receivables Subsidiaries, Finance Subsidiaries, Excluded
Subsidiaries and Foreign Subsidiaries) jointly and severally will guarantee
irrevocably and unconditionally all principal, premium, if any, and interest
(and Liquidated Damages, if any) on the Notes on a senior subordinated basis,
provided that DDI shall not be required to become a Guarantor until 120 days
after the Issue Date. Notwithstanding anything herein or in the Indenture to the
contrary and if permitted by the New Credit Facility, if any Subsidiary of the
Issuer that is not a Subsidiary Guarantor guarantees any other Indebtedness of
the Issuer or Parent or of any Subsidiary of the Issuer or Parent, or the Issuer
or Parent or any Subsidiary of the Issuer or of Parent, individually or
collectively pledges more than 65% of the Equity Interests of such Subsidiary to
a United States lender, then such Subsidiary must become a Guarantor.
Limitation on Merger of Subsidiary Guarantors and Release of Subsidiary
Guarantors
The Indenture provides that no Subsidiary Guarantor shall consolidate or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person) another Person unless (i) subject to the provisions of the following
paragraph, the Person formed by or surviving any such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture in form reasonably
satisfactory to the Trustee, pursuant to which such Person shall unconditionally
guarantee, on a senior subordinated basis, all of such Subsidiary Guarantor's
obligations under such Subsidiary Guarantor's guarantee and the Indenture on the
terms set forth in the Indenture; and
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(ii) immediately before and immediately after giving effect to such transaction
on a pro forma basis, no Default or Event of Default shall have occurred or be
continuing.
Upon the sale or disposition (whether by merger, stock purchase, asset sale
or otherwise) of a Subsidiary Guarantor or all or substantially all of its
assets to an entity which is not a Subsidiary Guarantor or the designation of a
Subsidiary to become an Unrestricted Subsidiary, which transaction is otherwise
in compliance with the Indenture (including, without limitation, the provisions
of the covenant "Limitations on Sale of Assets and Subsidiary Stock"), such
Subsidiary Guarantor will be deemed released from its obligations under its
Guarantee of the Notes; provided, however, that any such termination shall occur
only to the extent that all obligations of such Subsidiary Guarantor under all
of its guarantees of, and under all of its pledges of assets or other security
interests which secure, any Indebtedness of the Issuer or any other Subsidiary
of the Issuer shall also terminate upon such release, sale or transfer.
Limitation on Status as Investment Company
The Indenture prohibits the Issuer, its Subsidiaries and Parent from taking
any action which would require any of them to register as an "Investment
Company" (as that term is defined in the Investment Company Act of 1940, as
amended), or from otherwise becoming subject to regulation under the Investment
Company Act.
REPORTS
The Indenture provides that the Parent shall deliver to the Trustee and, to
each Holder and to prospective purchasers of Notes identified to the Issuer by
an Initial Purchaser, (i) its respective annual and quarterly reports filed
pursuant to Section 13 or 15(d) of the Exchange Act, within 15 days after such
reports have been filed with the Commission or (ii) in the event the Parent is
not subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act within 15 days after it would have been (if it were subject to such
reporting obligations) required to file such reports with the Commission, annual
and quarterly financial statements substantially equivalent to financial
statements that would have been included in reports filed with the Commission if
the Parent were subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Issuer's certified independent public accountants as such would
be required in such reports to the Commission, and, in each case, together with
a management's discussion and analysis of financial condition and results of
operations which would be so required and, unless the Commission will not accept
such reports, file with the Commission the annual, quarterly and other reports
which it is or would have been required to file with the Commission. If at any
time Parent does not file such reports which include the Issuer and its
Subsidiaries on a consolidated basis with Parent, the Issuer shall succeed to
the obligations of Parent hereunder.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Issuer
to pay any installment of interest (or Liquidated Damages, if any) on the Notes
as and when the same becomes due and payable and the continuance of any such
failure for 30 days, (ii) the failure by the Issuer to pay all or any part of
the principal, or premium, if any, on the Notes when and as the same becomes due
and payable at maturity, redemption, by acceleration or otherwise, including,
without limitation, payment of the Change of Control Purchase Price or the Asset
Sale Offer Price, or otherwise, (iii) the failure by the Issuer or any Guarantor
to observe or perform any other covenant or agreement contained in the Notes or
the Indenture and, subject to certain exceptions, the continuance of such
failure for a period of 45 days after written notice is given to the Issuer by
the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in
aggregate principal amount of the Notes outstanding, (iv) certain events of
bankruptcy, insolvency or reorganization in respect of the Issuer or any of its
Significant Subsidiaries, (v) a default in any Indebtedness of the Issuer or any
of its Subsidiaries with an aggregate principal amount in excess of $10.0
million (a) resulting from the failure to pay principal at final maturity or (b)
as a result of which the maturity of such Indebtedness has been accelerated
prior to its stated maturity, and (vi) final unsatisfied judgments not covered
by insurance aggregating in excess of $10.0 million, at any one time rendered
against the Issuer or any of its Significant Subsidiaries and not
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stayed, bonded or discharged within 60 days. The Indenture provides that if a
Default occurs and is continuing, the Trustee must, within 90 days after the
occurrence of such Default, give to the Holders notice of such Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv), above, relating to the Issuer), then in every
such case, unless the principal of all of the Notes shall have already become
due and payable, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Issuer (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal, determined as set forth below, and accrued interest
thereon to be due and payable immediately; provided, however, that if any Senior
Debt is outstanding pursuant to the New Credit Facility, upon a declaration of
such acceleration, such principal and interest shall be due and payable upon the
earlier of (x) the day that is five Business Days after the provision to the
Issuer and the representative under the New Credit Facility of such written
notice, unless such Event of Default is cured or waived prior to such date and
(y) the date of acceleration of any Senior Debt under the New Credit Facility.
In the event a declaration of acceleration resulting from an Event of Default
described in clause (v) above has occurred and is continuing, such declaration
of acceleration shall be automatically annulled if such Default is cured or
waived or the holders of the Indebtedness which is the subject of such Default
have rescinded their declaration of acceleration in respect of such Indebtedness
within 45 days thereof and the Trustee has received written notice of such cure,
waiver or rescission and no other Event of Default described in clause (v) above
has occurred that has not been cured or waived within 45 days of the declaration
of such acceleration in respect of such Indebtedness. If an Event of Default
specified in clause (iv) above relating to the Issuer occurs, all principal and
accrued interest thereon will be immediately due and payable on all outstanding
Notes without any declaration or other act on the part of Trustee or the
Holders. The Holders of a majority in aggregate principal amount of Notes
generally are authorized to rescind such acceleration if all existing Events of
Default, other than the non-payment of the principal of, premium, if any, and
interest on the Notes which have become due solely by such acceleration and
except any Default with respect to any provision requiring a supermajority
approval to amend, which Default may only be waived by such a supermajority,
have been cured or waived.
Prior to the declaration of acceleration of the maturity of the Notes, the
Holders of a majority in aggregate principal amount of the Notes at the time
outstanding may waive on behalf of all the Holders any Default, except a Default
with respect to any provision requiring a supermajority approval to amend, which
Default may be waived only by such a supermajority, and except a Default in the
payment of principal of or interest on any Note not yet cured or a Default with
respect to any covenant or provision which cannot be modified or amended without
the consent of the Holder of each outstanding Note affected. Subject to the
provisions of the Indenture relating to the duties of the Trustee, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the Holders, unless such
Holders have offered to the Trustee reasonable security or indemnity. Subject to
all provisions of the Indenture and applicable law, the Holders of a majority in
aggregate principal amount of the Notes at the time outstanding will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuer may, at its option, elect to have
its obligations and the obligations of the Guarantors discharged with respect to
the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Issuer shall be deemed to have paid and discharged the entire indebtedness
represented, and the Indenture shall cease to be of further effect as to all
outstanding Notes and Guarantees, except as to (i) rights of Holders to receive
payments in respect of the principal of, premium, if any, and interest (and
Liquidated Damages, if any) on such Notes when such payments are due from the
trust funds; (ii) the Issuer's obligations with respect to such Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes, and the maintenance of an office or agency for payment and money
for security payments held in trust; (iii) the rights, powers, trust, duties,
and immunities of the Trustee, and the Issuer's obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the
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Indenture. In addition, the Issuer may, at its option and at any time, elect to
have the obligations of the Issuer and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with such obligations shall not constitute
a Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, guarantees,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. legal tender, U.S. Government Obligations or a
combination thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such Notes on the stated date for
payment thereof or on the redemption date of such principal or installment of
principal of, premium, if any, or interest on such Notes, and the Holders of
Notes must have a valid, perfected, exclusive security interest in such trust;
(ii) in the case of Legal Defeasance, the Issuer shall have delivered to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Issuer has received from, or there has been
published by the Internal Revenue Service, a ruling or (B) since the date of the
Indenture, there has been a change in the applicable Federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of such Notes will not recognize income, gain or loss
for Federal income tax purposes as a result of such Legal Defeasance and will be
subject to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to such Trustee confirming that the Holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit; (v) such
Legal Defeasance or Covenant Defeasance shall not result in a breach or
violation of, or constitute a Default under the Indenture or any other material
agreement or instrument to which the Issuer or any of its Subsidiaries is a
party or by which the Issuer or any of its Subsidiaries is bound; (vi) the
Issuer shall have delivered to the Trustee an Officers' Certificate stating that
the deposit was not made by the Issuer with the intent of preferring the Holders
of such Notes over any other creditors of the Issuer or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the Issuer
or others; and (vii) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that the conditions
precedent provided for in, in the case of the Officers' Certificate, clauses (i)
through (vi) and, in the case of the opinion of counsel, clauses (i), (with
respect to the validity and perfection of the security interest) (ii), (iii) and
(v) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect Covenant Defeasance are
insufficient to pay the principal of, premium, if any, and interest on the Notes
when due, then the obligations of the Issuer and the Guarantors under the
Indenture will be revived and no such defeasance will be deemed to have
occurred.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Issuer, the Guarantors and
the Trustee to enter into a supplemental indenture for certain limited purposes
without the consent of the Holders. With the consent of the Holders of not less
than a majority in aggregate principal amount of the Notes at the time
outstanding, the Issuer, the Guarantors and the Trustee are permitted to amend
or supplement the Indenture or any supplemental indenture or modify the rights
of the Holders; provided that no such modification may, without the consent of
Holders of at least 66 2/3% in aggregate principal amount of Notes at the time
outstanding, modify the provisions (including the defined terms used therein) of
the covenant "Repurchase of Notes at the Option of the Holder upon a Change of
Control" in a manner adverse to the Holders; and provided, that no such
modification may, without the consent of each Holder affected thereby: (i)
change the Stated Maturity on any Note, or reduce the principal amount thereof
or the rate (or extend the time for payment) of interest
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thereon or any premium payable upon the redemption at the option of the Issuer
thereof, or change the place of payment where, or the coin or currency in which,
any Note or any premium or the interest thereon is payable, or impair the right
to institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption at the option of the Issuer, on
or after the Redemption Date), or reduce the Change of Control Purchase Price or
the Asset Sale Offer Price or alter the provisions (including the defined terms
used therein) regarding the right of the Issuer to redeem the Notes in a manner
adverse to the Holders, or (ii) reduce the percentage in principal amount of the
outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding Note
affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture will provide that no direct or indirect stockholder,
employee, officer or director, as such, past, present or future of the Issuer,
the Guarantors or any successor entity shall have any personal liability in
respect of the obligations of the Issuer or the Guarantors under the Indenture
or the Notes solely by reason of his or its status as such stockholder,
employee, officer or director.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness or Disqualified Capital Stock of
any Person existing at the time such Person becomes a Subsidiary of the Issuer,
including by designation, or is merged or consolidated into or with the Issuer
or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person of all
or substantially all the assets of any Person by any other Person, whether by
purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by contract,
or otherwise, provided that a Beneficial Owner of 20% or more of the total
voting power normally entitled to vote in the election of directors, managers or
trustees, as applicable, shall for such purposes be deemed to constitute
control.
"Assets to Be Disposed of" means assets identified in an Officer's
Certificate at the time of an Acquisition as assets the Issuer or the acquiring
Subsidiary intends to dispose of within 180 days of such Acquisition.
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (a) the sum of the
products (i) of the number of years (calculated to the nearest one-twelfth) from
the date of determination to the date or dates of each successive scheduled
principal (or redemption) payment of such security or instrument and (ii) the
amount of each such respective principal (or redemption) payment by (b) the sum
of all such principal (or redemption) payments.
"Beneficial Owner" or "beneficial owner" for purposes of the definitions of
Change of Control and Affiliate has the meaning attributed to it in Rules 13d-3
and 13d-5 under the Exchange Act (as in effect on the Issue Date), whether or
not applicable, except that a "Person" shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
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"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capital Contribution" means any contribution to the equity of the Issuer
from a direct or indirect parent of the Issuer for which no consideration other
than the issuance of common stock with no redemption rights and no special
preferences, privileges or voting rights is given.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (b) U.S. dollar denominated
(or foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits or Eurodollar certificates of deposit of (i) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $100.0 million or (ii) any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof (any such bank being an "Approved Lender"),
in each case with maturities of not more than twelve months from the date of
acquisition; (c) commercial paper and variable or fixed rate notes issued by any
Approved Lender (or by the parent company thereof) or any variable rate notes
issued by, or guaranteed by, any domestic corporation rated A-2 (or the
equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or
better by Moody's and maturing within twelve months of the date of acquisition,
(d) repurchase agreements with a bank or trust company or recognized securities
dealer having capital and surplus in excess of $100.0 million for direct
obligations issued by or fully guaranteed by the United States of America in
which the Company will have a perfected first priority security interest
(subject to no other Liens) and having, on the date of purchase thereof, a fair
market value of at least 100% of the amount of repurchase obligations, (e)
interests in money market mutual funds which invest solely in assets or
securities of the type described in subparagraphs (a), (b), (c) or (d) hereof
and (f) in the case of any Foreign Subsidiary: (i) direct obligations of the
sovereign nation (or any agency thereof) in which such Foreign Subsidiary is
organized and is conducting business or in obligations fully and unconditionally
guaranteed by such sovereign nation (or any agency thereof), (ii) investments of
the type and maturity described in clauses (a) through (e) above of foreign
obligors, which investments or obligors (or the direct or indirect parents of
such obligors) have ratings described in such clauses or equivalent ratings from
comparable foreign rating agencies or (iii) investments of the type and maturity
described in clauses (a) through (e) above of foreign obligors (or the direct or
indirect parents of such obligors), which investments or obligors (or the direct
or indirect parents of such obligors) are not rated as provided in such clauses
or in clause (ii) above but which are, in the reasonable judgment of the
Company, comparable in investment quality to such investments and obligors (or
the direct or indirect parent of such obligors).
"Claim" means any claim for damages arising from the purchase of the Notes
or for reimbursement or contribution on the account of such claim, in each case
to the extent relating to the purchase price of the Notes.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such Person
(exclusive of amounts attributable to operations and businesses
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permanently discontinued or disposed of, but only to the extent that the
obligations giving rise to such Consolidated Fixed Charges would no longer be
obligations contributing to such Person's Consolidated Fixed Charges subsequent
to the Transaction Date) during the Reference Period; provided, that for
purposes of such calculation, (i) Acquisitions which occurred during the
Reference Period or subsequent to the Reference Period and on or prior to the
Transaction Date shall be assumed to have occurred on the first day of the
Reference Period, (ii) transactions giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period without regard to the effect of subsection (c) of the
definition of "Consolidated Net Income", (iii) the incurrence of any
Indebtedness or issuance of any Disqualified Capital Stock during the Reference
Period or subsequent to the Reference Period and on or prior to the Transaction
Date (and the application of the proceeds therefrom to the extent used to
refinance or retire other Indebtedness) shall be assumed to have occurred on the
first day of the Reference Period, and (iv) the Consolidated Fixed Charges of
such Person attributable to interest on any Indebtedness or dividends on any
Disqualified Capital Stock bearing a floating interest (or dividend) rate shall
be computed on a pro forma basis as if the average rate in effect from the
beginning of the Reference Period to the Transaction Date had been the
applicable rate for the entire period, unless such Person or any of its
Subsidiaries is a party to an Interest Swap or Hedging Obligation (which shall
remain in effect for the 12-month period immediately following the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person for such period adjusted (a) to
eliminate (i) non-recurring charges related to the assimilation of Persons
acquired, and the expenses of, any Acquisitions, including expenses incurred in
connection with the retirement of Acquired Indebtedness, (ii) the write-off of
debt financing fees associated with termination of credit facilities, (iii) any
non-cash pre-Acquisition write-offs or similar charges incurred by a Person
acquired in an Acquisition that as a result of pooling of interest are included
in the Parent's consolidated financial statements for such period to the extent
such write-offs or charges would either (x) not be included as an expense on the
Parent's consolidated financial statements had the Acquisition not been
accounted for as a pooling of interests or (y) be eliminated by the provisions
hereof if recorded by the Parent for such period and (iv) any non-cash
write-offs or similar charges which are recorded following an Acquisition in the
Parent's consolidated financial statements with respect to an acquired Person's
assets to the extent such amounts were accounted for in the first twelve months
following the date such Acquisition was consummated and (b) to add thereto (to
the extent deducted from net revenues in determining Consolidated Net Income),
without duplication, the sum of (i) Consolidated income tax expense, (ii)
Consolidated depreciation and amortization expense (including any accelerations
thereof), (iii) Consolidated Fixed Charges, and (iv) non-cash charges
attributable to the grant, exercise or repurchase of options or shares of
Qualified Capital Stock to or from employees. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization and other non-cash charges of a Subsidiary of a Person will be
added to Consolidated Net Income to compute Consolidated EBITDA only to the
extent (and in the same proportion) that the net income of such Subsidiary was
included in calculating the Consolidated Net Income of such Person.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period, (b)
one-third of rental expense for such period attributable to operating leases of
such person and its Consolidated Subsidiaries, (c) the amount of dividends
accrued or payable by such Person or any of its Consolidated Subsidiaries in
respect of Preferred Stock (other than by Subsidiaries of such Person to such
Person or such Person's Subsidiaries) and (d) interest expense of Parent for
such period with respect to the Parent Convertible Notes and any refinancing
indebtedness incurred with respect thereto. For purposes of this
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definition, (x) interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined in good faith by the Issuer to
be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP and (y) interest expense attributable to any Indebtedness
represented by the guaranty by such Person or a Subsidiary of such Person of an
obligation of another Person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed.
"Consolidated Leverage Ratio" shall mean the ratio on a pro forma basis of
(i) the aggregate outstanding amount of Indebtedness of the Issuer and its
Consolidated Subsidiaries (excluding Indebtedness ranking subordinate to the
Notes and the Guarantees and Indebtedness of any Foreign Subsidiary that is
non-recourse to the Issuer and its other Subsidiaries) as of the date of
calculation on a consolidated basis, after giving effect to the incurrence of
Indebtedness on such date, net of cash stated on the Parent's consolidated
balance sheet (excluding cash held at Parent) to (ii) the Consolidated EBTIDA of
the Issuer for the four last full fiscal quarters ending on or prior to the date
of determination; provided, that for purposes of such calculation, Acquisitions
which occurred during the Reference Period or subsequent to the Reference Period
and on or prior to the Transaction Date shall be assumed to have occurred on the
first day of the Reference Period.
"Consolidated Net Income" means, with respect to any Person for any period,
the net income (or loss) of such Person and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP) for such period
adjusted to exclude (only to the extent included in computing such net income
(or loss) and without duplication): (a) all gains and losses which are either
extraordinary (as determined in accordance with GAAP) or are either unusual or
nonrecurring (including any gain or loss from the sale or other disposition of
assets outside the ordinary course of business or from the issuance or sale of
any capital stock), (b) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but in any case not
in excess of such Person's pro rata share of such Person's net income for such
period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, (d)
the net income, if positive, of any of such Person's Consolidated Subsidiaries
to the extent that the declaration or payment of dividends or similar
distributions is not at the time permitted by operation of the terms of its
charter or bylaws or any other agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Consolidated
Subsidiary, and (e) the net income of, or any dividends or other distributions
from, any Unrestricted Subsidiary, to the extent otherwise included, except to
the extent cash or Cash Equivalents are distributed to the Issuer or one of its
Subsidiaries in a transaction that does not relate to the liquidation of such
Unrestricted Subsidiary.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of such
Person (whether now existing or hereafter created or acquired) the financial
statements of which are consolidated for financial statement reporting purposes
with the financial statements of such Person in accordance with GAAP.
"Designated Senior Debt" means, (a) so long as it is in effect, the New
Credit Facility and (b) at any time when the New Credit Facility is no longer in
effect any other Senior Debt designated by the Issuer to be "Designated Senior
Debt" that has an outstanding principal amount of at least $20 million at the
time of such designation.
"Disqualified Capital Stock" means (a) except as set forth in (b), with
respect to any Person, Equity Interests of such Person that, by its terms or by
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or in
part, on or prior to the Stated Maturity of the Notes and (b) with respect to
any Subsidiary of such Person (including with respect to any Subsidiary of the
Issuer), any Equity Interests other than any common equity with no preference,
privileges, or redemption or repayment provisions.
"Disqualified Preferred Stock" means, with respect to any Person, Equity
Interests of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the happening
of an event or the passage of time or both would be, required to be redeemed or
repurchased
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(including at the option of the holder thereof) by such Person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the
Notes.
"Equity Interest" of any Person means any shares, interests, participations
or other equivalents (however designated) in such Person's equity, and shall in
any event include any Capital Stock issued by, or partnership or membership
interests in, such Person.
"Excluded Subsidiary" means any Subsidiary which has assets with a fair
market value of $5.0 million or less and is designated as an "Excluded
Subsidiary" by the Issuer; provided that at no time may the aggregate fair
market value of the assets of all Subsidiaries designated as "Excluded
Subsidiaries" exceed $25.0 million.
"Exempted Affiliate Transaction" means (a) reasonable and customary
financial advisory, securities underwriting or similar arrangements with
investment banking firms of national reputation, (b) issuances of Qualified
Capital Stock of the Issuer, (c) customary employee compensation or incentive
arrangements approved by a majority of independent (as to such transactions)
members of the Board of Directors of the Issuer, (d) dividends permitted under
the terms of the covenant "Limitation on Restricted Payments" and payable, in
form and amount, on a pro rata basis to all holders of Capital Stock of the
Issuer, and (e) transactions solely between the Issuer or any of the Issuer's
Subsidiaries or Unrestricted Subsidiaries or solely among Subsidiaries or
Unrestricted Subsidiaries of the Issuer.
"Existing Assets" means property, plant and equipment and other tangible
business assets existing as of the Issue Date used in a Related Business of the
Issuer or the Guarantors, but does not include inventory, cash or Cash
Equivalents or intangible assets, and the proceeds from the sale, disposition or
other transfer of any Existing Assets outside the ordinary course of business.
"Existing Indebtedness" means the Indebtedness of the Issuer and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Issue Date, until such amounts are repaid.
"Finance Subsidiary" means any Subsidiary of the Issuer (other than a
Subsidiary Guarantor or a Foreign Subsidiary) organized for the sole purpose of
issuing Capital Stock or other securities and loaning the proceeds thereof to
the Issuer or a Subsidiary Guarantor and which engaged in no other transactions
except those incidental thereto.
"Finance Subsidiary Indebtedness" means Indebtedness of or Disqualified
Capital Stock issued by a Finance Subsidiary, which Indebtedness or Disqualified
Capital Stock does not mature and is not mandatorily redeemable or redeemable at
the option of the holder thereof, in whole or in part (other than pursuant to
customary change of control or asset sale provisions), prior to the final Stated
Maturity of the Notes.
"Foreign Subsidiary" means any Subsidiary of the Issuer which (a) is not
organized under the laws of the United States, any state thereof or the District
of Columbia, (b) conducts substantially all of its business operations outside
the United States of America, and (c) does not own, or have the benefit of any
Lien on, any Equity Interests of the Issuer or any Subsidiary Guarantor.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, to the
extent such liabilities and obligations would appear as a liability upon the
consolidated balance sheet of such Person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, or (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 60 days past their original due
date) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors; (b) all liabilities
and obligations, contingent or otherwise, of such Person (i) evidenced by
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bankers' acceptances or similar instruments issued or accepted by banks, (ii)
for the payment of money relating to any Capitalized Lease Obligation, or (iii)
evidenced by a letter of credit or a reimbursement obligation of such Person
with respect to any letter of credit; (c) all net obligations of such Person
under Interest Swap and Hedging Obligations; (d) all liabilities and obligations
of others of the kind described in the preceding clauses (a), (b) or (c) that
such Person has guaranteed or that is otherwise its legal liability; and (e) any
and all deferrals, renewals, extensions, refinancings and refundings (whether
direct or indirect) of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding clauses (a), (b), (c) or
(d), or this clause (e), whether or not between or among the same parties;
provided that any indebtedness which has been defeased in accordance with GAAP
or defeased pursuant to the deposit of cash or Government Securities (in an
amount sufficient to satisfy all such indebtedness obligations at maturity or
redemption, as applicable, and all payments of interest and premium, if any) in
a trust or account created or pledged for the sole benefit of the holders of
such indebtedness, and subject to no other Liens, and the other applicable terms
of the instrument governing such indebtedness, shall not constitute
"Indebtedness."
"Interest Swap and Hedging Obligation" means any obligation of any Person
pursuant to any interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate exchange agreement, currency
exchange agreement or any other agreement or arrangement designed to protect
against fluctuations in interest rates or currency values, including, without
limitation, any arrangement whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments calculated by applying
either a fixed or floating rate of interest on a stated notional amount in
exchange for periodic payments made by such person calculated by applying a
fixed or floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise) by
such Person (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities, including any options or warrants, of such other
person or any agreement to make any such acquisition; (b) the making by such
Person of any deposit with, or advance, loan or other extension of credit to,
such other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such other Person) or any commitment to make any such advance,
loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of the Issuer or any Guarantor to the extent
permitted by the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," the entering into by such Person of any
guarantee of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Issuer of any Person to be an
Unrestricted Subsidiary. The Issuer shall be deemed to make an Investment in an
amount equal to the fair market value of the net assets of any subsidiary (or,
if neither the Issuer nor any of its Subsidiaries has theretofore made an
Investment in such subsidiary, in an amount equal to the Investments being
made), at the time that such subsidiary is designated an Unrestricted
Subsidiary, and any property transferred to an Unrestricted Subsidiary from the
Issuer or a Subsidiary of the Issuer shall be deemed an Investment valued at its
fair market value at the time of such transfer.
"Issue Date" means the date of first issuance of Notes under the Indenture.
"Junior Securities" means any Qualified Capital Stock and any Indebtedness
of the Issuer or a Guarantor, as applicable, that is subordinated in right of
payment to the Notes or the Guarantee, as applicable, and has no scheduled
installment of principal due, by redemption, sinking fund payment or otherwise,
on or prior to the Stated Maturity of the Notes; provided that in the case of
subordination in respect of Senior Debt under the New Credit Facility, "Junior
Security" shall mean any Qualified Capital Stock and any Indebtedness of the
Issuer or the Guarantor, as applicable, that is issued to a Holder on account of
the Notes pursuant to an order or decree of a court of competent jurisdiction in
a reorganization proceeding under any applicable bankruptcy or reorganization
law, which Qualified Capital Stock or Indebtedness (i) has a maturity, mandatory
redemption obligation or put right, if any, longer than, or occurring after the
final maturity date of, all Senior Debt outstanding under the New Credit
Facility on the date of issuance of such
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Qualified Capital Stock or Indebtedness (and to any securities issued in
exchange for any such Senior Debt), (ii) is unsecured, (iii) has an Average Life
longer than the security for which such Qualified Capital Stock or Indebtedness
is being exchanged, (iv) does not provide for terms, conditions or covenants
more onerous than those provided in the Notes and (v) by their terms or by law
are subordinated to Senior Debt outstanding under the New Credit Facility on the
date of issuance of such Qualified Capital Stock or Indebtedness (and to any
securities in exchange for any such Senior Debt) at least to the same extent as
the Notes.
"Lien" means any mortgage, charge, pledge, lien (statutory or otherwise),
privilege, security interest, hypothecation or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired.
"Net Cash Proceeds" means the aggregate amount of cash or Cash Equivalents
received by the Issuer in the case of a sale of its Qualified Capital Stock and
by the Issuer and its Subsidiaries in respect of an Asset Sale plus, in the case
of an issuance of Qualified Capital Stock of the Issuer upon any exercise,
exchange or conversion of securities (including options, warrants, rights and
convertible or exchangeable debt) of the Issuer that were issued for cash on or
after the Issue Date, the amount of cash originally received by the Issuer upon
the issuance of such securities (including options, warrants, rights and
convertible or exchangeable debt) less, in each case, the sum of all payments,
fees, commissions and expenses (including, without limitation, the fees and
expenses of legal counsel and investment banking fees and expenses) incurred in
connection with such Asset Sale or sale of Qualified Capital Stock, and, in the
case of an Asset Sale only, less the amount (estimated reasonably and in good
faith by the Issuer) of income, franchise, sales and other applicable taxes
required to be paid resulting from such sale by the Issuer or any of its
respective Subsidiaries in the taxable year that such sale is consummated or in
the immediately succeeding taxable year, the computation of which shall take
into account the reduction in tax liability resulting from any available
operating losses and net operating loss carryovers, tax credits and tax credit
carryforwards, and similar tax attributes. "Net Cash Proceeds" also includes the
amount of cash received by the Issuer as a Capital Contribution from Parent.
"New Credit Facility" means the credit agreement dated April 17, 1998 by
and among the Issuer, the Parent, and certain financial institutions providing
for an aggregate $250.0 million term credit facility and an aggregate $750.0
million revolving credit facility, and including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith, as such credit agreement and/or related documents may be amended,
restated, supplemented, renewed, replaced, refinanced (in whole or in part) or
otherwise modified from time to time whether or not with the same agent,
trustee, representative lenders or holders, and whether or not pursuant to a
single or multiple agreements or instruments, and, subject to the proviso to the
next succeeding sentence, irrespective of any changes in their terms and
conditions thereof. Without limiting the generality of the foregoing, the term
"New Credit Facility" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders at any time party to the New Credit Facility
(which Interest Swap and Hedging Obligations shall not be deemed to increase the
amount outstanding pursuant to the New Credit Facility for purposes of
determining compliance with the "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock" covenant contained herein) and
shall also include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any New Credit Facility and all
refundings, refinancings and replacements (whether in whole or in part) of all
or any part of the New Credit Facility, including any agreement or agreements
(i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as borrowers and issuers include one or more of the Issuer
and its Subsidiaries and their respective successors and assigns, (iii)
increasing the amount of Indebtedness incurred thereunder or available to be
borrowed thereunder; provided, that on the date such increased Indebtedness is
incurred it would be permitted to be incurred under the covenant "Limitation on
Incurrence of Additional Indebtedness and Disqualified Capital Stock," or (iv)
otherwise altering the terms and conditions thereof.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which neither the
Issuer nor any of its Subsidiaries (i) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (ii) is directly or indirectly liable (as a guarantor or
otherwise), or (iii) constitutes the lender; and (b) no default with respect to
which (including any rights that the holders
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thereof may have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Issuer or any of its Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity.
"Obligation" means any principal, premium, interest, penalties, fees,
reimbursements, damages, indemnification and other liabilities relating to
obligations of the Issuer or any Guarantor under the Notes or the Indenture,
including any liquidated damages pursuant to the Registration Rights Agreement.
"Officer's Certificate" means a certificate signed on behalf of the Issuer
or Subsidiary Guarantor, as applicable, by an officer of the Issuer or
Subsidiary Guarantor, as applicable, who must be the principal executive
officer, the principal financial officer, the treasurer or the principal
accounting officer of the Issuer or Subsidiary Guarantor, as applicable, that
meets the requirements set forth in the Indenture.
"Parent" means Corporate Express, Inc.
"Parent Consolidated Leverage Ratio" shall mean the ratio on a pro forma
basis of (i) the aggregate outstanding amount of Indebtedness of the Parent and
its Consolidated Subsidiaries as of the date of calculation on a consolidated
basis, after giving effect to the incurrence of Indebtedness and Disqualified
Preferred Stock on such date, net of cash stated on the Parent's consolidated
balance sheet, plus the aggregate liquidation preference of all Disqualified
Preferred Stock of the Parent and its Consolidated Subsidiaries to (ii) the
Consolidated EBITDA of the Parent for the four last full fiscal quarters ending
on or prior to the date of determination; provided, that for purposes of such
calculation, Acquisitions which occurred during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date shall
be assumed to have occurred on the first day of the Reference Period.
"Parent Convertible Notes" means the $325.0 million aggregate principal
amount of 4 1/2% Convertible Notes due July 1, 2000 of the Parent issued
pursuant to the Indenture, dated as of June 24, 1996, between Parent and Bankers
Trust Company, as Trustee, as in existence on the Issue Date.
"Permitted Indebtedness" means that:
(a) the Issuer, the Subsidiary Guarantors and the Foreign Subsidiaries
may incur Indebtedness solely in respect of bankers acceptances, bank
overdrafts, letters of credit and performance bonds (to the extent that
such incurrence does not result in the incurrence of any obligation to
repay any obligation relating to borrowed money of others), all in the
ordinary course of business in accordance with customary industry practices
and for the purposes customary in the Issuer's industry;
(b) the Issuer may incur Indebtedness to any Subsidiary Guarantor or a
Foreign Subsidiary, and any Subsidiary Guarantor or a Foreign Subsidiary
may incur Indebtedness to any other Subsidiary Guarantor or a Foreign
Subsidiary or to the Issuer; provided that the time any such Indebtedness
becomes held by any Person other than the Issuer or a Subsidiary, Guarantor
or a Foreign Subsidiary shall be deemed an Incurrence Date; provided,
further, that in the case of Indebtedness of the Issuer, such obligations
shall be unsecured and subordinated in all respects to the Issuer's
obligations pursuant to the Notes;
(c) any Subsidiary Guarantor may guaranty any Indebtedness of the
Issuer or another Subsidiary Guarantor that was permitted to be incurred
pursuant to the Indenture, substantially concurrently with such incurrence
or at the time such Person becomes a Subsidiary Guarantor;
(d) a Receivables Subsidiary may incur Indebtedness in a Qualified
Receivables Transaction that is without recourse to the Issuer or Parent or
to any Subsidiary of the Issuer or of Parent or any of their assets (other
than Standard Securitization Undertakings and other than such Receivables
Subsidiary and its assets), and is not guaranteed by any such Person and is
not otherwise any such other Person's legal liability; and
(e) the Issuer and the Subsidiary Guarantors and the Foreign
Subsidiaries may incur Interest Swap and Hedging Obligations, so long as
not for purposes of speculation, for the purpose of fixing or hedging
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(i) interest rate risk with respect to any floating Indebtedness that is
permitted by the terms of the Indenture to be outstanding or (ii) the value
of foreign currencies purchased or received by the Issuer or its
Subsidiaries in the ordinary course.
"Permitted Investment" means any Investment in (a) any of the Notes; (b)
Cash Equivalents; (c) intercompany notes to the extent permitted under clause
(b) of the definition of "Permitted Indebtedness; (d) Investments by the Issuer
or any Subsidiary Guarantor in any Person that is or immediately after such
Investment becomes a Subsidiary Guarantor, or immediately after such Investment
merges or consolidates into the Issuer or any Subsidiary Guarantor in compliance
with the terms of the Indenture, provided that such Person is engaged in all
material respects in Related Business; (e) Investments by the Issuer or any
Subsidiary Guarantor in any Person that is or immediately after such Investment
becomes a Wholly Owned Foreign Subsidiary, provided that such Person is engaged
in all material respects in a Related Business (other than Investments
consisting of or from the contribution, sale, disposition or other transfer of
Existing Assets of the Issuer or a Subsidiary Guarantor or the direct or
indirect proceeds of any such Existing Assets, in each case outside the ordinary
course of business); (f) Investments in the Issuer by any Subsidiary Guarantor,
provided that in the case of Indebtedness constituting any such Investment, such
Indebtedness shall be unsecured and subordinated in all respects to the Issuer's
obligations under the Notes; (g) Investments in securities of trade creditors or
customers received in settlement of obligations that arose in the ordinary
course of business or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade creditors or
customers; (h) Investments by the Issuer outstanding on the Issue Date; (i)
transactions or arrangements with officers or directors of the Issuer or any
Subsidiary Guarantor entered into in the ordinary course of business (including
compensation or employee benefit arrangements with any officer or director of
the Issuer or any Subsidiary Guarantor permitted under the covenant "Limitation
on Transactions with Affiliates"); (j) the acquisition by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction of Equity
Interests of a trust or other Person established by such Receivables Subsidiary
to effect such Qualified Receivables Transaction; (k) any Investment by the
Issuer or any Guarantor in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other person, in each case in connection with a
Qualified Receivables Transaction; provided, that the foregoing Investment is in
the form of a note that the Receivables Subsidiary or other Person is required
to repay as soon as practicable from available cash collections less amounts
required to be established as reserves pursuant to contractual arrangements with
entities that are not Affiliates entered into as part of a Qualified Receivables
Transaction; (l) Investments made as a result of the receipt of non-cash
consideration from a sale of assets that does not constitute an Asset Sale by
reason of the de minimus thresholds set forth in the definition thereof and from
an Asset Sale that was made pursuant to and in compliance with the covenant
entitled "Limitations on Sales of Assets and Subsidiary Stock"; and (m) any
acquisition of assets in exchange for the Qualified Capital Stock of the Issuer.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Issuer in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business,
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, or (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Issuer in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Issuer or any of its Subsidiaries) or interfere with the
ordinary conduct of the business of the Issuer or any of its Subsidiaries; (f)
Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default with
respect thereto; (g) pledges or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other types
of social security legislation; (h) Liens
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securing the Notes; (i) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the Issuer or is merged with or into
the Issuer or a Subsidiary of the Issuer, or Liens securing Indebtedness
incurred in connection with an Acquisition, provided that such Liens were in
existence prior to the date of such acquisition, merger or consolidation, were
not incurred in anticipation thereof, and do not extend to any other assets; (j)
Liens arising from Purchase Money Indebtedness permitted to be incurred under
paragraph (c) of the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," provided such Liens relate solely
to the property which is subject to such Purchase Money Indebtedness; (k) leases
or subleases granted to other Persons in the ordinary course of business not
materially interfering with the conduct of the business of the Issuer or any of
its Subsidiaries or materially detracting from the value of the relative assets
of the Issuer or any Subsidiary; (l) Liens arising from precautionary Uniform
Commercial Code financing statement filings regarding operating leases entered
into by the Issuer or any of its Subsidiaries in the ordinary course of
business; (m) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Notes than the terms of the Liens securing such refinanced
Indebtedness, provided that the Indebtedness secured is not increased and the
Liens are not extended to any additional assets or property that would not have
been security for the Indebtedness refinanced; (n) Liens securing Senior Debt,
including Indebtedness incurred under the New Credit Facility in accordance with
the terms of the Indenture; (o) Liens on assets of a Receivables Subsidiary
incurred in connection with a Qualified Receivables Transaction; and (p) Liens
securing Indebtedness of any Foreign Subsidiary incurred in accordance with the
provisions of the covenant "Limitation on Incurrence of Additional Indebtedness
and Disqualified Capital Stock," provided such Liens relate solely to the
property of one or more Foreign Subsidiaries; (q) Liens of landlords or of
mortgages of landlords arising by operation of law, provided that the rental
payments secured thereby are not yet due and payable; (r) Liens incurred in the
ordinary course of business of the Issuer or any Subsidiary of the Issuer with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (i) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (ii) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof; (s) Liens
securing reimbursement obligations with respect to letters of credit which
encumber only documents and other property relating to such letters of credit
and the products and proceeds thereof; (t) Liens arising out of consignment or
similar arrangements for the sale of goods; and (u) Liens securing Interest Swap
and Hedging Obligations permitted to be incurred by the Indenture.
"Permitted Payments to Parent" means, without duplication, (a) payments to
Parent in an aggregate amount not to exceed $1.0 million in any fiscal year in
an amount necessary and sufficient to permit Parent to pay reasonable and
necessary operating expenses and other general corporate expenses to the extent
such expenses relate or are fairly allocable to the Issuer and its Subsidiaries
(including any reasonable professional fees and expenses, but excluding all
expenses payable to or to be paid to or on behalf of an Excluded Person except
in a transaction constituting an Exempted Affiliate Transaction, and (b)
payments to Parent to enable Parent to pay foreign, Federal, state or local tax
liabilities ("Tax Payments"), not to exceed the amount of any tax liabilities
that would be otherwise payable by the Issuer and its Subsidiaries to the
appropriate taxing authorities if the Issuer and its Subsidiaries were to file
separate tax returns to the extent that Parent has an obligation to pay such tax
liabilities relating to the operations, assets or capital of the Issuer or its
Subsidiaries; provided, however, that (i) notwithstanding the foregoing, in the
case of determining the amount of a Tax Payment that is permitted to be paid by
the Issuer and any of its United States Subsidiaries in respect of their Federal
income tax liability, such payment shall be determined on the basis of assuming
that the Issuer is the parent company of an affiliated group (the "Issuer
Affiliated Group") filing a Federal income tax return and that Parent and each
such United States Subsidiary is a member of the Issuer Affiliated Group and
(ii) any Tax Payments shall either be used by Parent to pay such tax liabilities
within 90 days of Parent's receipt of such payment or refunded to the payee.
"Public Equity Offering" means an underwritten offering of common stock of
the Issuer or Parent for cash pursuant to an effective registration statement
under the Securities Act, provided, at the time or upon consummation of such
offering, such common stock of the Issuer or Parent is listed on a national
securities exchange or quoted on the national market system of the Nasdaq Stock
Market.
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"Purchase Money Indebtedness" of any Person means any Indebtedness of such
Person to any seller or other Person incurred to finance solely the acquisition
(including in the case of a Capitalized Lease Obligation, the lease) of any real
or personal tangible property which is incurred within 180 days of such
acquisition and is secured only by the assets so financed.
"Qualified Capital Stock" means any Equity Interests of the Issuer or such
other specified person that is not Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, retirement,
repurchase or other acquisition of Equity Interests or Indebtedness of the
Issuer issued on or after the Issue Date with the Net Cash Proceeds received by
the Issuer from the substantially concurrent sale of Qualified Capital Stock of
the Issuer or any exchange of Qualified Capital Stock of the Issuer for any
Equity Interests or Indebtedness of the Issuer issued on or after the Issue
Date.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Issuer, any Guarantor or any
Receivables Subsidiary pursuant to which the Issuer, any Guarantor or any
Receivables Subsidiary may sell, convey or otherwise transfer to, or grant a
security interest in for the benefit of, (a) a Receivables Subsidiary (in the
case of a transfer or encumbrancing by the Issuer or any Guarantor) and (b) any
other Person (solely in the case of a transfer or encumbrancing by a Receivables
Subsidiary), solely accounts receivable (whether now existing or arising in the
future) of the Issuer or any Guarantor which arose in the ordinary course of
business of the Issuer or any Guarantor, and any assets related thereto,
including, without limitation, all collateral securing such accounts receivable,
all contracts and all guarantees or other obligations in respect of such
accounts receivable, proceeds of such accounts receivable and other assets which
are customarily transferred or in respect of which security interests are
customarily granted in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Issuer
which engages in no activities other than in connection with the financing of
accounts receivable and which is designated by the Board of Directors of the
Issuer (as provided below) as a Receivables Subsidiary (a) no portion of any
Indebtedness or any other obligations (contingent or otherwise) of which,
directly or indirectly, contingently or otherwise, (i) is guaranteed by the
Issuer or Parent or any other Subsidiary of the Issuer or Parent (excluding
Standard Securities Undertakings), (ii) is recourse to or obligates the Issuer
or Parent or any other Subsidiary of the Issuer or Parent in any way other than
pursuant to Standard Securitization Undertakings, or (iii) subjects any property
or asset of the Issuer or Parent or any other Subsidiary of the Issuer or Parent
to the satisfaction thereof, other than Standard Securitization Undertakings,
(b) with which neither the Issuer or Parent nor any other Subsidiary of the
Issuer or Parent has any material contract, agreement, arrangement or
understanding other than those customarily entered into in connection with
Qualified Receivables Transactions, and (c) with which neither the Issuer or
Parent nor any other Subsidiaries of the Issuer or Parent has any obligation,
directly or indirectly, contingently or otherwise, to maintain or preserve such
Subsidiary's financial condition or cause such Subsidiary to achieve certain
levels of operating results. Any such designation by the Board of Directors of
the Issuer shall be evidenced to the Trustee by the filing with the Trustee a
certified copy of the resolution of the Board of Directors of the Issuer giving
effect to such designation and an Officer's Certificate certifying that such
designation complied with the foregoing conditions.
"Reference Period" with regard to any Person means the four full fiscal
quarters (or such lesser period during which such Person has been in existence)
ended immediately preceding any date upon which any determination is to be made
pursuant to the terms of the Notes or the Indenture.
"Refinanced Parent Convertible Note" means Refinancing Indebtedness
incurred to refinance the Parent Convertible Notes.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital Stock
(a) issued in exchange for, or the proceeds from the issuance and sale of which
are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of
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Disqualified Capital Stock, liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance with GAAP) at the time of such Refinancing;
provided, that (A) such Refinancing Indebtedness shall only be issued to
Refinance outstanding Indebtedness or Disqualified Capital Stock of such person
issuing such Refinancing Indebtedness, (B) such Refinancing Indebtedness shall
(x) not have an Average Life shorter than the Indebtedness or Disqualified
Capital Stock to be so refinanced at the time of such Refinancing and (y) in all
respects, be no less subordinated, if applicable, to the rights of Holders of
the Notes than was the Indebtedness or Disqualified Capital Stock to be
refinanced, and (C) such Refinancing Indebtedness shall have a final stated
maturity or redemption date, as applicable, no earlier than the final stated
maturity or redemption date, as applicable, of the Indebtedness or Disqualified
Capital Stock to be so refinanced.
"Related Business" means the business conducted (or proposed to be
conducted) by the Issuer and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Issuer are materially related businesses. Without limiting the generality of the
foregoing, Related Business shall include sales (including by mail) of office
products, computer systems and equipment and office furniture, computer systems
consulting and forms management.
"Related Person" means any Person who controls, is controlled by or is
under common control with an Excluded Person; provided that for purposes of this
definition "control" means the beneficial ownership of more than 50% of the
total voting power of a Person normally entitled to vote in the election of
directors, managers or trustees, as applicable, of a Person.
"Restricted Investment" means, in one or a series of related transactions,
any Investment, other than investments in Cash Equivalents and other Permitted
Investments.
"Restricted Payment" means, with respect to any Person, (a) the declaration
or payment of any dividend or other distribution in respect of Equity Interests
of such Person or the Parent or Subsidiary of such person, (b) any payment on
account of the purchase, redemption or other acquisition or retirement for value
of Equity Interests of such Person or any Subsidiary or the Parent of such
Person, (c) other than with the proceeds from the substantially concurrent sale
of, or in exchange for, Refinancing Indebtedness, any purchase, redemption, or
other acquisition or retirement for value of, any payment in respect of any
amendment of the terms of or any defeasance of, any Subordinated Indebtedness,
directly or indirectly, by such Person or the Parent or Subsidiary of such
Person prior to the scheduled maturity, any scheduled repayment of principal, or
scheduled sinking fund payment, as the case may be, of such Indebtedness and (d)
any Restricted Investment by such person; provided, however, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on or with respect to Equity Interests of an issuer to the extent
payable solely in shares of Qualified Capital Stock of such issuer; (ii) any
dividend, distribution or other payment to the Issuer or to any of its
Subsidiary Guarantors, by the Issuer or any of its Subsidiaries, or to a Foreign
Subsidiary which is a direct or indirect parent of another Foreign Subsidiary,
by such Foreign Subsidiary; (iii) loans or advances to any Subsidiary Guarantor
the proceeds of which are used by such Subsidiary Guarantor in a Related
Business activity of such Subsidiary Guarantor; or (iv) Permitted Investments.
"Senior Debt" of the Issuer or any Guarantor means Indebtedness (including,
without limitation, all monetary obligations in respect of the New Credit
Facility, and interest, whether or not allowable, accruing on Indebtedness
incurred pursuant to the New Credit Facility at the relevant contractual rate
provided in the New Credit Facility both before and after the filing of a
petition initiating any proceeding under any bankruptcy, insolvency or similar
law) of the Issuer or such Guarantor arising under the New Credit Facility or
that, by the terms of the instrument creating or evidencing such Indebtedness,
is expressly designated Senior Debt and made senior in right of payment to the
Notes or the applicable Guarantee; provided, that in no event shall Senior Debt
include (a) Indebtedness to any Subsidiary of the Issuer or any officer,
director or employee of the Issuer or any Subsidiary of the Issuer, (b)
Indebtedness to the extent the same is incurred in violation of the covenant
"Limitation on Incurrence of Additional Indebtedness and Disqualified Capital
Stock," (c) Indebtedness to trade creditors, (d) Disqualified Capital Stock, (e)
Capitalized Lease Obliga-
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tions, (f) any liability for taxes owed or owing by the Issuer or such Guarantor
or (g) the Parent Convertible Notes or the 9 1/8% Senior Subordinated Notes.
