<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION NO. 333-67185
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
DIMAC CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 2677 13-4013426
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
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5775 Peachtree Dunwoody Road
Suite C-150
Atlanta, Georgia 30342
(404) 256-1123
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------
MR. EDWARD LAZAROWITZ
CHIEF FINANCIAL OFFICER
DIMAC CORPORATION
5775 PEACHTREE DUNWOODY ROAD
SUITE C-150
ATLANTA, GEORGIA 30342
(404) 256-1123
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
COPY TO:
William F. Wynne, Jr.
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036-2787
(212) 819-8752
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the information of a holding company and there is compliance
with General Instruction G, check the following box. / /
--------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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- --------------------------------------------------------------------------------
<PAGE>
OTHER REGISTRANTS
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PRIMARY STANDARD ADDRESS, INCLUDING ZIP
JURISDICTION INDUSTRIAL IRS EMPLOYER CODE AND TELEPHONE NUMBER,
OF CLASSIFICATION CODE IDENTIFICATION INCLUDING AREA CODE, OF
NAME OF CORPORATION INCORPORATION NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
- --------------------- ------------- ------------------- ------------- --------------------------
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AmeriComm Direct Delaware 2677 23-2574778 5775 Peachtree Dunwoody
Marketing, Inc. Road,
Suite C-150
Altanta, GA 30342
(404) 256-1123
AmeriComm Holdings, Delaware 2677 52-1668844 5775 Peachtree Dunwoody
Inc. Road,
Suite C-150
Atlanta, GA 30342
(404) 256-1123
DIMAC DIRECT, Inc. Missouri 2677 43-0690811 One Corporate Woods Drive
Bridgeton, Missouri 63044
(314) 344-8000
DIMAC Marketing Delaware 2677 43-1464284 One Corporate Woods Drive
Corporation Bridgeton, Missouri 63044
(314) 344-8000
Palm Coast Data Inc. Missouri 2677 43-1706955 11 Commerce Boulevard
Palm Coast, FL 32164
(904) 445-4662
MBS/Multimode Inc. Missouri 2677 43-1743899 570 S. Research Pl.
Central Islip, NY 11722
(516) 851-5000
DMW Worldwide, Inc. Missouri 2677 23-2985052 1325 Morris Drive
Wayne, PA 19087
(610) 407-0407
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS WILL BE AMENDED OR COMPLETED;
DATED AUGUST 12, 1999
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PROSPECTUS
DIMAC CORPORATION [LOGO]
EXCHANGE OFFER FOR $100,000,000
12 1/2% SENIOR SUBORDINATED NOTES DUE 2008
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GUARANTEED BY:DIMAC MARKETING CORPORATION
DIMAC DIRECT, INC.
PALM COAST DATA INC.
DMW WORLDWIDE, INC.
MBS/MULTIMODE INC.
AMERICOMM HOLDINGS, INC.
AMERICOMM DIRECT MARKETING, INC.
INVESTMENT IN THE REGISTERED NOTES BEING OFFERED IN THIS PROSPECTUS INVOLVES
CERTAIN RISKS. IT IS IMPORTANT THAT YOU READ THE SECTION LABELED "RISK FACTORS"
BEGINNING ON PAGE 18 FOR A MORE DETAILED DISCUSSION OF THESE RISKS.
TERMS OF THE EXCHANGE OFFER
/ / The exchange offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended.
/ / This exchange offer is subject to customary conditions including that
the registered notes be freely tradeable and that the interests of
holders of outstanding unregistered notes not be materially adversely
affected by consummation of this exchange offer.
/ / We will exchange all outstanding unregistered notes that are validly
tendered and not validly withdrawn for registered notes.
/ / You may withdraw tenders of outstanding unregistered notes at any time
prior to the expiration of this exchange offer.
/ / The exchange of outstanding unregistered notes for registered notes will
not be a taxable event for federal income tax purposes.
/ / We will not receive any proceeds from this exchange offer.