"Significant Subsidiary" shall have the meaning provided under Regulation
S-X of the Securities Act, as in effect on the Issue Date.
"Standard Securitization Undertakings" mean representations, warranties,
covenants and indemnities entered into by the Issuer or any Subsidiary Guarantor
which are reasonably customary in an accounts receivables transaction.
"Stated Maturity" when used with respect to any Note, means June 1, 2008.
"Subordinated Indebtedness" means Indebtedness of the Issuer or a
Subsidiary Guarantor that is subordinated in right of payment by its terms or
the terms of any document or instrument relating thereto to the Notes or such
Subsidiary Guarantee, as applicable, in any respect or has a final stated
maturity after the Stated Maturity.
"Subsidiary" with respect to any Person, means (i) a corporation a majority
of whose Equity Interests with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such Person, by
such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such person, or (ii) any other Person (other than a corporation)
in which such person, one or more Subsidiaries of such Person, or such Person
and one or more Subsidiaries of such Person, directly or indirectly, at the date
of determination thereof has a majority ownership interest. Notwithstanding the
foregoing, an Unrestricted Subsidiary shall not be a Subsidiary of the Issuer or
of any Subsidiary of the Issuer. Unless the context requires otherwise,
Subsidiary means each direct and indirect Subsidiary of the Issuer.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Indebtedness; (b) is not party to any agreement, contract,
arrangement or understanding with the Issuer or any Subsidiary of the Issuer
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Issuer or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (c) is
a Person with respect to which neither the Issuer nor any of its Subsidiaries
has any direct or indirect obligation (x) to subscribe for additional Equity
Interests or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Issuer or any of its Subsidiaries. Any such
designation by the Board of Directors will be evidenced to the Trustee by filing
with the Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
entitled "Restricted Payments" hereof. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary will be deemed
to be incurred by a Subsidiary of the Issuer as of such date (and, if such
Indebtedness is not permitted to be incurred as of such date under the covenant
entitled "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock" hereof, the Issuer will be in default of such covenant). The
Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be
a Subsidiary, provided,that (i) no Default or Event of Default is existing or
will occur as a consequence thereof and (ii) immediately after giving effect to
such designation, on a pro forma basis, the Issuer could incur at least $1.00 of
Indebtedness pursuant to the Debt Incurrence Ratio in paragraph (a) of the
covenant "Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock." Each such designation shall be evidenced by filing with the
Trustee a certified copy of the resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations of, or
noncallable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
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"U.S. Legal Tender Equivalents" means securities issued or directly and
fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof with a maturity of 90 days or less (provided that the
full faith and credit of the United States of America is pledged in support
thereof).
"Wholly Owned Foreign Subsidiary" of any Person means a Foreign Subsidiary
of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Foreign Subsidiaries of such Person
or by such Person and one or more Subsidiary Guarantors of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiary Guarantors of such Person.
BOOK-ENTRY; DELIVERY; FORM AND TRANSFER
The Old Notes sold to Qualified Institutional Buyers initially were in the
form of one or more registered global notes without interest coupons
(collectively, the "U.S. Global Notes"). Upon issuance, the U.S. Global Notes
were deposited with the Trustee, as custodian for DTC in New York, New York, and
registered in the name of DTC or its nominee for credit to the accounts of DTC's
Direct and Indirect Participants (as defined below). The Old Notes sold in
offshore transactions in reliance on Regulation S, initially were in the form of
one or more temporary, registered, global book-entry notes without interest
coupons (the "Reg S Temporary Global Notes"). The Reg S Temporary Global Notes
were deposited with the Trustee, as custodian for DTC, in New York, New York,
and registered in the name of a nominee of DTC (a "Nominee") for credit to the
accounts of Indirect Participants participating in DTC through the Euroclear
System ("Euroclear") and Cedel Bank, societe anonyme ("CEDEL"). During the
40-day period commencing on the day after the later of the offering date and the
original Issue Date (as defined) of the Old Notes (the "40-Day Restricted
Period"), beneficial interests in the Reg S Temporary Global Note may be held
only through Euroclear or CEDEL, and, pursuant to DTC's procedures, Indirect
Participants that hold a beneficial interest in the Reg S Temporary Global Note
will not be able to transfer such interest to a person that takes delivery
thereof in the form of an interest in the U.S. Global Notes. Within a reasonable
time after the expiration of the 40-Day Restricted Period, the Reg S Temporary
Global Notes will be exchanged for one or more permanent global notes (the "Reg
S Permanent Global Notes", collectively with the Reg S Temporary Global Notes,
the "Reg S Global Notes") upon delivery to DTC of certification of compliance
with the transfer restrictions applicable to the Notes and pursuant to
Regulation S as provided in the Indenture. After the 40-Day Restricted Period,
(i) beneficial interests in the Reg S Permanent Global Notes may be transferred
to a person that takes delivery in the form of an interest in the U.S. Global
Notes and (ii) beneficial interests in the U.S. Global Notes may be transferred
to a person that takes delivery in the form of an interest in the Reg S
Permanent Global Notes, provided, in each case, that the certification
requirements described below are complied with. See "Transfers of Interests in
One Global Note for Interests in Another Global Note." All registered global
notes are referred to herein collectively as "Global Notes."
Beneficial interests in all Global Notes and all Certificated Notes (as
defined below), if any, will be subject to certain restrictions on transfer and
will bear a restrictive legend as described under "Notice to Investors." In
addition, transfer of beneficial interests in any Global Notes will be subject
to the applicable rules and procedures of DTC and its Direct or Indirect
Participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
The Global Notes may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Notes may be exchanged
for Notes in certificated form in certain limited circumstances. See "Transfer
of Interests in Global Notes for Certificated Notes."
Initially, the Trustee will act as Paying Agent and Registrar. The Notes
may be presented for registration of transfer and exchange at the offices of the
Registrar.
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DEPOSITARY PROCEDURES
DTC has advised the Issuer that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations, including
Euroclear and CEDEL. Access to DTC's system is also available to other entities
that clear through or maintain a direct or indirect, custodial relationship with
a Direct Participant (collectively, the "Indirect Participants").
DTC has also advised the Issuer that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes that have been allocated to them by the Initial
Purchasers, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Notes and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Notes. Direct Participants and Indirect Participants must maintain their
own records of the ownership interests of, and the transfer of ownership
interests by and between, Indirect Participants and other owners of beneficial
interests in the Global Notes.
Investors in the U.S. Global Notes may hold their interests therein
directly through DTC if they are Direct Participants in DTC or indirectly
through organizations that are Direct Participants in DTC. Investors in the Reg
S Temporary Global Notes may hold their interests therein directly through
Euroclear or CEDEL or indirectly through organizations that are participants in
Euroclear or CEDEL. After the expiration of the 40-Day Restricted Period (but
not earlier), investors may hold interests in the Reg S Global Notes through
organizations other than Euroclear and CEDEL that are Direct Participants in the
DTC system. Morgan Guaranty Trust Company of New York, Brussels office, is the
operator and depository of Euroclear and Citibank, N.A. is the operator and
depository of CEDEL (each a "Nominee" of Euroclear and CEDEL, respectively).
Therefore, they will each be recorded on DTC's records as the holders of all
ownership interests held by them on behalf of Euroclear and CEDEL, respectively.
Euroclear and CEDEL must maintain on their own records the ownership interests,
and transfers of ownership interests of, by and between their own customers'
securities accounts. DTC will not maintain such records. All ownership interests
in any Global Notes, including those of customers' securities accounts held
through Euroclear or CEDEL, may be subject to the procedures and requirements of
DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that they
own. This may limit or curtail the ability to transfer beneficial interests in a
Global Note to such persons. Because DTC can act only on behalf of Direct
Participants, which in turn act on behalf of Indirect Participants and others,
the ability of a person having a beneficial interest in a Global Note to pledge
such interest to persons or entities that are not Direct Participants in DTC, or
to otherwise take actions in respect of such interests, may be affected by the
lack of physical certificates evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "Reg S Temporary and Reg S
Permanent Global Notes" and "-- Transfers of Interests in Global Notes for
Certificated Notes."
EXCEPT AS DESCRIBED IN "TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR
CERTIFICATED NOTES", OWNERS OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Under the terms of the Indenture, the Issuer, the Guarantors and the
Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, Liquidated Damages, if any, and
interest on Global Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
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Indenture. Consequently, neither the Issuer, the Trustee nor any agent of the
Issuer or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC's records or any Direct Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Note or (ii) any other matter relating to the actions and practices of
DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Issuer that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Issuer or the Guarantors. Neither the Issuer, the Guarantors nor
the Trustee will be liable for any delay by DTC or its Direct Participants or
Indirect Participants in identifying the beneficial owners of the Notes, and the
Issuer and the Trustee may conclusively rely on and will be protected in relying
on instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
The Global Notes trade in DTC's Same-Day Funds Settlement System and,
therefore, transfers between Direct Participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in immediately available
funds. Transfers between Indirect Participants (other than Indirect Participants
who hold an interest in the Notes through Euroclear or CEDEL) who hold an
interest through a Direct Participant will be effected in accordance with the
procedures of such Direct Participant but generally will settle in immediately
available funds. Transfers between and among Indirect Participants who hold
interests in the Notes through Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes described herein, cross-market transfers between Direct Participants in
DTC, on the one hand, and Indirect Participants who hold interests in the Notes
through Euroclear or CEDEL, on the other hand, will be effected by Euroclear's
or CEDEL's respective Nominee through DTC in accordance with DTC's rules on
behalf of Euroclear or CEDEL; however, delivery of instructions relating to
crossmarket transactions must be made directly to Euroclear or CEDEL, as the
case may be, by the counterparty in accordance with the rules and procedures of
Euroclear or CEDEL and within their established deadlines (Brussels time for
Euroclear and UK time for CEDEL). Indirect Participants who hold interest in the
Notes through Euroclear and CEDEL may not deliver instructions directly to
Euroclear's or CEDEL's Nominee. Euroclear or CEDEL will, if the transaction
meets its settlement requirements, deliver instructions to its respective
Nominee to deliver or receive interests on Euroclear's or CEDEL's behalf in the
relevant Global Note in DTC, and make or receive payment in accordance with
normal procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the Notes through Euroclear or CEDEL
purchasing an interest in a Global Note from a Direct Participant in DTC will be
credited, and any such crediting will be reported to Euroclear or CEDEL during
the European business day immediately following the settlement date of DTC in
New York. Although recorded in DTC's accounting records as of DTC's settlement
date in New York, Euroclear and CEDEL customers will not have access to the cash
amount credited to their accounts as a result of a sale of an interest in Reg S
Permanent Global Note to a DTC Participant until the European business day for
Euroclear or CEDEL immediately following DTC's settlement date.
DTC has advised the Issuer that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its
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Direct Participants) for legended Notes in certificated form, and to distribute
such certificated forms of Notes to its Direct Participants. See "Transfers of
Interests in Global Notes for Certificated Notes."
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
to facilitate transfers of interests in the Reg S Global Notes and in the U.S.
Global Notes among Direct Participants, including Euroclear and CEDEL, they are
under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. None of the Issuer, the
Guarantors, the Initial Purchasers or the Trustee shall have any responsibility
for the performance by DTC, Euroclear or CEDEL or their respective Direct and
Indirect Participants of their respective obligations under the rules and
procedures governing any of their operations.
The information in this section concerning DTC, Euroclear and CEDEL and
their book-entry systems has been obtained from sources that the Issuer believes
to be reliable, but the Issuer takes no responsibility for the accuracy thereof.
REG S TEMPORARY AND REG S PERMANENT GLOBAL NOTES
An Indirect Participant who holds an interest in the Reg S Temporary Global
Notes through Euroclear or CEDEL must provide Euroclear or CEDEL, as the case
may be, with a certificate in the form required by the Indenture certifying that
such Indirect Participant is either not a U.S. Person (as defined below) or has
purchased such interests in a transaction that is exempt from the registration
requirements under the Securities Act, and Euroclear or CEDEL, as the case may
be, must provide to the Trustee (or the Paying Agent, if other than the Trustee)
a certificate in the form required by the Indenture prior to any exchange of
such beneficial interests for beneficial interests in Reg S Permanent Global
Notes.
"U.S. Person" means (i) any individual resident in the United States, (ii)
any partnership or corporation organized or incorporated under the laws of the
United States, (iii) any estate of which an executor or administrator is a U.S.
person (other than an estate governed by foreign law and of which at least one
executor or administrator is a non-U.S. Person who has sole or shared investment
discretion with respect to its assets), (iv) any trust of which any trustee is a
U.S. Person (other than a trust of which at least one trustee is a non-U.S.
Person who has sole or shared investment discretion with respect to its assets
and no beneficiary of the trust (and no settler, if the trust is revocable) is a
U.S. Person), (v) any agency or branch of a foreign entity located in the United
States, (vi) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a U.S.
person, (vii) any discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account held for
the benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign jurisdiction
and formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act (unless it is organized or
incorporated and owned by "accredited investors" within the meaning of Rule
501(a) under the Securities Act who are not natural persons, estates or trusts);
provided, however, that the, "U.S. Person" shall not include (A) a branch or
agency of a U.S. Person that is located and operating outside the United States
for valid business purposes as a locally regulated branch or agency engaged in
the banking or insurance business, (B) any employee benefit plan established and
administered in accordance with the law, customary practices and documentation
of a foreign country and (C) the international organizations set forth in
Section 902(o)(7) of Regulation S under the Securities Act and any other similar
international organizations, and their agencies, affiliates and pension plans.
TRANSFERS OF INTERESTS IN ONE GLOBAL NOTE FOR INTERESTS IN ANOTHER GLOBAL NOTE
Prior to the expiration of the 40-Day Restricted Period, an Indirect
Participant who holds an interest in the Reg S Temporary Global Note through
Euroclear or CEDEL will not be permitted to transfer its interest to a U.S.
Person who takes delivery in the form of an interest in U.S. Global Notes. After
the expiration of the 40-Day Restricted Period, an Indirect Participant who
holds an interest in Reg S Global Notes will be permitted to transfer its
interest to a U.S. Person who takes delivery in the form of an interest in U.S.
Global Notes only upon receipt by the Trustee of a written certification from
the transferor to the effect that such
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transfer is being made in accordance with the restrictions on transfer set forth
under "Notice to Investors" and set forth in the legend printed on the Reg S
Permanent Global Notes.
Prior to the expiration of the 40-Day Restricted Period, a Direct or
Indirect Participant who holds an interest in the U.S. Global Note will not be
permitted to transfer its interests to any person that takes delivery thereof in
the form of an interest in the Reg S Temporary Global Notes. After the
expiration of the 40-Day Restricted Period, a Direct or Indirect Participant who
holds an interest in U.S. Global Notes may transfer its interests to a person
who takes delivery in the form of an interest in Reg S Permanent Global Notes
only upon receipt by the Trustee of a written certification from the transferor
to the effect that such transfer is being made in accordance with Rule 904 of
Regulation S.
Transfers involving an exchange of a beneficial interest in Reg S Global
Notes for a beneficial interest in U.S. Global Notes or vice versa will be
effected by DTC by means of an instruction originated by the Trustee through
DTC/Deposit Withdraw at Custodian (DWAC) system. Accordingly, in connection with
such transfer, appropriate adjustments will be made to reflect a decrease in the
principal amount of the one Global Note and a corresponding increase in the
principal amount of the other Global Note, as applicable. Any beneficial
interest in the one Global Note that is transferred to a person who takes
delivery in the form of the other Global Note will, upon transfer, cease to be
an interest in such first Global Note and become an interest in such other
Global Note and, accordingly, will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other Global Note for as long as it remains such an interest.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC (x)
notifies the Issuer that it is unwilling or unable to continue as depositary for
the Global Notes and the Issuer thereupon fails to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuer, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Certificated Notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the Notes. In any such case, the Issuer will notify the Trustee
in writing that, upon surrender by the Direct and Indirect Participants of their
interest in such Global Note, Certificated Notes will be issued to each person
that such Direct and Indirect Participants and the DTC identify as being the
beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), to the
Trustee in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Notes will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
In all cases described herein, such Certificated Notes will bear the
restrictive legend referred to in "Notice to Investors," unless the Issuer
determines otherwise in compliance with applicable law.
Neither the Issuer, the Guarantors nor the Trustee will be liable for any
delay by the holder of the Global Notes or the DTC in identifying the beneficial
owners of Notes, and the Issuer and the Trustee may conclusively rely on, and
will be protected in relying on, instructions from the holder of the Global Note
or the DTC for all purposes.
TRANSFERS OF CERTIFICATED NOTES FOR INTERESTS IN GLOBAL NOTES
Certificated Notes may be transferred only if the transferor first delivers
to the Trustee a written certificate (and, in certain circumstances, an opinion
of counsel) confirming that, in connection with such transfer, it has complied
with the restrictions on transfer described under "Notice to Investors."
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SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global Note.
With respect to Certificated Notes, the Issuer will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available same day funds to the accounts specified by
the holders thereof or, if no such account is specified, by mailing a check to
each such holder's registered address. The Issuer expects that secondary trading
in the Certificated Notes will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Issuer, the Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, NationsBanc Montgomery Securities LLC, First Chicago Capital
Markets, Inc. and BNY Capital Markets, Inc. (the "Initial Purchasers") entered
into the Registration Rights Agreement pursuant to which the Issuer and the
Guarantors agreed to file a registration statement with the Commission with
respect to the New Notes, of which this Prospectus forms a part (the "Exchange
Offer Registration Statement") within 60 days of the closing of the issuance of
the Old Notes (the "Closing Date"), and use their respective best efforts to
have it declared effective within 120 days of the Closing Date. The Issuer and
the Guarantors also agreed to use their respective best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, to keep the
Exchange Offer open for a period of not less than 20 business days and cause the
Exchange Offer to be consummated no later than the 30th business day after it is
declared effective by the Commission. Pursuant to the Exchange Offer, certain
holders of the Notes which constitute Transfer Restricted Securities (as defined
herein) may exchange their Transfer Restricted Securities for registered New
Notes. To participate in the Exchange Offer, each holder must represent that it
is not an affiliate of the Issuer, it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Notes and it is acquiring the New
Notes in its ordinary course of business.
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) any holder of the Notes which are Transfer Restricted Securities
notifies the Issuer prior to the 20th business day following the consummation of
the Exchange Offer that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer, (b) it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus, and the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by it, or (c) it is a
broker-dealer and holds the Notes acquired directly from the Issuer or any of
the Issuer's affiliates, the Issuer and the Guarantors will file with the
Commission a Shelf Registration Statement to register for public resale the
Transfer Restricted Securities held by any such holder who provides the Issuer
with certain information for inclusion in the Shelf Registration Statement.
For the purposes of the Registration Rights Agreement, "Transfer Restricted
Securities" means each Note until the earliest on the date of which (i) such
Note is exchanged in the Exchange Offer and entitled to be resold to the public
by the holder thereof without complying with the prospectus delivery
requirements of the Securities Act, (ii) such Note has been disposed of in
accordance with the Shelf Registration Statement, (iii) such Note is disposed of
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (iv) such Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The Registration Rights Agreement provides that (i) if the Issuer and the
Guarantors fail to file an Exchange Offer Registration Statement with the
Commission on or prior to the 60th day after the Closing Date, (ii) if the
Exchange Offer Registration Statement is not declared effective by the
Commission on or prior to the 120th day after the Closing Date, (iii) if the
Exchange Offer is not consummated on or before the 30th business day after the
Exchange Offer Registration Statement is declared effective, (iv) if obligated
to file the Shelf Registration Statement and the Issuer and the Guarantors fail
to file the Shelf Registration
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Statement with the Commission on or prior to the 30th business day after such
filing obligation arises, (v) if obligated to file a Shelf Registration
Statement and the Shelf Registration Statement is not declared effective on or
prior to the 90th day after the obligation to file a Shelf Registration
Statement arises, or (vi) if the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, is declared effective but
thereafter ceases to be effective or useable in connection with resales of the
Transfer Restricted Securities, for such time of non-effectiveness or
non-usability (each, a "Registration Default"), the Issuer and the Guarantors
agree to pay to each holder of Transfer Restricted Securities affected thereby
liquidated damages ("Liquidated Damages") in an amount equal to $0.05 per week
per $1,000 in principal amount of Transfer Restricted Securities held by such
holder for each week or portion thereof that the Registration Default continues
for the first 90 day period immediately following the occurrence of such
Registration Default. The amount of the Liquidated Damages shall increase by an
additional $0.05 per week per $1,000 in principal amount of Transfer Restricted
Securities at the beginning of and for each subsequent 90 day period until all
Registration Defaults have been cured, up to a maximum amount of Liquidated
Damages of $0.50 per week, per $1,000 in principal amount of Transfer Restricted
Securities. The Issuer and the Guarantors shall not be required to pay
Liquidated Damages for more than one Registration Default at any given time.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
All accrued Liquidated Damages shall be paid by the Issuer or the
Guarantors to holders entitled thereto in the same manner as interest payments
on the Notes on semi-annual damages payment dates which correspond to interest
payment dates for the Notes.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in
connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by
Participating Broker-Dealers during the period referred to below in connection
with resales of New Notes received in exchange for Old Notes if such Old Notes
were acquired by such Participating Broker-Dealers for their own accounts as a
result of market-making activities or other trading activities. The Issuer has
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such New Notes for a period ending one year after the Expiration Date (subject
to extension under certain limited circumstances described herein) or, if
earlier, when all such New Notes have been disposed of by such Participating
Broker-Dealer. However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Notes received in exchange for
Old Notes pursuant to the Exchange Offer must notify the Issuer, or cause the
Issuer to be notified, on or prior to the Expiration Date, that it is a
Participating Broker-Dealer. Such notice may be given in the space provided for
that purpose in the Letter of Transmittal or may be delivered to the Exchange
Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." See "The Exchange Offer -- Resales of New Notes."
The Issuer will not receive any cash proceeds from the issuance of the New
Notes offered hereby. New Notes received by broker-dealers for their own
accounts in connection with the Exchange Offer may be sold from time to time in
one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated prices. Any
such resale may be made directly to purchasers or to or through brokers or
dealers who may receive compensation in the form of commissions or concessions
from any such broker-dealer and/or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it for its
own account in connection with the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act, and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that by acknowledging
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that it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon on behalf of
the Company by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia,
Pennsylvania.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of the Company as of January 31,
1998, March 1, 1997 and March 2, 1996 and for the eleven month period ended
January 31, 1998, and the three years in the period ended March 1, 1997 have
been audited by PricewaterhouseCoopers LLP, independent accountants, as stated
in their report appearing in the Company's Current Report on Form 8-K as filed
on July 29, 1998.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated in this Prospectus by reference and made a part hereof:
1. The Parent's Annual Report on Form 10-K for the fiscal year ended
January 31, 1998.
2. The Parent's Quarterly Report on Form 10-Q for the fiscal quarter
ended May 2, 1998.
3. The Parent's Current Reports on Form 8-K filed on May 7, 1998 and
July 29, 1998, respectively.
All documents filed by the Parent pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Statement shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained herein
or in any document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for the purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus, except
as so modified or superseded. The Company will provide without charge upon
written request, a copy of any or all of the information that has been
incorporated by reference in this Prospectus (excluding exhibits to such
information which are not specifically incorporated by reference into such
information). Any such request should be directed to the Secretary of the Parent
at 1 Environmental Way, Broomfield, Colorado 80021.
AVAILABLE INFORMATION
The Issuer and the Subsidiary Guarantors are not subject to the periodic
reporting and other informational requirements of the Exchange Act. However, the
Parent is subject to such requirements and, in accordance therewith, files
reports, proxy statements and other information with the Commission. The
reports, proxy statements and other information filed by the Parent with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site (www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.
The Parent's Common Stock is traded on the Nasdaq National Market under the
symbol "CEXP." Reports, proxy statements and other information concerning the
Parent may be inspected at the offices of the Nasdaq National Market.
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NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, IN WHICH THE
PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary............................... 1
Risk Factors.......................... 10
The Exchange Offer.................... 16
Certain Federal Income Tax
Consequences........................ 25
Use of Proceeds....................... 26
Capitalization........................ 27
Unaudited Pro Forma Consolidated
Financial Statement................. 28
Selected Historical Consolidated
Financial Data...................... 31
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 33
Business.............................. 47
Management............................ 56
Description of New Credit Facility.... 58
Description of Notes.................. 60
Plan of Distribution.................. 96
Legal Matters......................... 97
Independent Accountants............... 97
Incorporation of Certain Documents by
Reference........................... 97
Available Information................. 97
</TABLE>
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$350,000,000
CEX HOLDINGS, INC.
9 5/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008
---------------------
PROSPECTUS
---------------------
, 1998
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<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 7-109-101, et seq., of the Colorado Business Corporation Act
generally provides that a corporation may indemnify its directors, officers,
employees, fiduciaries and agents against liabilities and reasonable expenses
incurred in connection with any threatened, pending, or completed action, suit
or proceeding whether civil, criminal, administrative or investigative and
whether formal or informal (a "Proceeding"), by reason of being or having been a
director, officer, employee, fiduciary or agent of the corporation, if such
person acted in good faith and reasonably believed that his conduct, in his
official capacity, was in the best interests of the corporation (or, with
respect to employee benefit plans, was in the best interests of the participants
of the plan), and in all other cases his conduct was at least not opposed to the
corporation's best interests. In the case of a criminal proceeding, the
director, officer, employee, fiduciary or agent must have had no reasonable
cause to believe his conduct was unlawful. Under Colorado law, the corporation
may not indemnify a director, officer, employee, fiduciary or agent in
connection with a Proceeding by or in the right of the corporation if the
director is adjudged liable to the corporation, or in a proceeding in which the
director, officer, employee or agent is adjudged liable for an improper personal
benefit.
Corporate Express' Articles of Amendment and Restatement and By-Laws
provide that Corporate Express shall indemnify its officers and directors to the
full extent permitted by the law. The indemnification provisions in Corporate
Express' By-Laws are substantially similar to the provisions of Section
7-109-101, et seq. Corporate Express has entered into agreements to provide
indemnification for its directors and certain officers consistent with its
Articles of Amendment and Restatement and By-Laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
The following exhibits are incorporated in this Registration Statement by
reference or included and submitted with this Registration Statement, as
indicated. Except as otherwise noted, the exhibit has previously been filed or
incorporated by reference as an exhibit to the Company's Annual Report on Form
10-K for the transition period ended January 31, 1998, and is incorporated
herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Articles of Amendment and Restatement of the Articles of
Incorporation of Corporate Express, Inc., a Colorado
corporation (the "Company"), filed on September 30, 1994.
3.2 -- Articles of Amendment and Restatement of the Company,
filed on August 22, 1996.
3.3 -- Amended and Restated By-Laws of the Company.
*3.4 -- Articles of Incorporation of CEX Holdings, Inc.
*3.5 -- By-laws of CEX Holdings, Inc.
4.1 -- Specimen Common Stock Certificate of the Company.
4.2 -- Form of Warrant Agreement.
4.3 -- Indenture dated as of February 28, 1994 by and among the
Company, and the Guarantors named therein and First Trust
National Association for the $100,000,000 9 1/8% Senior
Subordinated Notes.
*4.4 -- Supplemental Indenture dated as of June 18, 1996 by and
among the Company, CEX Holdings, Inc. and First Trust
National Association.
</TABLE>
II-1
<PAGE> 107
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.5 -- Indenture dated as of June 24, 1996 by and among the
Company and Bankers Trust Company, as trustee, for the
4 1/2% Convertible Notes due July 1, 2000 (including Form
of Notes).
4.6 -- First Supplemental Indenture dated as of October 15, 1996
relating to the Company's 4 1/2% Convertible Notes.
4.7 -- Rights Agreement dated as of January 29, 1998 between the
Company and Chasemellon Shareholder Services, L.L.C. as
Rights Agent.
4.8 -- Form of 4 1/2% Convertible Note.
*4.9 -- Indenture dated as of May 29, 1998 for the 9 5/8% Senior
Subordinated Notes due 2008 by and among CEX Holdings,
Inc., Corporate Express, Inc. and the other Guarantors
listed therein and The Bank of New York.
*4.10 -- Registration Rights Agreement dated as of May 29, 1998 by
and among CEX Holdings Inc., Corporate Express, Inc., the
Guarantors listed therein and Donaldson, Lufkin &
Jenrette Securities Corporation, BT Alex. Brown
Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, NationsBanc Montgomery Securities LLC,
First Chicago Capital Markets, Inc. and BNY Capital
Markets, Inc.
4.11 -- Second Supplemental Indenture dated as of May 18, 1998 by
and among CEX Holdings, Inc., the Guarantors named
therein and U.S. Bank Trust National Association
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 2,
1998).
**5.1 -- Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
10.1 -- Employment Agreement dated as of August 25, 1993, by and
between the Company and Robert King, as amended effective
July 15, 1994.
10.2 -- Amended and Restated 1992 Stock Option Plan, Form of
Non-qualified Stock Option Agreement and Form of
Incentive Stock Option Agreement.
10.3 -- 1994 Executive Stock Option Plan.
10.4 -- Form of Indemnification Agreement between the Company and
its officers and directors.
10.5 -- 1994 Stock Option and Incentive Plan.
10.6 -- 1994 Employee Stock Purchase Plan.
10.7 -- Employment Agreement dated as of July 31, 1995 by and
between the Company and Sam Leno.
10.8 -- Corporate Express, Inc. Supplemental Stock Option Plan.
10.9 -- Agreement and Plan of Merger dated as of September 10,
1996 among the Company, United TransNet, Inc. and Bevo
Acquisition Corp., Inc.
10.10 -- Agreement and Plan of Merger dated as of September 10,
1997 by and among the Company, IDD Acquisition Corp. and
Data Documents Incorporated.
10.11 -- Credit Agreement dated as of April 17, 1998 among the
Company, CEX Holdings, Inc., Various Banks, The First
National Bank of Chicago, as Syndication Agent, The Bank
of New York, as Co-Documentation Agent, DLJ Capital
Funding, Inc., as Co-Documentation Agent, DLJ Capital
Funding, Inc., as Co-Documentation Agent and Bankers
Trust Company as Administrative Agent.
10.12 -- Form of First Amendment to Credit Agreement dated as of
April 23, 1998.
*12.1 -- Ratio of Earnings to Fixed Charges.
21.1 -- List of Subsidiaries.
</TABLE>
II-2
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*23.1 -- Consent of PricewaterhouseCoopers LLP.
*23.2 -- Consent of Deloitte & Touche LLP
**23.3 -- Consent of Ballard Spahr Andrews & Ingersoll, LLP.
*25.1 -- Statement of Eligibility of Trustee on Form T-1.
27.1 -- Financial Data Schedule.
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Form of Tender Instructions.
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
person who may be deemed underwriters, in addition to the information called for
by the other Items of the applicable form.
The Registrants hereby undertake that every prospectus (i) that is filed
pursuant to the paragraph immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act, and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is asserted against
the Registrants by such director, officer or controlling person in connection
with the securities being registered, the Registrants will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final resolution of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of
II-3
<PAGE> 109
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 110
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Broomfield, State of
Colorado, on July 24, 1998.
CEX HOLDINGS, INC.
By: /s/ ROBERT L. KING
----------------------------------
Robert L. King
President and
Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 24, 1998 by the following persons
in the capacities indicated. Each person whose signature appears below hereby
authorizes and appoints Robert L. King and Sam R. Leno, and any one of them, as
his or her attorneys-in-fact, to sign and file on his or her behalf, in the
capacities stated below, any and all pre-effective amendments and post-effective
amendments to this Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ ROBERT L. KING President, Chief Operating Officer and
- ----------------------------------------------------- Director (Principal Executive Officer)
Robert L. King
/s/ SAM R. LENO Executive Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial and
Sam R. Leno Accounting Officer)
/s/ GARY M. JACOBS Director
- -----------------------------------------------------
Gary M. Jacobs
</TABLE>
II-5
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Broomfield, State of
Colorado, on July 24, 1998.
CORPORATE EXPRESS, INC.
By: /s/ JIRKA RYSAVY
----------------------------------
Jirka Rysavy
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on July 24, 1998 by the following persons
in the capacities indicated. Each person whose signature appears below hereby
authorizes and appoints Jirka Rysavy, Robert L. King and Sam R. Leno, and any
one of them, as his or her attorneys-in-fact, to sign and file on his or her
behalf, in the capacities stated below, any and all pre-effective amendments and
post-effective amendments to this Registration Statement.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ JIRKA RYSAVY Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer (Principal Executive Officer)
Jirka Rysavy
/s/ ROBERT L. KING President, Chief Operating Officer and
- ----------------------------------------------------- Director
Robert L. King
/s/ SAM R. LENO Executive Vice President and Chief Financial
- ----------------------------------------------------- Officer (Principal Financial Officer)
Sam R. Leno
Director
- -----------------------------------------------------
Janet A. Hickey
Director
- -----------------------------------------------------
James P. Argyropoulos
/s/ MO SIEGEL Director
- -----------------------------------------------------
Mo Siegel
</TABLE>
II-6
<PAGE> 112
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
following registrants have duly caused this Registration Statement to be signed
on their behalf by the undersigned, thereunto duly authorized, in the City of
Broomfield, State of Colorado on July 24, 1998.
ASAP SOFTWARE EXPRESS, INC.
CORPORATE EXPRESS CALLCENTER
SERVICES, INC.
SOFCO, INC.
SQP, INC.
SOFCO OF OHIO, INC.
S&O PROPERTY, INC.
EPCO PACKAGING SERVICES
HERMANN MARKETING, INC.
DISTRIBUTION RESOURCES CO.
CORPORATE EXPRESS REAL ESTATE, INC.
CORPORATE EXPRESS OF THE EAST, INC.
CORPORATE EXPRESS OF TEXAS, INC.
FEDERAL SALES SERVICES, INC.
VIRGINIA IMPRESSIONS PRODUCTS
CO., INC.
MICROMAGNETIC SYSTEMS, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS, INC.
AMERICAN DELIVERY SYSTEM, INC.
CORPORATE EXPRESS DISTRIBUTION
SERVICES, INC.
NEW DELAWARE DELIVERY, INC.
RED ARROW CORPORATION
RAC, INC.
RED ARROW SPOTTING SERVICES, INC.
RED ARROW TRUCKING CO.
RED ARROW WAREHOUSING, CO.
RUSH TRUCKING, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- MID-WEST, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- MID-WEST, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- NORTHEAST, INC.
II-7
<PAGE> 113
CORPORATE EXPRESS DELIVERY
LEASING -- NORTHEAST, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- SOUTHEAST, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- SOUTHEAST, INC.
AIR COURIER DISPATCH OF
NEW JERSEY, INC.
SUNBELT COURIER, INC.
TRICOR AMERICA, INC.
MIDNITE EXPRESS INTERNATIONAL
COURIER, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- SOUTHWEST, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- SOUTHWEST, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- WEST COAST, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- WEST COAST, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS -- EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY
LEASING -- EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY
ADMINISTRATION, INC.
CORPORATE EXPRESS DELIVERY
MANAGEMENT BUSINESS TRUST
CORPORATE EXPRESS DELIVERY
SYSTEMS -- AIR DIVISION, INC.
By: /s/ ROBERT L. KING
----------------------------------
Robert L. King
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on July 24, 1998 by the following
persons in the capacities indicated. Each person whose signature appears below
hereby authorizes and appoints Robert L. King and Sam R. Leno, and any one of
them, as his attorneys-in-fact, to sign and file on his behalf, in the
capacities stated below, any and all pre-effective amendments and post-effective
amendments to this Registration Statement.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ ROBERT L. KING Chief Executive Officer and Sole Director of
- ----------------------------------------------------- each Registrant* (Principal Executive
Robert L. King Officer)
/s/ SAM R. LENO Vice President of each Registrant**
- ----------------------------------------------------- (Principal Financial and Accounting
Sam R. Leno Officer)
</TABLE>
* Except for New Delaware Delivery, Inc.
** Also signing as a director of New Delaware Delivery, Inc.
II-8
<PAGE> 114
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Articles of Amendment and Restatement of the Articles of
Incorporation of Corporate Express, Inc., a Colorado
corporation (the "Company"), filed on September 30, 1994.
3.2 -- Articles of Amendment and Restatement of the Company,
filed on August 22, 1996.
3.3 -- Amended and Restated By-Laws of the Company.
*3.4 -- Articles of Incorporation of CEX Holdings, Inc.
*3.5 -- By-laws of CEX Holdings, Inc.
4.1 -- Specimen Common Stock Certificate of the Company.
4.2 -- Form of Warrant Agreement.
4.3 -- Indenture dated as of February 28, 1994 by and among the
Company, and the Guarantors named therein and First Trust
National Association for the $100,000,000 9 1/8% Senior
Subordinated Notes.
4.5 -- Indenture dated as of June 24, 1996 by and among the
Company and Bankers Trust Company, as trustee, for the
4 1/2% Convertible Notes due July 1, 2000 (including Form
of Notes).
4.6 -- First Supplemental Indenture dated as of October 15, 1996
relating to the Company's 4 1/2% Convertible Notes.
4.7 -- Rights Agreement dated as of January 29, 1998 between the
Company and Chasemellon Shareholder Services, L.L.C. as
Rights Agent.
4.8 -- Form of 4 1/2% Convertible Note.
*4.9 -- Indenture dated as of May 29, 1998 for the 9 5/8% Senior
Subordinated Notes due 2008 by and among CEX Holdings,
Inc., Corporate Express, Inc. and the other Guarantors
listed therein and The Bank of New York.
*4.10 -- Registration Rights Agreement dated as of May 29, 1998 by
and among CEX Holdings Inc., Corporate Express, Inc., the
Guarantors listed therein and Donaldson, Lufkin &
Jenrette Securities Corporation, BT Alex. Brown
Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, NationsBanc Montgomery Securities LLC,
First Chicago Capital Markets, Inc. and BNY Capital
Markets, Inc.
*4.11 -- Supplemental Indenture dated as of June 18, 1996, by and
among the Company, CEX Holdings, Inc. and First Trust
National Association.
4.12 -- Second Supplemental Indenture dated as of May 18, 1998 by
and among CEX Holdings, Inc., the Guarantors named
therein and U.S. Bank Trust National Association
(incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended May 2,
1998).
**5.1 -- Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
10.1 -- Employment Agreement dated as of August 25, 1993, by and
between the Company and Robert King, as amended effective
July 15, 1994.
10.2 -- Amended and Restated 1992 Stock Option Plan, Form of
Non-qualified Stock Option Agreement and Form of
Incentive Stock Option Agreement.
10.3 -- 1994 Executive Stock Option Plan.
10.4 -- Form of Indemnification Agreement between the Company and
its officers and directors.
</TABLE>
<PAGE> 115
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.5 -- 1994 Stock Option and Incentive Plan.
10.6 -- 1994 Employee Stock Purchase Plan.
10.7 -- Employment Agreement dated as of July 31, 1995 by and
between the Company and Sam Leno.
10.8 -- Corporate Express, Inc. Supplemental Stock Option Plan.
10.9 -- Agreement and Plan of Merger dated as of September 10,
1996 among the Company, United TransNet, Inc. and Bevo
Acquisition Corp., Inc.
10.10 -- Agreement and Plan of Merger dated as of September 10,
1997 by and among the Company, IDD Acquisition Corp. and
Data Documents Incorporated.
10.11 -- Credit Agreement dated as of April 17, 1998 among the
Company, CEX Holdings, Inc., Various Banks, The First
National Bank of Chicago, as Syndication Agent, The Bank
of New York, as Co-Documentation Agent, DLJ Capital
Funding, Inc., as Co-Documentation Agent, DLJ Capital
Funding, Inc., as Co-Documentation Agent and Bankers
Trust Company as Administrative Agent.
10.12 -- Form of First Amendment to Credit Agreement dated as of
April 23, 1998.
*12.1 -- Ratio of Earnings to Fixed Charges.
21.1 -- List of Subsidiaries.
*23.1 -- Consent of PricewaterhouseCoopers LLP.
*23.2 -- Consent of Deloitte & Touche.
**23.3 -- Consent of Ballard Spahr Andrews & Ingersoll, LLP.
*25.1 -- Statement of Eligibility of Trustee on Form T-1.
27.1 -- Financial Data Schedule.
*99.1 -- Form of Letter of Transmittal.
*99.2 -- Form of Notice of Guaranteed Delivery.
*99.3 -- Form of Tender Instructions.
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment.
<PAGE> 1
EXHIBIT 3.4
ARTICLES OF INCORPORATION
OF
CEX HOLDINGS, INC.
The undersigned who, if a natural person, is eighteen (18) years or
older, hereby forms a corporation, under and pursuant to the statutes of the
State of Colorado, and adopts the following Articles of Incorporation:
ARTICLE I
The name of the Corporation is CEX Holdings, Inc.
ARTICLE II
The Corporation shall have and may exercise all of the rights, powers and
privileges now or hereafter conferred upon corporations organized under the
laws of the State of Colorado. In addition, the Corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporate
purposes. The Corporation may conduct part or all of its business in any part
of Colorado, the United States or the world and may hold, purchase, mortgage,
lease and convey real and personal property in any of such places.
ARTICLE III
This Corporation shall have perpetual existence, which existence shall
commence upon the filing of these Articles of Incorporation with the Secretary
of State of the State of Colorado.
ARTICLE IV
A. The aggregate number of shares which the Corporation shall have
authority to issue is One Thousand (1,000) shares of common stock of one-tenth
of One Cent ($0.01) par value. The shares of this class of common stock shall
have unlimited voting rights and shall constitute the sole voting group of the
Corporation, except to the extent any additional voting group or groups may
hereafter be established.
B. Each holder of Common Stock shall have one vote on all matters
submitted to shareholders for each share of Common Stock standing in the name
of such holder on the
<PAGE> 2
books of the Corporation and entitled to vote, except that in the election of
directors each holder of Common Stock shall be entitled to vote all of the
shareholder's votes for as many persons as there are directors to be elected.
In the election of directors, cumulative voting shall not be allowed. Except as
otherwise provided herein, and except as otherwise required by law, all shares
of capital stock of the Corporation entitled to vote shall vote as a single
class on all matters submitted to the shareholders.
C. Unless otherwise approved by a resolution of the Corporation's
board of directors, shareholders of the capital stock of the Corporation shall
not have the preemptive right to acquire unissued shares or securities
convertible into such shares or carrying a right to subscribe to or acquire
shares. Such provision shall apply to both shares outstanding and to newly
issued shares.
D. At all meetings of the shareholders, the holders of a majority
of the shares outstanding and entitled to vote shall constitute a quorum. If a
quorum is present, the affirmative vote of a majority of the shares represented
at the meeting and entitled to vote on the subject matter shall be the act of
the shareholders unless the vote of a greater number or voting by classes is
required by the Colorado Business Corporation Act or these Articles of
Incorporation.
ARTICLE V
A. The address of the initial registered office of the Corporation
is The Corporation Company (the "Registered Agent"). The address of the
Registered Agent is 1675 Broadway, Denver, CO 80202.
B. The name of the initial registered agent for the Corporation
at such address is The Corporation Company.
C. The address of the initial principal office of the Corporation
is 325 Interlocken Parkway, Broomfield, Colorado 80021.
2
<PAGE> 3
ARTICLE VI
A. The personal liability of a director to the Corporation or
its shareholders is limited to the fullest extent permitted by the Colorado
Business Corporation Act, as amended from time to time. Any limitations on
liability in effect prior to the date of these Articles of Incorporation shall
remain in full force and effect. Any repeal or modification of this Article
VII shall not adversely affect any right or protection of a director hereunder
existing at the time of such repeal or modification.
B. The Corporation shall indemnify all persons to the fullest
extent permitted by the Colorado Business Corporation Act, as amended from
time to time, subject to any expansion (but not limitation) of such
indemnification as may be set forth in the bylaws of the Corporation or any
shareholders' or directors' resolutions or by any indemnification or similar
agreement between the Company and any officer or director.
ARTICLE VII
The number of persons constituting the board of directors of the
Corporation shall be fixed by the bylaws of the Corporation. Directors need
not be residents of the State of Colorado or shareholders of the Corporation
and shall exercise all the powers conferred on the Corporation by these
Articles of Incorporation and by the laws of the State of Colorado.
ARTICLE VIII
The right is expressly reserved to amend, alter, change or repeal any
provision or provisions contained in these Articles of Incorporation or any
Article herein in any manner or respect now or hereafter permitted or provided
by the Colorado Business Corporation Act, and the rights of all officers,
directors and shareholders are expressly made subject to such reservation.
ARTICLE IX
The name and address of the incorporator of this Corporation is
Matthew R. Perkins, 1225 17th Street, Suite 2300, Denver, Colorado 80202.
Executed this 14th day of June, 1996
/s/ MATTHEW R. PERKINS
----------------------
Matthew R. Perkins
3
<PAGE> 4
The undersigned hereby consents to the appointment as the initial
registered agent for CEX Holdings, Inc.
/s/ MARCIA J. SUNAHARA
------------------------
The Corporation Company
Name: Marcia J. Sunahara
-------------------
4
<PAGE> 1
EXHIBIT 3.5
BYLAWS
OF
CEX HOLDINGS, INC.
ARTICLE I
Offices and Agents
1. Principal Office. The principal office of the
Corporation shall be located within or without the State of Colorado, as may be
subsequently designated by the Board of Directors. The Corporation may have
other offices and places of business at such places within or without the State
of Colorado as shall be determined by the directors or as the business of the
Corporation may require from time to time.
2. Registered Office. The registered office of the
Corporation required by the Colorado Business Corporation Act must be
continually maintained in the State of Colorado, and it may be, but need not be,
identical with the principal office, if located in the State of Colorado. The
address of the registered office of the Corporation may be changed from time
to time, as provided by the Colorado Business Corporation Act.
3. Registered Agent. The Corporation shall maintain a
registered agent in the State of Colorado as required by the Colorado Business
Corporation Act. Such registered agent may be changed from time to time as
provided by the Colorado Business Corporation Act.
ARTICLE II
Shareholders Meetings
1. Annual Meetings. The annual meeting of the
shareholders shall be held for the purpose of electing directors and
transacting such other corporate business as may come before the meeting. The
date, time and place of the annual meeting shall be determined by resolution of
the Board of Directors. If the election of directors is not held as provided
herein at any annual meeting of the shareholders, or at any adjournment
thereof, the Board of Directors shall cause the election to be held at a
special meeting of the shareholders as soon thereafter as it may conveniently
be held.
Notice of an annual meeting need not include a description of
the purpose or purposes of the meeting except when the purpose of the meeting
is to consider (i) an amendment to the Articles of Incorporation of the
Corporation, (ii) a merger or share exchange in which the
<PAGE> 2
Corporation is a party and, with respect to a share exchange, in which the
Corporation's shares will be acquired, (iii) the sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the Corporation or of another entity which
the Corporation controls, in each case with or without goodwill, (iv) the
dissolution of the Corporation or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act.
2. Special Meetings. Unless otherwise prescribed by
the Colorado Business Corporation Act, special meetings of the shareholders of
the Corporation may be called at any time by the chairman of the Board of
Directors, by the chief executive officer, by the president, by resolution of
the Board of Directors or upon receipt of one or more written demands for a
meeting, stating the purpose or purposes for which it is to be held, signed and
dated by the holders of at least ten percent (10%) of all votes entitled to be
cast on any issue proposed to be considered at the meeting. Notice of a special
meeting shall include a description of the purpose or purposes for which the
meeting is called.
3. Place of Meeting. The annual meeting of the
shareholders of the Corporation may be held at any place, either within or
without the State of Colorado, as may be designated by the Board of Directors.
Except as limited by the following sentence, the person or persons calling any
special meeting of the shareholders may designate any place, within or without
the State of Colorado, as the place for the meeting. If no designation is made
or if a special meeting shall be called other than by the Board of Directors,
the chairman of the Board of Directors, the chief executive officer or the
president, the place of meeting shall be the principal office of the
Corporation. A waiver of notice signed by all shareholders entitled to vote at
a meeting may designate any place as the place for holding such meeting.
4. Notice of Meeting. Except as otherwise provided in
these Bylaws or by the Colorado Business Corporation Act, notice stating the
date, time and place of the meeting shall be given no fewer than ten (10) and
no more than sixty (60) days before the date of the meeting, except that if the
number of authorized shares is to be increased, at least thirty (30) days'
notice shall be given. Notice shall be given personally or by mail, private
carrier, telephone (if reasonable under the circumstances), telegraph,
teletype, electronically transmitted facsimile or other form of wire or
wireless communication by or at the direction of the chief executive officer,
the president, the secretary, or the officer or other person calling the
meeting to each shareholder of record entitled to vote at such meeting. If
mailed and if in a comprehensible form, such notice shall be deemed to be given
and effective when deposited in the United States mail, addressed to the
shareholder at his or her address as it appears in the Corporation's current
record of shareholders, with postage prepaid. If notice is given other than by
mail, and provided that the notice is in comprehensible form, the notice is
given and effective on the date received by the shareholder. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as undeliverable until such
2
<PAGE> 3
time as another address for such shareholder is made known to the Corporation
by such shareholder.
When a meeting is adjourned to a different date, time or
place, notice need not be given of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than 120
days, or if a new record date is fixed for the adjourned meeting, a new notice
of the adjourned meeting shall be given to each shareholder of record entitled
to vote at the meeting as of the new record date.
5. Waiver of Notice. Any shareholder, either before,
or after any shareholders' meeting, may waive in writing notice of the meeting,
and his waiver shall be deemed the equivalent of giving notice. By attending a
meeting, a shareholder waives his right to object to lack of notice or to a
defective notice unless the shareholder objects to the holding of such meeting
or the transacting of business at such meeting at the beginning of such
meeting, and waives his right to object to consideration at such meeting of a
particular matter not within the purpose or purposes described in the meeting
notice, unless such shareholder objects to considering the matter when it is
presented.
6. Fixing of Record Date. The Board of Directors of
the Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, fifty (50) days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders such books shall
be closed for at least ten (10) days immediately preceding said meeting. The
Board of Directors may fix in advance a date as the record date for the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, such date in any case to be not more than seventy
(70) days and, in case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section such determination shall
apply to any adjournment thereof.
Notwithstanding the foregoing, the record date for determining
the shareholders entitled to take action without a meeting or entitled to be
given notice of action so taken shall be the date a writing upon which the
action is taken is first received by the Corporation. The
3
<PAGE> 4
record date for determining shareholders entitled to demand a special meeting
shall be the date of the earliest of the demands pursuant to which the meeting
is called.
7. Voting List. The officer or agent having charge of
the stock transfer books for share of the Corporation shall make, at least ten
(10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting (or any adjournment thereof)
arranged in alphabetical order by voting groups and within each voting group by
class or series, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the principal office of the Corporation, whether within or without
the State of Colorado. A shareholder, his agent or attorney may inspect and
copy the list during regular business hours and during the period it is
available for inspection, provided, (i) the shareholder has been a shareholder
for at least three (3) months immediately preceding the demand or holds at
least five percent (5%) of all outstanding shares of any class of shares as the
date of the demand, (ii) the demand is made in good faith and for a purpose
reasonably related to the demanding shareholder's interest as a shareholder,
(iii) the shareholder describes with reasonable particularity the purpose and
records the shareholder desires to inspect, (iv) the records are directly
connected with the described purpose and (v) the shareholder pays a reasonable
charge covering the costs of labor and material for such copies, not to exceed
the cost of production and reproduction. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any shareholder for any purpose germane to the meeting during the
whole time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the shareholders entitled to examine such list or
transfer books or to vote at any meeting of shareholders.
8. Proxies. At all meetings of shareholders, a
shareholder may vote by proxy by signing an appointment form either personally
or by his duly authorized attorney-in-fact. A shareholder may also appoint a
proxy by transmitting or authorizing the transmission of a telegram, teletype,
or other electronic transmission providing a written statement of the
appointment to the proxy, to a proxy solicitor, proxy support service
organization or other person duly authorized by the proxy to receive
appointments as agent for the proxy, or to the Corporation. The transmitted
appointment shall set forth or be transmitted with written evidence from which
it can be determined that the shareholder transmitted or authorized the
transmission of the appointment. The proxy appointment form shall be filed with
the Secretary of the Corporation by or at the time of the meeting. The
appointment of a proxy is effective when received by the Corporation and is
valid for eleven (11) months unless a different period is expressly provided in
the appointment form.
Any complete copy, including an electronically transmitted
facsimile, of an appointment of a proxy may be substituted for or used in lieu
of the original appointment for any purpose for which the original appointment
could be used.
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Revocation of a proxy does not affect the right of the
Corporation to accept the proxy's appointment unless (i) the Corporation had
notice that the appointment was coupled with an interest and notice that the
interest is extinguished is received by the Secretary or other officer or
agent authorized to tabulate votes before the proxy exercises his authority
under the appointment or (ii) other notice of the revocation of the appointment
is received by the Secretary or other officer or agent authorized to tabulate
votes before the proxy exercises his authority under the appointment. Other
notice of revocation may, in the discretion of the Corporation, be deemed to
include the appearance at a shareholders meeting of the shareholder who granted
the proxy appointment and his voting in person on any matter subject to a vote
at such meeting.
The death or incapacity of the shareholder appointing a proxy
does not affect the right of the Corporation to accept the proxy's authority
unless notice of the death or incapacity is received by the Secretary or other
officer or agent authorized to tabulate votes before the proxy exercised his
authority under the appointment.
The Corporation shall not be required to recognize an
appointment made irrevocable if it has received a writing revoking the
appointment signed by the shareholder either personally or by the shareholder's
attorney-in-fact notwithstanding that the revocation may be a breach of an
obligation of the shareholder to another person not to revoke the appointment.
A transferee for value of shares subject to an irrevocable
appointment may revoke the appointment if the transferee did not know of its
existence when he acquired the shares and the irrevocable appointment was not
noted on the certificate representing the shares.
Subject to the provisions of Article II, Section 10 below or
any express limitation on the proxy's authority appearing on the appointment
form, a corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
9. Voting Rights. Except to the extent that the voting
rights of the shares of any class or series are otherwise established, limited
or denied by the Articles of Incorporation and except as otherwise required by
law, each outstanding share, regardless of class, shall be entitled to one vote
and each fractional share is entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders.
At each election for directors every shareholder of record
entitled to vote at such election shall have the right to vote in person or by
proxy the number of votes to which such shareholder is entitled for as many
persons as there are directors to be elected and for whose election he has a
right to vote. Cumulative voting shall not be permitted for any purpose.
Shares held by another corporation, if the majority of shares
entitled to vote for the election of directors of such other corporation are
held by the Corporation, shall be voted at any meeting or counted in
determining the total number of outstanding shares entitled to vote
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at any given time. Except as provided in the preceding sentence, shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent or proxy as the Bylaws of such corporation may prescribe
or, in the absence of such provision, as the Board of Directors of such
corporation may determine, or in the absence of such determination, by the
chief executive officer of such corporation.
If shares having voting power stand of record in the names of
two or more persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, tenants by the entirety or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares,
voting with respect to the shares shall have the following effect: (i) if only
one person votes, his act binds all; (ii) if two or more persons vote, but the
vote is evenly split on any particular matter, each faction may vote the shares
in question proportionately, or any person voting the shares of a beneficiary,
if any, may apply to any court of competent jurisdiction in the State of
Colorado to appoint an additional person to act with the persons voting the
shares. The shares shall then be voted as determined by a majority of such
persons and the person appointed by the court. If a tenancy is held in
unequal interests, a majority or even split for the purpose of this subsection
shall be a majority or even split in interest, except that the effects of
voting stated above shall not be applicable if the secretary of the Corporation
is given written notice of alternative voting provisions and is furnished with
a copy of the instrument or order wherein the alternate voting provisions are
stated.
Shares held by an administrator, executor, guardian or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into his name if authority so to
do be contained in an appropriate order of the court by which such receiver was
appointed.
10. Corporation's Acceptance of Votes. If the name signed
on a vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the Corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment, or
proxy appointment revocation and to give it effect as the act of the
shareholder. If the name signed on a vote, consent, waiver, proxy appointment,
or proxy appointment revocation does not correspond to the name of a
shareholder, the Corporation, if acting in good faith, is nevertheless entitled
to accept the vote, consent, waiver, proxy appointment, or proxy appointment
revocation and to give it effect as the act of the shareholder if:
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(a) The shareholder is an entity and the name signed
purports to be that of an officer or agent of the entity;
(b) The name signed purports to be that of an
administrator, executor, guardian, or conservator representing the shareholder
and, if the Corporation requests, evidence of fiduciary status acceptable to
the Corporation has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of the signatory's
authority to sign for the shareholder has been presented with respect to the
vote, consent, waiver, proxy appointment or proxy appointment revocation;
(e) Two or more persons are the shareholder as cotenants
or fiduciaries and the name signed purports to be the name of at least one of
the cotenants or fiduciaries and the person signing appears to be acting on
behalf of all the cotenants or fiduciaries; or
(f) The acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the Corporation that are not inconsistent with the provisions of
this Section 10.
The Corporation is entitled to reject a vote, consent, waiver,
proxy appointment, or proxy appointment revocation if the secretary or other
officer or agent authorized to tabulate votes, acting in good faith, has
reasonable basis for doubt about the validity of the signature on it or about
the signatory's authority to sign for the shareholder.
The Corporation and its officer or agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section
10 are not liable in damages for the consequences of the acceptance or
rejection.
11. Quorum and Voting Requirements. Except as otherwise
provided in the Articles of Incorporation, the presence, in person or by proxy,
of the holders of a majority of the shares outstanding and entitled to vote
shall constitute a quorum at meetings of the shareholders. If a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders unless the vote of a greater number or voting by classes is
required by the Colorado Business.
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Corporation Act or the Articles of Incorporation. In the event any shareholders
withdraw from a duly organized meeting at which a quorum was initially present,
the remaining shares represented shall constitute a quorum for the purpose of
continuing to do business, and the affirmative vote of the majority of the
remaining shares represented at the meeting and entitled to vote on the subject
matter shall be the act of the shareholders unless the vote of a greater number
or voting by classes is required by the Colorado Business Corporation Act or
the Articles of Incorporation.
12. Adjournments. If less than a quorum of shares
entitled to vote is represented at any meeting of the shareholders, a majority
of the shares so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed one hundred twenty (120) days at any
one adjournment. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been
transacted at the meeting as originally notified. Any meeting of the
shareholders may adjourn from time to time until its business is completed.
13. Action by Shareholders Without Meeting. Any
action required or permitted to be taken at a shareholders' meeting may be
taken without a meeting if all of the shareholders entitled to vote thereon
consent to such action in writing. Action taken under this Section 13 shall be
effective as of the date the last writing necessary to effect the action is
received by the Corporation, unless all of the writings necessary to effect the
action specify a later date as the effective date of the action, in which case
such later date shall be the effective date of the action. If the Corporation
received writings describing and consenting to the action signed by all of the
shareholders entitled to vote with respect to the action, the effective date of
the action may be any date that is specified in all of the writings as the
effective date of the action. Any such writings may be received by the
Corporation by electronically transmitted facsimile or other form of wire or
wireless communication providing the Corporation with a complete copy thereof,
including a copy of the signature thereto. Action taken under this Section 13
has the same effect as action taken at a meeting of shareholders and may be
described as such in any document.
Any shareholder who has signed a writing describing and
consenting to action taken pursuant to this Section 13 may revoke such consent
by a writing signed by the shareholder describing the action and stating that
the shareholder's prior consent thereto is revoked, but only if such writing is
received by the Corporation before the effectiveness of the action.
14. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during
the meeting. A shareholder participating in a meeting by this means is deemed
to be present in person at the meeting.
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ARTICLE III
Board of Directors
1. Number, Qualifications and Term of Office. Except as
otherwise provided in the Articles of Incorporation or the Colorado Business
Corporation Act, the business and affairs of the Corporation shall be managed
by a Board of Directors, consisting of at least one (1), but not more than
seven (7), members. Each director shall be a natural person of the age of
eighteen years or older, but does not need to be a resident of the State of
Colorado or a shareholder of the Corporation. The Board of Directors, by
resolution, may increase or decrease the number of directors from time to time.
Except as otherwise provided in these Bylaws, each director shall be elected at
each annual meeting of shareholders and shall hold such office until the next
annual meeting of shareholders and until his successor shall be elected and
shall qualify. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director.
2. Performance of Duties. Pursuant to the provisions
of the Colorado Business Corporation Act, a director shall perform his duties
as a director, including his duties as a member of any committee of the Board
upon which he may serve, in good faith, in a manner he reasonably believes to
be in the best interests of the Corporation, and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances.
3. Vacancies. Any director may resign at any time by
giving written notice to the chairman of the Board of Directors and to the
chief executive officer, president or secretary of the Corporation. A
resignation of a director is effective when the notice is received by the
Corporation unless the notice specifies a later effective date. Unless
otherwise specified in the notice, the acceptance of such resignation by the
Corporation shall not be necessary to make it effective. Any vacancy on the
Board of Directors may be filled by the affirmative vote of a majority of the
remaining Board of Directors even if less than a quorum is remaining in office.
A director elected to fill a vacancy shall be elected for the unexpired term of
his predecessor in office. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by the affirmative vote of
a majority of the directors then in office or by an election at an annual
meeting or special meeting of shareholders called for that purpose. A director
elected to fill a position resulting from an increase in the number of
directors shall hold office until the next annual meeting of shareholders and
until his or her successor has been elected and qualified.
4. Removal. At a meeting of shareholders called
expressly for that purpose, the entire Board of Directors or any individual
directors may be removed from office without assignment of cause by the vote of
the majority of the shares entitled to vote an election of directors.
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5. Removal of Directors by Judicial Proceeding. A
director may be removed by the District Court of the Colorado county where the
principal office is located or if the Corporation has no principal office in
the State of Colorado, by the District Court of the Colorado county in which
its registered office is located, upon a finding by the District Court that the
director engaged in fraudulent or dishonest conduct or gross abuse of authority
or discretion with respect to the Corporation and that removal is in the best
interests of the Corporation. The judicial proceeding may be commenced either
by the Corporation or by shareholders holding at least ten percent (10%) of the
outstanding shares of any class.
6. Compensation. By resolution of the Board of
Directors, any director may be paid any one or more of the following: his
expenses, if any, of attendance at meetings; a fixed sum for attendance at each
meeting; a stated salary as director; or such other compensation as the
Corporation and the director may reasonably agree upon. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE IV
Meetings of the Board
1. Place of Meetings. The regular or special meetings
of the Board of Directors or of any committee designated by the Board shall be
held at the principal office of the Corporation or at any other place within or
without the State of Colorado that a majority of the Board of Directors or of
any such committee, as the case may be, may designate from time to time by
resolution.
2. Regular Meetings. The Board of Directors shall
meet each year immediately before or after and at the same place as the annual
meeting of the shareholders for the purpose of electing officers and
transacting such other business as may come before the meeting. The Board of
Directors or any committee designated by the Board may provide, by resolution,
for the holding of additional regular meetings without other notice than such
resolution.
3. Special Meetings. Special meetings of the Board of
Directors or of any committee designated by the Board may be called at any time
by the chairman of the Board, if any, by the chief executive officer, or by
three or more members of the Board of Directors or of any such committee, as
the case may be, provided that if any such committee consists of less than four
members, then a special meeting of such committee may be called by a majority
of the members thereof.
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4. Notice of Meetings. Notice of the regular meetings
of the Board of Directors or of any committee designated by the Board need not
be given. Except as otherwise provided by these Bylaws or the laws of the State
of Colorado, written notice of each special meeting of the Board of Directors
or of any such committee setting forth the time and the place of the meeting
shall be given to each director not less than one (1) day prior to the date and
time fixed for the meeting. Notice of any special meeting may be either
personally delivered or mailed to each director at his business address, by
telephone (if reasonable under the circumstances) or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) three (3) days after such notice is
deposited in the United States mail properly addressed, with postage prepaid,
or (ii) the date shown on the return receipt if mailed by registered or
certified mail return receipt requested. If notice be given by telephone (if
reasonable under the circumstances), telex, electronically transmitted
facsimile or other similar form of wire or wireless communication, such notice
shall be deemed to be given and to be effective when sent, and with respect to
a telegram, such notice shall be deemed to be given and to be effective when
the telegram is delivered to the telegraph company. If a director has
designated in writing one or more reasonable addresses or facsimile numbers
for delivery of notice to him, notice sent by mail, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
5. Waiver of Notice. A director may, in writing, waive
notice of any special meeting of the Board of Directors or of any committee
designated by the Board either before, at, or after the meeting and his waiver
shall be deemed the equivalent of giving notice. Such waiver shall be delivered
to the Corporation for filing with the corporate records. Attendance or
participation of a director at a meeting waives any required notice of that
meeting unless at the beginning of the meeting or promptly upon the director's
arrival, the director objects to holding the meeting or transacting business at
the meeting because of lack of notice or defective notice and does not
thereafter vote for or assent to action taken at the meeting.
6. Quorum. At meetings of the Board of Directors or of
any committee designated by the Board a majority of the number of directors
fixed by these Bylaws, or a majority of the members of any such committee, as
the case may be, shall be necessary to constitute a quorum for the transaction
of business. If the number of directors is not fixed, then a majority of the
number in office immediately before the meeting begins, shall constitute
a quorum. If a quorum is present, the act of the majority of directors present
shall be the act of the Board of Directors or of any such committee, as the
case may be, unless the act of a greater number is required by these Bylaws,
the Articles of Incorporation or the Colorado Business Corporation Act.
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7. Presumption of Assent. A director who is present at
a meeting of the Board of Directors or a committee thereof when action is taken
is deemed to have assented to the action taken unless:
(a) the director objects at the beginning of such meeting
or promptly upon his arrival, to the holding of the meeting or the transacting
of business at the meeting and does not thereafter vote for or assent to any
action taken at the meeting;
(b) the director contemporaneously requests that his
dissent or abstention as to any specific action taken be entered in the minutes
of such meeting; or
(c) the director causes written notice of his dissent or
abstention as to any specific action to be received by the chairman of the
Board, if any, or the presiding officer of such meeting before its adjournment
or to the secretary within 15 minutes after adjournment of such meeting.
The right of dissent or abstention as to a specific action
taken in a meeting of a Board or a committee thereof is not available to a
director who votes in favor of the action taken.
8. Executive Committee; Other Committees. The Board of
Directors may, by a resolution adopted by a majority of the full Board of
Directors, designate one (1) or more of its members to constitute an executive
committee and one or more other committees, each of which shall have and may
exercise all of the authority of the Board of Directors or such lesser authority
as may be set forth in said resolution; except that no such committee shall have
the authority of the Board of Directors to: (i) declare dividends or
distributions; (ii) approve or recommend to shareholders actions or proposals
required by the Colorado Business Corporation Act to be approved by
shareholders; (iii) fill vacancies on the Board of Directors or any committee
thereof; (iv) amend these Bylaws; (v) approve a plan of merger not requiring
shareholder approval; (vi) reduce earned or capital surplus; (vii) authorize or
approve the reacquisition of shares unless pursuant to a general formula method
specified by the Board of Directors; or (viii) authorize or approve the issuance
or sale of, or any contract to issue or sell, shares or designate the terms of a
series of a class of shares and except that the Board of Directors, having acted
regarding general authorization for the issuance or sale of shares or any
contract therefore, may pursuant to a general formula or method specified by the
Board of Directors by resolution or by adoption of a stock option or other plan,
authorize a committee to fix the terms of any contract for the sale of the
shares and to fix the terms upon which such shares may be issued or sold,
including, without limitation, the price, the dividend rate, provisions for
redemption, sinking fund, conversion, or voting or preferential rights, and
provisions for other features of a class of shares or a series of a class of
shares, with full power in such committee to adopt any final resolution setting
forth all terms thereof and to authorize the statement of the terms of a series
for filing with the Secretary of State of the State of
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Colorado under the Colorado Business Corporation Act. If any such delegation of
the authority of the Board of Directors is made as provided herein, all
references to the Board of Directors contained in these Bylaws, the Articles of
Incorporation, the Colorado Business Corporation Act or any other applicable
law or regulation relating to the authority so delegated shall be deemed to
refer to such committee.
Neither the designation of any such committee, the delegation
of authority to such committee, nor any action by such committee pursuant to
its authority shall alone constitute compliance by any member of the Board of
Directors, not a member of the committee in question, with his responsibility
to act in good faith, in a manner he reasonably believes to be in the best
interests of the Corporation, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances.
If the Board of Directors designates an executive or other
committee, so long as that certain Voting Agreement dated as of December 23,
1991 is in effect, at least one member of the executive committee must be
director designated by one or more of the Designating Investors or their Board
representative as defined in and pursuant to the Voting Agreement. This
provision shall terminate ab initio effective upon the termination of the
Voting Agreement.
9. Informal Action by Directors. Any action required
or permitted be taken at a Board of Directors' meeting or a meeting of any
committee thereof may be taken without a meeting if all members thereof consent
to such action in writing and such writing is delivered to the secretary of the
Corporation for inclusion in the minutes or for filing with the corporate
records. Action taken under this Section 9 is effective at the time the last
director signs a writing describing the action taken unless the directors
establish a different effective date, and unless, before such time, a director
has revoked his consent by a writing signed by the director and received by the
chief executive officer and secretary. Action taken pursuant to this Section 9
has the same effect as action taken at a meeting of the directors or committee
members and may be described as such in any document.
10. Telephonic Meetings. One or more members of the
Board of Directors or any committee designated by the Board may participate in
a regular or special meeting by or conduct the meeting through the use of any
means of communication by which all directors participating may hear each other
during the meeting. A director participating in a meeting by this means is
deemed to be present in person at the meeting.
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ARTICLE V
Standards of Conduct
In discharging his duties, a director or officer is entitled
to rely on information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by (i) one or
more officers or employees of the Corporation whom the director or officer
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, a public accountant, or other person as to matters which the
director or officer reasonably believes to be within such persons' professional
or expert competence, or (iii) in the case of a director, a committee of the
Board of Directors of which the director is not a member if the director
reasonably believes the committee merits confidence.
A director or officer is not liable as such to the Corporation
or its shareholders for any action he takes or omits to take as a director or
officer, as the case may be, if, in connection with such action or omission, he
performed the duties of the position in compliance with this Article V.
ARTICLE VI
Officers and Agents
1. General. The officers of the Corporation shall
consist of a chairman of the Board, a chief executive officer, a president and
a secretary and, in the discretion of the Board, a treasurer; in addition, one
or more vice presidents, and such other officers, assistant officers, agents
and employees that the Board of Directors may from time to time deem necessary
may be elected by the Board of Directors or be appointed in a manner prescribed
by the Board. Two or more offices may be held by the same person. Officers
shall hold office until their successors are chosen and have qualified, unless
they are sooner removed from office as provided in these Bylaws. All officers
of the Corporation shall be natural persons of the age of eighteen years or
older. Officers of the Corporation need not be residents of the State of
Colorado or directors or shareholders of the Corporation.
2. General Duties. All officers and agents of the
Corporation, as between themselves and the Corporation, shall have such
authority and shall perform such duties in the management of the Corporation as
may be provided in these Bylaws or as may be determined by resolution of the
Board of Directors not inconsistent with these Bylaws. In all cases where the
duties of any officer, agent or employee are not prescribed by the Bylaws or by
the Board of Directors, such officer, agent or employee shall follow the orders
and instructions of the chief executive officer.
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3. Vacancies. When a vacancy occurs in one of the
executive offices by reason of death, resignation or otherwise, it shall
however be filled by a resolution of the Board of Directors. The officer so
selected shall hold office until his successor is chosen and qualified.
4. Salaries. The salaries of the officers, agents and
employees of the Corporation may be fixed by the Board of Directors, or by any
committee designated by the Board or, in the absence of contrary resolution or
action by the Board, by the chief executive officer.
5. Resignation. An officer may resign at any time by
giving written notice of resignation to the chief executive officer of the
Corporation. A resignation of an officer is effective when the notice is
received by the Corporation unless the notice specifies a later effective date.
If a resignation is made effective at a later date, the Board of Directors may
permit the officer to remain in office until the effective date and may fill
the pending vacancy before the effective date if the Board of Directors
provides that the successor does not take office until the effective date, or
the Board of Directors may remove the officer at any time before the effective
date and may fill the resulting vacancy.
6. Removal. Any officer, agent or employee of this
Corporation may be removed by the Board of Directors or the chief executive
officer whenever in its judgment the best interests of the Corporation may be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an
officer, agent or employee shall not, of itself, create contract rights.
7. Chairman of the Board. The chairman of the Board, if
any, shall preside as chairman at meetings of the shareholders and the Board of
Directors. He shall, in addition, have such other duties as the Board may
prescribe that he perform. At the request of the chief executive officer, the
chairman of the Board may, in the case of the chief executive officer's absence
or inability to act, temporarily act in his place. In the case of death of the
chief executive officer or in the case of his absence or inability to act
without having designated the chairman of the Board to act temporarily in his
place, the chairman of the Board shall perform the duties of the chief executive
officer, unless the Board of Directors, by resolution, provides otherwise. If
the chairman of the Board shall be unable to act in place of the chief executive
officer, the president may exercise such powers and perform such duties as
provided below.
8. Chief Executive Officer. The chief executive
officer shall, subject to the direction and supervision of the Board of
Directors, be the most senior officer of the Corporation and shall have
primary, general and active control of its affairs and business and general
supervision of its officers, agents and employees. He shall have authority to
expend Corporation funds, to incur debt on behalf of the Corporation, and to
acquire and dispose of property, real and personal, tangible and intangible. In
the event the position of chairman of the Board shall not be occupied or the
chairman shall be absent or otherwise unable to act, the
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chief executive officer shall preside at meetings of the shareholders and
directors and shall discharge the duties of the presiding officer. He shall,
unless otherwise directed by the Board of Directors, attend in person or by
substitute appointed by him, or shall execute on behalf of the Corporation
written instruments appointing a proxy or proxies to represent the Corporation
at all meetings of the shareholders of any other corporation in which the
Corporation shall hold any stock. He may, on behalf of the Corporation, in
person or by substitute or by proxy, execute written waivers of notice and
consents with respect to any such meetings. At all such meetings and
otherwise, the chief executive officer, in person or by substitute or by proxy
as aforesaid, may vote the stock so held by the Corporation and may execute
written consents and other instruments with respect to such stock and may
exercise any and all rights and powers incident to the ownership of said stock,
subject however to the instructions, if any, of the Board of Directors. The
chief executive officer shall have custody of the treasurer's bond, if any.
9. President. The president shall assist the chief
executive officer, as directed by the Board of Directors or the chief executive
officer, and shall perform such duties as may be assigned to him from time to
time by the Board of Directors or the chief executive officer. If the office of
chief executive officer is vacant, the president shall have the powers and
perform the duties of chief executive officer until such vacancy is filled by
the Board of Directors.
10. Vice Presidents. Each vice president shall have
such powers and perform such duties as the Board of Directors may from time to
time prescribe or as the chief executive officer may from time to time delegate
to him. At the request of the chief executive officer, in the case of the
president's absence or inability to act, any vice president may temporarily act
in the president's place. In the case of the death of the president, or in the
case of his absence or inability to act without having designated a vice
president or vice presidents to act temporarily in his place, the Board of
Directors, by resolution, may designate a vice president or vice presidents, to
perform the duties of the president.
11. Secretary. The secretary shall keep or cause to be
kept in books, provided for that purpose, the minutes of the meetings of the
shareholders, executive committee, if any, and any other committees, and of the
Board of Directors; shall see that all notices are duly given in accordance
with the provisions of these Bylaws and as required by law; shall be custodian
of the records and of the seal of the Corporation and see that the seal is
affixed to all documents, the execution of which on behalf of the Corporation
under its seal is duly authorized and in accordance with the provisions of
these Bylaws; and, in general, shall perform all duties incident to the office
of secretary and such other duties as may, from time to time, be assigned to
him by the Board of Directors or by the president. In the absence of the
secretary or his inability to act, the assistant secretaries, if any, shall act
with the same powers and shall be subject to the same restrictions as are
applicable to the secretary.
12. Treasurer. The treasurer shall have custody of
corporate funds and securities. He shall keep full and accurate accounts of
receipts and disbursements and shall
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deposit all corporate monies and other valuable effects in the name and to the
credit of the Corporation in the depository or depositories of the Corporation,
and shall render an account of his transactions as treasurer and of the
financial condition of the Corporation to the chief executive officer,
president and/or the Board of Directors upon request. Such power given to the
treasurer to deposit and disburse funds shall not, however, preclude any other
officer or employee of the Corporation from also depositing and disbursing
funds when authorized to do so by the Board of Directors. The treasurer shall,
if required by the Board of Directors, give the Corporation a bond in such
amount and with such surety or sureties as may be ordered by the Board of
Directors for the faithful performance of the duties of his office. The
treasurer shall have such other powers and perform such other duties as may be
from time to time prescribed by the Board of Directors or the chief executive
officer or such other person appointed from time to time by the chief executive
officer. In the absence of the treasurer or his inability to act, the assistant
treasurers, if any, shall act with the same authority and shall be subject to
the same restrictions as are applicable to the treasurer.
13. Delegation of Duties. Whenever an officer is absent,
or whenever, for any reason, the Board of Directors may deem it desirable, the
Board may delegate the powers and duties of an officer to any other officer or
officers or to any director or directors.
ARTICLE VII
Conflicts of Interests
No contract or other transaction between the Corporation and
one or more of its directors, or any other corporation, partnership,
association or other organization in which one or more of its directors or
officers is a director or officer or is financially interested shall be either
void or voidable solely for that reason or solely because such director or
officer is present at or participates in the meeting of the Board of Directors
or a committee thereof that authorizes, approves, or ratifies such contract or
transaction or solely because their votes are counted for such purpose if:
(A) The material facts of such relationship, interest,
contract or transaction are disclosed to or known by the Board of Directors or
committee thereof, that in good faith authorizes, approves, or ratifies the
contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors are less than
a quorum;
(B) The material facts of such relationship, interest,
contract or transaction are disclosed to or known by the shareholders entitled
to vote thereon, and the contract or transaction is specifically authorized,
approved or ratified in good faith by vote of the shareholders; or
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(C) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified by the Board
of Directors, a committee thereof, or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
ARTICLE VII
Indemnification of Officers; Directors and Others
1. Definitions. Unless the context of this Article VIII
indicates otherwise, initially capitalized terms used herein shall have the
meanings given in Section 7-109-101 of the Colorado Business Corporation Act.
2. Standards for Indemnification.
A. General. Except as provided in Subsection B(4) below,
the Corporation shall indemnify against Liability, to the fullest extent
authorized by the Colorado Business Corporation Act, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than permitted prior thereto), incurred in any
Proceeding by an individual made a Party to the Proceeding because he is or was
a Director or officer of the Corporation or any subsidiary of the Corporation
(an "Indemnitee") if: (a) he conducted himself in good faith; (b) he
reasonably believed: (i) in the case of conduct in his Official capacity with
the Corporation, that his conduct was in the Corporation's best interests; or
(ii) that in all other cases, that his conduct was at least not opposed to the
Corporation's best interests; and (c) in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful.
B. Employee Benefit Plans: An Indemnitee's conduct with
respect to an employee benefit plan for a purpose he reasonably believed to be
in the interests of the participants in or beneficiaries of the plan is conduct
that satisfies the requirements of clause (b)(ii) of Subsection B(1) above. An
Indemnitee's conduct with respect to an employee benefit plan for a purpose
that he did not reasonably believe to be in the interests of the participants
in or beneficiaries of the plan shall be deemed not to satisfy the requirements
of clause (i) of Subsection B(1) above.
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C. Termination of a Proceeding. The termination of any
proceeding by judgment, order, settlement, or conviction, or upon a plea of
nolo contendere or its equivalent, is not of itself determinative that the
individual did not meet the standard of conduct set forth in Subsection
B(l) above.
D. Cases in Which Indemnification is Prohibited. The
Corporation may not indemnify an Indemnitee under this Section B either (a) in
connection with a Proceeding by or in the right of the Corporation in which the
Indemnitee was adjudged liable to the Corporation; or (b) in connection with
any Proceeding charging improper personal benefit to the Indemnitee, whether or
not involving action in his Official capacity, in which he was adjudged liable
on the basis that personal benefit was improperly received by him.
E. Reasonable Expenses Only. Indemnification permitted
under this Section B in connection with a Proceeding by or in the right of the
Corporation is limited to reasonable expenses incurred in connection with the
Proceeding.
F. Application of Indemnification Obligations.
The indemnity and prepayment obligations of the Corporation and the standards
for indemnification set forth in this Article VIII shall apply in all cases,
even if the conduct, act or omission in question occurred prior to the date
that such indemnity and prepayment obligations were adopted by the Corporation
by amendment to these Bylaws.
3. Mandatory Indemnification. Unless limited by these
Bylaws, the Corporation shall be required to indemnify an Indemnitee who was
wholly successful, on the merits or otherwise, in defense of any Proceeding to
which he was a Party, against reasonable expenses incurred by him in connection
with the Proceeding.
4. Court Ordered Indemnification. Unless limited by
these Bylaws, an Indemnitee who is or was a Party to a Proceeding may apply for
indemnification to the court conducting the Proceeding or to another court of
competent jurisdiction. On receipt of an application, the court, after giving
any notice the court considers necessary, may order indemnification in the
following manner:
A. Mandatory Indemnification. If it determines the
Indemnitee is entitled to mandatory indemnification under Section C above, the
court shall order indemnification, in which case the court shall also order the
Corporation to pay the Indemnitee's reasonable expenses incurred to obtain
court-ordered indemnification.
B. Indemnification Where Regardless of Meeting Standard
of Conduct. If it determines that the Indemnitee is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not he met the standard of conduct set forth in Subsection B(1) of this
Article VIII or was adjudged liable in the circumstances described in
Subsection
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B(4) of this Article, the court may order such indemnification as the court
deems proper; except that the indemnification with respect to any Proceeding in
which liability shall have been adjudged in the circumstances described in said
Subsection B(4) is limited to reasonable expenses incurred,
5. Indemnification Procedure.
A. Authorization of Indemnification Required. The
Corporation may not indemnify an Indemnitee under Section B of this Article
VIII unless authorized in the specific case after a determination has been made
that indemnification of the Indemnitee is permissible in the circumstances
because he has met the standard of conduct set forth in Subsection B(1).
B. Determination by the Board of Directors. The
determination required to be made by Subsection E(1) shall be made: (a) by the
Corporation's Board of Directors by a majority vote of a quorum, which quorum
shall consist of directors not parties to the Proceeding; or (b) if a quorum
cannot be obtained, by a majority vote of a committee of the Board designated
by the Board, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to the
proceeding may participate in the designation of directors for the committee.
C. Determination by Body Other Than the Board of
Directors. If the quorum cannot be obtained or the committee cannot be
established under Subsection E(2), or even if a quorum is obtained or a
committee designated if such quorum or committee so directs, the determination
required to be made by Subsection E(1) shall be made: (a) by independent legal
counsel selected by a vote of the Corporation's Board of Directors or the
committee in the manner specified in clause (a) or (b) of Subsection E(2) or,
if a quorum of the full Board cannot be obtained and a committee cannot be
established, by independent legal counsel selected by a majority vote of the
full Board; or (b) by the shareholders.
D. Standard for Authorizing Indemnification.
Authorization of indemnification and evaluation as to reasonableness of
expenses shall be made in the same manner as the determination that
indemnification is permissible; except that, if the determination that
indemnification is permissible is made by independent legal counsel,
authorization of indemnification and evaluation as to reasonableness of
expenses shall be made by the body that selected said counsel.
6. Pre-Payment or Reimbursement of Expenses.
A. General. The Corporation shall pay for or
reimburse the reasonable expenses incurred by an Indemnitee who is a Party to a
Proceeding because he is or was a Director or officer of the Corporation or any
subsidiary of the Corporation, in advance of the final disposition of the
Proceeding if: (a) the Indemnitee furnishes the Corporation a written
20
<PAGE> 21
affirmation of his good-faith belief that he has met the standard of conduct
described in clause (a) of Subsection B(1); (b) the Indemnitee furnishes the
Corporation a written undertaking, executed personally or on his behalf, to
repay the advance if it is determined that he did not meet such standard of
conduct; and (c) a determination is made that the facts then known to those
making the determination would not preclude indemnification under this Section
F.
B. Undertaking. The undertaking required by clause (b)
of Subsection F(1) shall be an unlimited general obligation of the Indemnitee,
but need not be secured and may be accepted without reference to financial
ability to make repayment.
C. Authorization of Pre-Payments. Determinations and
authorizations of payments under this Section F shall be made in the manner
specified in Section E of this Article VIII.
7. Expenses Incurred as a Witness. The Corporation shall
pay or reimburse Expenses incurred by an Indemnitee in connection with his
appearance, or preparation for his appearance, as a witness in a Proceeding or
at a deposition related to a Proceeding, at a time when he has not been made a
named defendant or respondent in the Proceeding. If the Indemnitee is not an
officer or Director of the Company at the time his appearance is required at a
Proceeding or deposition related to a Proceeding, the Company shall pay the
Indemnitee $500.00 for each day (or part thereof) that the Indemnitee is
required to attend such Proceeding or deposition.
8. Employees and Agents. Unless limited by these Bylaws:
A. Indemnification and Advancement of Expenses. The
Corporation may indemnify and advance expenses, pursuant to Sections B, C and F
of this Article VIII to an employee or agent of the Corporation who is not an
Indemnitee, in defense of any Proceeding to which he was a Party by reason of
his employment by or relationship with the Corporation, to the same extent as
an Indemnitee; and
B. Greater Rights of Indemnification Permitted. The
Corporation may indemnify and advance expenses to an employee or agent of the
Corporation who is not an Indemnitee to a greater extent if consistent with
law, these Bylaws, the Articles of Incorporation, resolution of the
shareholders or directors, or in a contract.
9. Insurance. The Corporation may purchase and maintain
insurance on behalf of a person who is or was a Director, officer, employee,
fiduciary or agent of the Corporation, or any subsidiary of the Corporation, or
who, while a Director, officer, employee, fiduciary or agent of the Corporation
or any subsidiary of the Corporation, is or was serving at the request of the
Corporation as a director, officer, partner, trustee, employee, fiduciary or
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agent of any other foreign or domestic corporation or of any partnership,
joint venture, trust, other enterprise or employee benefit plan against any
liability asserted against or incurred by him in any such capacity or arising
out of his Status as such, whether or not the Corporation would have the power
to indemnify him against such liability under the provisions of this Article
VIII. Any such insurance may be procured from any insurance company designated
by the Board of Directors of the Corporation, whether such insurance company is
formed under the laws of Colorado or any other jurisdiction of the United
States or elsewhere, including any insurance company in which the Corporation
has equity or any other interest, through stock ownership or otherwise.
10. Report to Shareholders. Any indemnification of or
advance of expenses to a Director in accordance with this Article VIII, if
arising out of a proceeding by or on behalf of the Corporation, shall be
reported in writing to the shareholders with or before the notice of the next
shareholders' meeting.
11. Governing Law. This Article VIII shall be governed
by and construed in accordance with Section 7-109-101 of the Colorado Business
Corporation Act, as amended from time to time.
12. Non-Exclusivity of Rights. The rights to
indemnification and to the advancement of expenses conferred in this Article
VIII shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, the Corporation's Articles of
Incorporation, Agreement, vote of stockholders or disinterested directors or
otherwise. To the extent that the rights to indemnification granted by these
Bylaws are inconsistent with those granted by the Corporation's Articles of
Incorporation, the provisions of these Articles of Incorporation shall govern.
ARTICLE IX
Share Certificates and the Transfer of Shares
1. Certificates Representing Shares. The shares may but
need not be represented by certificates. Unless the Colorado Business
Corporation Act or another law expressly provides otherwise, the fact that the
shares are not represented by certificates shall have no effect on the rights
and obligations of shareholders of the Corporation. If the shares are
represented by certificates, such certificates shall be in a form approved by
the Board of Directors, consecutively numbered, and signed in the name of the
Corporation by the chairman or vice chairman of the Board of Directors or by
the chief executive officer, the president or a vice president and by the
treasurer or an assistant treasurer or by the secretary or an assistant
secretary, and shall be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures upon a certificate may be facsimiles if
the certificate is countersigned by a
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transfer agent or registered by a registrar other than the Corporation itself
or an employee of the Corporation. In case any officer who has signed such
certificate shall have ceased to be such officer before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer at the date of its issue.
2. Shares Without Certificates. Unless the Articles of
Incorporation provide otherwise, the Board of Directors of the Corporation may
authorize the issuance of any of its classes of series, if any, of shares
without certificates. Such authorization shall not affect shares already
represented by certificates until they are surrendered to the Corporation.
Within a reasonable time after the issuance or transfer of shares without
certificates, the Corporation shall send to the shareholder a written
statement of the information required by the Colorado Business Corporation
Act.
3. Issuance of Shares. Except as provided in the
Articles of Incorporation, the Board of Directors may authorize the issuance of
shares for consideration consisting of any tangible, intangible property or
benefit to the Corporation, including cash, promissory notes, services
performed and other securities of the Corporation. The Board of Directors
shall determine that the consideration received or to be received for the
shares to be issued is adequate. Such determination, in the absence of fraud,
is conclusive insofar as the adequacy of such consideration relates to whether
the shares are validly issued, fully paid and nonassessable. The promissory note
of a subscriber or an affiliate of a subscriber for shares shall not constitute
consideration for the shares unless the note is negotiable and is secured by
collateral other than the shares, having a fair market value at least equal to
the principal amount of the note. For the purposes of this Section 3,
"promissory note" means a negotiable instrument on which there is an obligation
to pay independent of collateral and does not include a nonrecourse note.
Unless otherwise expressly provided in the Articles of Incorporation, shares
having a par value may be issued for less than the par value.
4. Lost Certificates. The Board of Directors may direct
a new certificate to be issued in place of a certificate alleged to have been
destroyed or lost if the owner makes an affidavit or affirmation of that fact
and produces such evidence of loss or destruction as the Board may require. The
Board, in its discretion, may as a condition precedent to the issuance of a new
certificate require the owner to give the Corporation a bond in such form and
amount and with such surety as it may determine as indemnity against any claim
that may be made against the Corporation relating to the certificate allegedly
destroyed or lost.
5. Transfer of Shares
(a) Shares of the Corporation shall only be transferred.
on the stock transfer books of the Corporation by the holder of record thereof
upon the surrender to the Corporation of the share certificates duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer and such documentary stamps as may be required by law.
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In that event, the surrendered certificates shall be cancelled, new
certificates issued to the persons entitled to them, and the transaction
recorded on the books of the Corporation.
6. Registered Shareholders. The Corporation shall be
entitled to treat the registered holder of any shares of the Corporation as the
owner thereof for all purposes, and the Corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or
rights deriving from such shares on the part of any person other than the
registered holder, including without limitation any purchaser, assignee or
transferee of such shares or rights deriving from such shares, unless and until
such other person becomes the registered holder of such shares, whether or not
the Corporation shall have either actual or constructive notice of the claimed
interest of such other person.
The Board of Directors may adopt by resolution a procedure
whereby a shareholder may certify in writing to the Corporation that all or a
portion of the shares registered in the name of such shareholder are held for
the account of a specified person or persons. Such resolution shall set forth:
(i) the classification of shareholder who may certify; (ii) the purpose or
purposes for which the certification may be made; (iii) the form of
certification and information to be contained therein; (iv) if the
certification is with respect to a record date or closing of the stock transfer
books within which the certification must be received by the Corporation; and
(v) such other provision with respect to the procedure as are deemed necessary
or desirable. Upon receipt by the Corporation of a certification complying with
the procedure, the persons specified in the certification shall be deemed, for
the purpose or purposes set forth in the certification, to be the holders of
record of the number of shares specified in place of the shareholder making the
certification.
7. Stock Ledger. An appropriate stock journal and
ledger shall be kept by the secretary or such registrars or transfer agents as
the directors by resolution may appoint in which all transactions in the shares
of stock of the Corporation shall be recorded.
8. Notice of Restriction on Transfer. Notice of any
restriction on the transfer of the stock of the Corporation shall be placed on
each certificate of stock issued.
ARTICLE X
Insurance
By action of the Board of Directors, notwithstanding any
interest of the directors in the action, the Corporation may purchase and
maintain insurance, in such scope and amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee, fiduciary or agent of the Corporation, or who, while a director,
officer, employee, fiduciary or agent of the Corporation, is or was serving at
the request of the
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Corporation as a director, officer, partner, trustee, employee, fiduciary or
agent of any other foreign or domestic corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company or other enterprise or employee benefit plan, against any
liability asserted against, or incurred by, him in that capacity or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of the Colorado
Business Corporation Act. Any such insurance may be procured from any insurance
company designated by the Board of Directors of the Corporation, whether such
insurance company is formed under the laws of the State of Colorado or any
company in which the Corporation has an equity interest or any other interest,
through stock ownership or otherwise.
ARTICLE XI
Seal and Fiscal Year
1. Seal. The Corporation shall have a seal in the form
impressed to the left of this paragraph of the Bylaws.
2. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors. Said fiscal year may be changed from
time to time by the Board of Directors in its discretion.
ARTICLE XII
Dividends
Dividends shall be declared and paid out of the net profits
and surplus of the Corporation as often and at such times as the Board of
Directors may determine, taking into account reserve, capital and other needs
of the Corporation. No unclaimed dividend shall bear interest against the
Corporation. Dividends of capital stock may also be declared when, in the
judgment of the Board of Directors, it is considered proper and in the
interests of the Corporation.
ARTICLE XIII
Amendments
Subject to repeal or change by action of the shareholders, the
Board of Directors may amend, supplement or repeal these Bylaws or adopt new
Bylaws, and all such changes shall
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affect and be binding upon the holders of all shares heretofore as well as
hereafter authorized, subscribed for or offered.
ARTICLE XIV
Miscellaneous
1. Gender. Whenever required by the context, the
singular shall include the plural, the plural the singular, and one gender
shall include all genders.
2. Invalid Provision. The invalidity or unenforceability
of any particular provision of these Bylaws shall not affect the other
provisions herein, and these Bylaws shall be construed in all respects as if
such invalid or unenforceable provision was omitted.
3. Governing Law. These Bylaws shall be governed by and
construed in accordance with the laws of the State of Colorado.
I, Gary M. Jacobs, as Secretary of CEX Holdings, Inc., hereby
certify that the foregoing Bylaws were adopted by the Board of Directors of the
Corporation effective as of June 18, 1996.
/s/ GARY M. JACOBS
-----------------------------
Gary M. Jacobs, Secretary
26
<PAGE> 1
EXHIBIT 4.4
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of June 18, 1996, by and among Corporate
Express, Inc., a Colorado corporation (the "Original Obligor"), CEX Holdings,
Inc., a Colorado corporation (the "Successor Obligor"), and First Trust
National Association, a national banking association, as Trustee (the
"Trustee"). All capitalized terms not defined herein shall have the meanings
assigned to them in the Original Indenture.
WHEREAS, the Original Obligor heretofore executed and delivered that
certain Indenture (the "Original Indenture") by and among the Original Obligor,
the Guarantors (as defined in the Original Indenture) and the Trustee, dated as
of February 28, 1994, with respect to the issuance of $100,000,000 of its 9 1/8%
Senior Subordinated Notes due 2004;
WHEREAS, Section 5.1 of the Original Indenture permits the Original
Obligor to sell, lease, convey or transfer all or substantially all of its
assets provided that the terms and conditions of such Section 5.1 have been
satisfied;
WHEREAS, the Original Obligor has contributed or otherwise transferred
substantially all of its assets to the Successor Obligor pursuant to that
certain Omnibus Contribution, Bill of Sale, Assignment and Assumption Agreement
dated as of June 18, 1996, by and between the Original Obligor and the
Successor Obligor;
WHEREAS, provision is made in Section 5.2 of the Original Indenture for a
successor corporation to succeed to, and be substituted for, the Original
Obligor whereby the Successor Obligor may exercise every right and power of the
Original Obligor under the Original Indenture with the same effect as if the
Successor Obligor had been named in the Original Indenture; and
WHEREAS, the execution and delivery of this Supplemental Indenture have
been duly authorized by the boards of directors of the Original Obligor and the
Successor Obligor at meetings duly called and held (or pursuant to consents in
lieu thereof) in accordance with applicable law, and all conditions and
requirements necessary to make this Supplemental Indenture a valid, binding and
legal instrument in accordance with its terms, for the purposes herein
expressed, and the execution and delivery hereof, in the form and terms hereof,
have been in all respects duly authorized.
NOW, THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Original Obligor and the Successor Obligor agree as follows:
<PAGE> 2
1. Successor Obligor Substituted. Pursuant to Sections 5.2 of the
Original Indenture, the Successor Obligor hereby assumes all the obligations
of the Original Obligor pursuant to the Original Indenture and pursuant to
the Securities and the Original Obligor shall be released from any and all
obligations under the Original Indenture and the Securities (except with
respect to any obligations that arise from, or are related to, transactions
contemplated by this Supplemental Indenture).