/ / The terms of the registered notes are substantially identical to the
outstanding unregistered notes, except that the registered notes will be
freely tradeable.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................................................... 1
Risk Factors.......................................................... 18
Company History....................................................... 26
The Acquisitions...................................................... 27
The Refinancing....................................................... 27
Use of Proceeds of the Registered Notes............................... 28
Capitalization........................................................ 29
The Exchange Offer.................................................... 30
DIMAC Corporation Unaudited Pro Forma Consolidated Statements......... 40
Selected Historical Financial Data AmeriComm Holdings, Inc............ 49
Selected Historical Financial Data DIMAC Marketing Corporation........ 51
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................... 53
Business.............................................................. 68
Management............................................................ 82
Security Ownership.................................................... 86
Certain Relationships and Related Transactions........................ 87
Description of Other Indebtedness..................................... 89
Description of Notes.................................................. 94
Certain United States Federal Tax Considerations...................... 134
Unregistered Notes Registration Rights Agreement...................... 136
Book-Entry; Delivery and Form......................................... 139
Plan of Distribution.................................................. 142
Legal Matters......................................................... 143
Experts............................................................... 143
Index to Financial Statements......................................... F-1
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PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety.
THE EXCHANGE OFFER
On October 22, 1998, we completed the private offering of our 12 1/2% Senior
Subordinated Notes Due 2008. The unregistered notes were sold for an aggregate
purchase price of $100.0 million. The notes are guaranteed by all of our
subsidiaries, which are as follows:
- DIMAC Marketing Corporation;
- DIMAC DIRECT, Inc.;
- Palm Coast Data Inc.;
- DMW Worldwide, Inc.
- MBS/Multimode Inc.;
- AmeriComm Holdings, Inc.; and
- AmeriComm Direct Marketing, Inc.
We entered into a Registration Rights Agreement in which we agreed, among
other things, to deliver to you this prospectus and to complete the exchange
offer on or prior to April 20, 1999. In the exchange offer, you are entitled to
exchange your outstanding unregistered notes for registered notes with
substantially identical terms. We did not complete the exchange offer on or
before April 20, 1999, and, therefore, the interest rate on the unregistered
notes was and will be increased as follows:
- 0.50% per year for the first 90 day period during which we did not comply
with our registration obligations; and
- 0.50% per year for each subsequent 90 day period until either we comply with
our registration obligations or the interest rate on the unregistered notes
has increased by 2.0% per year.
You should read the discussion under the headings "The Exchange Offer" and
"Description of Notes" for further information regarding the registered notes.
SUMMARY OF THE EXCHANGE OFFER
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Registration Rights Agreement..... You are entitled to exchange your unregistered notes for
registered notes issued in this exchange offer which
have substantially identical terms to the unregistered
notes. This exchange offer is intended to satisfy your
rights under the Registration Rights Agreement. We did
not complete the exchange offer on or prior to April 20,
1999 and, therefore, are obligated to pay additional
interest to holders of the unregistered notes. After the
exchange offer is completed, you will no longer be
entitled to any exchange or registration rights with
respect to your notes.
The Registered Notes.............. The registered notes you will receive for your
unregistered notes in this exchange offer will be
substantially identical to the unregistered notes.
However, the registered notes will not contain transfer
restrictions, registration rights or liquidated damages
provisions. Those provisions only relate to the
unregistered notes.
The Exchange Offer................ We are offering to exchange $100,000,000 total principal
amount of 12 1/2% Series B Senior Subordinated Notes Due
2008 which have been registered under the Securities Act
for your unregistered 12 1/2% Senior Subordinated Notes
Due 2008 sold in the private offering. To exchange your
unregistered
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1
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notes, you must properly tender them, and we must accept
them. We will exchange all unregistered notes that you
validly tender and do not validly withdraw. We will
issue registered notes at or promptly after the end of
the exchange offer.
Resales........................... We believe that you can offer for resale, resell and
otherwise transfer registered notes you receive in the
exchange offer without complying with the registration
and prospectus delivery provisions of the Securities Act
if:
- you are not an "affiliate" of our company within the
meaning of Rule 405 under the Securities Act;
- you acquire the registered notes in the ordinary
course of your business; and
- you do not intend to participate in the distribution
of the registered notes.