2. Amendment to Original Indenture. Upon the execution and delivery of
this Supplemental Indenture, all references in the Original Indenture to the
"Company" shall mean the Successor Obligor.
3. Miscellaneous. As amended and supplemented by this Supplemental
Indenture, the Original Indenture is in all respects ratified and confirmed and
the Original Indenture and the Supplemental Indenture shall be read, taken and
construed as one and the same instrument. This Supplemental Indenture shall be
simultaneously executed in several counterparts, and all such counterparts
executed and delivered, each as an original, shall constitute but one in the
same instrument.
* * * * * * * *
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
CORPORATE EXPRESS, INC.
By: /s/ GARY M. JACOBS
----------------------------
Name (Print): Gary M. Jacobs
------------------
Title: Executive Vice President
-------------------------
CEX HOLDINGS, INC.
By: /s/ GARY M. JACOBS
----------------------------
Name (Print): Gary M. Jacobs
------------------
Title: Vice President
-------------------------
FIRST TRUST NATIONAL
ASSOCIATION, as Trustee
By: /s/ KATHE BARRETT
----------------------------
Name (Print): Kathe Barrett
------------------
Title: Trust Officer
-------------------------
3
<PAGE> 1
EXHIBIT 4.9
CEX Holdings, Inc.
as Issuer
Corporate Express, Inc.
and the other Guarantors
listed on Schedule A hereto
as Guarantors
$550,000,000
9 5/8% Senior Subordinated Notes
due 2008
_____________
INDENTURE
Dated as of May 29, 1998
_____________
The Bank of New York
Trustee
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02 Other Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 1.03 Incorporation by Reference of Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 1.04 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 2
THE NOTES
Section 2.01 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.04 Paying Agent to Hold Money in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.06 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 2.07 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 2.08 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.13 CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.02 Selection of Notes to Be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 3.05 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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<S> <C> <C>
Section 3.07 Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 3.08 No Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 3.09 Sinking Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 4
COVENANTS
Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 4.02 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.03 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 4.04 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 4.05 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.06 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 4.07 Repurchase of Notes at the Option of the Holder Upon a Change of Control . . . . . . . . . . . . . . 55
Section 4.08 Limitation on Sale of Assets and Subsidiary Stock . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 4.09 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 4.10 Limitation on Incurrence of Additional Indebtedness and Disqualified
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 4.11 Limitations on Liens Securing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 4.12 Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries . . . . . . . . . . . 68
Section 4.13 Limitations on Layering Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 4.14 Limitations on Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 4.15 Future Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 4.16 Limitations on Merger of Subsidiary Guarantors and Release
of Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 4.17 Limitation on Status as an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE 5
SUCCESSORS
Section 5.01 Limitation on Merger, Sale or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 5.02 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
</TABLE>
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Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.04 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 6.05 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 6.06 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Section 6.07 Rights of Holders of Notes to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Section 7.02 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.06 Reports by Trustee to Holders of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 7.09 Successor Trustee by Merger, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Section 7.11 Preferential Collection of Claims Against Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.02 Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.03 Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 8.05 Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 8.06 Repayment to Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
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Section 8.07 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01 Without Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 9.02 With Consent of Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 9.03 Compliance with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Section 9.04 Revocation and Effect of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 10.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 10.03 Default on Designated Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Section 10.04 Acceleration of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 10.05 When Distribution Must Be Paid Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 10.06 Notice by Issuer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.07 Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.08 Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 10.9 Subordination May Not Be Impaired by Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.10 Distribution or Notice to Representative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 10.12 Authorization to Effect Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 10.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
ARTICLE 11
GUARANTEES
Section 11.01 Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 11.02 Execution and Delivery of Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Section 11.03 Guarantors May Consolidate, etc., on Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . 101
Section 11.04 Releases Following Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
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Section 11.05 Limitation of Guarantor's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 11.06 Application of Certain Terms and Provisions to the Guarantor . . . . . . . . . . . . . . . . . . . . 102
Section 11.07 Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
ARTICLE 12
MISCELLANEOUS
Section 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 12.02 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Section 12.03 Communication by Holders of Notes with Other Holders of Notes . . . . . . . . . . . . . . . . . . . 105
Section 12.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 12.05 Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Section 12.06 Rules by Trustee and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.07 No Personal Liability of Directors, Officers, Employees and Stockholders . . . . . . . . . . . . . . 106
Section 12.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.09 No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.10 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Section 12.12 Counterpart Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 12.13 Table of Contents, Headings, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
EXHIBITS
Exhibit A FORM OF NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
Exhibit B FORM OF GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
Exhibit C CERTIFICATE OF TRANSFEROR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
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CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.03
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06; 12.02
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09; 12.02
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.04
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.02; 12.04
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.05
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(2)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 12.02
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(1)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01(3)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.09
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.01
</TABLE>
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N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 8
INDENTURE dated as of May 29, 1998, among CEX Holdings, Inc.,
a Colorado corporation (the "Issuer") and a wholly owned subsidiary of
Corporate Express, Inc., a Colorado corporation (the "Parent"), the entities
listed in Schedule A hereto as guarantors (collectively, the "Guarantors"), and
The Bank of New York, a New York banking corporation, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of each other and
for the equal and ratable benefit of the holders (the "Holders") of the 95/8%
Series A Senior Subordinated Notes due 2008 (the "Series A Notes") and the
95/8% Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and,
together with the Series A Notes, the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"144A Global Note" means a global note in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, an registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Indebtedness" means Indebtedness or Disqualified Capital
Stock of any Person existing at the time such Person becomes a Subsidiary of
the Issuer, including by designation, or is merged or consolidated into or
with the Issuer or one of its Subsidiaries.
"Acquisition" means the purchase or other acquisition of any Person or
all or substantially all the assets of any Person by any other Person, whether
by purchase, merger, consolidation, or other transfer, and whether or not for
consideration.
"Affiliate" means any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer. For
purposes of this definition, the term "control" means the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, provided that a Beneficial Owner of 20% or more of the
total voting power normally entitled to vote in the election of directors,
managers or trustees, as applicable, shall for such purposes be deemed to
constitute control.
"Additional Notes" means additional Notes which may be issued after
the Issue Date pursuant to this Indenture (other than pursuant to an Exchange
Offer or otherwise in exchange for or in replacement of outstanding Notes).
<PAGE> 9
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Assets to Be Disposed of" means assets identified in an Officer's
Certificate at the time of an Acquisition as assets the Issuer or the acquiring
Subsidiary intends to dispose of within 180 days of such Acquisition.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (a) the sum of
the products (i) of the number of years (calculated to the nearest one-twelfth)
from the date of determination to the date or dates of each successive
scheduled principal (or redemption) payment of such security or instrument and
(ii) the amount of each such respective principal (or redemption) payment by
(b) the sum of all such principal (or redemption) payments.
"Beneficial Owner" or "beneficial owner" for purposes of the
definitions of Change of Control and Affiliate has the meaning attributed to it
in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "Person" shall be deemed to
have "beneficial ownership" of all shares that any such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the board of directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"Capital Contribution" means any contribution to the equity of the
Issuer from a direct or indirect parent of the Issuer for which no
consideration other than the issuance of common stock with no redemption rights
and no special preferences, privileges or voting rights is given.
"Capitalized Lease Obligation" means, as to any Person, the
obligations of such Person under a lease that are required to be classified and
accounted for as capital lease obligations under GAAP and, for purposes of this
definition, the amount of such
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<PAGE> 10
obligations at any date shall be the capitalized amount of such obligations at
such date, determined in accordance with GAAP.
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness that is not itself otherwise capital stock), warrants, options,
participations or other equivalents of or interests (however designated) in
stock issued by that corporation.
"Cash Equivalent" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (b) U.S. dollar denominated
(or foreign currency fully hedged) time deposits, certificates of deposit,
Eurodollar time deposits or Eurodollar Certificates of deposit of (i) any
domestic commercial bank of recognized standing having capital and surplus in
excess of $100,000,000 or (ii) any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at
least P-1 or the equivalent thereof (any such bank being an "Approved Lender"),
in each case with maturities of not more than twelve months from the date of
acquisition, (c) commercial paper and variable or fixed rate notes issued by
any Approved Lender (or by the parent company thereof) or any variable rate
notes issued by, or guaranteed by, any domestic corporation rated A-2 (or the
equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or
better by Moody's and maturing within twelve months after the date of
acquisition, and (d) repurchase agreements with a bank or trust company or
recognized securities dealer having capital and surplus in excess of
$100,000,000 for direct obligations issued by or fully guaranteed by the United
States of America in which the Company will have a perfected first priority
security interest (subject to no other Liens) and having, on the date of
purchase thereof, a fair market value of at least 100% of the amount of
repurchase obligations, (e) interests in money market mutual funds which invest
solely in assets or securities of the type described in subparagraphs (a), (b),
(c) or (d) hereof and (f) in the case of any Foreign Subsidiary: (i) direct
obligations of the sovereign nation (or any agency thereof) in which such
Foreign Subsidiary is organized and is conducting business or in obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof), (ii) investments of the type and maturity described in clauses (a)
through (e) above of foreign obligors, which investments or obligors (or the
direct or indirect parents of such obligors) have ratings described in such
clauses or equivalent ratings from comparable foreign rating agencies or (iii)
investments of the type and maturity described in clauses (a) through (e) above
of foreign obligors (or the direct or indirect parents of such obligors), which
investments or obligors (or the direct or indirect parents of such obligors)
are not rated as provided in such clauses or in clause (ii) above but which
are, in the reasonable judgment of the Company, comparable in investment
quality to such investments and obligors (or the direct or indirect parent of
such obligors).
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<PAGE> 11
"Cedel" means Cedel Bank, S.A. or its successors.
"Change of Control" means (i) any merger or consolidation of the
Issuer or Parent with or into any Person or any sale, transfer or other
conveyance, whether direct or indirect, of all or substantially all of the
assets of the Issuer or Parent, on a consolidated basis, in one transaction or
a series of related transactions, if, immediately after giving effect to such
transaction(s), any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election
of directors, managers, or trustees, as applicable, of the transferee(s) or
surviving entity or entities, (ii) any "person" or "group" (as such terms are
used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or
not applicable) is or becomes the "beneficial owner," directly or indirectly,
of more than 50% of the total voting power in the aggregate of all classes of
Capital Stock of the Issuer (other than the Parent so long as the Parent owns
100% of such voting power) or Parent then outstanding normally entitled to vote
in elections of directors, (iii) during any period of 12 consecutive months
after the Issue Date, individuals who at the beginning of any such 12-month
period constituted the Board of Directors of either the Issuer or Parent
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Issuer or Parent, as
applicable, was approved by a vote of a majority of the directors then still in
office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved, including new
directors designated in or provided for in an agreement regarding the merger,
consolidation or sale, transfer or other conveyance, all or substantially all
of the assets of the Issuer or the Parent, if such agreement was approved by a
vote of such majority of directors) cease for any reason to constitute a
majority of the Board of Directors of the Issuer or Parent then in office, as
applicable, or (iv) Parent ceases to own 100% of the Equity Interests of the
Issuer.
"Claim" means any claim for damages arising from the purchase of the
Notes or for reimbursement or contribution on the account of such claim, in
each case to the extent relating to the purchase price of the Notes.
"Consolidated Coverage Ratio" of any Person on any date of
determination (the "Transaction Date") means the ratio, on a pro forma basis,
of (a) the aggregate amount of Consolidated EBITDA of such Person attributable
to continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of) for the
Reference Period to (b) the aggregate Consolidated Fixed Charges of such Person
(exclusive of amounts attributable to operations and businesses permanently
discontinued or disposed of, but only to the extent that the obligations giving
rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such Person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference
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<PAGE> 12
Period; provided, that for purposes of such calculation, (i) Acquisitions which
occurred during the Reference Period or subsequent to the Reference Period and
on or prior to the Transaction Date shall be assumed to have occurred on the
first day of the Reference Period, (ii) transactions giving rise to the need to
calculate the Consolidated Coverage Ratio shall be assumed to have occurred on
the first day of the Reference Period without regard to the effect of
subsection (c) of the definition of "Consolidated Net Income", (iii) the
incurrence of any Indebtedness or issuance of any Disqualified Capital Stock
during the Reference Period or subsequent to the Reference Period and on or
prior to the Transaction Date (and the application of the proceeds therefrom to
the extent used to refinance or retire other Indebtedness) shall be assumed to
have occurred on the first day of the Reference Period, and (iv) the
Consolidated Fixed Charges of such Person attributable to interest on any
Indebtedness or dividends on any Disqualified Capital Stock bearing a floating
interest (or dividend) rate shall be computed on a pro forma basis as if the
average rate in effect from the beginning of the Reference Period to the
Transaction Date had been the applicable rate for the entire period, unless
such Person or any of its Subsidiaries is a party to an Interest Swap or
Hedging Obligation (which shall remain in effect for the 12-month period
immediately following the Transaction Date) that has the effect of fixing the
interest rate on the date of computation, in which case such rate (whether
higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated Net Income of such Person for such period adjusted (a)
to eliminate (i) non-recurring charges related to the assimilation of Persons
acquired, and the expenses of, any Acquisitions, including expenses incurred in
connection with the retirement of Acquired Indebtedness, (ii) the write-off of
debt financing fees associated with termination of credit facilities, (iii) any
non-cash pre-Acquisition write-offs or similar charges incurred by a Person
acquired in an Acquisition that as a result of pooling of interest are included
in the Parent's consolidated financial statements for such period to the extent
such write-offs or charges would either (x) not be included as an expense on
the Parent's consolidated financial statements had the Acquisition not been
accounted for as a pooling of interests or (y) be eliminated by the provisions
hereof if recorded by the Parent for such period and (iv) any non-cash
write-offs or similar charges which are recorded following an Acquisition in
the Parent's consolidated financial statements with respect to an acquired
Person's assets to the extent such amounts were accounted for in the first
twelve months following the date such Acquisition was consummated and (b) to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Consolidated
income tax expense, (ii) Consolidated depreciation and amortization expense
(including any accelerations thereof), (iii) Consolidated Fixed Charges, and
(iv) non-cash charges attributable to the grant, exercise or repurchase of
options or shares of Qualified Capital Stock to or from employees.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of
a Subsidiary of a Person will be added to
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<PAGE> 13
Consolidated Net Income to compute Consolidated EBITDA only to the extent (and
in the same proportion) that the net income of such Subsidiary was included in
calculating the Consolidated Net Income of such Person.
"Consolidated Fixed Charges" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued (including, in accordance with the following sentence,
interest attributable to Capitalized Lease Obligations) of such Person and its
Consolidated Subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness, (ii)
the interest portion of all deferred payment obligations, and (iii) all
commissions, discounts and other fees and charges owed with respect to bankers'
acceptances and letters of credit financings and currency and Interest Swap and
Hedging Obligations, in each case to the extent attributable to such period,
(b) one-third of rental expense for such period attributable to operating
leases of such Person and its Consolidated Subsidiaries, (c) the amount of
dividends accrued or payable by such Person or any of its Consolidated
Subsidiaries in respect of Preferred Stock (other than by Subsidiaries of such
Person to such Person or such Person's Subsidiaries) and (d) interest expense
of Parent for such period with respect to the Parent Convertible Notes and any
refinancing indebtedness incurred with respect thereto. For purposes of this
definition, (x) interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined in good faith by the Issuer to
be the rate of interest implicit in such Capitalized Lease Obligation in
accordance with GAAP and (y) interest expense attributable to any Indebtedness
represented by the guaranty by such Person or a Subsidiary of such Person of an
obligation of another Person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed.
"Consolidated Leverage Ratio" shall mean the ratio on a pro forma
basis of (i) the aggregate outstanding amount of Indebtedness of the Issuer and
its Consolidated Subsidiaries (excluding Indebtedness ranking subordinate to
the Notes and the Guarantees and Indebtedness of any Foreign Subsidiary that is
non-recourse to the Issuer and its other Subsidiaries) as of the date of
calculation on a consolidated basis, after giving effect to the incurrence of
Indebtedness on such date, net of cash stated on the Parent's consolidated
balance sheet (excluding cash held at Parent) to (ii) the Consolidated EBITDA
of the Issuer for the four last full fiscal quarters ending on or prior to the
date of determination; provided, that for purposes of such calculation,
Acquisitions which occurred during the Reference Period or subsequent to the
Reference Period, and on or prior to the Transaction Date shall be assumed to
have occurred on the first day of the Reference Period.
"Consolidated Net Income" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Consolidated
Subsidiaries (determined on a consolidated basis in accordance with GAAP) for
such period, adjusted to exclude (only
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<PAGE> 14
to the extent included in computing such net income (or loss) and without
duplication): (a) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain or loss from the sale or other disposition of assets
outside the ordinary course of business or from the issuance or sale of any
capital stock), (b) the net income, if positive, of any Person, other than a
Consolidated Subsidiary, in which such Person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to such Person or a
Consolidated Subsidiary of such Person during such period, but in any case not
in excess of such Person's pro rata share of such Person's net income for such
period, (c) the net income or loss of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition, and
(d) the net income, if positive, of any of such Person's Consolidated
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions is not at the time permitted by operation of the terms of
its charter or bylaws or any other agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such Consolidated
Subsidiary, and (e) the net income of, or any dividends or other distributions
from, any Unrestricted Subsidiary, to the extent otherwise included, except to
the extent cash or Cash Equivalents are distributed to the Issuer or one of its
Subsidiaries in a transaction that does not relate to the liquidation of such
Unrestricted Subsidiary.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which are consolidated for financial statement
reporting purposes with the financial statements of such Person in accordance
with GAAP.
"Corporate Trust Office" shall be at the address of the Trustee
specified in Section 12.02 hereof or such other address as to which the Trustee
may give notice to the Issuer.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor will have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depositary" will mean or include such successor.
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<PAGE> 15
"Designated Senior Debt" means, (a) so long as it is in effect, the
New Credit Facility and (b) at any time when the New Credit Facility is no
longer in effect any other Senior Debt designated by the Issuer to be
"Designated Senior Debt" that has an outstanding principal amount of at least
$20,000,000 at the time of such designation.
"Disqualified Capital Stock" means (a) except as set forth in (b),
with respect to any Person, Equity Interests of such Person that, by its terms
or by the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time or
both would be, required to be redeemed or repurchased (including at the option
of the holder thereof) by such Person or any of its Subsidiaries, in whole or
in part, on or prior to the Stated Maturity of the Notes and (b) with respect
to any Subsidiary of such Person (including with respect to any Subsidiary of
the Issuer), any Equity Interests other than any common equity with no
preference, privileges, or redemption or repayment provisions.
"Disqualified Preferred Stock" means, with respect to any Person,
Equity Interests of such Person that, by its terms or by the terms of any
security into which it is convertible, exercisable or exchangeable, is, or upon
the happening of an event or the passage of time or both would be, required to
be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to the
Stated Maturity of the Notes.
"Equity Interest" of any Person means any shares, interests,
participations or other equivalents (however designated) in such Person's
equity, and shall in any event include any Capital Stock issued by, or
partnership or membership interests in, such Person.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, or its successors, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means Series B Notes issued pursuant to an Exchange
Offer.
"Exchange Offer" means an offer that may be made by the Company
pursuant to the Registration Rights Agreement (or another similar agreement
entered into in connection with the issuance of Additional Notes) to exchange
Exchange Notes for Series A Notes.
"Excluded Person" means any Person who on the Issue Date is the
beneficial owner of at least 5% of the total voting power of the Issuer or
Parent normally entitled to vote in the election of directors of the Issuer or
Parent, as applicable, and all Related Persons of such Person, and, with
respect to the Issuer, the Parent.
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<PAGE> 16
"Excluded Subsidiary" means any Subsidiary which has assets with a
fair market value of $5,000,000 or less and is designated as an "Excluded
Subsidiary" by the Issuer; provided that at no time may the aggregate fair
market value of the assets of all Subsidiaries designated as "Excluded
Subsidiaries" exceed $25,000,000.
"Exempted Affiliate Transaction" means (a) reasonable and customary
financial advisory, securities underwriting or similar arrangements with
investment banking firms of national reputation, (b) issuances of Qualified
Capital Stock of the Issuer, (c) customary employee compensation or incentive
arrangements approved by a majority of independent (as to such transactions)
members of the Board of Directors of the Issuer, (d) dividends permitted under
the terms of Section 4.09 and payable, in form and amount, on a pro rata basis
to all holders of Capital Stock of the Issuer, and (e) transactions solely
between the Issuer or any of the Issuer's Subsidiaries or Unrestricted
Subsidiaries or solely among Subsidiaries or Unrestricted Subsidiaries of the
Issuer.
"Existing Assets" means property, plant and equipment and other
tangible business assets existing as of the Issue Date used in a Related
Business of the Issuer or the Guarantors, but does not include inventory, cash
or Cash Equivalents or intangible assets, and the proceeds from the sale,
disposition or other transfer of any Existing Assets outside the ordinary
course of business.
"Existing Indebtedness" means the Indebtedness of the Issuer and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the Issue Date, until such amounts are repaid.
"Finance Subsidiary" means any Subsidiary of the Issuer (other than a
Subsidiary Guarantor or a Foreign Subsidiary) organized for the sole purpose of
issuing Capital Stock or other securities and loaning the proceeds thereof to
the Issuer or a Subsidiary Guarantor and which engaged in no other transactions
except those incidental thereto.
"Finance Subsidiary Indebtedness" means Indebtedness of or
Disqualified Capital Stock issued by a Finance Subsidiary, which Indebtedness
or Disqualified Capital Stock does not mature and is not mandatorily redeemable
or redeemable at the option of the holder thereof, in whole or in part (other
than pursuant to customary change of control or asset sale provisions), prior
to the final Stated Maturity of the Notes.
"Foreign Subsidiary" means any Subsidiary of the Issuer which (a) is
not organized under the laws of the United States, any state thereof or the
District of Columbia, (b) conducts substantially all of its business operations
outside the United States of America, and (c) does not own, or have the benefit
of any Lien on, any Equity Interests of the Issuer or any Subsidiary Guarantor.
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<PAGE> 17
"GAAP" means United States generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
fully guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged.
"Guarantee" means the guarantees provided by the Guarantors hereunder.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, to the
extent such liabilities and obligations would appear as a liability upon the
consolidated balance sheet of such Person in accordance with GAAP, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii)
evidenced by bonds, notes, debentures or similar instruments, or (iii)
representing the balance deferred and unpaid of the purchase price of any
property or services, except (other than accounts payable or other obligations
to trade creditors which have remained unpaid for greater than 60 days past
their original due date) those incurred in the ordinary course of its business
that would constitute ordinarily a trade payable to trade creditors; (b) all
liabilities and obligations, contingent or otherwise, of such Person (i)
evidenced by bankers' acceptances or similar instruments issued or accepted by
banks, (ii) for the payment of money relating to any Capitalized Lease
Obligation, or (iii) evidenced by a letter of credit or a reimbursement
obligation of such Person with respect to any letter of credit; (c) all net
obligations of such Person under Interest Swap and Hedging Obligations; (d) all
liabilities and obligations of others of the kind described in the preceding
clause (a), (b) or (c) that such Person has guaranteed or that is otherwise its
legal liability; and (e) any and all deferrals, renewals, extensions,
refinancings and refundings (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b), (c) or (d), or this clause (e), whether or not
between or among the same parties; provided that any indebtedness which has
been defeased in accordance with GAAP or defeased pursuant to the deposit of
cash or
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Government Securities (in an amount sufficient to satisfy all such indebtedness
obligations at maturity or redemption, as applicable, and all payments of
interest and premium, if any) in a trust or account created or pledged for the
sole benefit of the holders of such indebtedness, and subject to no other
Liens, and the other applicable terms of the instrument governing such
indebtedness, shall not constitute "Indebtedness."
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means any Person that settles transactions
through or maintains a direct or indirect custodial relationship with a
Participant.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation, BT Alex. Brown Incorporated, Merrill Lynch, Pierce Fenner & Smith
Incorporated, NationsBanc Montgomery Securities LLC, First Chicago Capital
Markets, Inc. and BNY Capital Markets, Inc.
"Interest Swap and Hedging Obligation" means any obligation of any
Person pursuant to any interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate exchange agreement,
currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional
amount in exchange for periodic payments made by such Person calculated by
applying a fixed or floating rate of interest on the same notional amount.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities, including any options or warrants, of
such other person or any agreement to make any such acquisition; (b) the making
by such Person of any deposit with, or advance, loan or other extension of
credit to, such other Person (including the purchase of property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such property to such other Person) or any commitment to make any such
advance, loan or extension (but excluding accounts receivable, endorsements for
collection or deposits arising in the ordinary course of business); (c) other
than guarantees of Indebtedness of the Issuer or any Guarantor to the extent
permitted by Section 4.10, the entering into by such Person of any guarantee
of, or other credit support or contingent obligation with respect to,
Indebtedness or other liability of such other Person; (d) the making of any
capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Issuer of any Person to be an
Unrestricted Subsidiary. The Issuer shall be
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deemed to make an Investment in an amount equal to the fair market value of the
net assets of any subsidiary (or, if neither the Issuer nor any of its
Subsidiaries has theretofore made an Investment in such subsidiary, in an
amount equal to the Investments being made), at the time that such subsidiary
is designated an Unrestricted Subsidiary, and any property transferred to an
Unrestricted Subsidiary from the Issuer or a Subsidiary of the Issuer shall be
deemed an Investment valued at its fair market value at the time of such
transfer.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Junior Securities" means any Qualified Capital Stock and any
Indebtedness of the Issuer or a Guarantor, as applicable, that is subordinated
in right of payment to the Notes or the Guarantee, as applicable, and has no
scheduled installment of principal due, by redemption, sinking fund payment or
otherwise, on or prior to the Stated Maturity of the Notes; provided that in
the case of subordination in respect of Senior Debt under the New Credit
Facility, "Junior Security" shall mean any Qualified Capital Stock and any
Indebtedness of the Issuer or the Guarantor, as applicable, that is issued to a
Holder on account of the Notes pursuant to an order or decree of a court of
competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy or reorganization law, which Qualified Capital Stock or Indebtedness
(i) has a maturity, mandatory redemption obligation or put right, if any,
longer than, or occurring after the final maturity date of, all Senior Debt
outstanding under the New Credit Facility on the date of issuance of such
Qualified Capital Stock or Indebtedness (and to any securities issued in
exchange for any such Senior Debt), (ii) is unsecured, (iii) has an Average
Life longer than the security for which such Qualified Capital Stock or
Indebtedness is being exchanged, (iv) does not provide for terms, conditions or
covenants more onerous than those provided in the Notes and (v) by their terms
or by law are subordinated to Senior Debt outstanding under the New Credit
Facility on the date of issuance of such Qualified Capital Stock or
Indebtedness (and to any securities in exchange for any such Senior Debt) at
least to the same extent as the Notes.
Letter of Transmittal" means the letter of transmittal to be prepared
by the Issuer and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means any mortgage, charge, pledge, lien (statutory or
otherwise), privilege, security interest, hypothecation or other encumbrance
upon or with respect to any property of any kind, real or personal, movable or
immovable, now owned or hereafter acquired.
"Liquidated Damages" means all Liquidated Damages then owing pursuant
to the Registration Rights Agreement.
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"Moody's" means Moody's Investor Service, Inc. and its successors.
"Net Cash Proceeds" means the aggregate amount of cash or Cash
Equivalents received by the Issuer in the case of a sale of its Qualified
Capital Stock and by the Issuer and its Subsidiaries in respect of an Asset
Sale plus, in the case of an issuance of Qualified Capital Stock of the Issuer
upon any exercise, exchange or conversion of securities (including options,
warrants, rights and convertible or exchangeable debt) of the Issuer that were
issued for cash on or after the Issue Date, the amount of cash originally
received by the Issuer upon the issuance of such securities (including options,
warrants, rights and convertible or exchangeable debt) less, in each case, the
sum of all payments, fees, commissions and expenses (including, without
limitation, the fees and expenses of legal counsel and investment banking fees
and expenses) incurred in connection with such Asset Sale or sale of Qualified
Capital Stock, and, in the case of an Asset Sale only, less the amount
(estimated reasonably and in good faith by the Issuer) of income, franchise,
sales and other applicable taxes required to be paid resulting from such sale
by the Issuer or any of its respective Subsidiaries, in the taxable year that
such sale is consummated or in the immediately succeeding taxable year, the
computation of which shall take into account the reduction in tax liability
resulting from any available operating losses and net operating loss
carryovers, tax credits and tax credit carryforwards and similar tax
attributes. "Net Cash Proceeds" also includes the amount of cash received by
the Issuer as a Capital Contribution from Parent.
"New Credit Facility" means the credit agreement dated as of April 17,
1998 by and among the Issuer, the Parent, certain financial institutions and
providing for an aggregate $250,000,000 term credit facility and an aggregate
$750,000,000 revolving credit facility, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreement and/or related documents may be
amended, restated, supplemented, renewed, replaced, refinanced (in whole or in
part) or otherwise modified from time to time whether or not with the same
agent, trustee, representative lenders or holders, and whether or not pursuant
to a single or multiple agreements or instruments, and, subject to the proviso
to the next succeeding sentence, irrespective of any changes in their terms and
conditions thereof. Without limiting the generality of the foregoing, the term
"New Credit Facility" shall include agreements in respect of Interest Swap and
Hedging Obligations with lenders at any time party to the New Credit Facility
(which Interest Swap and Hedging Obligations shall not be deemed to increase
the amount outstanding pursuant to the New Credit Facility for purposes of
determining compliance with Section 4.10 contained herein) and shall also
include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any New Credit Facility and all
refundings, refinancings and replacements (whether in whole or in part) of all
or any part of the New Credit Facility, including any agreement or agreements
(i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or
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guarantors thereunder, so long as borrowers and issuers include one or more of
the Issuer and its Subsidiaries and their respective successors and assigns,
(iii) increasing the amount of Indebtedness incurred thereunder or available to
be borrowed thereunder, provided, that on the date such increased Indebtedness
is incurred it would be permitted to be incurred under Section 4.10, or (iv)
otherwise altering the terms and conditions thereof.
"Non-Recourse Indebtedness" means Indebtedness (a) as to which neither
the Issuer nor any of its Subsidiaries (i) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (ii) is directly or indirectly liable (as a guarantor or
otherwise), or (iii) constitutes the lender; and (b) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any of its Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Notes Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Obligation" means any principal, premium, interest, penalties, fees,
reimbursements, damages, indemnification and other liabilities relating to
obligations of the Issuer or any Guarantor under the Notes or the Indenture,
including any liquidated damages pursuant to the Registration Rights Agreement.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice President of
such Person.
"Officer's Certificate" means a certificate signed on behalf of the
Issuer or Subsidiary Guarantor, as applicable, by an officer of the Issuer or
Subsidiary Guarantor, as applicable, who must be the principal executive
officer, the principal financial officer or the principal accounting officer of
the Issuer or Subsidiary Guarantor, as applicable, that meets the requirements
set forth in this Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company or
any Subsidiary of the Company.
"Parent Consolidated Leverage Ratio" shall mean the ratio on a pro
forma basis of (i) the aggregate outstanding amount of Indebtedness of the
Parent and its Consolidated Subsidiaries as of the date of calculation on a
consolidated basis, after giving effect to the
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incurrence of Indebtedness and Disqualified Preferred Stock on such date, net
of cash stated on the Parent's consolidated balance sheet, plus the aggregate
liquidation preference of all Disqualified Preferred Stock of the Parent and
its Consolidated Subsidiaries to (ii) the Consolidated EBITDA of the Parent for
the four last full fiscal quarters ending on or prior to the date of
determination; provided, that for purposes of such calculation, Acquisitions
which occurred during the Reference Period or subsequent to the Reference
Period and on or prior to the Transaction Date shall be assumed to have
occurred on the first day of the Reference Period.
"Parent Convertible Notes" means the $325,000,000 aggregate principal
amount of 4 1/2% Convertible Notes due July 1, 2000 of the Parent issued
pursuant to this Indenture, dated as of June 24, 1996, between Parent and
Bankers Trust Company, as Trustee, as in existence on the Issue Date.
"Participant" means, with respect to the Depositary Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Permitted Indebtedness" means that:
(a) the Issuer, the Subsidiary Guarantors and the Foreign
Subsidiaries may incur Indebtedness solely in respect of bankers acceptances,
bank overdrafts, letters of credit and performance bonds (to the extent that
such incurrence does not result in the incurrence of any obligation to repay
any obligation relating to borrowed money of others), all in the ordinary
course of business in accordance with customary industry practices and for the
purposes customary in the Issuer's industry;
(b) the Issuer may incur Indebtedness to any Subsidiary
Guarantor or a Foreign Subsidiary, and any Subsidiary Guarantor or a Foreign
Subsidiary may incur Indebtedness to any other Subsidiary Guarantor or a
Foreign Subsidiary or to the Issuer; provided that the time any such
Indebtedness becomes held by any Person other than the Issuer or a Subsidiary
Guarantor or a Foreign Subsidiary shall be deemed an Incurrence Date; provided,
further, that in the case of Indebtedness of the Issuer, such obligations shall
be unsecured and subordinated in all respects to the Issuer's obligations
pursuant to the Notes;
(c) any Subsidiary Guarantor may guaranty any
Indebtedness of the Issuer or another Subsidiary Guarantor that was permitted
to be incurred pursuant to this Indenture, substantially concurrently with such
incurrence or at the time such Person becomes a Subsidiary Guarantor;
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(d) a Receivables Subsidiary may incur Indebtedness in a
Qualified Receivables Transaction that is without recourse to the Issuer or
Parent or to any Subsidiary of the Issuer or of Parent or any of their assets
(other than Standard Securitization Undertakings and other than such
Receivables Subsidiary and its assets), and is not guaranteed by any such
Person and is not otherwise any such other Person's legal liability; and
(e) the Issuer and the Subsidiary Guarantors and the
Foreign Subsidiaries may incur Interest Swap and Hedging Obligations so long as
not for purposes of speculation for the purpose of fixing or hedging (i)
interest rate risk with respect to any floating Indebtedness that is permitted
by the terms of this Indenture to be outstanding or (ii) the value of foreign
currencies purchased or received by the Issuer or its Subsidiaries in the
ordinary course.
"Permitted Investment" means any Investment in (a) any of the Notes;
(b) Cash Equivalents; (c) intercompany notes to the extent permitted under
clause (b) of the definition of "Permitted Indebtedness; (d) Investments by the
Issuer or any Subsidiary Guarantor in any Person that is or immediately after
such Investment becomes a Subsidiary Guarantor, or immediately after such
Investment merges or consolidates into the Issuer or any Subsidiary Guarantor
in compliance with the terms of this Indenture, provided that such Person is
engaged in all material respects in a Related Business; (e) Investments by the
Issuer or any Subsidiary Guarantor in any Person that is or immediately after
such Investment becomes a Wholly Owned Foreign Subsidiary; provided that such
Person is engaged in all material respects in a Related Business (other than
Investments consisting of or from the contribution, sale, disposition or other
transfer of Existing Assets of the Issuer or a Subsidiary Guarantor or the
direct or indirect proceeds of any such Existing Assets, in each case outside
the ordinary course of business); (f) Investments in the Issuer by any
Subsidiary Guarantor, provided that in the case of Indebtedness constituting
any such Investment, such Indebtedness shall be unsecured and subordinated in
all respects to the Issuer's obligations under the Notes; (g) Investments in
securities of trade creditors or customers received in settlement of
obligations that arose in the ordinary course of business or pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of such trade creditors or customers; (h) Investments by the Issuer outstanding
on the Issue Date; (i) transactions or arrangements with officers or directors
of the Issuer or any Subsidiary Guarantor entered into in the ordinary course
of business (including compensation or employee benefit arrangements with any
officer or director of the Issuer or any Subsidiary Guarantor permitted under
Section 4.14); (j) the acquisition by a Receivables Subsidiary in connection
with a Qualified Receivables Transaction of Equity Interests of a trust or
other Person established by such Receivables Subsidiary to effect such
Qualified Receivables Transaction; (k) any Investment by the Issuer or any
Guarantor in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person, in each case in connection with Qualified
Receivables
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Transaction; provided, that the foregoing Investment is in the form of a note
that the Receivables Subsidiary or other Person is required to repay as soon as
practicable from available cash collections less amounts required to be
established as reserves pursuant to contractual arrangements with entities that
are not Affiliates entered into as part of a Qualified Receivables Transaction;
(l) Investments made as a result of the receipt of non-cash consideration from
a sale of assets that does not constitute an Asset Sale by reason of the de
minimus thresholds set forth in the definition thereof and from an Asset Sale
that was made pursuant to and in compliance with Section 4.08; and (m) any
acquisition of assets in exchange for the Qualified Capital Stock of the
Issuer.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Issuer in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business, provided that (i) the underlying obligations are not overdue for a
period of more than 30 days, or (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect thereto
are maintained on the books of the Issuer in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property subject thereto (as such
property is used by the Issuer or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Issuer or any of its Subsidiaries;
(f) Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in an Event of Default
with respect thereto; (g) pledges or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security legislation; (h) Liens securing the Notes; (i)
Liens securing Indebtedness of a Person existing at the time such Person
becomes a Subsidiary of the Issuer or is merged with or into the Issuer or a
Subsidiary of the Issuer, or Liens securing Indebtedness incurred in connection
with an Acquisition, provided that such Liens were in existence prior to the
date of such acquisition, merger or consolidation, were not incurred in
anticipation thereof, and do not extend to any other assets; (j) Liens arising
from Purchase Money Indebtedness permitted to be incurred under paragraph (c)
of Section 4.10, provided such Liens relate solely to the property which is
subject to such Purchase Money Indebtedness; (k) leases or subleases granted to
other Persons in the ordinary course of business not materially interfering
with the conduct of the business of the Issuer or any of its Subsidiaries or
materially detracting from the value of the relative assets of the Issuer or
any Subsidiary; (l) Liens arising from precautionary Uniform
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<PAGE> 25
Commercial Code financing statement filings regarding operating leases entered
into by the Issuer or any of its Subsidiaries in the ordinary course of
business; (m) Liens securing Refinancing Indebtedness incurred to refinance any
Indebtedness that was previously so secured in a manner no more adverse to the
Holders of the Notes than the terms of the Liens securing such refinanced
Indebtedness, provided that the Indebtedness secured is not increased and the
Liens are not extended to any additional assets or property that would not have
been security for the Indebtedness refinanced; (n) Liens securing Senior Debt,
including Indebtedness incurred under the New Credit Facility in accordance
with the terms of this Indenture; (o) Liens on assets of a Receivables
Subsidiary incurred in connection with a Qualified Receivables Transaction; (p)
Liens securing Indebtedness of any Foreign Subsidiary incurred in accordance
with the provisions of Section 4.10, provided such Liens relate solely to the
property of one or more Foreign Subsidiaries; (q) Liens of landlords or of
mortgages of landlords arising by operation of law, provided that the rental
payments secured thereby are not yet due and payable; (r) Liens incurred in the
ordinary course of business of the Issuer or any Subsidiary of the Issuer with
respect to obligations that do not exceed $5,000,000 at any one time
outstanding and that (i) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (ii) do not in the aggregate materially
detract from the value of the property or materially impair the use thereof;
(s) Liens securing reimbursement obligations with respect to letters of credit
which encumber only documents and other property relating to such letters of
credit and the products and proceeds thereof; (t) Liens arising out of
consignment or similar arrangements for the sale of goods; and (u) Liens
securing Interest Swap and Hedging Obligations permitted to be incurred by this
Indenture.
"Permitted Payments to Parent" means, without duplication, (a)
payments to Parent in an aggregate amount not to exceed $1,000,000 in any
fiscal year in an amount necessary and sufficient to permit Parent to pay
reasonable and necessary operating expenses and other general corporate
expenses to the extent such expenses relate to or are fairly allocable to the
Issuer and its Subsidiaries (including any reasonable professional fees and
expenses, but excluding all expenses payable to or to be paid to or on behalf
of an Excluded Person except in a transaction constituting an Exempted
Affiliate Transaction); and (b) payments to Parent to enable Parent to pay
foreign, Federal, state or local tax liabilities ("Tax Payments"), not to
exceed the amount of any tax liabilities that would be otherwise payable by the
Issuer and its Subsidiaries to the appropriate taxing authorities if the Issuer
and its Subsidiaries were to file separate tax returns to the extent that
Parent has an obligation to pay such tax liabilities relating to the
operations, assets or capital of the Issuer or its Subsidiaries, provided,
however, that (i) notwithstanding the foregoing, in the case of determining the
amount of a Tax Payment that is permitted to be paid by the Issuer and any of
its United States Subsidiaries in respect of their Federal income tax
liability, such payment shall be determined on the basis of assuming that the
Issuer is the parent company of an affiliated group (the "Issuer Affiliated
Group") filing a Federal
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income tax return and that Parent and each such United States Subsidiary is a
member of the Issuer Affiliated Group and (ii) any Tax Payments shall either be
used by Parent to pay such tax liabilities within 90 days of Parent's receipt
of such payment or refunded to the payee.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or agency or political subdivision thereof (including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision business).
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Equity Offering" means an underwritten offering of common
stock of the Issuer or Parent for cash pursuant to an effective registration
statement under the Securities Act, provided, at the time or upon consummation
of such offering, such common stock of the Issuer or Parent is listed on a
national securities exchange or quoted on the national market system of the
Nasdaq Stock Market.
"Purchase Money Indebtedness" of any Person means any Indebtedness of
such Person to any seller or other Person incurred to finance solely the
acquisition (including in the case of a Capitalized Lease Obligation, the
lease) of any real or personal tangible property which is incurred within 180
days of such acquisition and is secured only by the assets so financed.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Equity Interests of the Issuer or
such other specified Person that is not Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, retirement,
repurchase or other acquisition of Equity Interests or Indebtedness of the
Issuer issued on or after the Issue Date with the Net Cash Proceeds received by
the Issuer from the substantially concurrent sale of Qualified Capital Stock of
the Issuer or any exchange of Qualified Capital Stock of the Issuer for any
Equity Interests or Indebtedness of the Issuer issued on or after the Issue
Date.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Issuer, any Guarantor or any
Receivables Subsidiary pursuant to which the Issuer, any Guarantor or any
Receivables Subsidiary may sell, convey or otherwise transfer to, or grant a
security interest in for the benefit of, (a)
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a Receivables Subsidiary (in the case of a transfer or encumbrancing by the
Issuer or any Guarantor) and (b) any other Person (solely in the case of a
transfer or encumbrancing by a Receivables Subsidiary), solely accounts
receivable (whether now existing or arising in the future) of the Issuer or any
Guarantor which arose in the ordinary course of business of the Issuer or any
Guarantor, and any assets related thereto, including, without limitation, all
collateral securing such accounts receivable, all contracts and all guarantees
or other obligations in respect of such accounts receivable, proceeds of such
accounts receivable and other assets which are customarily transferred or in
respect of which security interests are customarily granted in connection with
asset securitization transactions involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Subsidiary of the Issuer
which engages in no activities other than in connection with the financing of
accounts receivable and which is designated by the Board of Directors of the
Issuer (as provided below) as a Receivables Subsidiary (a) no portion of any
Indebtedness or any other obligations (contingent or otherwise) of which,
directly or indirectly, contingently or otherwise, (i) is guaranteed by the
Issuer or Parent or any other Subsidiary of the Issuer or Parent (excluding
Standard Securitization Undertakings), (ii) is recourse to or obligates the
Issuer or Parent or any other Subsidiary of the Issuer or Parent in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Issuer or Parent or any other Subsidiary of the
Issuer or Parent to the satisfaction thereof, other than Standard
Securitization Undertakings, (b) with which neither the Issuer or Parent nor
any other Subsidiary of the Issuer or Parent has any material contract,
agreement, arrangement or understanding other than those customarily entered
into in connection with Qualified Receivables Transactions, and (c) with which
neither the Issuer or Parent nor any other Subsidiaries of the Issuer or Parent
has any obligation, directly or indirectly, contingently or otherwise, to
maintain or preserve such Subsidiary's financial condition or cause such
Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Issuer shall be evidenced to the
Trustee by the filing with the Trustee a certified copy of the resolution of
the Board of Directors of the Issuer giving effect to such designation and an
Officer's Certificate certifying that such designation complied with the
foregoing conditions.
"Reference Period" with regard to any Person means the four full
fiscal quarters (or such lesser period during which such Person has been in
existence) ended immediately preceding any date upon which any determination is
to be made pursuant to the terms of the Notes or this Indenture.
"Refinanced Parent Convertible Note" means Refinancing Indebtedness
incurred to refinance the Parent Convertible Notes.
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"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the
case of Disqualified Capital Stock, liquidation preference, not to exceed
(after deduction of reasonable and customary fees and expenses incurred in
connection with the Refinancing) the lesser of (i) the principal amount or, in
the case of Disqualified Capital Stock, liquidation preference, of the
Indebtedness or Disqualified Capital Stock so Refinanced and (ii) if such
Indebtedness being Refinanced was issued with an original issue discount, the
accreted value thereof (as determined in accordance with GAAP) at the time of
such Refinancing; provided, that (A) such Refinancing Indebtedness shall only
be issued to Refinance outstanding Indebtedness or Disqualified Capital Stock
of such Person issuing such Refinancing Indebtedness, (B) such Refinancing
Indebtedness shall (x) not have an Average Life shorter than the Indebtedness
or Disqualified Capital Stock to be so refinanced at the time of such
Refinancing and (y) in all respects, be no less subordinated, if applicable, to
the rights of Holders of the Notes than was the Indebtedness or Disqualified
Capital Stock to be refinanced, and (C) such Refinancing Indebtedness shall
have a final stated maturity or redemption date, as applicable, no earlier than
the final stated maturity or redemption date, as applicable, of the
Indebtedness or Disqualified Capital Stock to be so refinanced.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 29, 1998, by and among, the Issuer, the Guarantors
and the Initial Purchasers, as such agreement may be amended, modified or
supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act
and as it may be amended, and any successor rule governing substantially the
same matter.
"Regulation S Global Note" means a global Note in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Note initially sold in reliance on Rule 903 of Regulation S.
"Related Business" means the business conducted (or proposed to be
conducted) by the Issuer and its Subsidiaries as of the Issue Date and any and
all businesses that in the good faith judgment of the Board of Directors of the
Issuer are materially related businesses. Without limiting the generality of
the foregoing, Related Business shall include sales (including by mail) of
office products, computer systems and equipment and office furniture, computer
systems consulting and forms management.
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"Related Person" means any Person who controls, is controlled by or is
under common control with an Excluded Person; provided that for purposes of
this definition "control" means the beneficial ownership of more than 50% of
the total voting power of a Person normally entitled to vote in the election of
directors, managers or trustees, as applicable, of a Person.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means, in one or a series of related
transactions, any Investment, other than investments in Cash Equivalents and
other Permitted Investments.
"Restricted Payment" means, with respect to any Person, (a) the
declaration or payment of any dividend or other distribution in respect of
Equity Interests of such Person or the Parent or Subsidiary of such Person, (b)
any payment on account of the purchase, redemption or other acquisition or
retirement for value of Equity Interests of such Person or any Subsidiary or
the Parent of such Person, (c) other than with the proceeds from the
substantially concurrent sale of, or in exchange for, Refinancing Indebtedness,
any purchase, redemption, or other acquisition or retirement for value of, any
payment in respect of any amendment of the terms of or any defeasance of, any
Subordinated Indebtedness, directly or indirectly, by such Person or the Parent
or Subsidiary of such Person prior to the scheduled maturity, any scheduled
repayment of principal, or scheduled sinking fund payment, as the case may be,
of such Indebtedness and (d) any Restricted Investment by such Person;
provided, however, that the term "Restricted Payment" does not include (i) any
dividend, distribution or other payment on or with respect to Equity Interests
of an issuer to the extent payable solely in shares of Qualified Capital Stock
of such issuer; (ii) any dividend, distribution or other payment to the Issuer
or to any of its Subsidiary Guarantors, by the Issuer or any of its
Subsidiaries, or to a Foreign Subsidiary which is a direct or indirect parent
of another Foreign Subsidiary, by such Foreign Subsidiary; (iii) loans or
advances to any Subsidiary Guarantor the proceeds of which are used by such
Subsidiary Guarantor in a Related Business activity of such Subsidiary
Guarantor; or (iv) Permitted Investments.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, and its successors.
"Rule 144A" means Rule 144A promulgated under the Securities Act, as
it may be amended, and any successor rule governing substantially the same
matters.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" of the Issuer or any Guarantor means Indebtedness
(including, without limitation, all monetary obligations in respect of the New
Credit Facility, and interest, whether or not allowable, accruing on
Indebtedness incurred pursuant to the New Credit Facility at the relevant
contractual rate provided in the New Credit Facility both before and after the
filing of a petition initiating any proceeding under any bankruptcy, insolvency
or similar law) of the Issuer or such Guarantor arising under the New Credit
Facility or that, by the terms of the instrument creating or evidencing such
Indebtedness, is expressly designated Senior Debt and made senior in right of
payment to the Notes or the applicable Guarantee; provided, that in no event
shall Senior Debt include (a) Indebtedness to any Subsidiary of the Issuer or
any officer, director or employee of the Issuer or any Subsidiary of the
Issuer, (b) Indebtedness to the extent the same is incurred in violation of
Section 4.10, (c) Indebtedness to trade creditors, (d) Disqualified Capital
Stock, (e) Capitalized Lease Obligations, and (f) any liability for taxes owed
or owing by the Issuer or such Guarantor or (g) the Parent Convertible Notes or
the 9 1/8% Senior Subordinated Notes.
"Significant Subsidiary" shall have the meaning provided under
Regulation S-X of the Securities Act, as in effect on the Issue Date.
"Standard Securitization Undertakings" mean representations,
warranties, covenants and indemnities entered into by the Issuer or any
Subsidiary Guarantor which are reasonably customary in an accounts receivables
transaction.
"Stated Maturity," when used with respect to any Note, means June 1,
2008.
"Subordinated Indebtedness" means Indebtedness of the Issuer or a
Subsidiary Guarantor that is subordinated in right of payment by its terms or
the terms of any document or instrument relating thereto to the Notes or such
Subsidiary Guarantee, as applicable, in any respect or has a final stated
maturity after the Stated Maturity.
"Subsidiary," with respect to any Person, means (i) a corporation a
majority of whose Equity Interests with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or
by one or more Subsidiaries of such Person, or (ii)
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any other Person (other than a corporation) in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has a
majority ownership interest. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be a Subsidiary of the Issuer or of any Subsidiary of the
Issuer. Unless the context requires otherwise, Subsidiary means each direct
and indirect Subsidiary of the Issuer.
"Subsidiary Guarantee" means the Guarantee of each Subsidiary
Guarantor.
"Subsidiary Guarantor" means all present and future Subsidiaries of
the Issuer (other than Receivables Subsidiaries, Finance Subsidiaries, Excluded
Subsidiaries and Foreign Subsidiaries) which jointly and severally guarantee
irrevocably and unconditionally all principal, premium, if any, and interest
(and Liquidated Damages, if any) on the Notes on a senior subordinated basis,
as discussed in Section 4.15 of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, except as otherwise provided in Section 9.03.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a global Note in the form of Exhibit
A attached hereto that bears the Global Note Legend attached thereto, and that
is deposited with or on behalf of and registered in the name of the Depositary,
representing a series of Notes that do not bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Indebtedness; (b) is not party to any
agreement, contract, arrangement or understanding with the Issuer or any
Subsidiary of the Issuer unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Issuer or such
Subsidiary than those that might be obtained at the time from Persons who are
not Affiliates of the Company; (c) is a Person with respect to which neither
the Issuer nor any of its Subsidiaries has any direct or indirect obligation
(x) to subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause
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<PAGE> 32
such Person to achieve any specified levels of operating results; and (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Issuer or any of its Subsidiaries. Any such
designation by the Board of Directors will be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officer's Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.09 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it will thereafter
cease to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary will be deemed to be incurred by a Subsidiary
of the Issuer as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.10 hereof, the Issuer will be in
default of such covenant). The Board of Directors of the Issuer may designate
any Unrestricted Subsidiary to be a Subsidiary, provided, that (i) no Default
or Event of Default is existing or will occur as a consequence thereof and (ii)
immediately after giving effect to such designation, on a pro forma basis, the
Issuer could incur at least $1.00 of Indebtedness pursuant to the Debt
Incurrence Ratio in paragraph (a) of Section 4.10. Each such designation shall
be evidenced by filing with the Trustee a certified copy of the resolution
giving effect to such designation and an Officer's Certificate certifying that
such designation complied with the foregoing conditions.
"U.S. Government Obligations" means direct non-callable obligations
of, or noncallable obligations guaranteed by, the United States of America for
the payment of which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"U.S. Legal Tender Equivalents" means securities issued or directly
and fully guaranteed or insured by the United States of America or any agency
or instrumentality thereof with a maturity of 90 days or less (provided that
the full faith and credit of the United States of America is pledged in support
thereof).
"Wholly Owned Foreign Subsidiary" of any Person means a Foreign
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Foreign
Subsidiaries of such Person or by such Person and one or more Subsidiary
Guarantors of such Person.
"Wholly Owned Subsidiary" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiary Guarantors of such Person.
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SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Acceleration Notice" 6.02
"Affiliate Transaction" 4.14
"Asset Sale" 4.08
"Asset Sale Offer" 4.08
"Asset Sale Offer Amount" 4.08
"Asset Sale Offer Price" 4.08
"Asset Sale Offer Period" 4.08
"Authentication Order" 2.02
"Benefitted Party" 11.01
"Broker-Dealer" 2.06
"Change of Control Offer" 4.07
"Change of Control Offer Period" 4.07
"Change of Control Purchase Date" 4.07
"Change of Control Purchase Price" 4.07
"Core Operating Software" 4.08
"Covenant Defeasance" 8.03
"Debt Incurrence Ratio" 4.10
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.08
"Existing Restricted Investments" 4.09
"Incurrence Date" 4.10
"Legal Defeasance" 8.02
"Offer Amount" 4.08
"Offer Period" 4.08
"Paying Agent" 2.03
"Payment Blockage Notice" 10.03
"Payment Default" 10.03
"Payment Notice" 10.03
"Purchase Date" 4.08
"Registrar" 2.03
"Restricted Payments" 4.09
"Transfer" 4.08
</TABLE>
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<PAGE> 34
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means the Issuer, the Guarantors and
any successor obligor upon the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
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(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2
THE NOTES
SECTION 2.01 FORM AND DATING
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Issuer, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the
express provision of this Indenture, the provisions of the Indenture shall
control.
Global Notes shall be substantially in the form of Exhibit A
attached hereto (including the text referred to in footnotes 1 and 2 thereto).
Notes issued in definitive form shall be substantially in the form of Exhibit A
attached hereto (but without including the text referred to in footnotes 1 and
2 thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from
time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the amount of outstanding Notes represented thereby
shall be made by the Trustee or the Note Custodian, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall
be applicable to transfers of beneficial interests in Regulation S Global Notes
that are held by Participants through Euroclear or Cedel Bank.
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<PAGE> 36
SECTION 2.02 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Notes for the Issuer by manual or
facsimile signature. The Issuer's seal shall be reproduced on the Notes and
may be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuer signed
by two Officers (an "Authentication Order"), (i) authenticate Notes for
issuance on the Issue Date up to the aggregate principal amount stated in such
Authentication Order, which shall not exceed $350,000,000, and (ii)
authenticate Additional Notes for issuance on any other Business Day up to the
aggregate principal amount stated in such Authentication Order; provided that
such amount may not exceed $200,000,000 in the aggregate and the issue of
Additional Notes pursuant to this clause (ii) is subject to compliance with
Section 4.10. The aggregate principal amount of Notes and Additional Notes
will be limited to the sum of $550,000,000.
The Trustee may appoint an authenticating agent acceptable to
the Issuer to authenticate the Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Issuer or
an Affiliate of the Issuer.
SECTION 2.03 REGISTRAR AND PAYING AGENT
The Issuer shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent").
The Registrar shall keep a register of the Notes and of their transfer and
exchange. The Issuer may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and
the term "Paying Agent" includes any additional paying agent. The Issuer may
change any Paying Agent or Registrar without notice to any Holder. The Issuer
shall notify the Trustee in writing of the name and address of any Agent not a
party to this Indenture. If the Issuer fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. The Issuer
or any of its Subsidiaries may act as Paying Agent or Registrar.
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<PAGE> 37
The Issuer initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Issuer initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Issuer shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Issuer in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Issuer at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or
a Subsidiary) shall have no further liability for the money. If the Issuer or
a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Issuer, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER LISTS
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA Section 312(a).
If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Issuer shall otherwise comply with TIA Section
312(a).
SECTION 2.06 TRANSFER AND EXCHANGE
(a) Transfer and Exchange and Global Notes. A Global
Note may not be transferred as a whole except by the Depositary to a nominee of
the Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Notes will be exchanged by the Issuer for Definitive Notes if (i) the Issuer
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Issuer within 120 days after the date of
such notice from the Depositary,
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(ii) the Issuer in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee or (iii) upon request of the
Trustee or any Holders if there shall have occurred and be continuing a Default
or Event of Default with respect to the Notes. Upon the occurrence of any of
the preceding events in (i), (ii) or (iii) above, Definitive Notes shall be
issued in such names as the Depositary shall instruct the Trustee. Global
Notes also may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.10 hereof. Every Note authenticated and delivered in
exchange for, or in lieu of, a Global Note or any portion thereof, pursuant to
this Section 2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and
delivered in the form of, and shall be a Global Note. A Global Note may not be
exchanged for another Note other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable.
(i) Transfer of Beneficial Interests in the Same
Global Note. Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in form of a beneficial
interest in the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however, that
prior to the expiration of the Restricted Period, transfers of beneficial
interests in the Regulation S Global Note may not be made to a U.S. Person or
for the account or benefit of a U.S. Person (other than a Initial Purchaser).
Beneficial interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be required
to be delivered to the Registrar to effect the transfers described in this
Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of
Beneficial Interests in Global Notes. In connection with all transfers and
exchanges of beneficial interests that are not subject to Section 2.06(b)(i)
above, the transferor of such beneficial interest must deliver to the Registrar
either (A) (1) a written order from a Participant or an Indirect Participant
given to the Depositary in accordance with the Applicable Procedures directing
the Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2)
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instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such increase
or (B) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions given
by the Depositary to the Registrar containing information regarding the Person
in who name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (B)(1) above. Upon consummation of an Exchange Offer
by the Issuer in accordance with Section 2.06(f) hereof, the requirements of
this Section 2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Notes. Upon satisfaction of all of the requirements for transfer or exchange
of beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another
Restricted Global Note. A beneficial interest in any Restricted Global Note
may be transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer complies
with the requirements of Section 2.06(b)(ii) above and the Registrar receives
the following:
(A) if the transferee will take delivery
in the form of a beneficial interest in the 144A Global Notes,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transferee will take delivery
in the form of a beneficial interest in the Regulation S
Global Note, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests
in a Restricted Global Note for Beneficial Interests in the Unrestricted Global
Note. A beneficial interest in any Restricted Global Note may be exchanged by
any holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note if the exchange or transfer complies
with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement
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and the holder of the beneficial interest to be transferred,
in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating
in the distribution of the Exchange Notes or (3) a Person who
is an affiliate (as defined in Rule 144) of the Issuer.
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the
Registration Statement in accordance with the Registration
Rights Agreement; or
(C) such transfer is effected by a
Broker-Dealer, as defined in the Registration Rights
Agreement, pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the
following: (1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof;
or (2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof, and,
in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the
Registrar and the Issuer to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuer shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above. Beneficial interests in an Unrestricted Global
Note cannot be exchanged for, or transferred to Persons who take delivery
thereof in the form of, a beneficial interest in a Restricted Global Note.
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<PAGE> 41
(c) Transfer or Exchange of Beneficial Interests for
Definitive Notes.
(i) Beneficial Interests in Restricted Global
Notes to Restricted Definitive Notes. If any holder of a beneficial interest
in a Restricted Global Note proposed to exchange such beneficial interest for a
Restricted Definitive Note or to transfer such interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial
interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1)
thereof;
(C) if such beneficial interest is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (2) thereof;
(D) if such beneficial interest is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being
transferred to an Institutional Accredited Investor in
reliance on an exemption from the registration requirements of
the Securities Act other than those listed in subparagraphs
(B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3)
thereof, if applicable;
(F) if such beneficial interest is being
transferred to the Issuer or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(b) thereof; or
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(G) if such beneficial interest is being
transferred pursuant to an effective registration statement
under the Securities Act, a certificate to the effect set
forth to the effect set in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Restricted Global Note to be reduced accordingly pursuant to Section 2.06(h)
hereof, and the Issuer shall execute and, upon receipt of an Authentication
Order pursuant to Section 2.02, the Trustee shall authenticate and deliver to
the Person designated in the instructions a Restricted Definitive Note in the
appropriate principal amount. Any Restricted Definitive Note issued in
exchange for the beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and the Participant or Indirect Participant. The Trustee shall deliver such
Restricted Definitive Notes to the Persons in whose names such Notes as so
registered. Any Restricted Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i) shall
bear the Private Placement Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Beneficial Interests in Restricted Global
Notes to Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to Person
who takes delivery thereof in the form of an Unrestricted Definitive Note only
if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the holder of such
beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
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(D) the Registrar receives the
following: (1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or (2) if the holder of such beneficial
interest in a Restricted Global Note proposes to transfer such
beneficial interest in a Restricted Global Note proposes to
transfer such beneficial interest to a Person who shall take
delivery thereof in the form of a Definitive Note that does
not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof; and, in each such case set
forth in this subparagraph (D), an Opinion of Counsel in form
reasonably acceptable to the Registrar and the Issuer to the
effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the
Securities Act.
(iii) Beneficial Interests in Unrestricted Global
Notes to Unrestricted Definitive Notes. If any holder of a beneficial interest
in a Unrestricted Global Note proposes to exchange such beneficial interest for
an Unrestricted Definitive Note or to transfer such beneficial interest to a
Person who take delivery thereof in the form of a Unrestricted Definitive Note,
then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii)
hereof, the Trustee shall cause the aggregate principal amount of the
applicable Unrestricted Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Issuer shall execute and, upon receipt of the
Authentication Order pursuant to Section 2.02, the Trustee shall authenticate
and deliver to the Person designated in the instructions and Unrestricted
Definitive Note in the appropriate principal amount. Any Unrestricted
Definitive Note issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the Depositary
and Participant or Indirect Participant. The Trustee shall deliver such
Unrestricted Definitive Notes to the Persons in who names such Notes are no
registered. Any Unrestricted Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for
Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial
Interest in Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person who
takes delivery thereof in the form of a
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beneficial interest in a Restricted Global Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the Holder of such Restricted
Definitive Note proposes to exchange such Note for a
beneficial interest in a Restricted Global Note, a certificate
from such Holder in the form of Exhibit C thereto, including
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note
is being transferred to a QIB in accordance with Rule 144A
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in
item (1) thereof; or
(C) if such Restricted Definitive Note
is being transferred to a Non-U.S. Person in an offshore
transaction in accordance with Rule 903 or Rule 904 under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2)
thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to
be increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of clause (B) above,
the 144A Global Note, and in the case of clause (C) above, the Regulation S
Global Note.
(ii) Restricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of a Restricted Definitive
Note may exchange such Note for a beneficial interest in a Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuer;
(B) such transfer is effected pursuant
to the Shelf Registration Statement in accordance with the
Registration Rights Agreement;
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(C) such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the
following: (1) if the Holder of such Restricted Definitive
notes proposes to exchange such Notes for a beneficial
interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or (2) if the Holder of
such Restricted Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form
of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof; and, in each
such case set forth in this subparagraph (D), an Opinion of
Counsel in form reasonably acceptable to the Registrar and the
Issuer to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions
on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance
with the Securities Act. Upon satisfaction of the conditions
of any of the subparagraphs in this Section 2.06(d)(ii), the
Trustee shall cancel the Restricted Definitive Notes so
transferred or exchanged and increase or cause to be increased
the aggregate principal amount of the Unrestricted Global
Note.
(iii) Unrestricted Definitive Notes to Beneficial
Interests in Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery thereof
in the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the Trustee
shall cancel the applicable Unrestricted Definitive Note and increase or cause
to be increased the aggregate principal amount of one of the Unrestricted
Global Notes. If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B) or (ii)(D)
above or this subparagraph (iii) above at a time when an Unrestricted Global
Note has not yet been issued, the Issuer shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for
Definitive Notes. Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(e), the Registrar
shall register the transfer or exchange of
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Definitive Notes. Prior to such registration of transfer or exchange, the
requesting Holder shall present or surrender to the Registrar the Definitive
Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its attorney,
duly authorized in writing. In addition, the requesting Holder shall provide
any additional certifications, documents and information, as applicable,
required pursuant to the following provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted
Definitive Notes. Any Restricted Definitive Notes may be transferred to and
registered in the name of Persons who take delivery thereof in the form of a
Restricted Definitive Note if the Registrar receives the following:
(A) if the transfer will be made
pursuant to Rule 144A under the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made
pursuant to Rule 903 or Rule 904, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transfer will be made
pursuant to any other exemption from the registration
requirements of the Securities Act, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted
Definitive Notes. Any Restricted Definitive Note may be exchanged by the
Holder thereof for an Unrestricted Definitive Note or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted Definitive
Note if:
(A) such exchange or transfer is
effected pursuant to the Exchange Offer in accordance with the
Registration Rights Agreement and the Holder, in the case of
an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Issuer;
(B) any such transfer is effected
pursuant to the Shelf Registration Statement in accordance
with the Registration Rights Agreement;
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(C) any such transfer is effected by a
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights
Agreement; or
(D) the Registrar receives the
following: (1) if the Holder of such Restricted Definitive
Notes proposes to exchange such Notes for an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (1)(d)
thereof; or (2) if the Holder of such Restricted Definitive
Notes proposes to transfer such Notes to a Person who shall
take delivery thereof in the form of an Unrestricted
Definitive Note, a certificate from such Holder in the form of
Exhibit B hereto, including the certifications in item (4)
thereof; and, in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to
the Registrar and the Issuer to the effect that such exchange
or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted
Definitive Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Issuer shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes
in an aggregate principal amount equal to the sum of (A) the principal amount
of the beneficial interests in the Restricted Global Notes tendered for
acceptance by Persons that certify in the applicable Letters of Transmittal
that (x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Issuer, and accepted for exchange in the Exchange Offer and
(B) the principal amount of Definitive Notes exchanged or transferred for
beneficial interests in Unrestricted Global Notes in connection with the
Exchange Offer pursuant to Section 2.06(d)(ii) and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer (other than
Definitive Notes described in clause (i)(B) immediately above). Concurrently
with the issuance of such Notes, the Trustee shall cause the aggregate
principal amount of the
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applicable Restricted Global Notes to be reduced accordingly, and the Issuer
shall execute and, upon receipt of an Authentication Order pursuant to Section
2.02, the Trustee shall authenticate and deliver to the Persons designated by
the Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the
face of all Global Notes and Definitive Notes issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph
(B) below, each Global Note and each Definitive Note (and all
Notes issued in exchange therefor or substitution thereof)
shall bear the legend in substantially the following form:
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH
IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), OR (II) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT;
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS
NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
A TRANSACTION MEETING THE REQUIREMENTS OF
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RULE 144A, (III) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (IV) IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (V) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (VI)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION; AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS
A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
(B) Notwithstanding the foregoing, any
Global Note or Definitive Note issued pursuant to subparagraph
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii),
(e)(iii) or (f) to this Section 2.06 (and all Notes issued in
exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall
bear a legend in substantially the following form:
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL
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OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN
WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY.
(h) Cancellation and/or Adjustment of Global Notes. At
such time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Note shall
be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for or transferred to a Person who will
take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on
such Global Note by the Trustee or by the Depositary at the direction of the
Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and
exchanges, the Issuer shall execute and the Trustee shall authenticate
Definitive Notes and Global Notes at the Registrar's request.
(ii) No service charge shall be made to a Holder
for any registration of transfer or exchange, but the Issuer may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 4.07 and 4.08 hereto).
(iii) The Registrar shall not be required to
register the transfer of or exchange any Note selected for redemption in whole
or in part, except the unredeemed portion of any Note being redeemed in part.
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(iv) All Definitive Notes and Global Notes issued
upon any registration of transfer or exchange of Definitive Notes or Global
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Definitive Notes
or Global Notes surrendered upon such registration of transfer or exchange.
(v) The Issuer shall not be required: (A) to
issue, to register the transfer of or to exchange Notes during a period
beginning at the opening of business 15 days before the day of mailing of a
notice of redemption of Notes under Section 3.02 hereof and ending at the close
of business on the day of such mailing; or (B) to register the transfer of or
to exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part; or (C) to register the
transfer of or to exchange a Note between a record date and the next succeeding
interest payment date.
(vi) Prior to due presentment for the registration
of a transfer of any Note, the Trustee, any Agent and the Issuer may deem and
treat the Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and interest on
such Notes, and neither the Trustee, any Agent nor the Issuer shall be affected
by notice to the contrary.
(vii) The Trustee shall authenticate Definitive
Notes and Global Notes in accordance with the provisions of Section 2.02
hereof.
Each Holder of a Note agrees to indemnify the Issuer and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of
any interest in any Note (including any transfers between or among Participants
or beneficial owners of interests in any Global Note) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
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SECTION 2.07 REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee, or the
Issuer and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Issuer shall issue and the Trustee,
upon the written order of the Issuer signed by two Officers of the Issuer,
shall authenticate a replacement Note if the Trustee's requirements are met.
An indemnity bond must be supplied by the Holder that is sufficient in the
judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any
Agent and any authenticating agent from any loss that any of them may suffer if
a Note is replaced. The Issuer may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the
Issuer and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08 OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section
2.09 hereof, a Note does not cease to be outstanding because the Issuer or an
Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Issuer, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date (which as used herein
does not include an Asset Sale Purchase Date or Change of Control Purchase
Date) or Final Stated Maturity Date, money sufficient to pay Notes payable on
that date, then on and after that date such Notes shall be deemed to be no
longer outstanding and shall cease to accrue interest.
SECTION 2.09 TREASURY NOTES
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Issuer, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Issuer, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any
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such direction, waiver or consent, only Notes that a responsible officer of the
Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY NOTES
Until Definitive Notes are ready for delivery, the Issuer may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of the Issuer signed by two Officers of the Issuer. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Issuer considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuer shall
prepare and the Trustee shall authenticate Definitive Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11 CANCELLATION
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall dispose
of cancelled Notes in accordance with its customary procedures (subject to the
record retention requirement of the Exchange Act). The Issuer may not issue
new Notes to replace Notes that it has paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Issuer defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Issuer shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Issuer shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment
date for such defaulted interest. At least 15 days before the special record
date, the Issuer (or, upon the written request of the Issuer, the Trustee in
the name and at the expense of the Issuer) shall mail or cause to be mailed to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
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SECTION 2.13 CUSIP NUMBERS
The Issuer in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Issuer will promptly notify the
Trustee of any change in the"CUSIP" numbers.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01 NOTICES TO TRUSTEE
If the Issuer elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days (unless a shorter period is acceptable to the Trustee) but not
more than 60 days before a redemption date, an Officer's Certificate setting
forth (i) the clause of this Indenture pursuant to which the redemption shall
occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed among the Holders of the
Notes in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not so
listed, on a pro rata basis, by lot or in accordance with any other method the
Trustee deems fair and appropriate. In the event of partial redemption by lot,
the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Issuer in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or integral multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not an integral
multiple of $1,000, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for
redemption
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also apply to portions of Notes called for redemption. On and after the date
of redemption, interest will cease to accrue on the Notes or portions thereof
called for redemption, unless the Issuer defaults in the payment thereof.
SECTION 3.03 NOTICE OF REDEMPTION
Subject to the provisions of Section 3.07 hereof, at least 30
days but not more than 60 days before a redemption date, the Issuer shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of
the principal amount of such Note equal to the unredeemed portion
thereof and that, on and after the redemption date upon surrender of
such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered
to the Paying Agent to collect the redemption price;
(f) that, unless the Issuer defaults in making such
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness
or accuracy of the CUSIP number, if any, listed in such notice or
printed on the Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at its expense; provided, however, that the
Issuer shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officer's Certificate requesting that the Trustee give such
notice and setting forth the information
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to be stated in such notice as provided in the preceding paragraph.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Issuer
shall deposit with the Trustee or with the Paying Agent immediately available
funds sufficient to pay the redemption price of and accrued interest on all
Notes to be redeemed on that date. The Trustee or the Paying Agent shall
promptly return to the Issuer any money deposited with the Trustee or the
Paying Agent by the Issuer in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Notes to be redeemed.
If the Issuer complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption unless the Issuer
defaults in such payments due on the redemption date. If a Note is redeemed on
or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender
for redemption because of the failure of the Issuer to comply with the
preceding paragraph, interest shall be paid on the unpaid principal, from the
redemption date until such principal is paid, and to the extent lawful on any
interest not paid on such unpaid principal, in each case at the rate provided
in the Notes and in Section 4.01 hereof.
SECTION 3.06 NOTES REDEEMED IN PART
Upon surrender of a Note that is redeemed in part, the Issuer
shall issue and, upon the Issuer's written request, the Trustee shall
authenticate for the Holder at the expense of the Issuer a new Note equal in
principal amount to the unredeemed portion of the Note surrendered. In the
case of a partial redemption, the Trustee shall select the Notes or portions
thereof for redemption on a pro rata basis, by lot or in such other manner it
deems appropriate and fair.
SECTION 3.07 OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section 3.07,
the Issuer shall not have the right to redeem the Notes pursuant to this
Section 3.07 prior to June 1, 2003.
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<PAGE> 57
Thereafter, the Issuer shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days notice to the Holders, at
the redemption prices (expressed as percentages of principal amount) set forth
below, if redeemed during the 12-month period commencing on June 1 of the years
indicated below in each case (subject to the right of Holders of record on a
Record Date to receive the corresponding interest due (and the corresponding
Liquidated Damages due, if any) on an Interest Payment Date corresponding to
such Record Date that is on or prior to such Redemption Date) together with
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
Redemption Date.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.813%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.208%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.604%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, at any time on or prior to June 1, 2001, the Issuer may redeem,
on one or more occasions, redeem up to an aggregate of 35% of the aggregate
principal amount of Notes issued under this Indenture at a redemption price
equal to 109.625% of the principal amount thereof (subject to the right of
Holders of record on a Record Date to receive interest due on an Interest
Payment Date that is on or prior to such Redemption Date) together with accrued
and unpaid interest and Liquidated Damages, if any, to the date of redemption,
with cash from the Net Cash Proceeds to the Issuer of one or more Public Equity
Offerings; provided that at least 65% of the aggregate principal amount of the
Notes issued under this Indenture remain outstanding immediately after the
occurrence of such redemption; provided, further, that such notice of
redemption shall be sent within 30 days after the date of the closing of any
such Public Equity Offering, and such redemption date shall occur within 60
days after such notice is sent.
(c) Any redemption pursuant to this Section 3.07 shall be
made pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 NO MANDATORY REDEMPTION
The Issuer shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09 SINKING FUNDS
The Notes will not have the benefit of any sinking fund.
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ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF NOTES
The Issuer shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Issuer
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Issuer in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due;
provided that interest which, under the Notes, may be paid with Additional
Notes shall be considered paid on the date due if the Paying Agent, if other
than the Issuer or a Subsidiary thereof, holds as of 10:00 A.M. Eastern Time on
the due date Additional Notes or a combination of Additional Notes and money
deposited by the Issuer in immediately available funds sufficient to pay all
interest then due. The Issuer shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration
Rights Agreement. The Issuer shall notify the Trustee of the amount of
Liquidated Damages, if any, within one day of any payment date. In the absence
of such notice, the Trustee is conclusively entitled to assume that no
Liquidated Damages are payable under the Registration Rights Agreement.
The Issuer shall pay interest (including post-petition
interest in any proceeding under any bankruptcy law) on overdue principal at
the rate equal to 1% per annum in excess of the then applicable interest rate
on the Notes to the extent lawful; it shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest and Liquidated Damages (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Issuer shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the
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Corporate Trust Office of the Trustee.
The Issuer may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Issuer of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Issuer shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Issuer hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Issuer in accordance with Section
2.03 hereof.
SECTION 4.03 REPORTS
(a) The Parent shall deliver to the Trustee and, to each
Holder and to prospective purchasers of Notes identified to the Issuer by an
Initial Purchaser, (i) its respective annual and quarterly reports filed
pursuant to Section 13 or 15 (d) of the Exchange Act, within 15 days after such
reports have been filed with the SEC or (ii) in the event the Parent is not
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act within 15 days after it would have been (if it were subject to such
reporting obligations) required to file such reports with the SEC, annual and
quarterly financial statements substantially equivalent to financial statements
that would have been included in reports filed with the SEC if the Parent were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Issuer's certified independent public accountants as such would be required in
such reports to the SEC and, in each case, together with a management's
discussion and analysis of financial condition and results of operations which
would be so required and, unless the SEC will not accept such reports, file
with the SEC the annual, quarterly and other reports which it is or would have
been required to file with the SEC. If at any time Parent does not file such
reports which include the Issuer and its Subsidiaries on a consolidated basis
with Parent, the Issuer shall succeed the obligations of Parent hereunder.
(b) For so long as any Transfer Restricted Notes remain
outstanding, the Issuer and the Subsidiary Guarantors shall furnish to all
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute
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constructive notice of any information contained therein or determinable from
information contained therein, including the Issuer's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officer's Certificates).
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Issuer shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officer's Certificate stating that a
review of the activities of the Issuer and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Issuer and its Subsidiaries
have kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuer and its
Subsidiaries have kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions and conditions of this Indenture
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he or she may have knowledge and what
action the Issuer is taking or proposes to take with respect thereto) and that
to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Issuer is taking or proposes to
take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) hereof
shall be accompanied by a written statement of the Issuer's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial
statements, nothing has come to their attention that would lead them to believe
that the Issuer has violated any provisions of Article 4 or Article 5 hereof
or, if any such violation has occurred, specifying the nature and period of
existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Issuer shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officer's Certificate specifying such
Default or Event of Default and what action the Issuer is taking or proposes to
take with respect thereto.
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SECTION 4.05 TAXES
The Issuer shall pay, and shall cause each of its Subsidiaries
to pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings or where the failure to effect such payment is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Issuer covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Issuer (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07 REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE
OF CONTROL
Upon the occurrence of a Change of Control (subject to the
provisions of the immediately succeeding paragraph), each Holder of Notes shall
have the right, at such Holder's option, pursuant to an offer (subject only to
conditions required by applicable law, if any) by the Issuer (the "Change of
Control Offer") to require the Issuer to repurchase all or any part of such
Holder's Notes (provided, that the principal amount of such Notes must be
$1,000 or an integral multiple thereof) on a date (the "Change of Control
Purchase Date") that shall be no later than 40 Business Days after the
occurrence of such Change of Control, at a cash price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof together with
accrued and unpaid interest and Liquidated Damages, if any, to the Change of
Control Purchase Date. The Change of Control Offer shall be made within 35
days following a Change of Control and shall remain open for 20 Business Days
following its commencement or such longer period as may be required by
applicable law (the "Change of Control Offer Period").
If a New Credit Facility is in effect, or any amounts are
owing thereunder, at the time of the occurrence of a Change of Control, prior
to the mailing of the notice to Holders described in the preceding paragraph,
but in any event within thirty days following any Change of Control, the Issuer
shall (i) repay in full all
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<PAGE> 62
Obligations under the New Credit Facility or offer to repay in full all
Obligations under the New Credit Facility and repay the Obligations under the
New Credit Facility of each lender who has accepted such offer or (ii) obtain
the requisite consent under the New Credit Facility to permit the repurchase of
Notes as described above. The Issuer must first comply with the covenant
described in the preceding sentence before it shall be required to purchase
Notes in the event of a Change of Control; provided that the Issuer's failure
to comply with the covenant described in the preceding sentence shall
constitute an Event of Default described in clause (iii) under "Events of
Default" below if not cured within thirty days after the notice required by
such clause. As a result of the foregoing, a Holder of the Notes may not be
able to compel the Issuer to purchase the Notes unless the Issuer is able at
the time to refinance all of the New Credit Facility or obtain requisite
consents under the New Credit Facility.
On or before the Change of Control Purchase Date, the Issuer
shall (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent cash
sufficient to pay the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any) of all Notes so tendered
and (3) deliver to the Trustee Notes so accepted together with an Officer's
Certificate listing the Notes or portions thereof being purchased by the
Issuer. The Paying Agent shall promptly pay the Holders of Notes so accepted
an amount equal to the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any), and the Trustee shall
authenticate and deliver to such Holders a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered. Any Notes not so accepted
shall be delivered promptly by the Issuer to the Holder thereof. The Issuer
shall publicly announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Purchase Date.
Any Change of Control Offer will be made in compliance with
all applicable laws, rules and regulations, including, if applicable,
Regulation 14E under the Exchange Act and the rules thereunder and all other
applicable Federal and state securities laws. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this covenant, compliance by the Issuer or any of the Guarantors with such
laws and regulations shall not in and of itself cause a breach of its
obligations under such covenant.
If the Change of Control Purchase Date hereunder is on or
after an interest payment record date and on or before the associated Interest
Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any,
due on such Interest Payment Date) will be paid to the Person in whose name a
Note is registered at the close of business on such Record Date, and such
interest (and Liquidated Damages, if applicable) will not be payable to Holders
who tender the Notes pursuant to the Change of Control Offer.
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SECTION 4.08 LIMITATION ON SALE OF ASSETS AND SUBSIDIARY STOCK
The Issuer and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, business or assets, including by merger or
consolidation (in the case of a Subsidiary of the Issuer), and including any
sale or other transfer or issuance of any Equity Interests of any Subsidiary of
the Issuer, whether by the Issuer or a Subsidiary of either or through the
issuance, sale or transfer of any Equity Interest by a Subsidiary of the Issuer
(any of the foregoing an "Asset Sale"), unless (1)(a) the Net Cash Proceeds
therefrom (the "Asset Sale Offer Amount") are applied (i) within 330 days after
the date of each such Asset Sale, to the optional redemption of the Notes in
accordance with the terms of this Indenture and, at the Issuer's option, other
Indebtedness of the Issuer ranking on a parity with the Notes from time to time
outstanding with similar provisions requiring the Issuer to make an offer to
purchase or to redeem such Indebtedness with the proceeds from asset sales, pro
rata in proportion to the respective principal amounts (or accreted values in
the case of Indebtedness issued with an original issue discount) of the Notes
and such other Indebtedness then outstanding or (ii) within 360 days after the
date of each such Asset Sale, to the repurchase of the Notes pursuant to a cash
offer to repurchase Notes and, at the Issuer's option, other Indebtedness of
the Issuer ranking on a parity with the Notes from time to time outstanding
with similar provisions requiring the Issuer to make an offer to purchase or to
redeem such Indebtedness with the proceeds from asset sales, pro rata in
proportion to the respective principal amounts (or accreted values in the case
of Indebtedness issued with an original issue discount) of the Notes and such
other Indebtedness then outstanding (the "Asset Sale Offer") at a purchase
price of 100% of principal amount (or accreted value in the case of
Indebtedness issued with an original issue discount) (the "Asset Sale Offer
Price") together with accrued and unpaid interest and Liquidated Damages, if
any, to the date of payment, made within 330 days of such Asset Sale, or (b)
within 330 days following such Asset Sale, the Asset Sale Offer Amount is (i)
used to make a Permitted Investment (other than pursuant to clause (i) thereof)
or otherwise invested (or committed, pursuant to a binding commitment subject
only to reasonable, customary closing conditions, to be invested, and in fact
is so invested, within an additional 90 days) in assets and property which in
the good faith reasonable judgment of the Issuer will immediately constitute or
be a part of a Related Business of the Issuer or such Subsidiary (if it
continues to be a Subsidiary) immediately following such transaction, except
that no proceeds from an Asset Sale of Existing Assets or assets acquired
(directly or indirectly) from the proceeds of an Asset Sale of Existing Assets
may be invested in or used to acquire assets or property for a Foreign
Subsidiary or (ii) used to retire Purchase Money Indebtedness or other Senior
Debt in accordance with
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any provisions therein requiring the Issuer to repurchase, redeem, or otherwise
retire such Indebtedness with the proceeds from such Asset Sale, Indebtedness
outstanding under the New Credit Facility and, except with respect to the use
of proceeds from the sale of Assets to Be Disposed of, to permanently reduce
(in the case of Senior Debt that is not Purchase Money Indebtedness) the amount
of such Indebtedness outstanding on the Issue Date, any amount outstanding
under the New Credit Facility, or Indebtedness permitted pursuant to paragraph
(c), (f) or (g) of Section 4.10 (including that in the case of a revolver or
similar arrangement that makes credit available, such commitment is permanently
so reduced by such amount), except that no proceeds from an Asset Sale of
Existing Assets or assets acquired from the proceeds or Asset Sale of Existing
Assets may be used to retire Indebtedness of a Foreign Subsidiary (unless such
Existing Assets were assets of such Foreign Subsidiary on the Issue Date), (2)
with respect to any transaction or related series of transactions of
securities, property or assets with an aggregate fair market value in excess of
$3,000,000, at least 75% of the consideration for such Asset Sale (excluding
(a) Senior Debt assumed by a transferee which assumption permanently reduces
the amount of Indebtedness outstanding on the Issue Date or permitted pursuant
to paragraph (c), (f) or (g) of Section 4.10 (including that in the case of a
revolver or similar arrangement that makes credit available, such commitment is
permanently so reduced by such amount), (b) Purchase Money Indebtedness assumed
by a transferee and (c) property that within 30 days of such Asset Sale is
converted into cash or Cash Equivalents) consists of cash or Cash Equivalents
which is applied as set forth above or consists of Restricted Investments, (3)
no Default or Event of Default shall have occurred and be continuing at the
time of, or would occur after giving effect, on a pro forma basis, to, such
Asset Sale, and (4) the Issuer determines in good faith that the Issuer or
such Subsidiary, as applicable, receives fair market value for such Asset Sale.
Any Asset Sale Offer may be deferred until the accumulated Net
Cash Proceeds from Asset Sales not applied to the uses set forth in clauses
1(a)(i) or 1(b) above (the "Excess Proceeds") exceeds $20,000,000. Each Asset
Sale Offer shall remain open for at least 20 Business Days following its
commencement (the "Asset Sale Offer Period"). Upon expiration of the Asset
Sale Offer Period, the Issuer shall apply the Asset Sale Offer Amount plus an
amount equal to accrued and unpaid interest and Liquidated Damages, if any, to
the purchase of all Indebtedness properly tendered pursuant to the Asset Sale
Offer (on a pro rata basis (in $1,000 increments) if the Asset Sale Offer
Amount is insufficient to purchase all Indebtedness so tendered) at the Asset
Sale Offer Price (together with accrued interest and Liquidated Damages, if
any). To the extent that the aggregate amount of Indebtedness tendered
pursuant to an Asset Sale Offer is less than the Asset Sale Offer Amount, the
Issuer may use any remaining Net Cash Proceeds for general corporate purposes
as otherwise permitted by this Indenture and following each Asset Sale Offer
the Excess Proceeds amount shall be reset to zero.
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Notwithstanding and without complying with the foregoing
provisions: (i) the Issuer and its Subsidiaries may, in the ordinary course of
business, convey, sell, transfer, assign or otherwise dispose of (x) assets or
series of related assets with an aggregate fair market value not in excess of
$1,000,000, but in any case limited in the aggregate to not more than
$5,000,000 million for any fiscal year and (y) inventory and other assets
acquired and held for resale in the ordinary course of business; (ii) the
Issuer and its Subsidiaries may convey, sell, transfer, assign or otherwise
dispose of assets pursuant to and in accordance with the limitation on mergers,
sales or consolidations provisions in this Indenture; (iii) the Issuer and its
Subsidiaries may sell or dispose of damaged, worn out or other obsolete
property in the ordinary course of business so long as such property is no
longer necessary for the proper conduct of the business of the Issuer or such
Subsidiary, as applicable; (iv) the Issuer and the Subsidiary Guarantors may
convey, sell, transfer, assign or otherwise dispose of assets to the Issuer or
any of the Subsidiary Guarantors; (v) the Issuer and its Subsidiaries may
surrender or waive contract rights or the settlement, release or surrender of
contract, tort or other claims of any kind; (vi) the Issuer and its
Subsidiaries may grant Liens not prohibited by this Indenture; (vii) the Issuer
and each of the Subsidiaries may liquidate Cash Equivalents in the ordinary
course of business; (viii) the Issuer and each of the Subsidiaries may sell
sales of accounts receivable and related assets of the type specified in the
definition of Qualified Receivables Transaction to a Receivables Subsidiary for
the fair market value thereof, including cash in an amount at least equal to
75% of the book value thereof as determined in accordance with GAAP, and
transfers of accounts receivable and related assets of the type specified in
the definition of Qualified Receivables Transaction (or a fractional undivided
interest therein) by a Receivables Subsidiary in a Qualified Receivables
Transaction; (ix) Foreign Subsidiaries may convey, sell, transfer, assign or
otherwise dispose of assets to the Issuer, any of the Subsidiary Guarantors, or
any other Foreign Subsidiary; and (x) the Issuer and its Subsidiaries may make
Permitted Investments (excluding clauses (b) and (l) in the definition thereof)
and Restricted Investments made under clause (s) of the third paragraph under
"Limitation on Restricted Payments."
Notwithstanding anything herein to the contrary, other than as
provided in the following sentence, the Issuer and its Subsidiaries may sell
(including by merger, consolidation or issuance), transfer, assign, license,
sublicense or otherwise dispose of (collectively "Transfer") any software,
trademark or other intellectual property, or any interest (including any Equity
Interest) in any entity which has as its principal assets such property or
rights, and such Transfer shall not be treated as an Asset Sale hereunder, if
(a) the Issuer and its Subsidiary Guarantors thereafter have unfettered access
to and use of such property or rights at a cost to the Issuer and its
Subsidiaries which is not in excess of the aggregate normal operating costs and
third party license fees which have been incurred by the Issuer and its
Subsidiaries prior to any such Transfer, and(b) any proceeds from any Transfer
of any such property, rights or
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interests (including Equity Interests) are used (i) solely for the purpose of
the development or installation or implementation of such property or rights
(or similar property or rights) or (ii) otherwise in accordance with the
provisions of the first paragraph of this covenant. Notwithstanding the
preceding sentence or any other provision of this covenant to the contrary, the
Issuer and its Subsidiaries may not Transfer the internally developed product
distribution software used by the Issuer and its Subsidiaries ("Core Operating
Software") or intellectual property rights therein or any interests (including
any Equity Interests) in any entity which has as its principal assets such Core
Operating Software or rights therein, unless the Issuer and its Subsidiary
Guarantors comply with clauses (a) and (b) of the preceding sentence in
connection with such Transfer.
Any Asset Sale Offer shall be made in compliance with all
applicable laws, rules, and regulations, including, if applicable, Regulation
14E of the Exchange Act and the rules and regulations thereunder and all other
applicable Federal and state securities laws. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this covenant, compliance by the Issuer or any of its Subsidiaries with such
laws and regulations shall not in and of itself cause a breach of its
obligations under such covenant.
If the payment date in connection with an Asset Sale Offer
hereunder is on or after an interest payment Record Date and on or before the
associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the Person in whose name a Note is registered at the close of business on such
Record Date, and such interest (or Liquidated Damages, if applicable) will not
be payable to Holders who tender Notes pursuant to such Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuer shall
send, by first class mail, a notice to each of the Holders, with a copy to the
Trustee. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Notes pursuant to the Asset Sale Offer. The
Asset Sale Offer shall be made to all Holders. The notice, which shall govern
the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made
pursuant to this Section 4.08 and the length of time the Asset Sale
Offer shall remain open;
(b) the Asset Sale Offer Amount, the purchase
price and the Purchase Date;
(c) that any Note not tendered or accepted for
payment
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shall continue to accrete or accrue interest;
(d) that, unless the Issuer defaults in making
such payment, any Note accepted for payment pursuant to the Asset Sale
Offer shall cease to accrete or accrue interest on and after the Asset
Sale Purchase Date;
(e) that Holders electing to have a Note
purchased pursuant to an Asset Sale Offer may only elect to have all
of such Note purchased and may not elect to have only a portion of
such Note purchased;
(f) that Holders electing to have a Note
purchased pursuant to any Asset Sale Offer shall be required to
surrender the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, or transfer by
book-entry transfer, to the Issuer, a depositary, if appointed by the
Issuer, or a Paying Agent at the address specified in the notice at
least three days before the Asset Sale Purchase Date;
(g) that Holders shall be entitled to withdraw
their election if the Issuer, the depositary or the Paying Agent, as
the case may be, receives, not later than the expiration of the Asset
Sale Offer Period, a facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Note the Holder
delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased;
(h) that, if the aggregate principal amount of
Notes surrendered by Holders exceeds the Asset Sale Offer Amount, the
Issuer shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Issuer so
that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only
in part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered (or transferred by
book-entry transfer).
On or before the Asset Sale Purchase Date, the Issuer shall,
to the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Asset Sale Offer Amount of Notes or portions thereof tendered
pursuant to the Asset Sale Offer, or if less than the Asset Sale Offer Amount
has been tendered, all Notes tendered, and shall deliver to the Trustee an
Officer's Certificate stating that such Notes or portions thereof were accepted
for payment by the Issuer in accordance with the terms of this Section 4.08.
The Issuer, the Depositary or the Paying Agent, as the case may be, shall
promptly (but in any case not later than five days after the Purchase
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Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Issuer for
purchase, and the Issuer shall promptly issue a new Note, and the Trustee, upon
written request from the Issuer shall authenticate and mail or deliver such new
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Issuer to the Holder thereof. The Issuer shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
SECTION 4.09 LIMITATION ON RESTRICTED PAYMENTS
The Issuer and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to, directly or indirectly, make any
Restricted Payment if, after giving effect to such Restricted Payment on a pro
forma basis, (1) a Default or an Event of Default shall have occurred and be
continuing, (2) the Issuer is not permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Debt Incurrence Ratio in paragraph (a)
of Section 4.10, or (3) the aggregate amount of all Restricted Payments made by
the Issuer and its Subsidiaries, including after giving effect to such proposed
Restricted Payment, from and after the Issue Date, would exceed the sum of,
without duplication, (a) $15,000,000, plus (b) 50% of the aggregate
Consolidated Net Income of the Issuer and its Consolidated Subsidiaries for the
period (taken as one accounting period), commencing on the first day of the
first full fiscal quarter commencing after the Issue Date, to and including the
last day of the fiscal quarter ended immediately prior to the date of each such
calculation (or, in the event Consolidated Net Income for such period is a
deficit, then minus 100% of such deficit), plus (c) to the extent not included
in the amount described in clause (b) above, (i) 100% of the aggregate Net Cash
Proceeds received after the Issue Date by the Issuer from the issue or sale of,
or from Capital Contributions in respect of, Equity Interests of the Issuer or
of debt securities of the Issuer or any Subsidiary Guarantor that have been
converted into, or cancelled in exchange for, Equity Interests of the Issuer
(other than Equity Interests (or convertible debt securities) sold to a
Subsidiary of the Issuer and other than Disqualified Capital Stock or debt
securities that have been converted into or exchanged for Disqualified Capital
Stock), plus (ii) 100% of any dividends or other distributions received by the
Issuer or a Subsidiary of the Issuer after the Issue Date from an Unrestricted
Subsidiary of the Issuer, plus (iii) 100% of the cash proceeds (or Cash
Equivalents) realized upon the sale of any Unrestricted Subsidiary (less the
amount of any reserve established for purchase price adjustments and less the
maximum amount of any indemnification or similar contingent obligation for the
benefit of the purchaser, any of its Affiliates or any other third party in
such sale, in each case as adjusted for any permanent reduction in any such
amount on or after the date of such sale, other than by virtue of a payment
made to such Person) following the Issue Date, plus (iv) to the extent that any
Restricted Investment that was made after the
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Issue Date is sold for cash (or Cash Equivalents) or otherwise liquidated or
repaid for cash (or Cash Equivalents), at the Issuer's option the amount of
cash proceeds (or Cash Equivalents) received by the Issuer or any Subsidiary
Guarantor with respect to such Restricted Investment plus, (v) upon the
redesignation of an Unrestricted Subsidiary as a Subsidiary, the lesser of (x)
the fair market value of such Subsidiary or (y) the aggregate amount of all
Investments made in such Subsidiary subsequent to the Issue Date by the Issuer
and its Subsidiaries.