Expiration Date................... The exchange offer expires at 5:00 p.m., New York City
time, on , 1999, unless we extend the
expiration date.
Conditions to the Exchange
Offer............................. The exchange offer is subject to customary conditions,
some of which we may waive.
Procedures for Tendering
Unregistered Notes................ We issued the unregistered notes as global securities.
When the unregistered notes were issued, we deposited
them with Wilmington Trust Company, as book-entry
depositary. Wilmington Trust Company issued a
certificateless depositary interest in each note, which
represents a 100% interest in the notes, to The
Depository Trust Company. Beneficial interests in the
unregistered notes, which are held by direct or indirect
participants in The Depository Trust Company through the
certificateless depositary interest, are shown on
records maintained in book-entry form by The Depository
Trust Company.
You may tender your unregistered notes through
book-entry transfer in accordance with The Depository
Trust Company's Automated Tender Offer Program. To
tender your unregistered notes by a means other than
book-entry transfer, a letter of transmittal must be
completed and signed according to the instructions
contained in the letter of transmittal. 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. In addition, you must deliver the unregistered
notes to the exchange agent or comply with the
procedures for guaranteed delivery. See "The Exchange
Offer--Procedures for Tendering" for more information.
Do not send letters of transmittal and certificates
representing unregistered notes to us. Send these
documents only to the exchange agent. See "The Exchange
Offer--Exchange Agent" for more information.
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2
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Special Procedures for Beneficial
Owners............................ If you are a beneficial owner whose unregistered notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and wish
to tender your unregistered notes in the exchange offer,
please contact the registered holder as soon as possible
and instruct it to tender on your behalf and comply with
our instructions set forth elsewhere in this prospectus.
Withdrawal Rights................. You may withdraw the tender of your unregistered notes
at any time before 5:00 p.m. New York City time on
, 1999, unless we extend the expiration date.
Federal Income Tax
Considerations.................... The exchange of notes is not a taxable exchange for
United States federal income tax purposes. You will not
recognize any taxable gain or loss or any interest
income as a result of the exchange. For additional
information regarding federal income tax considerations,
you should read the discussion under the heading
"Certain United States Federal Income Tax
Considerations."
Use of Proceeds................... We will not receive any proceeds from the issuance of
the registered notes issued in the exchange offer, and
we will pay the expenses of the exchange offer.
Exchange Agent.................... Wilmington Trust Company is serving as the exchange
agent in the exchange offer. The exchange agent's
address, and telephone and facsimile numbers are listed
in the section of this prospectus entitled "The Exchange
Offer--Exchange Agent" and in the letter of transmittal.
Ranking........................... The notes:
- are unsecured senior subordinated obligations of
our company;
- rank junior in right of payment to all of our
senior indebtedness, including our senior secured
credit facility;
- rank equally in right of payment to all of our
unsecured senior subordinated indebtedness;
- rank junior in right of payment to all of our
indebtedness that is secured, including our senior
secured credit facility, to the extent of such
security interests; and
- effectively rank junior in right of payment to all
senior indebtedness and secured indebtedness of our
subsidiaries.
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3
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The guarantees of the notes by our subsidiaries:
- are unsecured senior subordinated obligations of
our subsidiaries;
- rank junior in right of payment to all of our
subsidiaries' senior indebtedness, including their
guarantees under our senior secured credit
facility;
- rank equally in right of payment to our
subsidiaries' senior subordinated indebtedness; and
- rank junior in right of payment to our
subsidiaries' indebtedness that is secured, including
their guarantees under our senior secured credit
facility, to the extent of such security
interests.
</TABLE>
You should consider carefully the information set forth under the caption
"Risk Factors" beginning on page 18 and all other information set forth in this
prospectus before deciding whether to participate in the exchange offer.
THE COMPANY
OVERVIEW
We were formed in May 1998 and acquired AmeriComm Holdings, Inc. and DIMAC
Marketing Corporation on June 26, 1998.