Clauses (2) and (3) of the immediately preceding paragraph
will not prohibit (i) Restricted Investments, provided, that after giving pro
forma effect to such Restricted Investments, the aggregate amount of all such
Restricted Investments made on or after the Issue Date that are outstanding
(after reducing such aggregate amount by (A) the net cash proceeds received by
the Issuer or any Subsidiary Guarantor from any Restricted Investments made
after the Issue Date that are sold or otherwise liquidated or repaid to the
Issuer or its Subsidiary Guarantors, other than amounts credited, at the option
of the Issuer, under clause (iv) of the immediately preceding paragraph, and
(B) the amount of all Restricted Investments made after the Issue Date that
have become Permitted Investments, valued at the lesser of (x) the fair market
value thereof on the date that such Investments became Permitted Investments or
(y) the aggregate amount of such prior Investments) does not exceed the sum of
(A) $50,000,000 plus (B) the aggregate amount of any Investments that, but for
the fact that such Investments were made prior to the Issue Date would be
Restricted Investments ("Existing Restricted Investments") less the amount by
which the net cash proceeds received by the Issuer and its Subsidiary
Guarantors upon the sale, liquidation or repayment of Existing Restricted
Investments is less than the original amount of such Existing Restricted
Investments; provided, however, that the aggregate of (B) shall not exceed
$65,500,000; (ii) pro rata dividends and other distributions on the Equity
Interests of any Subsidiary of the Issuer by such Subsidiary; (iii) payments in
lieu of fractional shares in an amount not to exceed $50,000 in the aggregate;
(iv) repurchases of Capital Stock from employees of the Parent, the Issuer or
Subsidiaries of the Issuer pursuant to any management agreement or stock
option agreement upon their death or disability or the termination of their
employment in an aggregate amount to all employees not to exceed $5,000,000 per
year plus the net cash proceeds received by the Issuer of Capital Stock (other
than Disqualified Capital Stock) of the Parent sold to directors, executive
officers, members of the management or employees of the Parent, the Issuer and
its Subsidiaries in such year on and after the Issue Date; (v) the acquisition
by a Receivables Subsidiary in connection with a Qualified Receivables
Transaction of Equity Interests of a trust or other Person established by such
Receivables Subsidiary to effect such Qualified Receivables Transaction, and
the immediately preceding paragraph will not prohibit, (x) Permitted Payments
to Parent, (y) a Qualified Exchange or (z) the payment of any dividend on
Qualified Capital Stock within 60 days after the date of declaration if such
dividend could have been made on the date of such
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declaration in compliance with the foregoing provisions. The full amount of
any Restricted Payment made pursuant to the foregoing clauses (ii) , (iii), (v)
and (viii) (but not pursuant to clauses (i), (iv), (vi) and (viii)) of the
immediately preceding sentence, however, will be deducted in the calculation of
the aggregate amount of Restricted Payments available to be made referred to in
clause (c) of the immediately preceding paragraph.
Additionally, (a) the foregoing clauses (2) and (3) of the
first paragraph of this covenant will not prohibit any payment of cash
dividends to Parent, which dividends are used by Parent (x) to make the next
scheduled interest payment, or, at the final scheduled maturity of July 1,
2000, the then outstanding principal due (but in no event to exceed
$325,000,000), on the Parent Convertible Notes as required by the terms of the
Parent Convertible Notes in effect on the Issue Date or (y) to pay the next
scheduled interest payment on Refinanced Parent Convertible Notes (but in no
event to exceed an aggregate of $325,000,000, less amounts, if any, used to
repay the Parent Convertible Notes) and (b) the foregoing clause (3) of the
first paragraph of this covenant will not prohibit repurchases of Capital Stock
(other than Disqualified Capital Stock) of the Parent in an aggregate amount
not to exceed $100,000,000 and provided that the Parent Consolidated Leverage
Ratio for the most recent four consecutive fiscal quarters ending on or prior
to the date of any such repurchase would be no more than 4.5 to 1, an
additional $50,000,000 in the aggregate; provided, that the aggregate amount of
all payments made pursuant to clauses (a) and (b) of this paragraph (excluding
payments of interest on the Parent Convertible Notes and Refinanced Parent
Convertible Notes paid in accordance with clauses (a) (x) and (a) (y)) shall
not exceed $400,000,000. Any Restricted Payment made pursuant to this
paragraph shall be counted in the calculation of the aggregate amount of
Restricted Payments available to be made pursuant to clause (3) of the first
paragraph of this covenant except that any such amount that is substantially
concurrently used by Parent to pay interest on or retire Parent Convertible
Notes in accordance with clause (a) (x) or to pay interest on Refinanced
Convertible Notes in accordance with clause (a) (y) will not be counted in such
calculation. Notwithstanding anything herein to the contrary, in no event
shall any proceeds from any debt ranking senior to or pari passu with any of
the Notes or Guarantees, as applicable, of the Issuer or any of its
Subsidiaries (excluding Indebtedness of any Foreign Subsidiary that is
non-recourse to the Issuer and its other Subsidiaries) be used (directly or
indirectly) to make any principal payments in respect of the Parent Convertible
Notes unless on the date of such incurrence of any such debt ranking senior to
or pari passu with any of the Notes or Guarantees, the Consolidated Leverage
Ratio of the Issuer for the most recent four consecutive fiscal quarters ending
on or prior to the date of such incurrence, after giving effect, on a pro forma
basis, to such incurrence of Indebtedness would be less than 4.5 to 1.
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For purposes of this Section 4.09, the amount of any
Restricted Payment, if other than cash, shall be the fair market value thereof,
as determined by the Issuer and set forth in an Officer's Certificate delivered
to the Trustee pursuant to the next sentence. Additionally, on the date of
each Restricted Payment in excess of $10,000,000, the Issuer shall deliver an
Officer's Certificate to the Trustee describing in reasonable detail the nature
of such Restricted Payment, stating the amount of such Restricted Payment,
stating in reasonable detail the provisions of this Indenture pursuant to which
such Restricted Payment was made and certifying that such Restricted Payment
was made in compliance with the terms of this Indenture.
SECTION 4.10 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND
DISQUALIFIED CAPITAL STOCK.
Except as set forth below in this Section 4.10, the Issuer and
the Subsidiary Guarantors shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to, extend the maturity or otherwise
become responsible for, contingently or otherwise, (individually and
collectively, to "incur" or as appropriate, an "incurrence") any Indebtedness
(including Acquisition Indebtedness) or any Disqualified Capital Stock from and
after the Issue Date. Notwithstanding the foregoing:
(a) if (i) no Default or Event of Default shall have occurred
and be continuing at the time of, or would occur after giving effect on a pro
forma basis to, such incurrence of Indebtedness or Disqualified Capital Stock
and (ii) on the date of such incurrence (the "Incurrence Date"), the
Consolidated Coverage Ratio of the Issuer for the Reference Period immediately
preceding the Incurrence Date, after giving effect on a pro forma basis to such
incurrence of such Indebtedness or Disqualified Capital Stock and, to the
extent set forth in the definition of Consolidated Coverage Ratio, the use of
proceeds thereof, would be at least 2.0 to 1 (the "Debt Incurrence Ratio"),
then the Issuer may incur such Indebtedness or Disqualified Capital Stock and
the Subsidiary Guarantors may incur such Indebtedness provided that no
Guarantee may be incurred pursuant to this paragraph unless the guaranteed
Indebtedness is incurred by the Company or a Subsidiary Guarantor pursuant to
this paragraph;
(b) the Issuer and the Subsidiary Guarantors may incur
Indebtedness evidenced by the Notes (and any related Guarantees) issued as of
the original Issue Date and the Exchange Notes (and any related Guarantees)
issued in exchange therefor;
(c) the Issuer and the Subsidiary Guarantors may incur
Purchase Money Indebtedness on or after the Issue Date, provided, that (i) the
aggregate amount of such Indebtedness incurred on or after the Issue Date and
outstanding at any time pursuant to this paragraph (c) (including any
Indebtedness issued to refinance, replace, defease or refund such Indebtedness)
shall not exceed (A) $35,000,000 plus (B)
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Purchase Money Indebtedness existing on the Issue Date; provided, however, (B)
shall not exceed $29,200,000, and (ii) in each case, such Indebtedness shall
not constitute more than 100% of the cost (determined in accordance with GAAP)
to the Issuer or such Subsidiary Guarantor, as applicable, of the property so
purchased or leased;
(d) the Issuer, the Subsidiary Guarantors and the Foreign
Subsidiaries, as applicable, may incur permitted Refinancing Indebtedness with
respect to any Existing Indebtedness and Indebtedness or Disqualified Capital
Stock, as applicable, incurred in accordance with this covenant so long as, in
the case of Indebtedness used to refinance, replace, defease or refund secured
Indebtedness, such Refinancing Indebtedness is secured only by the assets that
secured the Indebtedness so refinanced;
(e) the Issuer, the Subsidiary Guarantors and the Foreign
Subsidiaries, as applicable, may incur Permitted Indebtedness;
(f) the Issuer, the Subsidiary Guarantors and the Foreign
Subsidiaries may incur Indebtedness in an aggregate amount outstanding at any
time pursuant to this clause (f) (including any Indebtedness issued to
refinance, replace, defease or refund such Indebtedness) of up to $50,000,000,
minus the amount of any such Indebtedness retired (including, in the case of a
revolver or a similar arrangement, to the extent permanently retired) with Net
Cash Proceeds from any Asset Sale (other than a sale of Assets to Be Disposed
of) or assumed by a transferee in an Asset Sale;
(g) the Issuer and the Subsidiary Guarantors may incur
Indebtedness pursuant to the New Credit Facility up to an aggregate amount
outstanding at any time pursuant to this clause (g) (including any Indebtedness
issued to refinance, replace, defease or refund such Indebtedness) at any time
of $1,000,000,000, minus the amount of any such Indebtedness retired
(including, in the case of a revolver or a similar arrangement, to the extent
permanently retired) with Net Cash Proceeds from any Asset Sale (other than a
sale of Assets to Be Disposed of) or assumed by a transferee in an Asset Sale;
(h) the Foreign Subsidiaries may incur Indebtedness (and the
Issuer and the Subsidiary Guarantors may guarantee such Indebtedness of the
Foreign Subsidiaries) in an aggregate amount outstanding at any time pursuant
to this clause (h) (including any Indebtedness used to refinance, replace or
refund such Indebtedness) of up to $50,000,000 plus (B) the amount of the
Foreign Subsidiary Indebtedness outstanding on the Issue Date, minus the amount
of any such Indebtedness retired (including, in the case of a revolver or a
similar arrangement, to the extent permanently retired) with the Net Cash
Proceeds from any Asset Sale (other than a sale of Assets to Be Disposed of) or
assumed by a transferee in an Asset Sale; provided, however, the aggregate of
(B) shall not exceed $71,100,000; and
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(i) the Finance Subsidiary may incur Finance Subsidiary
Indebtedness.
Indebtedness or Disqualified Capital Stock of any Person which
is outstanding at the time such Person becomes a Subsidiary of the Issuer
(including, without limitation, upon designation of any subsidiary or other
Person as a Subsidiary and upon the contribution of the Equity Interests
thereof to the Issuer) or is merged with or into or consolidated with the
Issuer or a Subsidiary of the Issuer shall be deemed to have been incurred at
the time such Person becomes such a Subsidiary of the Issuer or is merged with
or into or consolidated with the Issuer or a Subsidiary of the Issuer, as
applicable.
SECTION 4.11 LIMITATION ON LIENS SECURING INDEBTEDNESS
The Issuer and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to create, incur, assume or suffer to
exist any Lien of any kind, other than Permitted Liens, now owned or acquired
on or after the date of this Indenture.
SECTION 4.12 LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES
The Issuer and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to, directly or indirectly, create, assume
or suffer to exist any consensual restriction on the ability of any Subsidiary
of the Issuer to pay dividends or make other distributions to or on behalf of,
or to pay any obligation to or on behalf of, or otherwise to transfer assets or
property to or on behalf of, or make or pay loans or advances to or on behalf
of, the Issuer or any of its Subsidiaries except (a) restrictions imposed by
the Notes or this Indenture or by other indebtedness of the Issuer or any of
the Subsidiary Guarantors ranking pari passu with the Notes or the Guarantees,
as applicable, provided such restrictions are no more restrictive taken as a
whole than those imposed by this Indenture and the Notes, (b) restrictions
imposed by applicable law, (c) existing restrictions under Indebtedness
outstanding on the Issue Date and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings of
such Indebtedness, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings are
no more restrictive taken as a whole with respect to dividend and other payment
restrictions than those contained in the applicable existing Indebtedness, (d)
restrictions under any Acquired Indebtedness not incurred in violation of this
Indenture or any agreement relating to any property, asset, or business
acquired by the Issuer or any of its Subsidiaries, which restrictions existed
at the time of acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any Person, other
than the Person acquired, or to
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any property, asset or business, other than the property, assets and business
so acquired, (e) any such restriction or requirement imposed by Senior Debt
incurred under Section 4.10, provided such restriction or requirement is no
more restrictive than that imposed by the New Credit Facility as of the Issue
Date, (f) restrictions with respect solely to a Subsidiary of the Issuer
imposed pursuant to a binding agreement which has been entered into for the
sale or disposition of all or substantially all of the Equity Interests or
assets of such Subsidiary, provided such restrictions apply solely to the
Equity Interests or assets of such Subsidiary, (g) restrictions on transfer
contained in Purchase Money Indebtedness incurred pursuant to paragraph (c) of
Section 4.10, provided such restrictions relate only to the transfer of the
property acquired with the proceeds of such Purchase Money Indebtedness, (h)
restrictions contained in Indebtedness or other contractual requirements of a
Receivables Subsidiary in connection with a Qualified Receivables Transaction,
provided that such restrictions apply only to such Receivables Subsidiary, (i)
restrictions contained in Indebtedness incurred by a Foreign Subsidiary in
accordance with the covenant "Limitation on Incurrence of Additional
Indebtedness and Disqualified Capital Stock," provided such restrictions relate
only to one or more Foreign Subsidiaries and (j) any asset subject to a Lien
which is not prohibited to exist with respect to such asset pursuant to the
terms of this Indenture may be subject to restrictions on the transfer or
disposition thereof or (k) in connection with and pursuant to permitted
Refinancings, replacements of restrictions imposed pursuant to clauses (a), (c)
or (d) of this paragraph that are not more restrictive than those being
replaced and do not apply to any other Person or assets than those that would
have been covered by the restrictions in the Indebtedness so refinanced.
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into in the ordinary course of
business, consistent with industry practice, nor (b) Liens permitted under the
terms of this Indenture on assets securing Senior Debt or Purchase Money
Indebtedness incurred in accordance with Section 4.10 shall in and of
themselves be considered a restriction on the ability of the applicable
Subsidiary to transfer such agreement or assets, as the case may be.
SECTION 4.13 LIMITATIONS ON LAYERING INDEBTEDNESS
The Issuer and the Subsidiary Guarantors shall not, and shall
not permit any of their Subsidiaries to, directly or indirectly, incur or
suffer to exist any Indebtedness (other than the Notes and any Acquired
Indebtedness not incurred in connection with or in contemplation of such
Acquisition by the Issuer or a Subsidiary of the Issuer) that is subordinate in
right of payment to any other Indebtedness of the Issuer or a Subsidiary
Guarantor unless, by its terms, such Indebtedness is subordinate in right of
payment to, or ranks pari passu with, the Notes or the Guarantee, as
applicable.
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SECTION 4.14 LIMITATIONS ON TRANSACTIONS WITH AFFILIATES
The Issuer shall not, and shall not permit any of its
Subsidiaries to, on or after the Issue Date enter into any contract, agreement,
arrangement or transaction with any Affiliate (an "Affiliate Transaction"), or
any series of related Affiliate Transactions, other than Exempted Affiliate
Transactions, (l) involving consideration to either party in excess of
$5,000,000 unless such transaction is evidenced by an Officer's Certificate
addressed and delivered to the Trustee stating that the terms of such Affiliate
Transaction are fair and reasonable to the Issuer or such Subsidiary, as the
case may be, and no less favorable to the Issuer or such Subsidiary, as the
case may be, than could have been obtained in an arm's length transaction with
a non-Affiliate, and (2) involving consideration to either party in excess of
$l0,000,000, unless the Issuer, prior to the consummation thereof, obtains a
written favorable opinion as to the fairness of such transaction to the Issuer
from a financial point of view from an independent investment banking firm of
national reputation or, if pertaining to a matter for which such investment
banking firms do not customarily render such opinions, an appraisal or
valuation firm of national reputation.
SECTION 4.15 FUTURE SUBSIDIARY GUARANTORS
All present and future Subsidiaries of the Issuer (other than
Receivables Subsidiaries, Finance Subsidiaries, Excluded Subsidiaries and
Foreign Subsidiaries) jointly and severally shall guaranty irrevocably and
unconditionally all principal, premium, if any, and interest (and Liquidated
Damages, if any) on the Notes on a senior subordinated basis, provided that DDI
shall not be required to become a Guarantor until 120 days after the Issue
Date. Notwithstanding anything herein or in this Indenture to the contrary and
if permitted by the New Credit Facility, if any Subsidiary of the Issuer that
is not a Subsidiary Guarantor guarantees any other Indebtedness of the Issuer
or Parent or of any Subsidiary of the Issuer or Parent, or the Issuer or Parent
or any Subsidiary of the Issuer or of Parent, individually or collectively
pledges more than 65% of the Equity Interests of such Subsidiary to a United
States lender, then such Subsidiary must become a Guarantor.
SECTION 4.16 LIMITATION ON MERGER OF SUBSIDIARY GUARANTORS AND RELEASE OF
SUBSIDIARY GUARANTORS
No Subsidiary Guarantor shall consolidate or merge with or
into (whether or not such Subsidiary Guarantor is the surviving Person) another
Person unless (i) subject to the provisions of the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form reasonably satisfactory
to the Trustee, pursuant to which such Person
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shall unconditionally guarantee, on a senior subordinated basis, all of such
Subsidiary Guarantor's obligations under such Subsidiary Guarantor's guarantee
and this Indenture on the terms set forth in this Indenture; and (ii)
immediately before and immediately after giving effect to such transaction on a
pro forma basis, no Default or Event of Default shall have occurred or be
continuing.
Upon the sale or disposition (whether by merger, stock
purchase, asset sale or otherwise) of a Subsidiary Guarantor or all or
substantially all of its assets to an entity which is not a Subsidiary
Guarantor or the designation of a Subsidiary to become an Unrestricted
Subsidiary, which transaction is otherwise in compliance with this Indenture
(including, without limitation, the provisions of Section 4.08), such
Subsidiary Guarantor will be deemed released from its obligations under its
Guarantee of the Notes; provided, however, that any such termination shall
occur only to the extent that all obligations of such Subsidiary Guarantor
under all of its guarantees of, and under all of its pledges of assets or other
security interests which secure, any Indebtedness of the Issuer or any other
Subsidiary of the Issuer shall also terminate upon such release, sale or
transfer.
SECTION 4.17 LIMITATION ON STATUS AS AN INVESTMENT COMPANY
The Issuer, its Subsidiaries and Parent are prohibited from
taking any action that would require any of them to register as an "Investment
Company" (as that term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act")), or otherwise become subject to
regulation under the Investment Company Act.
ARTICLE 5
SUCCESSORS
SECTION 5.01 LIMITATION ON MERGER, SALE OR CONSOLIDATION
Neither the Issuer nor Parent shall consolidate with or merge
with or into another Person or, directly or indirectly, sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, unless (i) either (a) the Issuer
or Parent, as applicable, is the continuing entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Issuer or
Parent, as applicable, in connection with the Notes and this Indenture; (ii) no
Default or Event of Default shall exist or shall occur immediately after giving
effect on a pro forma basis to
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such transaction; (iii) except in the case of a transaction involving only the
Parent, immediately after giving effect to such transaction on a pro forma
basis, the consolidated resulting, surviving or transferee entity would
immediately thereafter be permitted to incur at least $l.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio set forth in paragraph (a)
of Section 4.10; and (iv) the Issuer will have delivered to the Trustee an
Officer's Certificate addressed to the Trustee, stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
disposition and such supplemental indenture, if any, comply with this Indenture
and that the supplemental indenture is enforceable.
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Issuer or Parent, as applicable, in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Issuer or Parent, as applicable, is merged or
to which such transfer is made shall succeed to, and (except in case of a
lease) be substituted for, and may exercise every right and power of, the
Issuer or Parent, as applicable, under this Indenture with the same effect as
if such successor corporation had been named therein as the Issuer or Parent,
as applicable, and (except in case of a lease) the Issuer or Parent, as
applicable, shall be released from the obligations under the Notes and this
Indenture except with respect to any obligations that arise from, or are
related to, such transaction.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any transfer, lease,
conveyance or other disposition of all or substantially all of the assets of
the Issuer in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Issuer is merged or to
which such transfer is made shall succeed to, and (except in the case of a
lease) be substituted for (so that from and after the date of such transfer,
the provisions of this Indenture referring to the "Issuer" shall refer instead
to the successor corporation and not to the Issuer), and may exercise every
right and power of the Issuer under this Indenture with the same effect as if
such successor corporation had been named therein as the Issuer (except in the
case of a lease); the Issuer shall not be released from the obligation to pay
the principal of and interest on the Notes.
For the purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise) of all or substantially all of the properties
and assets of one or more Subsidiaries of the Issuer, the Issuer's interest in
which constitutes all or substantially all of the properties and assets of the
Issuer shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Issuer.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) the Issuer fails to pay any installment of interest
(or Liquidated Damages, if any) on the Notes when and as the same
becomes due and payable and the Default continues for a period of 30
days;
(2) the Issuer fails to pay all or any part of the
principal of or premium, if any, on the Notes when and as the same
becomes due and payable at maturity, redemption by acceleration or
otherwise, including, without limitation, payment of the Change of
Control Purchase Price or the Asset Sale Offer Price, or otherwise;
(3) the failure by the Issuer or any Guarantor to observe
or perform any other covenant or agreement contained in the Notes or
this Indenture and, subject to certain exceptions, the continuance of
such failure for a period of 45 days after written notice is given to
the Issuer by the Trustee or to the Issuer and the Trustee by the
Holders of at least 25% in aggregate principal amount of Notes
outstanding;
(4) certain events of bankruptcy, insolvency or
reorganization in respect of the Issuer or any of its Significant
Subsidiaries;
(5) a default in any Indebtedness of the Issuer or any of
its Subsidiaries with an aggregate principal amount in excess of $10.0
million (a) resulting from the failure to pay principal at final
maturity or (b) as a result of which the maturity of such Indebtedness
has been accelerated prior to its stated maturity;
(6) final unsatisfied judgments not covered by insurance
aggregating in excess of $10.0 million, at any one time rendered
against the Issuer or any of its Significant Subsidiaries and not
stayed, bonded or discharged within 60 days.
SECTION 6.02 ACCELERATION
If an Event of Default occurs and is continuing (other than an
Event of Default specified in clause (4), above, relating to the Issuer, then
in every such case,
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unless the principal of all of the Notes shall have already become due and
payable, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes then outstanding, by notice in writing to the
Issuer (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal, determined as set forth below, and accrued interest
thereon to be due and payable immediately; provided, however, that if any
Senior Debt is outstanding pursuant to the New Credit Facility, upon a
declaration of such acceleration, such principal and interest shall be due and
payable upon the earlier of (x) the day that is five Business Days after the
provision to the Issuer and the representative under the New Credit Facility of
such written notice, unless such Event of Default is cured or waived prior to
such date and (y) the date of acceleration of any Senior Debt under the New
Credit Facility. In the event a declaration of acceleration resulting from an
Event of Default described in clause (5) above has occurred and is continuing,
such declaration of acceleration shall be automatically annulled if such
Default is cured or waived or the holders of the Indebtedness which is the
subject of such Default have rescinded their declaration of acceleration in
respect of such Indebtedness within 45 days thereof and the Trustee has
received written notice of such cure, waiver or rescission and no other Event
of Default described in clause (5) above has occurred that has not been cured
or waived within 45 days of the declaration of such acceleration in respect of
such Indebtedness. If an Event of Default specified in clause (4) above
relating to the Issuer occurs, all principal and accrued interest thereon will
be immediately due and payable on all outstanding Notes without any declaration
or other act on the part of Trustee or the Holders. The Holders of a majority
in aggregate principal amount of Notes generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Notes which have become
due solely by such acceleration and except any Default with respect to any
provision requiring a supermajority approval to amend, which Default may only
be waived by such a supermajority, have been cured or waived.
SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium or
Liquidated Damages, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note 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. All
remedies are cumulative to the extent permitted by law.
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SECTION 6.04 WAIVER OF PAST DEFAULTS
Prior to the declaration of acceleration of the maturity of
the Notes, the Holders of a majority in aggregate principal amount of the Notes
at the time outstanding may waive on behalf of all the Holders any Default,
except a Default with respect to any provision requiring a supermajority
approval to amend, which Default may be waived only by such a supermajority,
and except a Default in the payment of principal of or interest on any Note not
yet cured or a Default with respect to any covenant or provision which cannot
be modified or amended without the consent of the Holder of each outstanding
Note affected. Subject to the provisions of this Indenture relating to the
duties of the Trustee, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity.
SECTION 6.05 CONTROL BY MAJORITY
Subject to the provisions of this Indenture and applicable
law, Holders of a majority in aggregate principal amount of the Notes at the
time outstanding will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee.
SECTION 6.06 LIMITATION ON SUITS
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to
pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
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(e) during such 60-day period the Holders of a majority
in aggregate principal amount of the then outstanding Notes do not
give the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01 occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Issuer for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Issuer (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect, receive and distribute any
money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation,
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expenses, disbursements and advances of the Trustee, its agents and counsel,
and any other amounts due the Trustee under Section 7.07 hereof out of the
estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to
or accept or adopt on behalf of any Holder any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any and
interest, respectively; and
Third: to the Issuer or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
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Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a
suit by Holders of more than 10% in principal amount of the then outstanding
Notes.
ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(a) If an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its
exercise, as a prudent Person would exercise or use under the circumstances in
the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely
by the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions required to be furnished to the Trustee by this Indenture and
conforming to the requirements of this Indenture, but in the case of
any such certificates or opinions furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether
or not they conform to the requirements of this Indenture (but need
not confirm or investigate the accuracy of mathematical calculations
or other facts stated therein).
(c) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this clause (c) does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
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(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject
to paragraphs 7.01 and 7.02.
(e) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under
this Indenture at the request of any Holders, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with the
Issuer. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officer's Certificate or Opinion of Counsel. The
Trustee may consult with counsel of its selection and the written advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action it
takes or omits to take in good faith that it believes to be authorized or
within the rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from the Issuer shall be
sufficient if signed by an Officer of the Issuer.
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(f) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) Except with respect to Section 4.01 herein, the
Trustee shall have no duty to inquire as to the performance of the Issuer's
covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to
have knowledge of any Default or Event of Default except (i) any Event of
Default occurring pursuant to Sections 6.01(1), 6.01(2) and 4.01 or (ii) any
Default or Event of Default of which the Trustee shall have received written
notification or obtained actual knowledge.
(h) The Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee may, in its discretion, make such further inquiry or
investigation into such facts or matters as it may see fit and if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Issuer personally or
by agent or attorney at the sole cost of the Issuer and shall incur no
liability or additional liability of any kind by reason of such inquiry or
investigation.
(i) The rights, privileges, protections, immunities and
benefits given to the Trustee, including, without limitation, its right to be
indemnified, are extended to, and shall be enforceable by, the Trustee in each
of its capacities hereunder, and the right of the Trustee to be indemnified
shall be extended to and shall be enforceable by each of the Trustee's agents.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuer or any
Affiliate of the Issuer with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
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SECTION 7.04 TRUSTEE'S DISCLAIMER
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Issuer's use of the proceeds from the Notes
or any money paid to the Issuer or upon the Issuer's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice
if and so long as a committee of its Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA Section 313(a) (but if
no event described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by
mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Issuer and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA Section
313(d). The Issuer shall promptly notify the Trustee when the Notes are listed
on any stock exchange or any delisting thereof.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Issuer shall pay to the Trustee from time to time such
compensation as the Issuer and the Trustee shall agree in writing from time to
time for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The
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Issuer shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Issuer shall indemnify the Trustee against any and all
losses, damages, claims, liabilities or expenses (including of reasonable
attorneys' fees and expenses) incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the Issuer
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Issuer or any Holder or any other Person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or bad faith or willful misconduct. The Trustee
shall notify the Issuer promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of
its obligations hereunder. The Issuer shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Issuer under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Issuer's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(4) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
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The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Issuer. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Issuer in
writing. The Issuer may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuer shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in aggregate principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuer.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuer, or the Holders of Notes of at least 10% in aggregate principal amount
of the then outstanding Notes may petition, at the expense of the Issuer, any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuer's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
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SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to
TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE
The Issuer may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officer's Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE
The Issuer may, at its option, elect to have its obligations
and the obligations of the Guarantors discharged with respect to the
outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the
Issuer shall be deemed to have paid and discharged the entire Indebtedness
represented, and this Indenture shall cease to be of further effect as to all
outstanding Notes and Guarantees, except as to (i) the
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rights of Holders to receive payments in respect of the principal of, premium,
if any, and interest (and Liquidated Damages, if any) on such Notes when such
payments are due from the trust funds; (ii) the Issuer's obligations with
respect to such Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an
office or agency for payment and money for security payments held in trust;
(iii) rights, powers, trusts, duties and immunities of the Trustee, and the
Issuer's obligations in connection therewith and (iv) the Legal Defeasance
provisions under this Section 8.02.
SECTION 8.03 COVENANT DEFEASANCE
Upon the Issuer's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Issuer may, at its option and at
any time, elect to have the obligations of the Issuer and the Guarantors
released with respect to the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17 and 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, guarantees, bankruptcy, receivership,
rehabilitation and insolvency events) described under Section 6.01 will no
longer constitute an Event of Default with respect to the Notes.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Issuer must irrevocably deposit with
the Trustee, in trust, for the benefit of the Holders of the
Notes, U.S. legal tender, U.S. Government Obligations, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any,
and interest on such Notes on the stated date for payment
thereof or on the redemption date of such principal of,
premium, if any, or interest on such Notes, and the Holders of
the Notes must have a valid, perfected, exclusive security
interest on such trust;
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(b) in the case of Legal Defeasance, the
Issuer shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the
Trustee confirming that (A) the Issuer has received from, or
there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been
a change in the applicable Federal income tax law, in either
case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for Federal
income tax purposes as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in
the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the
Issuer shall have delivered to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to Federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit;
(e) such Legal Defeasance or Covenant
Defeasance shall not result in a breach or violation of, or
constitute a Default under this Indenture or any other
material agreement or instrument to which the Issuer or any of
its Subsidiaries is a party or by which the Issuer or any of
its Subsidiaries is bound;
(f) the Issuer shall have delivered to the
Trustee an Officer's Certificate stating that the deposit was
not made by the Issuer with the intent of preferring the
Holders of such Notes over any other creditors of the Issuer
or with the intent of defeating, hindering,
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delaying or defrauding any other creditors of the Issuer or
others; and
(g) the Issuer shall have delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel,
each stating that the conditions precedent provided for in, in
the case of the Officer's Certificate, (a) through (g) and, in
the case of the Opinion of Counsel, clauses (a) (with respect
to the validity and perfection of the trust), (b), (c) and (e)
of this paragraph relating to the Legal Defeasance or the
Covenant Defeasance, as applicable, have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Issuer
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Issuer shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuer from time to time upon the
request of the Issuer any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
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SECTION 8.06 REPAYMENT TO ISSUER
Any money deposited with the Trustee or any Paying Agent, or
then held by the Issuer, in trust for the payment of the principal of, premium,
if any, Liquidated Damages, or interest on any Note and remaining unclaimed for
two years after such principal, and premium, if any, Liquidated Damages, if
any, or interest has become due and payable shall be paid to the Issuer on its
written request or (if then held by the Issuer) shall be discharged from such
trust; and the Holder of such Note shall thereafter, as a secured creditor,
look only to the Issuer for payment thereof, and all liability of the Trustee
or such Paying Agent with respect to such trust money, and all liability of the
Issuer as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Issuer cause to be published once, in The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining will be repaid to the Issuer.
SECTION 8.07 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any U.S.
legal tender or U.S. obligation obligating in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, then the Issuer's obligations under this Indenture and the
Notes shall be revived and reinstated as though no defeasance had occurred.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES
Notwithstanding Section 9.02 of this Indenture, the Issuer and
the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note and the Guarantors and the Trustee may amend or
supplement any Guarantee:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
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(c) to provide for the assumption of the Issuer's
obligations to the Holders of the Notes in the case of a merger or
consolidation pursuant to Article 5 hereof;
(d) to provide for additional Subsidiary Guarantors as
set forth in Section 4.15;
(e) to make any change that would provide any additional
rights or benefits to the Holders of the Notes (including the addition
of any Subsidiary Guarantors) or that does not adversely affect the
legal rights hereunder of any Holder of the Note;
(f) to comply with the provisions of the Depositary,
Euroclear or Cedel or the Trustee with respect to the provisions of
this Indenture or the Notes relating to transfers and exchanges of
Notes or beneficial interests in Notes; or
(g) to comply with requirements of the SEC in order to
effect or maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuer accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Issuer in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that adversely
affects its own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES
Except as provided below in this Section 9.02, the Issuer, the
Guarantors and the Trustee may amend or supplement this Indenture (including
Sections 4.07 and 4.08 hereof) or any supplemental indenture or modify the
rights of the Holders of the Notes with the consent of not less than a majority
in aggregate principal amount of the Notes at the time outstanding; provided
that no such modification may, without the consent of Holders of at least 66
2/3% in aggregate principal amount of Notes at the time outstanding, modify the
provisions (including the defined terms used therein) of the covenant
"Repurchase of Notes at the Option of the Holder upon a Change of Control" in
a manner adverse to the Holders.
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Upon the request of the Issuer accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of
such amended or supplemental Indenture unless such amended or supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Issuer shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof,
the Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Issuer with
any provision of this Indenture or the Notes. However, without the consent of
each Holder affected (it being understood that Section 4.07 and 4.08 may be
amended in accordance with the first paragraph of Section 9.02), an amendment
or waiver may not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the aggregate principal amount of Notes
whose Holders must consent to an amendment, supplement or
waiver;
(b) reduce the principal of or change the fixed final
stated maturity of any Note or alter or waive any of the
provisions with respect to the redemption of the Notes, except
as provided above with respect to Sections 4.07 and 4.08
hereof;
(c) reduce the rate of or change the time for payment
of interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the
payment of principal of, premium, if any, Liquidated Damages,
if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of a majority in
aggregate principal amount of the then outstanding Notes and a
waiver of the payment default that resulted from such
acceleration);
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(e) make any Note payable in money other than that
stated in the Notes;
(f) make any change in the provisions of this
Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or
interest on the Notes; or
(g) make any change in Section 6.04 or 6.07 hereof or
in the foregoing amendment and waiver provisions.
In addition, any amendment to the subordination provisions of
this Indenture will require the consent of the holders of Designated Senior
Debt if the amendment would adversely affect the holders of Designated Senior
Debt.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Issuer in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not
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affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuer may not sign an amendment until the Board of Directors approves it.
In executing any amended or supplemental Indenture, the Trustee shall be
entitled to receive and (subject to Section 7.01) shall be fully protected in
relying upon, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE
The Issuer agrees, and each Holder by accepting a Note agrees,
that the Indebtedness evidenced by the Note is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Debt of the Issuer, the Parent and the
Subsidiary Guarantors, as applicable. This Article 10 shall constitute a
continuing offer to all Persons who become holders of, or continue to hold,
Senior Debt, and such provisions are made for the benefit of the holders of
Senior Debt.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any distribution of assets of the Issuer or any Guarantor
upon any dissolution, winding up, total or partial liquidation or
reorganization of the Issuer or a Guarantor, whether voluntary or involuntary,
in bankruptcy, insolvency, receivership or similar proceeding or upon
assignment for the benefit of creditors or any marshalling of the Issuer's or
Guarantors' assets and liabilities:
(1) holders of all Senior Debt of the Issuer or such
Guarantor, as applicable, shall first be entitled to receive payment
in full in cash or U.S. Legal Tender Equivalents or otherwise, to the
extent holders accept satisfaction of amounts due by settlement in
other than cash or U.S. Legal Tender Equivalents (or have such payment
duly provided for), before Holders shall be entitled to receive any
payment on account of any Obligation (and Claims, but only in the case
of Senior Debt under the New Credit Facility) in respect of the
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Notes, including the principal of premium, if any, and interest on the
Notes (and Liquidated Damages pursuant to the Registration Rights
Agreement); and
(2) any payment or distribution of assets of the Issuer
or such Guarantor of any kind or character from any source, whether in
cash, property or securities (other than Junior Securities) to which
Holders or the Trustee on behalf of the Holders would be entitled (by
set-off or otherwise), except for the subordination provisions
contained in this Indenture, will be paid by the liquidating trustee
or agent or other Person making such a payment or distribution
directly to the holders of such Senior Debt or their representative to
the extent necessary to make payment in full in cash or Cash
Equivalents (or have such payment duly provided for) on all such
Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the holders of such Senior Debt.
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR DEBT
No payment (by set-off or otherwise) may be made by or on
behalf of the Issuer or a Guarantor, as applicable, on account of the principal
of, premium, if any, or interest on, the Notes (including any repurchases of
any of the Notes), or any Obligation (and Claim, but only in the case of Senior
Debt under the New Credit Facility) in respect of the Notes, including for cash
or property (other than Junior Securities, or on account of the redemption
provisions of the Notes (or Liquidated Damages), (i) upon the maturity of any
Senior Debt of the Issuer or such Guarantor by lapse of time, acceleration
(unless waived) or otherwise, unless and until all principal of, premium, if
any, and the interest on such Senior Debt (and in the case of Senior Debt under
the New Credit Facility, all other monetary obligations in respect thereof) are
first paid in full in cash or Cash Equivalents (or such payment is duly
provided for) or otherwise to the extent holders accept satisfaction of amounts
due by settlement in other than cash or Cash Equivalents, or (ii) in the event
of default in the payment of any principal of, premium, if any, or interest on
Senior Debt of the Issuer or such Guarantor (and, in the case of Senior Debt
under the New Credit Facility, any other monetary obligation in respect
thereof) when it becomes due and payable, whether at maturity, a scheduled
payment date, or at a date fixed for prepayment or by declaration or otherwise
(a "Payment Default"), unless and until such Payment Default has been cured or
waived or otherwise has ceased to exist.
Upon (i) the happening of an event of default (other than a
Payment Default) that permits the holders of Senior Debt (or a trustee or agent
on behalf of such holders) to declare such Senior Debt to be due and payable
(or, in the case of letters of credit, require cash collateralization thereof)
and (ii) written notice of such event of default being given to the Trustee by
the holders (or a trustee, agent or other
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representative of such holders) of Designated Senior Debt (a "Payment Notice"),
then, unless and until such event of default has been cured or waived or
otherwise has ceased to exist, no payment by set-off or otherwise) may be made
by or on behalf of the Issuer or any Guarantor which is an obligor under such
Senior Debt on account of any Obligation (and Claims, but only in the case of
Senior Debt under the New Credit Facility) in respect of the Notes, including
the principal of, premium, if any, or interest on the Notes, or to repurchase
any of the Notes, or on account of the redemption provisions of the Notes, in
any such case, other than payments made with Junior Securities.
Notwithstanding the foregoing, unless the Senior Debt in respect of which such
event of default exists has been declared due and payable in its entirety
within 179 days after the Payment Notice is delivered as set forth above (the
"Payment Blockage Period") (and such declaration has not been rescinded or
waived), at the end of the Payment Blockage Period (but subject to the
preceding paragraphs and Section 10.05), the Issuer and the Guarantors shall be
required to pay all sums not paid to the Holders of the Notes during the
Payment Blockage Period due to the foregoing prohibitions and to resume all
other payments as and when due on the Notes. Any number of Payment Notices may
be given; provided, however, that (i) not more than one Payment Notice shall be
given within a period of any 360 consecutive days, and (ii) no default that
existed upon the date of such Payment Notice or the commencement of such
Payment Blockage Period (whether or not such event of default relates to the
same issue of Senior Debt) shall be made the basis for the commencement of any
other Payment Blockage Period unless such other Payment Blockage Period is
commenced by a Payment Notice from the representative under the New Credit
Facility and such event of default shall have been cured or waived for a period
of at least 90 consecutive days.
SECTION 10.04 ACCELERATION OF NOTES
If payment of the Notes is accelerated because of an Event of
Default, the Issuer shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER
In the event that, notwithstanding the foregoing, any payment
or distribution of assets of the Issuer or any Guarantor (other than Junior
Securities) shall be received by the Trustee or the Holders at a time when such
payment or distribution is prohibited by the provisions of this Article 10,
such payment or distribution shall be held in trust for the benefit of the
holders of such Senior Debt, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to, the holders of such Senior Debt remaining
unpaid (or unprovided for) or to their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Debt may have been issued, ratably according to
the aggregate principal amounts remaining unpaid on account of such
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Senior Debt held or represented by each for application to the payment of all
such Senior Debt remaining unpaid to the extent necessary to pay all such
Senior Debt in full in cash or U.S. Legal Tender Equivalents after giving
effect to any concurrent payment or distribution to any concurrent payment or
distribution to the holders of such Senior Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Issuer or any other Person money or assets to which any holders
of Senior Debt shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or negligence of the
Trustee.
SECTION 10.06 NOTICE BY ISSUER
The Issuer shall promptly notify the Trustee and the Paying
Agent of any facts known to the Issuer that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure
to give such notice shall not affect the subordination of the Notes to the
Senior Debt, as provided in this Article 10.
SECTION 10.07 SUBROGATION
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt, to receive distributions applicable to Senior Debt, to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article 10 to holders of Senior
Debt, that otherwise would have been made to Holders is not, as between the
Issuer and Holders, a payment by the Issuer, on the Notes.
SECTION 10.08 RELATIVE RIGHTS
This Article 10 defines the relative rights of Holders and
holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Issuer and Holders, the
obligation of the Issuer, which is absolute and unconditional, to pay,
when due, principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes in
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accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Issuer other than their rights in relation to holders of Senior
Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt, to receive distributions
and payments otherwise payable to Holders.
If the Issuer fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
SECTION 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY ISSUER
No right of any holder of Senior Debt, to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Issuer or any Holder or by the failure of the
Issuer, or any Holder to comply with this Indenture.
SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative. The Issuer shall provide the Trustee with notice of the
name and address of any Representative. In the absence of such notice, the
Trustee may conclusively assume that no Representative exists.
Upon any payment or distribution of assets of the Issuer
referred to in this Article 10, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Issuer, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
10.
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SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Issuer or a
Representative may give the notice. Nothing in this Article 10 shall impair
the claims of, or payments to, the Trustee under or pursuant to Section 7.07
hereof.
The Trustee shall be entitled to rely on the delivery to it of
a written notice by a Person representing himself to be a holder of Senior Debt
(or a Representative on behalf of such holder) to establish that such notice
has been given by a holder of Senior Debt or a Representative on behalf of such
holder. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person who is a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment or until such time as the Trustee
shall be otherwise satisfied as to the right of such Person to receive such
payment.
The Trustee in its individual or any other capacity may hold
Senior Debt, with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION
Each Holder of a Note by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as the Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of
the time to file such claim, the Representative is hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
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SECTION 10.13 AMENDMENTS
The provisions of this Article 10 shall not be amended or
modified in a manner materially adverse to the Holders of Senior Debt without
the written consent of the holders of all Senior Debt.
ARTICLE 11
GUARANTEES
SECTION 11.01 GUARANTEES
Subject to the provisions of this Article 11, each Guarantor,
jointly and severally, hereby unconditionally guarantees to each Holder of a
Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, that: (a) the principal of, and premium, if any,
Liquidated Damages, if any, and interest on the Notes will be duly and
punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on overdue principal of, and premium, if any,
Liquidated Damages, if any and (to the extent permitted by law) interest on any
interest, if any, on the Notes and all other obligations of the Issuer to the
Holders or the Trustee hereunder or under the Notes (including fees, expenses
or other) will be promptly paid in full or performed, all in accordance with
the terms hereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or failing performance of
any other obligation of the Issuer to the Holders, for whatever reason, each
Guarantor will be obligated to pay, or to perform or to cause the performance
of, the same immediately. An Event of Default under this Indenture or the
Notes shall constitute an event of default under this Guarantee, and shall
entitle the Holders of Notes to accelerate the obligations of each Guarantor
hereunder in the same manner and to the same extent as the obligations of the
Issuer. Each Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any thereof, the
entry of any judgment against the Issuer, any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor hereby waives and
relinquishes: (a) any right to require the Trustee, the Holders or the Issuer
(each, a "Benefitted Party") to proceed against the Issuer or any other Person
or to proceed against or exhaust any security held by a Benefitted Party at any
time or to pursue any other remedy in any secured party's power before
proceeding against the Guarantors; (b) any
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defense that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of a Benefitted Party
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of any other Person or Persons; (c) demand, protest and
notice of any kind (except as expressly required by this Indenture), including
but not limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the
part of the Guarantors, the Issuer, any Benefitted Party, any creditor of the
Guarantors, the Issuer or the Subsidiaries or on the part of any other Person
whomsoever in connection with any obligations the performance of which are
hereby guaranteed; (d) any defense based upon an election of remedies by a
Benefitted Party, including but not limited to an election to proceed against
the Guarantors for reimbursement; (e) any defense based upon any statute or
rule of law which provides that the obligation of a surety must be neither
larger in amount nor in other respects more burdensome than that of the
principal; (f) any defense arising because of a Benefitted Party's election, in
any proceeding instituted under the Bankruptcy Law, of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Guarantors hereby covenant that the Guarantee will not be discharged
except by payment in full of all principal, premium, if any, Liquidated
Damages, if any, and interest on the Notes and all other costs provided for
under this Indenture, or as provided in Section 8.01.
If any Holder or the Trustee is required by any court or
otherwise to return to either the Issuer or the Guarantors, or any trustee or
similar official acting in relation to either the Issuer or the Guarantors, any
amount paid by the Issuer or the Guarantors to the Trustee or such Holder, the
Guarantees, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each of the Guarantors agrees that it will not be entitled
to any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Guarantor agrees that, as between it, on the one hand,
and the Holders of Notes and the Trustee, on the other hand, (x) the maturity
of the obligations guaranteed hereby may be accelerated as provided in Article
6 hereof for the purposes hereof, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article 6 hereof, such obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purpose of the Guarantee.
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SECTION 11.02 EXECUTION AND DELIVERY OF GUARANTEES
To evidence the Guarantees set forth in Section 11.01 hereof,
each of the Guarantors agrees that a notation of the Guarantees substantially
in the form included in Exhibit B shall be endorsed on each Note authenticated
and delivered by the Trustee and that this Indenture shall be executed on
behalf of the Guarantors by the Chairman of the Board, any Vice Chairman, the
President or one of the Vice Presidents of the Guarantors.
Each of the Guarantors agree that the Guarantees set forth in
this Article 11 will remain in full force and effect and apply to all the Notes
notwithstanding any failure to endorse on each Note a notation of the
Guarantees.
If an Officer whose facsimile signature is on a Note no longer
holds that office at the time the Trustee authenticates the Note on which the
Guarantees are endorsed, the Guarantees shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Guarantees set forth in this Indenture on behalf of the Guarantors.
SECTION 11.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Issuer or another Guarantor, or shall prevent the transfer of all or
substantially all of the assets of a Guarantor to the Issuer or another
Guarantor. Upon any such consolidation, merger, transfer or sale, the
Guarantee of such Guarantor shall no longer have any force or effect.
(b) No Subsidiary Guarantor shall consolidate or merge
with or into a corporation or corporations other than the Issuer or another
Guarantor, except pursuant to the provisions of Section 4.16 hereof.
(c) The Trustee, subject to the provisions of Section
11.04 hereof, shall be entitled to receive an Officer's Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale or conveyance, and any such assumption of Obligations, comply with the
provisions of this Section 11.03. Such certificate and opinion shall comply
with the provisions of Section 11.05.
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SECTION 11.04 RELEASES FOLLOWING SALE OF ASSETS
Concurrently with any sale of assets (including, if
applicable, all of the Capital Stock of any Guarantor other than the Parent),
any Liens in favor of the Trustee in the assets sold thereby shall be released;
provided that in the event of an Asset Sale, the Net Proceeds from such sale or
other disposition are treated in accordance with the provisions of Section 4.08
hereof. If the assets sold in such sale or other disposition include all or
substantially all of the assets of any Guarantor or all of the Capital Stock of
any Guarantor in each case, in compliance with the terms hereof, then such
Guarantor (in the event of a sale or other disposition of all of the Capital
Stock of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of the assets
of such Guarantor) shall be released from and relieved of its obligations under
its Guarantee or Section 11.03 hereof as the case may be; provided that in the
event of an Asset Sale, the Net Proceeds from such sale or other disposition
are treated in accordance with the provisions of Section 4.08 hereof. Upon
delivery by the Issuer to the Trustee of an Officer's Certificate and Opinion
of Counsel, and to the effect that such sale or other disposition was made by
the Issuer in accordance with the provisions of this Indenture, including
without limitation Section 4.08 hereof, the Trustee shall execute any documents
reasonably required in order to evidence the release of any such Guarantor from
its obligations under its Guarantee. Any Guarantor not released from its
obligations under its Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other obligations of any
Guarantor under this Indenture as provided in this Article 11.
SECTION 11.05 LIMITATION OF GUARANTOR'S LIABILITY
Each Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by such Guarantor pursuant to its Guarantee not constitute a fraudulent
transfer or conveyance for purposes of the Bankruptcy Law, the Uniform
Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal or state law. To effectuate the foregoing intention, the Holders and
such Guarantor hereby irrevocably agree that the obligations of such Guarantor
under this Article 11 shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Guarantor
and after giving effect to any collections from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under the Guarantee of such Guarantor not constituting a fraudulent transfer or
conveyance.
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SECTION 11.06 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE GUARANTOR
(a) For purposes of any provision of this Indenture which
provides for the delivery by any Guarantor of an Officer's Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.01 shall
apply to such Guarantor as if references therein to the Issuer were references
to such Guarantor.
(b) Any request, direction, order or demand which by any
provision of this Indenture is to be made by any Guarantor, shall be sufficient
if evidenced as described in Section 12.02 as if references therein to the
Issuer were references to such Guarantor.
(c) Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Notes to or on any Guarantor may be given or served as described
in Section 12.02 as if references therein to Issuer were references to such
Guarantor.
(d) Upon any demand, request or application by any
Guarantor to the Trustee to take any action under this Indenture, such
Guarantor shall furnish to the Trustee such certificates and opinions as are
required in Section 11.04 hereof as if all references therein to the Issuer
were references to such Guarantor.
SECTION 11.07 SUBORDINATION OF GUARANTEES
The Obligations of each Guarantor under its Guarantee pursuant
to this Article 11 shall be subordinated in right of payment to all Senior Debt
of the Parent or the Subsidiary Guarantor, as applicable, including the
indebtedness under the New Credit Facility. The Subsidiary Guarantees will
rank pari passu in right of payment with all current and future senior
subordinated Indebtedness of the Guarantors, including the guarantees by the
Subsidiary Guarantors of obligations under the 9 1/8% Senior Subordinated Notes
and the Parent's obligations under the Parent Convertible Notes. For the
purposes of the foregoing sentence, (a) each Guarantor may make, and the
Trustee and the Holders of the Notes shall have the right to receive and/or
retain, payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 10 hereof, and (b) the rights and obligations of
the relevant parties relative to the Guarantees and the Senior Debt shall be
the same as their respective rights and obligations relative to the Notes and
Senior Debt of the Issuer pursuant to Article 10.
Each Holder of a Note by its acceptance thereof (a) agrees to
and shall be bound by the provisions of this Section 10.07, (b) authorize and
directs the Trustee on the Holder's behalf to take such action as shall be
necessary and appropriate to
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<PAGE> 108
effectuate the subordination so provided, and (c) appoints the Trustee as the
Holder's attorney-in-fact for any and all such purposes.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02 NOTICES
Any notice or communication by the Issuer or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Issuer:
CEX Holdings, Inc.
1 Environmental Way
Broomfield, Colorado 85021
Telecopier No.: (303) 664-3823
Attention: Chief Financial Officer
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Administration
The Issuer or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; if telecopied; and the next Business Day after
timely delivery to the courier, if sent by overnight air courier guaranteeing
next day delivery.
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<PAGE> 109
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Issuer mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Issuer, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Issuer to the Trustee
to take any action under this Indenture, the Issuer shall furnish to the
Trustee:
(a) an Officer's Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the
opinion of the signer, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have
been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the
statements set forth in Section 12.05 hereof) stating that, in the
opinion of such counsel, all such conditions precedent and covenants
have been satisfied; provided, that no such Opinion of Counsel shall
be required on the Issue Date.
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<PAGE> 110
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions
of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules
and set reasonable requirements for its functions.
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No past, present or future director, officer, employee,
incorporator or stockholder of the Issuer, as such, shall have any liability
for any obligations of the Issuer under the Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance
of the Notes.
SECTION 12.08 GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES.
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SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Issuer or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 12.10 SUCCESSORS
All agreements of the Issuer in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 12.11 SEVERABILITY
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 12.12 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following pages]
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<PAGE> 112
SIGNATURES
Dated as of May 29, 1998 CEX HOLDINGS, INC.
Attest: By: /s/ Gary M. Jacobs
-------------------------------
Name: Gary M. Jacobs
Title: Executive Vice President
/s/ Kyle M. Hall
- ---------------------
Name: Kyle M. Hall
Title: Assistant Secretary
CORPORATE EXPRESS, INC.
Attest: By: /s/ Gary M. Jacobs
-------------------------------
Name: Gary M. Jacobs
Title: Executive Vice President
/s/ Kyle M. Hall
- ---------------------
Name: Kyle M. Hall
Title: Assistant Secretary
ASAP SOFTWARE EXPRESS, INC.
CORPORATE EXPRESS CALLCENTER
SERVICES, INC.
SOFCO-MEAD, INC.
SQP, INC.
SOFCO OF OHIO, INC.
S&O PROPERTY, INC.
EPCO PACKAGING SERVICES, INC.
HERMANN MARKETING, INC.
DISTRIBUTION RESOURCES CO.
CORPORATE EXPRESS REAL ESTATE, INC.
CORPORATE EXPRESS OF THE EAST, INC.
CORPORATE EXPRESS OF TEXAS, INC.
FEDERAL SALES SERVICE, INC.
VIRGINIA IMPRESSIONS PRODUCTS CO., INC
MICROMAGNETIC SYSTEMS, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS, INC.
AMERICAN DELIVERY SYSTEM, INC.
CORPORATE EXPRESS DISTRIBUTION
SERVICES, INC.
NEW DELAWARE DELIVERY, INC.
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<PAGE> 113
RED ARROW CORPORATION
RAC, INC.
RED ARROW SPOTTING SERVICES, INC.
RED ARROW TRUCKING CO.
RED ARROW WAREHOUSING, CO.
RUSH TRUCKING, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY LEASING -
INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY LEASING -
MID-ATLANTIC, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
MID-WEST, INC.
CORPORATE EXPRESS DELIVERY LEASING -
MID-WEST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY LEASING -
NEW ENGLAND, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
NORTHEAST, INC.
CORPORATE EXPRESS DELIVERY LEASING -
NORTHEAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
SOUTHEAST, INC.
CORPORATE EXPRESS DELIVERY LEASING -
SOUTHEAST, INC.
AIR COURIER DISPATCH OF
NEW JERSEY, INC.
SUNBELT COURIER, INC.
TRICOR AMERICA, INC.
MIDNITE EXPRESS INTERNATIONAL
COURIER, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
SOUTHWEST, INC.
CORPORATE EXPRESS DELIVERY LEASING -
SOUTHWEST, INC.
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<PAGE> 114
CORPORATE EXPRESS DELIVERY SYSTEMS -
WEST COAST, INC.
CORPORATE EXPRESS DELIVERY LEASING -
WEST COAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY LEASING -
EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY
ADMINISTRATION, INC.
CORPORATE EXPRESS DELIVERY
MANAGEMENT BUSINESS TRUST
By: /s/ Gary M. Jacobs
------------------------------------
Name: Gary M. Jacobs
Title: Vice President
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<PAGE> 115
THE BANK OF NEW YORK, as Trustee
By: /s/ Walter N. Gitlin
----------------------------
Name: Walter N. Gitlin
Title: Vice President
(SEAL)
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<PAGE> 116
EXHIBIT A (144A)
(Face of Note) Reg. S)
CUSIP No.: (ISIN)
9 5/8% [Series A] [Series B] Senior Subordinated Notes due 2008
No. $350,000,000
CEX HOLDINGS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on June 1, 2008
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Dated: May 29, 1998
CEX HOLDINGS, INC.
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
The Bank of New York, as Trustee
By:
----------------------------
Authorized Signatory
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<PAGE> 117
(Back of Note)
9 5/8% [Series A] [Series B] Senior Subordinated Notes due 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGE IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(A) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL
NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.(1)
Unless this certificate is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York) ("DTC"), to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
Cede & Co. or such other name as may be requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.(1)
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE.
BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER: (1) REPRESENTS THAT (I) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"),
OR (II) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE
- -------------
(1) These paragraphs should be included only if the Note is issued in global
form.
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<PAGE> 118
SECURITIES ACT (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE
TRANSFER THIS NOTE EXCEPT (I) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (II) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF
THE SECURITIES ACT, (IV) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (V) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR
(VI) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND
"UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF
REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. Interest. CEX Holdings, Inc., a Colorado corporation (the
"Company"), promises to pay interest on the principal amount of this Note at 9
5/8% per annum from May 29, 1998 until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually on June 1 and December 1 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to
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<PAGE> 119
on the face hereof and the next succeeding Interest Payment Date, interest
shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be December 1, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time
to time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Notes at the close of business on the May
15 or November 15 next preceding the Interest Payment Date, even if such Notes
are cancelled after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Notes will be payable as to principal, premium,
interest and Liquidated Damages, if any, at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages,
if any, may be made by check mailed to the Holders at their addresses set forth
in the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of,
interest, premium and Liquidated Damages, if any, on all Global Notes and all
other Notes the Holders of which shall have provided written wire transfer
instructions to the Company or the Paying Agent at least 15 days before the
relevant payment. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New
York, the Trustee under the Indenture, will act as Paying Agent and Registrar.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an
Indenture dated as of May 29, 1998 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject
to all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are unsecured obligations of the Company
limited to $550,000,000 (of which $350,000,000 will be issued as of May 29,
1998) in aggregate principal amount.
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<PAGE> 120
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Section of this
Note, the Company shall not have the option to redeem the Notes prior to June
1, 2003. Thereafter, the Company shall have the option to redeem the Notes, in
whole or in part, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on June 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.813%
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.208%
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.604%
2006 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this
Section 3.07, at any time prior to June 1, 2001, the Issuer may, on one or more
occasions, redeem up to an aggregate of 35% of the aggregate principal amount
of Notes issued under the Indenture at a redemption price equal to 109.625% of
the principal amount thereof, (subject to the right of Holders of record on a
Record Date to receive interest due on an Interest Payment Date that is on or
prior to such Redemption Date) together with accrued and unpaid interest and
Liquidated Damages, if any, to the date of redemption, with cash from the Net
Cash Proceeds to the Issuer of one or more Public Equity Offerings; provided
that at least 65% of the aggregate principal amount of the Notes issued under
the Indenture remain outstanding immediately after the occurrence of such
redemption; provided, further, that such notice of redemption shall be sent
within 30 days after the date of the closing of any such Public Equity
Offering and such redemption date shall occur within 60 days after such notice
has been sent.
(c) Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Notes are
to be redeemed at its registered address. Notes in denominations larger than
$1,000 may be redeemed in part but only in integral multiples of $1,000, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption unless the Company defaults in such payments due on the
redemption date.
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6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control (subject
to the provisions of the immediately succeeding paragraph), each Holder of
Notes shall have the right, at such Holder's option, pursuant to an offer
(subject only to conditions required by applicable law, if any) by the Company
(the "Change of Control Offer"), to require the Company to repurchase all or
any part of such Holder's Notes (provided, that the principal amount of such
Notes must be $1,000 or an integral multiple thereof) on a date (the "Change of
Control Purchase Date") that shall be no later than 40 Business Days after the
occurrence of such Change of Control, at a cash price (the "Change of Control
Purchase Price") equal to 101% of the principal amount thereof together with
accrued and unpaid interest and Liquidated Damages, if any, to the Change of
Control Purchase Date. The Change of Control Offer shall be made within 35
days following a Change of Control and shall remain open for 20 Business Days
following its commencement or such longer period as may be required by
applicable law (the "Change of Control Offer Period").
If a New Credit Facility is in effect, or any amounts are
owing thereunder, at the time of the occurrence of a Change of Control, prior
to the mailing of the notice to Holders described in the preceding paragraph,
but in any event within thirty days following any Change of Control, the
Company shall (i) repay in full all Obligations under the New Credit Facility
or offer to repay in full all Obligations under the New Credit Facility and
repay the Obligations under the New Credit Facility of each lender who has
accepted such offer or (ii) obtain the requisite consent under the New Credit
Facility to permit the repurchase of Notes as described above. The Company
must first comply with the covenant described in the preceding sentence before
it shall be required to purchase Notes in the event of a Change of Control;
provided that the Company's failure to comply with the covenant described in
the preceding sentence shall constitute an Event of Default described in clause
(iii) under "Events of Default" if not cured within thirty days after the
notice required by such clause. As a result of the foregoing, a Holder of the
Notes may not be able to compel the Company to purchase the Notes unless the
Company is able at the time to refinance all of the New Credit Facility or
obtain requisite consents under the New Credit Facility.
On or before the Change of Control Purchase Date, the Company
shall (1) accept for payment Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent cash
sufficient to pay the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any) of all Notes so tendered
and (3) deliver to the Trustee Notes so accepted an Officers' Certificate
listing the Notes or portions thereof being purchased by the Company. The
Paying Agent shall promptly pay the Holders of
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Notes so accepted an amount equal to the Change of Control Purchase Price
(together with accrued and unpaid interest and Liquidated Damages, if any), and
the Trustee promptly shall authenticate and deliver to such Holders a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Purchase Date.
Any Change of Control Offer will be made in compliance with
all applicable laws, rules and regulations, including, if applicable,
Regulation 14E under the Exchange Act and the rules thereunder and all other
applicable Federal and state securities laws. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this covenant, compliance by the Company or any of the Guarantors with such
laws and regulations shall not in and of itself cause a breach of its
obligations under such covenant.
If the Change of Control Purchase Date hereunder is on or
after an interest payment Record Date and on or before the associated Interest
Payment Date, any accrued and unpaid interest (and Liquidated Damages, if any
due on such Interest Payment Date) will be paid to the Person in whose name a
Note is registered at the close of business on such Record Date, and such
interest (and Liquidated Damages, if applicable) will not be payable to Holders
who tender the Notes pursuant to the Change of Control Offer.
(b) The Company and the Subsidiary Guarantors shall not,
and shall not permit any of their Subsidiaries to, in one or a series of
related transactions, convey, sell, transfer, assign or otherwise dispose of,
directly or indirectly, any of its property, business or assets, including by
merger or consolidation (in the case of a Subsidiary of the Company), and
including any sale or other transfer or issuance of any Equity Interests of any
Subsidiary of the Company, whether by the Company or a Subsidiary of either or
through the issuance, sale or transfer of any Equity Interest by a Subsidiary
of the Company (any of the foregoing an "Asset Sale"), unless (1)(a) the Net
Cash Proceeds therefrom (the "Asset Sale Offer Amount") are applied (i) within
330 days after the date of each such Asset Sale, to the optional redemption of
the Notes in accordance with the terms of the Indenture and, at the Company's
option, other Indebtedness of the Company ranking on a parity with the Notes
from time to time outstanding with similar provisions requiring the Company to
make an offer to purchase or to redeem such Indebtedness with the proceeds from
asset sales, pro rata in proportion to the respective principal amounts (or
accreted values in the case of Indebtedness issued with an original issue
discount) of the Notes and such other Indebtedness then outstanding or (ii)
within 360 days after the date of each such Asset Sale, to the repurchase of
the Notes pursuant to a cash offer to repurchase Notes and, at the Company's
option, other Indebtedness of the Company ranking on a parity with the Notes
from time to time outstanding with similar provisions requiring the Company to
make an offer to purchase or to redeem such Indebtedness with the proceeds from
asset sales, pro rata in proportion to the respective principal amounts (or
accreted values in the case of Indebtedness issued with an original issue
discount) of the Notes and such other Indebtedness then outstanding (the "Asset
Sale Offer") at a purchase
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price of 100% of principal amount (or accreted value in the case of
Indebtedness issued with an original issue discount) (the "Asset Sale Offer
Price") together with accrued and unpaid interest and Liquidated Damages, if
any, to the date of payment, made within 330 days of such Asset Sale, or (b)
within 330 days following such Asset Sale, the Asset Sale Offer Amount is (i)
used to make a Permitted Investment (other than pursuant to clause (i) thereof)
or otherwise invested (or committed, pursuant to a binding commitment subject
only to reasonable, customary closing conditions, to be invested, and in fact
is so invested, within an additional 90 days) in assets and property which in
the good faith reasonable judgment of the Company will immediately constitute
or be a part of a Related Business of the Company or such Subsidiary (if it
continues to be a Subsidiary) immediately following such transaction, except
that no proceeds from an Asset Sale of Existing Assets or assets acquired
(directly or indirectly) from the proceeds of an Asset Sale of Existing Assets
may be invested in or used to acquire assets or property for a Foreign
Subsidiary or (ii) used to retire Purchase Money Indebtedness or other Senior
Debt in accordance with any provisions therein requiring the Company to
repurchase, redeem, or otherwise retire such Indebtedness with the proceeds
from such Asset Sale, Indebtedness outstanding under the New Credit Facility
and, except with respect to the use of proceeds from the sale of Assets to Be
Disposed of, to permanently reduce (in the case of Senior Debt that is not
Purchase Money Indebtedness) the amount of such Indebtedness outstanding on the
Issue Date, any amount outstanding under New Credit Facility or Indebtedness
permitted pursuant to paragraph (c), (f) or (g) of Section 4.10 of the
Indenture (including that in the case of a revolver or similar arrangement that
makes credit available, such commitment is permanently so reduced by such
amount), except that no proceeds from an Asset Sale of Existing Assets or
assets acquired from the proceeds or Asset Sale of Existing Assets may be used
to retire Indebtedness of a Foreign Subsidiary (unless such Existing Assets
were assets of such Foreign Subsidiary on the Issue Date), (2) with respect to
any transaction or related series of transactions of securities, property or
assets with an aggregate fair market value in excess of $3,000,000, at least
75% of the consideration for such Asset Sale (excluding (a) Senior Debt assumed
by a transferee which assumption permanently reduces the amount of Indebtedness
outstanding on the Issue Date or permitted pursuant to paragraph (c), (f) or
(g) of Section 4.10 of the Indenture (including that in the case of a revolver
or similar arrangement that makes credit available, such commitment is
permanently so reduced by such amount), (b) Purchase Money Indebtedness assumed
by a transferee and (c) property that within 30 days of such Asset Sale is
converted into cash or Cash Equivalents) consists of Cash or Cash Equivalents
which is applied as set forth above or consists of Restricted Investments, (3)
no Default or Event of Default shall have occurred and be continuing at the
time of, or would occur after giving effect, on a pro forma basis, to, such
Asset Sale, and (4) the Company determines in good faith that the Company or
such Subsidiary, as applicable, receives fair market value for such Asset Sale.
Any Asset Sale Offer may be deferred until the accumulated Net
Cash Proceeds from Asset Sales not applied to the uses set forth in clauses
(1)(a)(i) or (b) above (the "Excess Proceeds") exceeds $20,000,000 each Asset
Sale Offer shall remain open for at least 20 Business Days following its
commencement (the "Asset Sale Offer
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Period"). Upon expiration of the Asset Sale Offer Period, the Company shall
apply the Asset Sale Offer Amount plus an amount equal to accrued and unpaid
interest and Liquidated Damages, if any, to the purchase of all Indebtedness
properly tendered pursuant to the Asset Sale Offer (on a pro rata basis (in
$1,000 increments) if the Asset Sale Offer Amount is insufficient to purchase
all Indebtedness so tendered) at the Asset Sale Offer Price (together with
accrued interest and Liquidated Damages, if any). To the extent that the
aggregate amount of Indebtedness tendered pursuant to an Asset Sale Offer is
less than the Asset Sale Offer Amount, the Company may use any remaining Net
Cash Proceeds for general corporate purposes as otherwise permitted by the
Indenture and following each Asset Sale Offer the Excess Proceeds amount shall
be reset to zero.
Notwithstanding anything herein to the contrary, other than as
provided in the following sentence, the Issuer and its Subsidiaries may sell
(including by merger, consolidation or issuance), transfer, assign, license,
sublicense or otherwise dispose of (collectively "Transfer") any software,
trademark or other intellectual property, or any interest (including any Equity
Interest) in any entity which has as its principal assets such property or
rights, and such Transfer shall not be treated as an Asset Sale hereunder, if
(a) the Issuer and its Subsidiary Guarantors thereafter have unfettered access
to and use of such property or rights at a cost to the Issuer and its
Subsidiaries which is not in excess of the aggregate normal operating costs and
third party license fees which have been incurred by the Issuer and its
Subsidiaries prior to any such Transfer, and (b) any proceeds from any Transfer
of any such property, rights or interests (including Equity Interests) are used
(i) solely for the purpose of the development or installation or implementation
of such property or rights (or similar property or rights) or (ii) otherwise in
accordance with the provisions of the first paragraph of this covenant.
Notwithstanding the preceding sentence or any other provision of this Section
7(b) to the contrary, the Issuer and its Subsidiaries may not Transfer the
internally developed product distribution software used by the Issuer and its
Subsidiaries ("Core Operating Software") or intellectual property rights
therein or any interests (including any Equity Interests) in any entity which
has as its principal assets such Core Operating Software or rights therein,
unless the Issuer and its Subsidiary Guarantors comply with clauses (a) and (b)
of the preceding sentence in connection with such Transfer.
8. Denominations, Transfer, Exchange. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before the mailing of a notice of redemption of Notes to be
redeemed or during the period between a record date and the corresponding
Interest Payment Date.
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9. Persons Deemed Owners. The registered Holder of a Note
may be treated as its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of a majority in aggregate principal amount of the then
outstanding Notes, and any existing default or compliance with any provision of
the Indenture or the Notes may be waived with the consent of the Holders of a
majority in aggregate principal amount of the then outstanding Notes. Without
the consent of any Holder of a Note, the Indenture or the Notes may be amended
or supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of the Notes
in case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of the Notes (including the
addition of any Subsidiary Guarantors) or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
11. Defaults and Remedies. Events of Default include: (i)
default for 30 days in the payment when due of interest on or Liquidated
Damages, if any, with respect to the Notes; (ii) default in payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption by acceleration or otherwise, including
without limitation, payment of the Change of Control Purchase Price or the
Asset Sale Offer Price, or otherwise; (iii) failure by the Company for 45 days
after notice to the Company by the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding to comply with certain
other agreements in the Indenture or the Notes; (iv) default under certain
other agreements relating to Indebtedness of the Company which default results
in the acceleration of such Indebtedness prior to its express maturity; (v)
certain nonappealable final judgments for the payment of money that remain
undischarged for a period of 60 days; or (vi) certain events of bankruptcy or
insolvency with respect to the Company or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in aggregate principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately by notice in writing to
the Company (and to the Trustee if given by the Holders) and the representative
of holders of Indebtedness under the New Credit Facility, if any amounts are
outstanding thereunder. Notwithstanding the foregoing, in the case of an Event
of Default arising from certain events of bankruptcy or insolvency, all
outstanding Notes will (i) become due and payable without further action or
notice or (ii) if there are any amounts outstanding under the New Credit
Facility, become due and immediately payable upon the first to occur of an
acceleration under the New Credit Facility or five Business Days after receipt
by the Company and the representative of the holders of the Indebtedness under
the New Credit Facility of the Acceleration Notice, but only if an Event of
Default is then continuing. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders
of a majority in aggregate principal amount of the then
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outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, except a Default with respect to any provision requiring a
supermajority approval to amend, which Default may be waived only by such a
supermajority, and except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture, and the Company is required upon becoming aware of any
Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
12. Subordination. The payment of principal of, premium,
if any, and interest on the Notes will be subordinated in right of payment to
the prior payment in full of Senior Debt as set forth in Article 10 of the
Indenture.
13. Trustee Dealings with Company. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. No Recourse Against Others. A director, officer,
employee, incorporator or stockholder, as such, past, present or future, of the
Company, the Guarantors or any successor entity, shall not have any personal
liability in respect of the obligations of the Company or the Guarantors under
the Notes or the Indenture solely by reason of his status as such stockholder,
employee, officer or director. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. Authentication. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
Agent.
16. Abbreviations. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. Additional Rights of Holders of Transfer Restricted
Securities. In addition to the rights provided to Holders of Notes under the
Indenture, Holders of Transfer Restricted Securities (as defined in the
Registration Rights Agreement) shall have all the rights set forth in the
Registration Rights Agreement dated as of the date of the Indenture, between
the Company and the parties named on the signature pages thereof (the
"Registration Rights Agreement").
18. CUSIP Numbers. Pursuant to a recommendation promulgated
by the Committee on Uniform Security Identification Procedures, the Company has
caused
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CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is
made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
CEX Holdings, Inc.
1 Environmental Way
Broomfield, Colorado 80071
Telecopier No.: (303) 664-3823
Attention: Chief Financial Officer
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GUARANTEE
The Guarantors listed below (hereinafter referred to as the
"Guarantors," which term includes any successor or assign under the Indenture
(the "Indenture") and any additional Guarantors), have irrevocably and
unconditionally guaranteed (i) the due and punctual payment of the principal
of, premium, if any, and interest on the 9 5/8% Senior Subordinated Notes due
2008 (the "Notes") of CEX Holdings, Inc., a Colorado corporation (the
"Company"), whether at stated maturity, by acceleration or otherwise, the due
and punctual payment of interest on the overdue principal, and premium if any,
and (to the extent permitted by law) interest on any interest, if any, on the
Notes, and the due and punctual performance of all other obligations of the
Company, to the Holders or the Trustee all in accordance with the terms set
forth in Article 11 of the Indenture, (ii) in case of any extension of time of
payment or renewal of any Notes or any such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise, and (iii) the payment of any and all costs and expenses
(including reasonable attorneys' fees) incurred by the Trustee or any Holder in
enforcing any rights under this Guarantee.
The obligations of each Guarantor to the Holder and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 11 of the Indenture and reference is hereby made to such Indenture for
the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such,
past, present or future of each Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, officer, director
or incorporator.
This is a continuing Guarantee and shall remain in full force
and effect and shall be binding upon each Guarantor and its successors and
assigns until full and final payment of all of the Company's obligations under
the Notes and Indenture and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders, and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This is a Guarantee of payment and not of collectibility.
This Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized signatories.
The Obligations of each Guarantor under its Guarantee shall be
limited to the extent necessary to insure that it does not constitute a
fraudulent conveyance under applicable law.
The Guarantees pursuant to Article 11 of the Indenture shall be
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subordinated in right of payment to all Senior Debt of the Parent or the
Subsidiary Guarantor, as applicable, including the indebtedness of the New
Credit Facility. The Subsidiary Guarantees will rank pari passu in right of
payment with all current and future senior subordinated Indebtedness of the
Guarantors, including the guarantees by the Subsidiary Guarantors of
Obligations under the 9 1/8% Senior Subordinated Notes and the Parent's
obligations under the Parent Convertible Notes. For the purposes of the
foregoing sentence, (a) each Guarantor may make, and the Trustee and the
Holders of the Notes shall have the right to receive and/or retain, payments by
any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to the Indenture, including Article
10 thereof, and (b) the rights and obligations of the relevant parties relative
to the Guarantees and the Senior Debt shall be the same as their respective
rights and obligations relative to the Notes and Senior Debt of the Company
pursuant to Article 10 of the Indenture.
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE INCORPORATED
HEREIN BY REFERENCE.
Capitalized terms used herein have the same meanings given in
the Indenture unless otherwise indicated.
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Guarantors:
Corporate Express, Inc.
By:
--------------------------------
Name:
Title:
ASAP Software Express, Inc.
Corporate Express CallCenter
Services, Inc.
Sofco-Mead, Inc.
SQP, Inc.
Sofco of Ohio, Inc.
S&O Property, Inc.
EPCO Packaging Services, Inc.
Hermann Marketing, Inc.
Distribution Resources Co.
Corporate Express Real Estate, Inc.
Corporate Express of the East, Inc.
Corporate Express of Texas, Inc.
Federal Sales Service, Inc.
Virginia Impressions Products Co.,
Inc.
MicroMagnetic Systems, Inc.
Corporate Express Delivery Systems,
Inc.
American Delivery System, Inc.
Corporate Express Distribution
Services, Inc.
New Delaware Delivery, Inc.
Red Arrow Corporation
RAC, Inc.
Red Arrow Spotting Services, Inc.
Red Arrow Trucking Co.
Red Arrow Warehousing, Co.
Rush Trucking, Inc.
Corporate Express Delivery Systems -
Intermountain, Inc.
Corporate Express Delivery Leasing -
Intermountain, Inc.
Corporate Express Delivery Systems -
Mid-Atlantic, Inc.
Corporate Express Delivery Leasing -
Mid-Atlantic, Inc.
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<PAGE> 131
Corporate Express Delivery Systems -
Mid-West, Inc.
Corporate Express Delivery Leasing -
Mid-West, Inc.
Corporate Express Delivery Systems -
New England, Inc.
Corporate Express Delivery Leasing -
New England, Inc.
Corporate Express Delivery Systems -
Northeast, Inc.
Corporate Express Delivery Leasing -
Northeast, Inc.
Corporate Express Delivery Systems -
Southeast, Inc.
Corporate Express Delivery Leasing -
Southeast, Inc.
Air Courier Dispatch of New Jersey,
Inc.
Sunbelt Courier, Inc.
Tricor America, Inc.
Midnite Express International
Courier, Inc.
Corporate Express Delivery Systems -
Southwest, Inc.
Corporate Express Delivery Leasing -
Southwest, Inc.
Corporate Express Delivery Systems -
West Coast, Inc.
Corporate Express Delivery Leasing -
West Coast, Inc.
Corporate Express Delivery Systems -
Expedited, Inc.
Corporate Express Delivery Leasing -
Expedited, Inc.
Corporate Express Delivery
Administration, Inc.
Corporate Express Delivery Management
Business Trust
By:
----------------------------------
Name:
Title:
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<PAGE> 132
Assignment Form
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
--------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
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<PAGE> 133
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.07 or 4.08 of the Indenture, check the box below:
[ ] Section 4.07 [ ] Section 4.08
If you want to elect to have only part of the Note purchased by
the Company pursuant to Section 4.07 or Section 4.08 of the Indenture, state
the amount you elect to have purchased: $___________
Date:
--------------
Your Signature:
-----------------------------------
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:
--------------------
Signature Guarantee.
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<PAGE> 134
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(2)
The following exchanges of a part of this Global Note for
Definitive Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of Signature of
Amount of decrease in Amount of increase in this Global Note authorized signatory
Principal Amount of Principal Amount of following such decrease of Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
------------------- ----------------------- ----------------------- ------------------------ -------------------
<S> <C> <C> <C> <C>
</TABLE>
- ---------------------
(2) This should be included only if the Note is issued in global form.
A-19
<PAGE> 135
EXHIBIT B
CERTIFICATE OF TRANSFER
CEX Holdings, Inc.
1 Environmental Way
Broomfield, Colorado 80021
Attention: President
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York
Attention: Corporate Trust Administration
Re: 9 5/8% Senior Subordinate Notes due 2008
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 29, 1998
(the "Indenture"), among CEX Holdings, Inc., as issuer (the "Company), the
Guarantors party thereto and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture. _____________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $________________ in such Note[s] or interests (the
"Transfer"), to ______________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby confers
that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest of Definitive Note is being transferred to a Person that
the Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each account is a "qualified institutional buyer" within the
meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and
such Transfer is in compliance with any applicable blue sky securities laws of
any State of the United States. Upon consummation of the proposed Transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions
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<PAGE> 136
on transfer enumerated in the Private Placement Legend printed on the 144A
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
2. [ ] CHECK IF THE TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO
REGULATION S. The Transfer is being effected pursuant to and in accordance
with Rule 903 or Rule 904 under the Securities Act and, accordingly, the
Transferor hereby certifies that (i)the Transfer is not being made to a person
in the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than a Initial
Purchaser) and the interest transferred will be held immediately thereafter
through Euroclear or Cedel. Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial interest
or Definitive Note will be subject to the restrictions on Transfer enumerated
in the Private Placement Legend printed on the Regulation S Global Note and/or
the Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any State of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] Such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act; or
(b) [ ] Such Transfer is being effected to the Company or a subsidiary
thereof; or
(c) [ ] Such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act; or
B-2
<PAGE> 137
(d) [ ] Such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in a form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached to
this certification and provided to the Company, which has confirmed its
acceptability), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Definitive Notes and in the Indenture and the Securities Act.
4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST
IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] Check if transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to an in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any State of the United States
and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
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<PAGE> 138
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
B-4
<PAGE> 139
This certificate and the statements contained herein are made for your benefit
and the benefit of the Company.
----------------------------- Dated:
[Insert Name of Transferor] -------------------
By:
----------------------------
Name:
Title:
B-5
<PAGE> 140
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
-----------
(ii) [ ] Regulation S Global Note (CUSIP ), or
----------
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
------------
(ii) [ ] Regulation S Global Note (CUSIP ), or
-----------
(iii) [ ] Unrestricted Global Note (CUSIP ); or
----------
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note, in accordance with
the terms of the Indenture.
B-6
<PAGE> 141
EXHIBIT C
CERTIFICATE OF EXCHANGE
Corporate Express, Inc.
1 Environmental Way
Broomfield, Colorado 80021
Attention: President
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York
Attention: Corporate Trust Administration
Re: 9 5/8% Senior Subordinated Notes due 2008
Dear Sirs:
Reference is hereby made to the Indenture, dated as of May 29,
1998 (the "Indenture"), between Corporate Express, Inc., as issuer (the
"Company"), the Subsidiary Guarantors party thereto and The Bank of New York,
as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
__________________________________(the "Owner") owns and
proposes to exchange the Notes] or interest in such Notes] specified herein, in
the principal amount of $_____________ in such Notes] or interests (the
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN A RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE
NOTES OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
NOTE. In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in
C-1
<PAGE> 142
an Unrestricted Global Note is being acquired in compliance with any applicable
blue sky securities laws of any State of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL
INTEREST IN A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i)
the Definitive Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Note is being acquired in compliance with any applicable blue sky securities
laws of any State of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Owner's Exchange of a Restricted Definitive Note for a
beneficial interest in an Unrestricted Global Note, the Owner hereby certifies
(i) the beneficial interest is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky
securities laws of any State of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive
Note is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the Unrestricted
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any State of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST
IN A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In
connection with the Exchange of the
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<PAGE> 143
Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the Restricted Definitive Note issued will
continue to be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Definitive Note and in the
Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's Restricted Definitive Note for a
beneficial interest in the: [CHECK ONE] [ ] 144A Global Note or [ ] Regulation
S Global Note with an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any
applicable blue sky securities laws of any State of the United States. Upon
consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
C-3
<PAGE> 144
This certificate and the statements contained herein are made for your BENEFIT
and the benefit of the Company.
- --------------------------------------
[insert Name of Owner]
By:
-----------------------------------
Name:
Title:
Dated:
--------------------------------
C-4
<PAGE> 1
EXHIBIT 4.10
REGISTRATION RIGHTS AGREEMENT
Dated as of May 29, 1998
by and among
CEX Holdings, Inc.
Corporate Express, Inc.
The Guarantors Listed on Schedule A Hereto
and
Donaldson, Lufkin & Jenrette Securities Corporation
BT Alex. Brown Incorporated
Merrill Lynch, Pierce, Fenner & Smith Incorporated
NationsBanc Montgomery Securities LLC
First Chicago Capital Markets, Inc.
BNY Capital Markets, Inc.
<PAGE> 2
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of May 29, 1998, by and among CEX Holdings, Inc., a Colorado
corporation (the "COMPANY") and a wholly owned subsidiary of Corporate Express,
Inc., a Colorado corporation, and the entities listed on Schedule A hereto
(each a "GUARANTOR" and collectively the "GUARANTORS"), and Donaldson Lufkin &
Jenrette Securities Corporation, BT Alex. Brown Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NationsBanc Montgomery Securities LLC,
First Chicago Capital Markets, Inc., and BNY Capital Markets, Inc. (each an
"INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom
has agreed to purchase the Company's 95/8% Series A Senior Notes due 2008 (the
"SERIES A NOTES") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated May
29, 1998, (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors
and the Initial Purchasers. In order to induce the Initial Purchasers to
purchase the Series A Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchasers set forth
in Section 3 of the Purchase Agreement. Capitalized terms used herein and not
otherwise defined shall have the meaning assigned to them in the Indenture,
dated May 29, 1998, between the Company and The Bank of New York, as Trustee,
relating to the Series A Notes and the Series B Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange
Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the
Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of all of the following events:
(a) the filing and effectiveness under the Act of the Exchange Offer
Registration Statement relating to the Series B Notes to be issued in the
Exchange Offer, (b) the keeping of the Exchange Offer open for a period not
less than the period required pursuant to Section 3(b) hereof and (c) the
delivery by the Company to the Registrar under the Indenture of Series B Notes
in the same aggregate principal amount as the aggregate principal amount of
Series A Notes tendered by Holders thereof pursuant to the Exchange Offer.
2
<PAGE> 3
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER: The exchange and issuance by the Company of a
principal amount of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal
amount of Series A Notes that are tendered by such Holders in connection with
such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers
propose to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act and pursuant to Regulation S
under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
INDENTURE: The Indenture, dated as of the date hereof, by and among
the Company and The Bank of New York, as trustee, pursuant to which the Notes
are being issued, as amended or supplemented from time to time in accordance
with the terms hereof.
PROSPECTUS: The prospectus included in a Registration Statement at
the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company
and the Guarantors relating to (a) an offering of Series B Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
3
<PAGE> 4
SERIES B NOTES: The Company's 95/8% Series B Senior Notes due 2008
to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Series A Note, until the
earliest to occur of (a) the date on which such Series A Note is exchanged in
the Exchange Offer for a Series B Note which is entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Series A Note has been
disposed of in accordance with a Shelf Registration Statement (and the
purchasers thereof have been issued Series B Notes), or (c) the date on which
such Series A Note is distributed to the public pursuant to Rule 144 under the
Act (and purchasers thereof have been issued Series B Notes) and each Series B
Note until the date on which such Series B Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 60 days after
the Closing Date (such 60th day being the "FILING DEADLINE"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 120 days after the
Closing Date (such 120th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to
such Exchange Offer Registration Statement pursuant to Rule 430A under the Act
and (C) cause all necessary filings, if any, in connection with the
registration and qualification of the Series B Notes to be made under the Blue
Sky laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting (i) registration of
the Series B Notes to be offered in exchange for the Series A Notes that are
Transfer Restricted Securities and (ii) resales of Series B Notes by
Broker-Dealers that tendered into the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company
4
<PAGE> 5
or any of its Affiliates) as contemplated by Section 3(c) below. If, after such
Exchange Offer Registration Statement initially is declared effective by the
Commission, the Exchange Offer or the issuance of Series B Notes thereunder as
contemplated by Section 3(c) below is interfered with by any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or court, such Exchange Offer Registration Statement shall
be deemed not to have been effective for purposes of this Agreement during the
period that such stop order, injunction or other similar order or requirement
shall remain in effect.
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event
shall such period be less than 20 Business Days. The Company and the Guarantors
shall cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes shall be included
in the Exchange Offer Registration Statement. The Company and the Guarantors
shall use their respective best efforts to cause the Exchange Offer to be
Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
Business Days thereafter (such 30th day being the "CONSUMMATION DEADLINE").
(c) The Company and the Guarantors shall include a "Plan of
Distribution" section in the Prospectus contained in the Exchange Offer
Registration Statement and indicate therein that any Broker-Dealer who holds
Transfer Restricted Securities that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities (other than Series A Notes acquired directly from the Company or any
Affiliate of the Company), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also
contain all other information with respect to such sales by such Broker-Dealers
that the Commission may require in order to permit such sales pursuant thereto,
but such "Plan of Distribution" shall not name any such Broker-Dealer or
disclose the amount of Transfer Restricted Securities held by any such
Broker-Dealer, except to the extent required by the Commission.
Because such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a Prospectus meeting
the requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the Prospectus
contained in the Exchange Offer Registration Statement is available for sales
of Series B Notes by Broker-Dealers, the Company and the Guarantors agree to
use their respective best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by and subject to the provisions of Section 6(a) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Company and the
Guarantors shall provide sufficient copies of the latest version of such
Prospectus to such Broker-Dealers, promptly upon request, and in no event later
than one day after such request, at any time during such period.
5
<PAGE> 6
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted
by applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of
Transfer Restricted Securities shall notify the Company no later than 20
Business Days following the Consummation Deadline that (A) such Holder was
prohibited by law or Commission policy from participating in the Exchange Offer
or (B) such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Notes acquired directly from the Company or any of its
Affiliates, then the Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of
(i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the notice specified in clause
(a)(ii) above, (such earlier date, the "FILING DEADLINE"), a shelf registration
statement on Form S-3 or, if such form is unavailable, other appropriate form
permitting registration of the Transfer Restricted Securities, pursuant to Rule
415 under the Act (which may be an amendment to the Exchange Offer Registration
Statement (the "SHELF REGISTRATION STATEMENT")), relating to all Transfer
Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration
Statement that satisfies the requirements of Section 3(a) above, the Company is
required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer is not permitted under applicable federal law (i.e.,
clause (a)(i) above), then the filing of the Exchange Offer Registration
Statement shall be deemed to satisfy the requirements of clause (x) above;
provided that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other
securities required to be registered therein pursuant to Section 6(b)(ii)
hereof, the Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for sales of Transfer Restricted
Securities by the Holders thereof entitled to the benefit of this Section 4(a)
and in conformity with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years (as extended pursuant to Section
6(c)(i)) following the Closing or such shorter period as will terminate when
all Transfer Restricted Securities covered by such Shelf Registration Statement
have been sold pursuant thereto.
6
<PAGE> 7
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within ten (10) Business Days after receipt of a
request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included
therein. No Holder of Transfer Restricted Securities shall be entitled to
liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have provided all such information. Each selling Holder agrees to
promptly furnish additional information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any applicable Registration Statement required by this
Agreement is not filed with the Commission on or prior to the applicable Filing
Deadline, (ii) any such applicable Registration Statement has not been declared
effective by the Commission on or prior to the applicable Effectiveness
Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the
Consummation Deadline, except in the case of Section 4(a)(i) when Section
4(a)(x)(i) has been satisfied or (iv) any applicable Registration Statement
required by this Agreement is filed and declared effective but shall thereafter
cease to be effective or fail to be usable for its intended purpose without
being succeeded immediately by a post-effective amendment to such Registration
Statement or a new Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(i) through (iv), a "REGISTRATION DEFAULT"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby liquidated damages in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90-day period immediately following the
occurrence of such Registration Default. The amount of the liquidated damages
shall increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
liquidated damages of $.50 per week per $1,000 in principal amount of Transfer
Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay liquidated damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner
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provided for the payment of interest in the Indenture, on each Interest Payment
Date, as more fully set forth in the Indenture and the Notes. Notwithstanding
the fact that any securities for which liquidated damages are due cease to be
Transfer Restricted Securities, all obligations of the Company and the
Guarantors to pay liquidated damages with respect to securities shall survive
until such time as such obligations with respect to such securities shall have
been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply
with all of the following provisions:
(i) If, following the date hereof there has been
announced a change in Commission policy with respect to exchange offers
such as the Exchange Offer, that in the reasonable opinion of counsel to
the Company raises a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company and the
Guarantors hereby agree to seek a no-action letter or other favorable
decision from the Commission allowing the Company and the Guarantors to
Consummate an Exchange Offer for such Transfer Restricted Securities. The
Company and the Guarantors hereby agree to pursue the issuance of such a
decision to the Commission staff level. In connection with the foregoing,
the Company and the Guarantors hereby agree to take all such other
actions as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the
Exchange Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the effect
that (A) it is not an Affiliate of the Company, (B) it is not engaged in,
and does not intend to engage in, and has no arrangement or understanding
with any person to participate in, a distribution of the Series B Notes
to be issued in the Exchange Offer and (C) it is acquiring the Series B
Notes in its ordinary course of business. As a condition to its
participation in the Exchange Offer, each Holder using the Exchange Offer
to participate in a distribution of the Series B Notes acknowledges and
agrees that, if the resales are of Series B Notes obtained by such Holder
in exchange for Series A Notes acquired directly from the Company or an
Affiliate thereof, it (1) could not, under
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<PAGE> 9
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
(available June 5, 1991) and Exxon Capital Holdings Corporation
(available May 13, 1988), as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and similar no-action letters
(including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a
secondary resale transaction and that such a secondary resale transaction
must be covered by an effective registration statement containing the
selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that neither the Company nor any Guarantor has entered
into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the best
of the Company's and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B Notes
received in the Exchange Offer, and (C) any other undertaking or
representation required by the Commission.
(b) Shelf Registration Statement. (i) In connection with the Shelf
Registration Statement, the Company and the Guarantors shall (x) comply with
all the provisions of Section 6(c) below and (y) use their respective best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(ii) issue, upon the request of any Holder or
purchaser of Series A Notes covered by any Shelf Registration Statement
contemplated by this Agreement, Series B Notes having an aggregate
principal amount equal to the aggregate principal amount of Series A
Notes sold pursuant to the Shelf Registration Statement and surrendered
to the Company for cancellation; the Company shall register Series B
Notes on the Shelf Registration Statement for this purpose and issue the
Series B Notes to the purchaser(s) of securities subject to the Shelf
Registration Statement in the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration
Statement and any related
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<PAGE> 10
Prospectus required by this Agreement, the Company and the Guarantors shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained therein
(A) to contain a material misstatement or omission or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors
shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required, use
their respective best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the applicable Registration
Statement as may be necessary to keep such Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof,
as the case may be; cause the Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 under the Act, and to comply fully with Rules 424,
430A and 462, as applicable, under the Act in a timely manner; and comply
with the provisions of the Act with respect to the disposition of all
securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution
by the sellers thereof set forth in such Registration Statement or
supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested
by such Holder, confirm such advice in writing, (A) when the Prospectus
or any Prospectus supplement or post-effective amendment has been filed,
and, with respect to any applicable Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to
make the statements therein not misleading, or that requires the making
of any additions to or changes in the Prospectus in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement,
or any state securities commission or other regulatory authority shall
issue an order suspending the qualification or exemption from
qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, the Company and the Guarantors shall use
their respective best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
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<PAGE> 11
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have occurred,
prepare a supplement or post-effective amendment to the Registration
Statement or related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(v) furnish to each Holder in connection with such
exchange or sale, if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such in connection with such sale,
if any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus (including
all such documents incorporated by reference) to which such Holders shall
reasonably object within five Business Days after the receipt thereof.
Such Holder shall be deemed to have reasonably objected to such filing if
such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains a material misstatement or
omission or fails to comply with the applicable requirements of the Act;
(vi) promptly upon the filing of any document that
is incorporated by reference into a Registration Statement or Prospectus,
at the request of any Holder, provide copies of such document to such
Holder in connection with such exchange or sale, if any, make the
Company's and the Guarantors' representatives reasonably available for
discussion of such document and other customary due diligence matters;
(vii) make available, at reasonable times, for
inspection by each Holder and any attorney or accountant retained by such
Holders, all financial and other records, pertinent corporate documents
of the Company and the Guarantors generally available to shareholders of
a public company and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holders, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent
to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection
with such exchange or sale, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such Holders may reasonably
request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
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<PAGE> 12
(ix) furnish to each Holder upon request in
connection with such exchange or sale without charge, at least one copy
of the Registration Statement, as first filed with the Commission, and of
each amendment thereto, including, if requested, all documents
incorporated by reference therein and all exhibits (including exhibits
incorporated therein by reference);
(x) deliver to each Holder without charge, as many
copies of the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Holder reasonably may request;
the Company and the Guarantors hereby consent to the use (in accordance
with law) of the Prospectus and any amendment or supplement thereto by
each selling Person in connection with the offering and the sale of the
Transfer Restricted Securities covered by the Prospectus or any amendment
or supplement thereto;
(xi) upon the request of any Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties with respect to the business of the
Company and the Guarantors and provide for such indemnification and take
all such other actions in connection therewith that are customary in
underwritten offerings in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Initial Purchaser or by any Holder of
Transfer Restricted Securities in connection with any sale or resale
pursuant to any applicable Registration Statement. In such connection,
the Company and the Guarantors shall:
(A) Upon request of any Holder, furnish (or in
the case of paragraphs (2) and (3), use its best efforts to cause to be
furnished) to each Holder, upon Consummation of the Exchange Offer or
upon the effectiveness of the Shelf Registration Statement, as the case
may be (including upon effectiveness of any Post Effective Amendment):
(1) a certificate, dated such date,
signed on behalf of the Company and each Guarantor by (x) the
President or any Vice President and (y) a principal financial or
accounting officer of the Company and such Guarantor, confirming, as
of the date thereof, the matters set forth in paragraphs (a) through
(d) of Section 9 of the Purchase Agreement and such other similar
matters as such Person may reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be (including the
date of effectiveness of any Post Effective Amendment), of counsel
for the Company and the Guarantors covering matters similar to those
set forth in paragraph (e) of Section 9 of the Purchase Agreement
and such other matter as such Holder may reasonably request, and in
any event including a statement to the effect that such counsel has
participated in conferences with officers and other representatives
of the Company and the Guarantors, representatives of the
independent public accountants for the
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<PAGE> 13
Company and the Guarantors and have considered the matters required
to be stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel assumes
no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the
date of Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case may
be (including the date of effectiveness of any Post Effective
Amendment) from the Company's independent accountants, in the
customary form and covering matters of the type customarily covered
in comfort letters to underwriters in connection with underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section 9(h) of the Purchase
Agreement, in form and substance reasonably satisfactory to the
Holders; and
(B) Deliver such other documents and
certificates as may be reasonably requested by the such selling Persons
to evidence compliance with clause (A) above and with any customary
conditions contained in the any agreement entered into by the Company and
the Guarantors pursuant to this clause (xi);
If at any time the representations and warranties of the Company
contemplated in clause (A)(1) above cease to be true and correct, the Company
shall so advise the Initial Purchasers and the underwriter(s), if any, and each
selling Holder promptly and, if requested by such Persons, shall confirm such
advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders and their
counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Transfer
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<PAGE> 14
Restricted Securities covered by the applicable Registration Statement;
provided, however, that neither the Company nor any Guarantor shall be
required to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the
service of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) issue, upon the request of any Holder of
Series A Notes covered by any Shelf Registration Statement contemplated
by this Agreement, Series B Notes having an aggregate principal amount
equal to the aggregate principal amount of Series A Notes surrendered to
the Company by such Holder in exchange therefor or being sold by such
Holder; such Series B Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Series B Notes, as the case
may be; in return, the Series A Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer
Restricted Securities that will result in such securities no longer being
Transfer Restricted Securities, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive legends;
and to register such Transfer Restricted Securities in such denominations
and such names as the selling Holders may request at least two Business
Days prior to such sale of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xiii)
above;
(xvi) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) otherwise use their respective best efforts
to comply with all applicable rules and regulations of the Commission,
and make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not
be audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in paragraph
(c) of Rule 158 under the Act);
(xviii) cause the Indenture to be qualified under
the TIA not later than the effective date of the first Registration
Statement required by this Agreement and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best
efforts to cause the Trustee to execute,
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<PAGE> 15
all documents that may be required to effect such changes and all other
forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner; and
(xix) use their respective best efforts to cause
the Transfer Restricted Securities or the Series B Notes, as applicable,
covered by an effective registration statement required by Section 3 or
Section 4 hereof to be rated by one or two rating agencies, if and as so
requested by the Holders of a majority in aggregate principal amount of
Transfer Restricted Securities relating to such registration statement or
the managing underwriters in connection therewith, if any;
(xx) provide promptly to each Holder, upon request,
each document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act;
(xxi) use their respective best efforts to take all
other steps necessary to effect the registration of the Transfer
Restricted Securities covered by a Registration Statement contemplated
hereby; and
(xxii) cause all Transfer Restricted Securities
covered by the Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are then
listed if requested by the Holders of a majority in aggregate principal
amount of Series A Notes of the managing underwriter(s), if any.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration
Statement until (i) such Holder has received copies of the supplemented or
amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder
is advised in writing by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated by reference in the Prospectus (in each case, the
"RECOMMENCEMENT DATE"). Each Holder receiving a Suspension Notice hereby agrees
that it will either (i) destroy any Prospectuses, other than file copies, then
in such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than file copies, then in such Holder's possession
of the Prospectus covering such Transfer Restricted Securities that was current
at the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or
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<PAGE> 16
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all Registration and filing fees and expenses; (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws (including, without limitation, reasonable fees and
disbursements of one firm of lawyers in connection with Blue Sky qualifications
of the Transfer Restricted Securities or Series B Notes); (iii) all expenses of
printing (including printing certificates for the Series B Notes to be issued
in the Exchange Offer and printing of Prospectuses), messenger and delivery
services and telephone; (iv) all fees and disbursements of counsel for the
Company and the Guarantors and one firm of lawyers for the Holders of Transfer
Restricted Securities; (v) all application and filing fees in connection with
listing the Series B Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; (vi) any rating agency
fees; and (vii) all fees and disbursements of independent certified public
accountants of the Company and the Guarantors (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors'
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), the expenses
of any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Notes into in the Exchange Offer and/or
selling or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one firm of lawyers, who shall be Skadden, Arps,
Slate, Meagher and Flom LLP and any local counsel, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), to the fullest extent lawful, from
and against any and all losses, claims, damages, liabilities, judgments,
actions and expenses (including without limitation and as incurred, any legal
or other expenses incurred in connection with investigating or defending any
matter, including any action that could give rise to any such losses, claims,
damages, liabilities or judgments) directly or indirectly caused by, related
to, based upon, arising out of or in connection with any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Notes or registered Series A Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission
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<PAGE> 17
that is based upon information relating to any of the Holders furnished in
writing to the Company by any of the Holders. The Company agrees to notify the
Holders promptly of the institution, threat or assertion of any claim,
proceeding (including any governmental investigation) or litigation in
connection with the matters addressed by this Agreement which involves the
Company or any Indemnified Person. This indemnity agreement will be in addition
to any liability which the Company may otherwise have, including under this
Agreement.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and the Guarantors,
and their respective directors and officers, and each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) the Company, or the Guarantors to the same extent as the
foregoing indemnity from the Company and the Guarantors set forth in section
(a) above, but only with reference to information relating to such Holder
furnished in writing to the Company by such Holder expressly for use in any
Registration Statement. In no event shall any Holder, its directors, officers
or any Person who controls such Holder be liable or responsible for any amount
in excess of the amount by which the total amount received by such Holder with
respect to its sale of Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages that
such Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in
writing (provided, that the failure to give such notice shall not relieve the
Company of its obligations pursuant to this Agreement except to the extent that
the Company has been prejudiced in any material respect by such failure) and
the indemnifying party shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the indemnified party and the
payment of all fees and expenses of such counsel, as incurred (except that in
the case of any action in respect of which indemnity may be sought pursuant to
both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different
from or additional to those available to the indemnifying party (in which case
the indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
17
<PAGE> 18
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to
Section 8(a), and by the Company and Guarantors, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify
and hold harmless the indemnified party from and against any and all losses,
claims, damages, liabilities and judgments by reason of any settlement of any
action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business
days after the indemnifying party shall have received a request from the
indemnified party for reimbursement for the fees and expenses of counsel (in
any case where such fees and expenses are at the expense of the indemnifying
party) and, prior to the date of such settlement, the indemnifying party shall
have failed to comply with such reimbursement request. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could
have been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Holders, on the other
hand, from their sale of Transfer Restricted Securities or (ii) if the
allocation provided by clause 8(d)(i) is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause 8(d)(i) above but also the relative fault of the Company
and the Guarantors, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company and the Guarantors,
on the one hand, and of the Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or such Guarantor,
on the one hand, or by the Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result
of the losses, claims, damages, liabilities and judgments referred to above
shall be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantors and each Holder agree that it would not
be just and equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to
18
<PAGE> 19
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any matter, including any action that could have
given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(c) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder
hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long
as any Transfer Restricted Securities remain outstanding and during any period
in which the Company or such Guarantor (i) is not subject to Section 13 or
15(d) of the Exchange Act, to make available, upon request of any Holder, to
such Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree
that any failure by the Company and/or the Guarantors to comply with their
respective obligations under Sections 3 and 4 hereof may result in material
irreparable injury to the Initial Purchasers or the Holders 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 any such failure, the Initial
Purchasers or any Holder may obtain such relief as may be required to
specifically enforce the Company's and the Guarantor's obligations under
Sections 3 and 4 hereof. The Company and the Guarantors further agree to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any
Guarantor will, on or after the date of this Agreement, enter into any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any
way conflict with and are not inconsistent with the rights granted to the
holders of the Company's and the Guarantors' securities under any agreement in
effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
be amended,
19
<PAGE> 20
modified or supplemented, and waivers or consents to or departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held
by the Company or its Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose Transfer Restricted Securities are being tendered
pursuant to the Exchange Offer, and that does not affect directly or indirectly
the rights of other Holders whose Transfer Restricted Securities are not being
tendered pursuant to such Exchange Offer, may be given by the Holders of a
majority of the outstanding principal amount of Transfer Restricted Securities
subject to such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company or the Guarantors:
Corporate Express, Inc.
1 Environmental Way
Broomfield, Colorado 80021
Telecopier No.: (303) 664-3823
Attention: Gary M. Jacobs
With a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
1753 Market Street, 51st Floor
Philadelphia, PA 19103
Telecopier No.: 215-864-8999
Attention: Gerald J. Guarcini, Esq.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when receipt acknowledged, if telecopied; and on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding
20
<PAGE> 21
upon the successors and assigns of each of the parties, including without
limitation and without the need for an express assignment, subsequent Holders;
provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale
set forth in this Agreement and, if applicable, the Purchase Agreement, and
such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
CEX HOLDINGS, INC.
By: /s/ Gary M. Jacobs
-----------------------------------
Name: Gary M. Jacobs
Title: Executive Vice President
CORPORATE EXPRESS, INC.
By: /s/ Gary M. Jacobs
-----------------------------------
Name: Gary M. Jacobs
Title: Executive Vice President
ASAP SOFTWARE EXPRESS, INC.
CORPORATE EXPRESS CALLCENTER SERVICES, INC.
SOFCO-MEAD, INC.
SQP, INC.
SOFCO OF OHIO, INC.
S&O PROPERTY, INC.
EPCO PACKAGING SERVICES, INC.
HERMANN MARKETING, INC.
DISTRIBUTION RESOURCES CO.
CORPORATE EXPRESS REAL ESTATE, INC.
CORPORATE EXPRESS OF THE EAST, INC.
CORPORATE EXPRESS OF TEXAS, INC.
FEDERAL SALES SERVICE, INC.
VIRGINIA IMPRESSIONS PRODUCTS CO., INC.
MICROMAGNETIC SYSTEMS, INC.
CORPORATE EXPRESS DELIVERY
SYSTEMS, INC.
AMERICAN DELIVERY SYSTEM, INC.
CORPORATE EXPRESS DISTRIBUTION SERVICES, INC.
22
<PAGE> 23
NEW DELAWARE DELIVERY, INC.
RED ARROW CORPORATION
RAC, INC.
RED ARROW SPOTTING SERVICES, INC.
RED ARROW TRUCKING CO.
RED ARROW WAREHOUSING, CO.
RUSH TRUCKING, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS -
INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY LEASING -
INTERMOUNTAIN, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - MID-ATLANTIC,
INC.
CORPORATE EXPRESS DELIVERY LEASING - MID-ATLANTIC,
INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - MID-WEST, INC.
CORPORATE EXPRESS DELIVERY LEASING - MID-WEST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - NEW ENGLAND,
INC.
CORPORATE EXPRESS DELIVERY LEASING - NEW ENGLAND,
INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - NORTHEAST,
INC.
CORPORATE EXPRESS DELIVERY LEASING - NORTHEAST,
INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - SOUTHEAST,
INC.
CORPORATE EXPRESS DELIVERY LEASING - SOUTHEAST, INC.
AIR COURIER DISPATCH OF
NEW JERSEY, INC.
SUNBELT COURIER, INC.
TRICOR AMERICA, INC.
MIDNITE EXPRESS INTERNATIONAL
COURIER, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - SOUTHWEST,
INC.
CORPORATE EXPRESS DELIVERY LEASING - SOUTHWEST,
INC.
23
<PAGE> 24
CORPORATE EXPRESS DELIVERY SYSTEMS - WEST COAST, INC.
CORPORATE EXPRESS DELIVERY LEASING - WEST COAST, INC.
CORPORATE EXPRESS DELIVERY SYSTEMS - EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY LEASING - EXPEDITED, INC.
CORPORATE EXPRESS DELIVERY ADMINISTRATION, INC.
CORPORATE EXPRESS DELIVERY MANAGEMENT
BUSINESS TRUST
By: /s/ Gary M. Jacobs
-------------------------------------
Name: Gary M. Jacobs
Title: Executive Vice President
24
<PAGE> 25
DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
BT ALEX. BROWN INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
NATIONSBANC MONTGOMERY SECURITIES LLC
FIRST CHICAGO CAPITAL MARKETS, INC.
BNY CAPITAL MARKETS, INC.
By: DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION
By: /s/ Jeff Raich
----------------------------------------
Name: Jeff Raich
Title: Senior Vice President
25
<PAGE> 26
EXHIBIT A
NOTICE OF FILING OF
A/B EXCHANGE OFFER REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: CEX Holdings, Inc.
95/8% Series B Senior Notes due 2008
Date: ___, 199_
For your information only (NO ACTION REQUIRED):
Today, ______, 199_, we filed [an A/B Exchange Registration
Statement/a Shelf Registration Statement] with the Securities and Exchange
Commission. We currently expect this Registration statement to be declared
effective within __ days of the date hereof.
CEX Holdings, Inc.
By:
----------------------------
Name:
Title:
26
<PAGE> 1
EXHIBIT 12.1
CORPORATE EXPRESS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
AS AS
ADJUSTED ADJUSTED
THREE THREE TWELVE
MONTHS MONTHS MONTHS ELEVEN MONTHS
ENDED ENDED ENDED ENDED FISCAL YEARS
MAY 2, MAY 2, JANUARY 31, JANUARY 31, ----------------------------------------------
1998 1998 1998 1998 1996 1995 1994 1993 1992
--------- ------- ----------- ------------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income from
continuing operations..... $ 19,537 $29,052 $ 60,099 $ 77,542 $ 73,785 $21,978 $24,600 $ 505 $ (913)
Add: Fixed charges.......... 31,932 22,417 117,332 64,112 49,025 25,248 21,550 5,742 5,501
Deduct: Capitalized
interest.................. 1,091 1,091 3,533 3,239 3,887 882 -- -- --
-------- ------- -------- -------- -------- ------- ------- ------ ------
Adjusted earnings........... 50,378 50,378 173,898 138,415 118,923 46,344 46,150 6,247 4,588
Fixed charges:
Interest expense............ 22,593 13,078 88,972 38,115 26,949 17,968 16,915 5,014 4,972
Capitalized interest........ 1,091 1,091 3,533 3,239 3,887 882
Interest portion of rent
expense................... 8,248 8,248 24,827 22,758 18,189 6,398 4,635 728 529
-------- ------- -------- -------- -------- ------- ------- ------ ------
Total fixed
charges........... 31,932 $22,417 $117,332 $ 64,112 $ 49,025 $25,248 $21,550 $5,742 $5,501
Ratio of earnings to fixed
charges................... 1.6 2.2 1.5 2.2 2.4 1.8 2.1 1.1 --(1)
</TABLE>
- ---------------
(1) The ratio of earnings to fixed charges is calculated by dividing earnings,
defined as income from continuing operations before income taxes and
minority interest plus fixed charges less capitalized interest, by fixed
charges, defined as interest expense plus capitalized interest and the
interest portion of rent expense. Fiscal 1992 earnings were lower than total
fixed charges resulting in a less than one-to-one ratio of earnings to fixed
charges, consequently, additional earnings of $913,000 would have been
required to attain a ratio of one-to-one.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Corporate Express, Inc. on Form S-4 (the "Registration Statement") of our
report dated April 6, 1998, except for Note 18, for which the date is April 22,
1998 and Note 19 for which the date is July 17, 1998 on our audits of the
consolidated financial statements of Corporate Express, Inc. as of January 31,
1998, March 1, 1997 and March 2, 1996, and for the eleven month period ended
January 31, 1998 and the years ended March 1, 1997, March 2, 1996 and February
25, 1995.
PricewaterhouseCoopers LLP
Denver, Colorado
July 24, 1998
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
CEX Holdings, Inc. and Corporate Express, Inc. on Form S-4 of our report dated
February 6, 1997, (on the consolidated financial statements of Data Documents
Incorporated for the years ended December 31, 1996, 1995 and 1994) appearing in
the Current Report on Form 8-K, to be filed on July 28, 1998 by Corporate
Express, Inc.
DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 24, 1998
<PAGE> 1
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [__]
-------------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------------------------
CEX HOLDINGS, INC.
(Exact name of obligor as specified in its charter)
Colorado 84-1347853
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
CORPORATE EXPRESS, INC.
(Exact name of obligor as specified in its charter)
Colorado 84-0978360
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
<PAGE> 2
<TABLE>
<CAPTION>
Table of Additional Registrants
-------------------------------
<S> <C> <C>
ASAP Software Express, Inc. Illinois 36-3328437
Corporate Express Callcenter
Services, Inc. Delaware 22-8292338
Sofco, Inc. New York 14-1550996
SQP, Inc. New York 14-1680132
Sofco of Ohio, Inc. New York 34-1690942
S&O Property, Inc. New York 14-1499350
Epco Packaging Services Delaware 04-2989953
Hermann Marketing, Inc. Missouri 43-1540873
Distribution Resources Co. Colorado 84-1015452
Corporate Express Real Estate, Inc. Delaware 84-1326952
Corporate Express of the East, Inc. Delaware 84-1248716
Corporate Express of Texas, Inc. Delaware 74-1926921
Federal Sales Services, Inc. Virginia 54-1000288
Virginia Impressions Products
Co., Inc. Virginia 54-0619020
Micromagnetic Systems, Inc. Virginia 54-1092699
Corporate Express Delivery
Systems, Inc. Delaware 76-0424426
American Delivery System, Inc. Michigan 38-2523356
Corporate Express Distribution
Services, Inc. Michigan 38-1889687
New Delaware Delivery, Inc. Delaware 51-0366092
Red Arrow Corporation Missouri 43-0678384
RAC, Inc. Missouri 43-1389320
Red Arrow Spotting Services, Inc. Missouri 43-1622097
Red Arrow Trucking Co. Missouri 43-1335313
Red Arrow Warehousing, Co. Missouri 43-1344561
Rush Trucking, Inc. Illinois 43-1409469
Corporate Express Delivery Systems-
Intermountain, Inc. Delaware 86-0809519
Corporate Express Delivery Leasing-
Intermountain, Inc. Delaware 86-0808518
Corporate Express Delivery Systems-
Mid-Atlantic, Inc. Delaware 52-1951978
Corporate Express Delivery Leasing-
Mid-Atlantic, Inc. Delaware 52-1951974
Corporate Express Delivery Systems-
Mid-West, Inc. Delaware 36-4054055
Corporate Express Delivery Leasing-
Mid-West, Inc. Delaware 36-4054057
Corporate Express Delivery Systems-
New England, Inc. Delaware 06-1441914
Corporate Express Delivery Leasing-
New England, Inc. Delaware 06-1441911
Corporate Express Delivery Systems-
Northeast, Inc. Delaware 11-3295386
Corporate Express Delivery Leasing-
Northeast, Inc. Delaware 11-3295385
Corporate Express Delivery Systems-
Southeast, Inc. Delaware 56-1949066
Corporate Express Delivery Leasing-
Southeast, Inc. Delaware 56-1949063
Air Courier Dispatch of New Jersey,
Inc. Minnesota 22-3096947
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C> <C>
Sunbelt Courier, Inc. Arkansas 71-0684115
Tricor America, Inc. California 94-2593523
Midnite Express International
Courier, Inc. California 95-3796228
Corporate Express Delivery Systems-
Southwest, Inc. Delaware 76-0486734
Corporate Express Delivery Leasing-
Southwest, Inc. Delaware 76-0486733
Corporate Express Delivery Systems-
West Coast, Inc. Delaware 95-4560129
Corporate Express Delivery Leasing-
West Coast, Inc. Delaware 95-4556544
Corporate Express Delivery System-
Expedited, Inc. Delaware 74-2854132
Corporate Express Delivery Leasing-
Expedited, Inc. Delaware 76-0555266
Corporate Express Delivery
Administration, Inc. Nevada 76-0465269
Corporate Express Delivery
Management Business Trust Delaware 51-0363269
Corporate Express Delivery
Systems-Air Division, Inc. Delaware 76-0566357
</TABLE>
One Environmental Way
Broomfield, Colorado 80021
(Address of principal executive offices) (Zip code)
----------------------
9-5/8% Series B Senior Subordinated
Notes due 2008
(Title of the indenture securities)
================================================================================
- 3 -
<PAGE> 4
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Name Address
- ------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which
contains the authority to commence business and a grant of
powers to exercise corporate trust powers. (Exhibit 1 to
Amendment No. 1 to Form T-1 filed with Registration Statement
No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with
Registration Statement No. 33-21672 and Exhibit 1 to Form T-1
filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
</TABLE>
- 4 -
<PAGE> 5
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 21st day of July, 1998.
THE BANK OF NEW YORK
By: /s/ REMO J. REALE
------------------------------------
Name: REMO J. REALE
Title: ASSISTANT VICE PRESIDENT
- 5 -
<PAGE> 6
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................... $ 6,397,993
Interest-bearing balances ............. 1,138,362
Securities:
Held-to-maturity securities ........... 1,062,074
Available-for-sale securities ......... 4,167,240
Federal funds sold and Securities pur-
chased under agreements to resell...... 391,650
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .............................. 36,538,242
LESS: Allowance for loan and
lease losses ........................ 631,725
LESS: Allocated transfer risk
reserve.............................. 0
Loans and leases, net of unearned
income, allowance, and reserve....... 35,906,517
Assets held in trading accounts ......... 2,145,149
Premises and fixed assets (including
capitalized leases) ................... 663,928
Other real estate owned ................. 10,895
Investments in unconsolidated
subsidiaries and associated
companies ............................. 237,991
Customers' liability to this bank on
acceptances outstanding ............... 992,747
Intangible assets ....................... 1,072,517
Other assets ............................ 1,643,173
-----------
Total assets ............................ $55,830,236
===========
LIABILITIES
Deposits:
In domestic offices ................... $24,849,054
Noninterest-bearing ................... 10,011,422
Interest-bearing ...................... 14,837,632
In foreign offices, Edge and
Agreement subsidiaries, and IBFs .... 15,319,002
Noninterest-bearing ................... 707,820
Interest-bearing ...................... 14,611,182
Federal funds purchased and Securities
sold under agreements to repurchase.... 1,906,066
Demand notes issued to the U.S.
Treasury .............................. 215,985
Trading liabilities ..................... 1,591,288
Other borrowed money:
With remaining maturity of one year
or less ............................. 1,991,119
With remaining maturity of more than
one year through three years......... 0
With remaining maturity of more than
three years ......................... 25,574
Bank's liability on acceptances exe-
cuted and outstanding ................. 998,145
Subordinated notes and debentures ....... 1,314,000
Other liabilities ....................... 2,421,281
----------
Total liabilities ....................... 50,631,514
==========
EQUITY CAPITAL
Common stock ............................ 1,135,284
Surplus ................................. 731,319
Undivided profits and capital
reserves .............................. 3,328,050
Net unrealized holding gains
(losses) on available-for-sale
securities ............................ 40,198
Cumulative foreign currency transla-
tion adjustments ...................... (36,129)
Total equity capital .................... -----------
Total liabilities and equity
capital ............................... 5,198,722
-----------
$55,830,236
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi ]
Alan R. Griffith ] Directors
J. Carter Bacot ]
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
CEX HOLDINGS, INC.
OFFER TO EXCHANGE ITS
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 5/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED , 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail Facsimile Transmissions
The Bank of New York (Eligible Institutions Only).
101 Barclay Street, 7E (212) 815-6339
New York, NY 10286
Attention: Reorganization Section
Jackie Warren
By Hand or Overnight Delivery: To Confirm by Telephone
The Bank of New York or for Information Call:
101 Barclay Street (212) 815-5924
Corporate Trust Services Window
Ground Level
New York, NY 10286
Attention: Reorganization Section
Jackie Warren
</TABLE>
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER
OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed either if (a) certificates are
to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth under "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus and an Agent's
Message (as defined below) is not delivered. Certificates, or book-entry
confirmation of a book-entry transfer of such Old Notes into the Exchange
Agent's account at The Depository Trust Company ("DTC"), as well as this Letter
of Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees, and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at its address set
forth herein on or prior to the Expiration Date. Tenders by book-entry transfer
may also be made by delivering an Agent's Message in lieu of this Letter of
Transmittal. The term "book-entry confirmation" means a confirmation of a
book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The
term "Agent's Message" means a message, transmitted by DTC to and received by
the Exchange Agent and forming a part of a book-entry confirmation, which states
that DTC has received an express acknowledgment from the tendering participant,
which acknowledgment states that such participant has received and agrees to be
bound by this Letter of Transmittal and that CEX Holdings, Inc., a Delaware
corporation (the "Company"), may enforce this Letter of Transmittal against such
participant.
Holders (as defined below) of Old Notes whose certificates (the
"Certificates") for such Old Notes are not immediately available or who cannot
deliver their Certificates and all other required documents to the Exchange
Agent on or prior to the Expiration Date (as defined in the Prospectus) or who
cannot complete the procedures for book-entry transfer on a timely basis, must
tender their Old Notes according to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Procedures for Tendering Old Notes" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS MUST COMPLETE THIS BOX:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- ------------------------------------------------------------------------------------------------------------------------
IF BLANK, PLEASE PRINT NAME AND ADDRESS OLD NOTES
OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
PRINCIPAL
AGGREGATE AMOUNT OF
PRINCIPAL OLD NOTES
CERTIFICATE AMOUNT OF TENDERED (IF
NUMBER(S)* OLD NOTES LESS THAN ALL)**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total:
- ------------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Old Notes may be tendered in whole or in part in multiples of $1,000. All Old Notes held shall be deemed tendered
unless a lesser number is specified in this column. See Instructions 4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution ______________________________________________
DTC Account Number ________________ Transaction Code Number ________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING
(SEE INSTRUCTION 1):
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket Number (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
DTC Account Number ________________ Transaction Code Number ________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES
ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN
ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name: __________________________________________________________________________
Address: _______________________________________________________________________
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to CEX Holdings, Inc., a Colorado
corporation (the "Company"), the above described principal amount of the
Company's 9 5/8% Series A Senior Subordinated Notes due 2008 (the "Old Notes")
in exchange for equivalent amount of the Company's 9 5/8% Series B Senior
Subordinated Notes due 2008 (the "New Notes") which have been registered under
the Securities Act of 1933 (the "Securities Act"), upon the terms and subject to
the conditions set forth in the Prospectus dated , 1998 (as the same
may be amended or supplemented from time to time, the "Prospectus"), receipt of
which is hereby acknowledged, and in this Letter of Transmittal (which, together
with the Prospectus, constitute the "Exchange Offer").
Subject to and effective upon the acceptance for exchange of all or any
portion of the Old Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Old Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent as its agent and attorney-in-fact (with full knowledge that
the Exchange Agent is also acting as agent of the Company in connection with the
Exchange Offer) with respect to the tendered Old Notes, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) subject only to the right of withdrawal described in
the Prospectus, to (i) deliver Certificates for Old Notes to the Company
together with all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company, upon receipt by the Exchange Agent, as the
undersigned's agent, of the Series B Notes to be issued in exchange for such Old
Notes, (ii) present Certificates for such Old Notes for transfer, and to
transfer the Old Notes on the books of the Company, and (iii) receive for the
account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Old Notes, all in accordance with the terms and
conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the Old
Notes tendered hereby and that, when the same are accepted for exchange, the
Company will acquire good, marketable and unencumbered title thereto, free and
clear of all liens, restrictions, charges and encumbrances, and that the Old
Notes tendered hereby are not subject to any adverse claims or proxies. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, assignment and transfer of the Old Notes tendered hereby,
and the undersigned will comply with its obligations under the Registration
Rights Agreement. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
The name(s) and address(es) of the registered Holder(s) of the Old Notes
tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Old Notes. The
Certificate number(s) and the Old Notes that the undersigned wishes to tender
should be indicated in the appropriate boxes above.
If any tendered Old Notes are not exchanged pursuant to the Exchange Offer
for any reason, or if Certificates are submitted for more Old Notes than are
tendered or accepted for exchange, Certificates for such nonexchanged or
nontendered Old Notes will be returned (or, in the case of Old Notes tendered by
book-entry transfer, such Old Notes will be credited to an account maintained at
DTC), without expense to the tendering Holder, promptly following the expiration
or termination of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to any one
of the procedures described in "The Exchange Offer -- Procedures for Tendering
Old Notes" in the Prospectus and in the instructions attached hereto will, upon
the Company's acceptance for exchange of such tendered Old Notes, constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer. The undersigned recognizes
that, under certain circumstances set forth in the Prospectus, the Company may
not be required to accept for exchange any of the Old Notes tendered hereby.
3
<PAGE> 4
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the New Notes be issued
in the name(s) of the undersigned or, in the case of a book-entry transfer of
Old Notes, that such New Notes be credited to the account indicated above
maintained at DTC. If applicable, substitute Certificates representing Old Notes
not exchanged or not accepted for exchange will be issued to the undersigned or,
in the case of a book-entry transfer of Old Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver New Notes to the
undersigned at the address shown below the undersigned's signature.
By tendering Notes and executing this Letter of Transmittal or effecting
delivery of an Agent's Message in lieu thereof, the undersigned hereby
represents and agrees that (i) the undersigned is not an "affiliate" of the
Company, (ii) any New Notes to be received by the undersigned are being acquired
in the ordinary course of its business, (iii) the undersigned has no arrangement
or understanding with any person to participate in a distribution (within the
meaning of the Securities Act) of New Notes to be received in the Exchange
Offer, and (iv) if the undersigned is not a broker-dealer, the undersigned is
not engaged in, and does not intend to engage in, a distribution (within the
meaning of the Securities Act) of such New Notes. The Company may require the
undersigned, as a condition to the undersigned's eligibility to participate in
the Exchange Offer to furnish to the Company (or an agent thereof) in writing
information as to the number of "beneficial owners" within the meaning of Rule
13d-3 under the Exchange Act on behalf of whom the undersigned holds the Old
Notes to be exchanged in the Exchange Offer. By tendering Old Notes pursuant to
the Exchange Offer and executing this Letter of Transmittal or effecting
delivery of an Agent's Message in lieu thereof, a Holder of Old Notes which is a
broker-dealer represents and agrees, consistent with certain interpretive
letters issued by the staff of the Division of Corporation Finance of the
Securities and Exchange Commission to third parties, that such Old Notes were
acquired by such broker-dealer for its own account as a result of market-making
activities or other trading activities, and it will deliver a Prospectus (as
amended or supplemented from time to time) meeting the requirements of the
Securities Act in connection with any resale of such New Notes (provided that,
by so acknowledging and by delivering a Prospectus, such broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a participating broker-dealer (as defined below) in
connection with resales of New Notes received in exchange for Old Notes, where
such Old Notes were acquired by such participating broker-dealer for its own
account as a result of market-making activities or other trading activities, for
a period ending 180 days after the Expiration Date (subject to extension under
certain limited circumstances described in the Prospectus) or, if earlier, when
all such New Notes have been disposed of by such participating broker-dealer. In
that regard, each broker-dealer who acquired Old Notes for its own account as a
result of market-making or other trading activities (a "participating
broker-dealer"), by tendering such Old Notes and executing this Letter of
Transmittal or effecting delivery of an Agent's Message in lieu thereof, agrees
that, upon receipt of notice from the Company of the occurrence of any event or
the discovery of any fact which makes any statement contained or incorporated by
reference in the Prospectus untrue in any material respect or which causes the
Prospectus to omit to state a material fact necessary in order to make the
statements contained or incorporated by reference therein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
participating broker-dealer will suspend the sale of New Notes pursuant to the
Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to the participating broker-dealer or the Company has
given notice that the sale of the New Notes may be resumed, as the case may be.
If the Company gives such notice to suspend the sale of the New Notes, it shall
extend the 180-day period referred to above during which participating
broker-dealers are entitled to use the Prospectus in connection with the resale
of New Notes by the number of days during the period from and including the date
of the giving of such notice to and including the date when participating
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the New Notes or to and including the
date on which the Company has given notice that the sale of New Notes may be
resumed, as the case may be.
4
<PAGE> 5
As a result, a participating broker-dealer who intends to use the
Prospectus in connection with resales of New Notes received in exchange for Old
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
participating broker-dealer. Such notice may be given in the space provided
above or may be delivered to the Exchange Agent at the address set forth in the
Prospectus under "The Exchange Offer -- Exchange Agent."
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
herein conferred or agreed to be conferred in this Letter of Transmittal shall
survive the death or incapacity of the undersigned and any obligation of the
undersigned hereunder shall be binding upon the heirs, executors,
administrators, personal representatives, trustees in bankruptcy, legal
representatives, successors and assigns of the undersigned. Except as stated in
the Prospectus, this tender is irrevocable.
The undersigned, by completing the box entitled "Description of Old Notes"
above and signing this letter, will be deemed to have tendered the Old Notes as
set forth in such box.
5
<PAGE> 6
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 13)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED
BY INSTRUCTION 2)
Must be signed by registered Holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Old Notes hereby tendered or on the register of Holders
maintained by the Company, or by any person(s) authorized to become the
registered Holder(s) by endorsements and documents transmitted herewith
(including such opinions of counsel, certifications and other information as may
be required by the Company) or the Trustee for the Old Notes to comply with the
restrictions on transfer applicable to the Old Notes). If signature is by an
attorney-in-fact, executor, administrator, trustee, guardian, officer of a
corporation or another acting in a fiduciary capacity or representative
capacity, please set forth the signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date: ______________________________, 1998
Name(s) ________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
- --------------------------------------------------------------------------------
(TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S))
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED, SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: ______________________________, 1998
Name of Firm ___________________________________________________________________
Capacity (full title) __________________________________________________________
(PLEASE PRINT)
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number _________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6
<PAGE> 7
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be
issued in the name of someone other than the registered Holder of the Old Notes
whose name(s) appear(s) above.
Issue
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s) ________________________________________________________________________
Address ________________________________________________________________________
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area code and
Telephone Number _______________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if New Notes or Old Notes not tendered are to be sent
to someone other than the registered Holder of the Old Notes whose name(s)
appear(s) above, or such registered Holder(s) at an address other than that
shown above.
Mail
[ ] Old Notes not tendered to:
[ ] New Notes to:
Name(s) ________________________________________________________________________
Address ________________________________________________________________________
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area code and
Telephone Number _______________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering Old Notes" in the Prospectus and an Agent's
Message is not delivered. Certificates, or timely confirmation of a book-entry
transfer of such Old Notes into the Exchange Agent's account at DTC, as well as
this Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with all required signature guarantees, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth herein on or prior to the Expiration Date. Tenders by
book-entry transfer may also be made by delivering an Agent's Message in lieu
thereof. Old Notes may be tendered in whole or in part in integral multiples of
$1,000.
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available or (ii) who cannot deliver their Old Notes, this Letter of
Transmittal and all other required documents to the Exchange Agent on or prior
to the Expiration Date or (iii) who cannot complete the procedures for delivery
by book-entry transfer on a timely basis, may tender their Old Notes by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures
for Tendering Old Notes" in the Prospectus. Pursuant to such procedures: (i)
such tender must be made by or through an Eligible Institution (as defined
below); (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Company, must be
received by the Exchange Agent on or prior to the Expiration Date; and (iii) the
Certificates (or a book-entry confirmation) representing all tendered Old Notes,
in proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer -- Procedures for Tendering Old Notes" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery. For Old Notes to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery on or prior to the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified in
Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering Holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered Holder
(which term, for purposes of this document, shall include any participant
in DTC whose name appears on a security position listing as the owner of
the Old Notes (the "Holder")) of Old Notes tendered herewith, unless such
Holder(s) has
8
<PAGE> 9
completed either the box entitled "Special Issuance Instructions" or the
box entitled "Special Delivery Instructions" above, or
(ii) such Old Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Old Notes" is inadequate, the Certificate number(s) and/or the
principal amount of Old Notes and any other required information should be
listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be
accepted only in integral multiples of $1,000. If less than all the Old Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Old Notes which are to be tendered in the box entitled "Principal
Amount of Old Notes Tendered." In such case, new Certificate(s) for the
remainder of the Old Notes that were evidenced by your old Certificate(s) will
only be sent to the Holder of the Old Note, promptly after the Expiration Date.
All Old Notes represented by Certificates delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time on or prior to the Expiration Date. In order for a withdrawal to be
elective on or prior to that time, a written or facsimile transmission of such
notice of withdrawal must be timely received by the Exchange Agent at one of its
addresses set forth above or in the Prospectus on or prior to the Expiration
Date. Any such notice of withdrawal must specify the name of the person who
tendered the Old Notes to be withdrawn, the aggregate principal amount of Old
Notes to be withdrawn, and (if Certificates for Old Notes have been tendered)
the name of the registered Holder of the Old Notes as set forth on the
Certificate for the Old Notes, if different from that of the person who tendered
such Original Notes. If Certificates for the Old Notes have been delivered or
otherwise identified to the Exchange Agent, then prior to the physical release
of such Certificates for the Old Notes, the tendering Holder must submit the
serial numbers shown on the particular Certificates for the Old Notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution, except in the case of Old Notes tendered for the account
of an Eligible Institution. If Old Notes have been tendered pursuant to the
procedures for book-entry transfer set forth in the Prospectus under "The
Exchange Offer -- Procedures for Tendering Old Notes," the notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawal of Old Notes, in which case a notice of withdrawal will be effective
if delivered to the Exchange Agent by written or facsimile transmission.
Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly
withdrawn will not be deemed validly tendered for purposes of the Exchange
Offer, but may be retendered at any subsequent time on or prior to the
Expiration Date by following any of the procedures described in the Prospectus
under "The Exchange Offer -- Procedures for Tendering Old Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, any affiliates or assigns of the Company, the Exchange Agent or any
other person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Old Notes which have been tendered but which are
withdrawn will be returned to the Holder thereof without cost to such Holder
promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered Holder(s) of the Old
Notes tendered hereby, the signature(s) must correspond exactly with the name(s)
as written on the face of the Certificate(s) without alteration, enlargement or
any change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
9
<PAGE> 10
If any tendered Old Notes are registered in different name(s) on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
each such person's authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless New Notes are to be
issued in the name of a person other than the registered Holder(s). Signature(s)
on such Certificate(s) or bond power(s) must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Old Notes listed, the Certificates must be endorsed
or accompanied by appropriate bond powers, signed exactly as the name or names
of the registered owner(s) appear(s) on the Certificates, and also must be
accompanied by such opinions of counsel, certifications and other information as
the Company or the Trustee for the Old Notes may require in accordance with the
restrictions on transfer applicable to the Old Notes. Signatures on such
Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if New Notes are to be sent to someone other than the signer of
this Letter of Transmittal or to an address other than that shown above, the
appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Old Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Old Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to the Company be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Conditions to the
Exchange Offer" or any conditions or irregularity in any tender of Old Notes of
any particular Holder whether or not similar conditions or irregularities are
waived in the case of other Holders. The Company's interpretation of the terms
and conditions of the Exchange Offer (including this Letter of Transmittal and
the instructions hereto) will be final and binding. No tender of Old Notes will
be deemed to have been validly made until all irregularities with respect to
such tender have been cured or waived. The Company, any affiliates or assigns of
the Company, the Exchange Agent, or any other person shall not be under any duty
to give notification of any irregularities in tenders or incur any liability for
failure to give such notification.
8. QUESTIONS, REQUESTS FOR THE ASSISTANCE AND ADDITIONAL
COPIES. Questions and requests for assistance may be directed to the Exchange
Agent at its address and telephone number set forth on the front of this Letter
of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under the U.S. Federal
income tax law, a Holder whose tendered Old Notes are accepted for exchange is
required to provide the Exchange Agent with such Holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the Holder or other payee to a $50 penalty. In addition,
payments to such Holders or other payees with respect to Old Notes exchanged
pursuant to the Exchange Offer may be subject to 31% backup withholding.
10
<PAGE> 11
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
Holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the Holder furnishes the Exchange Agent with its TIN within 60 days after the
date of the Substitute Form W-9, the amounts retained during the 60-day period
will be remitted to the Holder and no further amounts shall be retained or
withheld from payments made to the Holder thereafter. If, however, the Holder
has not provided the Exchange Agent with its TIN within such 60-day period,
amounts withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the IRS
until a correct TIN is provided.
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Old Notes or of the last transferee appearing on the transfers attached to,
or endorsed on, the Old Notes. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
Certain Holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such Holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
Holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering Holders of Old Notes, by execution of
this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Old Notes have been lost, destroyed or stolen, the Holder should
promptly notify the Exchange Agent. The Holder will then be instructed as to the
steps that must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Certificate(s) have been followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, New Notes are to be delivered to, or are to be issued in
the name of, any person other than the registered Holder of the Old Notes
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Notes in connection with the Exchange Offer, then the amount of any such
transfer tax (whether imposed on the registered Holder or any other persons)
will be payable by the tendering Holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted with the Letter of
Transmittal the amount of such transfer taxes will be billed directly to such
tendering Holder.
11
<PAGE> 12
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF)
AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: THE BANK OF NEW YORK
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN ON THE
FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING AND Social Security Number
DATING BELOW.
OR ___________________________
Employer Identification
Number
----------------------------------------------------------------------------
PART 2 -- PART 3 --
DEPARTMENT OF THE CERTIFICATION -- Under the Penalties of Check if
TREASURY, INTERNAL Perjury, I certify that: (1) The number TIN Applied for [ ]
REVENUE SERVICE shown on this form is my correct taxpayer
identification number (or I am waiting for
a number to be issued to me), (2) I am not
subject to backup withholding either
because (i) I am exempt from backup
withholding, (ii) I have not been notified
by the Internal Revenue Service ("IRS")
that I am subject to backup withholding as
a result of a failure to report all
interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to
backup withholding, and (3) any other
information provided on this form is true
and correct.
----------------------------------------------------------------------------
You must cross out item (iii) in Part (2) above if you have been notified
PAYOR'S REQUEST FOR by the IRS that you are subject to backup withholding because of
TAXPAYER IDENTIFICATION underreporting interest or dividends on your tax return and you have not
NUMBER ("TIN") AND been notified by the IRS that you are no longer subject to backup
CERTIFICATION withholding.
SIGNATURE _______________________________________ DATE ____________ , 1998
- ------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES
RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO
THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the New Notes shall be retained until I
provide a taxpayer identification number to the Exchange Agent and that, if I do
not provide my taxpayer identification number within 60 days, such retained
amounts shall be remitted to the Internal Revenue Service as backup withholding
and 31% of all reportable payments made to me thereafter will be withheld and
remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE ____________________________________________ DATE ______________, 1998
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
CEX HOLDINGS, INC.
OFFER TO EXCHANGE ITS
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 5/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
PURSUANT TO THE PROSPECTUS DATED , 1998
This Notice of Guaranteed Delivery, or one substantially equivalent to this
form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's Series A 9 5/8% Senior Subordinated Notes due
2008 (the "Old Notes") are not immediately available, (ii) Old Notes, the Letter
of Transmittal and all other required documents cannot be delivered to The Bank
of New York (the "Exchange Agent") on or prior to the Expiration Date or (iii)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis. This Notice of Guaranteed Delivery may be delivered by hand,
overnight courier or mail, or transmitted by facsimile transmission, to the
Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Old Notes"
in the Prospectus. In addition, in order to utilize the guaranteed delivery
procedure to tender Old Notes pursuant to the Exchange Offer, a completed,
signed and dated Letter of Transmittal relating to the Old Notes (or facsimile
thereof) must also be received by the Exchange Agent on or prior to the
Expiration Date. Capitalized terms not defined herein have the meanings assigned
to them in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
By Registered or Certified Mail Facsimile Transmissions
(Eligible Institutions Only)
The Bank of New York
101 Barclay Street, 7E (212) 815-6339
New York, NY 10286
Attention: Reorganization Section To Confirm by Telephone
Jackie Warren or for Information Call:
By Hand or Overnight Delivery: (212) 815-5924
The Bank of New York
101 Barclay Street
Corporate Trust Services Window
Ground Level
New York, NY 10286
Attention: Reorganization Section
Jackie Warren
</TABLE>
------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA
FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
NOTICE OF GUARANTEED DELIVERY
Ladies and Gentlemen:
The undersigned hereby tenders to CEX Holdings, Inc., a Colorado
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1998 (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Old Notes set forth
below pursuant to the guaranteed delivery procedures set forth in the Prospectus
under the caption "The Exchange Offer -- Procedures for Tendering Old Notes."
Aggregate Principal Amount
-------------- Name(s) of Registered Holder(s):
---------------------------
Amount Tendered: $
-----------------*
-----------------------------------------------------------------------
Certificate No(s) (if available):
----------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
$
------------------------------------------------------------------------------
(TOTAL PRINCIPAL AMOUNT REPRESENTED BY OLD NOTES CERTIFICATE(S))
If Old Notes will be tendered by book-entry transfer, provide the following
information:
DTC Account Number:
------------------------------------------------------------------------------
Date:
------------------------------------------------------------------------------
-----------------
* Must be in integral multiples of $1,000.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X
----------------------------------------------------
X
----------------------------------------------------
Signature(s) of Owner(s) or Authorized Signatory
-----------------------------------------------------
-----------------------------------------------------
Date
Area Code and Telephone Number:
------------------------------------------------------------------------
Must be signed by the holder(s) of the Old Notes as their name(s)
appear(s) on certificates for Old Notes or on a security position listing, or
by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person
must set forth his or her full title below and, unless waived by the Company,
provide proper evidence satisfactory to the Company of such person's authority
to so act.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------------------
---------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------------
Address(es):
------------------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
2
<PAGE> 3
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (i) a bank; (ii) a
broker, dealer, municipal securities broker, government securities broker or
government securities dealer; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association that is a participant in a Securities Transfer Association (each of
the foregoing being referred to as an "Eligible Institution"), hereby guarantees
to deliver to the Exchange Agent, at one of its addresses set forth above,
either the Old Notes tendered hereby in proper form for transfer, or
confirmation of the book-entry transfer of such Old Notes to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures for book-entry transfer set forth in the Prospectus, in either case
together with one or more properly completed and duly executed Letter(s) of
Transmittal (or facsimile thereof) and any other required documents within three
New York Stock Exchange trading days after the date of execution of this Notice
of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal (or facsimile thereof) and the Old Notes tendered hereby to the
Exchange Agent within the time period set forth above and that failure to do so
could result in a financial loss to the undersigned.
<TABLE>
<S> <C>
- ------------------------------------------ ------------------------------------------
NAME OF FIRM AUTHORIZED SIGNATURE
- ------------------------------------------ ------------------------------------------
ADDRESS TITLE
- ------------------------------------------ ------------------------------------------
ZIP CODE (PLEASE TYPE OR PRINT)
Area Code and Telephone No. ______________ Dated: ___________________________________
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
ORIGINAL NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99.3
CEX HOLDINGS, INC.
INSTRUCTION TO REGISTERED HOLDER AND/OR DEPOSITORY
TRUST COMPANY PARTICIPANT FROM BENEFICIAL OWNER
FOR
OFFER TO EXCHANGE ITS
9 5/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
9 5/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON , 1998, UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M.,
NEW YORK CITY TIME, ON THE EXPIRATION DATE.
To Registered Holder and/or Depository Trust Company Participant:
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "Prospectus") of CEX Holding, Inc., a Colorado
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 9 5/8% Series B Senior Subordinated Notes Due
2008 (the "New Notes") for all of its outstanding 9 5/8% Series A Senior
Subordinated Notes Due 2008 (the "Old Notes"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or Depository Trust
Company Participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$ of the 9 5/8% Senior Subordinated Notes Due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX ):
[ ] To TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF ORIGINAL NOTES TO BE TENDERED
(IF LESS THAN ALL): $
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
undersigned is not an "affiliate" of the Company, (ii) any New Notes to be
received by the undersigned are being acquired in the ordinary course of its
business, (iii) the undersigned has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of New Notes to be received in the Exchange Offer, and (iv) if the
undersigned is not a broker-dealer, the undersigned is not engaged in, and does
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such New Notes. The Company may require the
<PAGE> 2
undersigned, as a condition to the undersigned's eligibility to participate in
the Exchange Offer, to furnish to the Company (or an agent thereof) in writing
information as to the number of "beneficial owners" within the meaning of Rule
13d-3 under the Exchange Act on behalf of whom the undersigned holds the Old
Notes to be exchanged in the Exchange Offer. By tendering Old Notes pursuant to
the Exchange Offer, a holder of Old Notes which is a broker-dealer represents
and agrees, consistent with certain interpretive letters issued by the staff of
the Division of Corporation Finance of the Securities and Exchange Commission to
third parties, that such Old Notes were acquired by such broker-dealer for its
own account as a result of market-making activities or other trading activities,
and it will deliver a Prospectus (as amended or supplemented from time to time)
meeting the requirements of the Securities Act in connection with any resale of
such New Notes (provided that, by so acknowledging and by delivering a
Prospectus, such broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act).
SIGN HERE
- --------------------------------------------------------------------------------
Name of beneficial owner(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) (please print)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address)
- --------------------------------------------------------------------------------
(Telephone Number)
- --------------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
- --------------------------------------------------------------------------------
Date
2