4
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ORGANIZATIONAL CHART
The following chart depicts, as of July 31, 1999, the organizational
structure of DIMAC Holdings and DIMAC Corporation and their subsidiaries, the
percentage ownership of each subsidiary by its direct parent, the indebtedness
and capital leases of each of these companies, excluding intercompany
indebtedness, and the equity contribution made to DIMAC Holdings.
[CHART]
5
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CONTROLLING STOCKHOLDER
The controlling stockholder of DIMAC Holdings, through certain of its
affiliates, is McCown De Leeuw & Co., Inc., a private equity investment firm
based in Menlo Park, California and New York City. As of August 1, 1999, three
affiliates of McCown De Leeuw own approximately 67.2% of the issued and
outstanding common stock of DIMAC Holdings. As a result of its control of DIMAC
Holdings, McCown De Leeuw controls the election of our Board of Directors and
the direction of our affairs and those of our subsidiaries.
WHAT WE DO
We primarily provide comprehensive products and services that support direct
marketing programs. Direct marketing is a form of advertising in which companies
can direct their advertising specifically to a target market and can measure the
response. Direct marketing is another form of mass advertising, such as
television, newspapers and magazines. Direct marketing utilizes mediums such as
mail, the internet, telemarketing and television to deliver the advertising
message.
One type of direct marketing medium is direct mail advertising in which a
company sends to targeted individuals or households a letter or other
advertising materials. We use our network of 18 production facilities to provide
our customers with a comprehensive range of direct marketing services that
emphasize cost-effective production of large, complex, personalized direct mail
campaigns. Examples of our direct marketing production services include the
following:
- Addressing mail pieces;
- Inserting advertising pieces into envelopes;
- Manufacturing envelopes for direct mail campaigns;
- Printing, folding, assembling and mailing packages in a variety of
combinations;
- Personalizing or customizing direct mail by printing the recipient's name or
other personal information on the direct mail piece;
- Building a client database or sorting existing data to compile a target
audience list for a direct mail program;
- Developing a complete marketing campaign for a customer, including
determining target customer demographics and designing the layout and
content of direct mail pieces; and
- Providing fulfillment services in which direct mail recipients call us in
response to a direct mail offer, often for trials of products or magazines.
In addition to these services, we also provide customers with custom
pressure sensitive labels and custom mailers.
HOW WE HAVE DONE
Our pro forma net sales and pro forma EBITDA for the twelve-months ended
March 31, 1999 would have been $368.0 million and $38.5 million, respectively.
Our pro forma net sales and pro forma EBITDA give retroactive effect to the
following transactions as if each of these transactions occurred on January 1,
1998:
- AmeriComm Holdings' acquisitions of Cardinal Marketing, Inc. and Cardinal
Marketing of New Jersey, Inc.;
- our acquisitions of AmeriComm Holdings and DIMAC Marketing; and
- the refinancing of certain indebtedness assumed in connection with our
acquisitions of AmeriComm Holdings and DIMAC Marketing.
PRO FORMA INFORMATION. Pro forma information does not indicate actual
results and might not indicate future results. We have presented both historical
and pro forma information throughout this prospectus, however, because of the
changes to our business during 1998, we believe that the pro forma information
may be more meaningful to you.
6
<PAGE>
BUSINESS STRATEGY
Our business strategy is to enhance our competitive position and increase
net sales and profitability through the following initiatives:
EMPHASIZE COMPREHENSIVE DIRECT MARKETING SOLUTIONS
We believe that an increasingly important factor in clients' selection of a
direct mail service provider is the availability of "one-stop shopping" for all
of their direct mail needs. Because of our comprehensive range of products and
services, we believe that we are well positioned to offer clients "one-stop
shopping". We believe that as a "single-source" supplier offering comprehensive
solutions, we will save our clients both time and money.
LEVERAGE LARGE SCALE AND NATIONAL PRESENCE TO ATTRACT NEW HIGH VOLUME, NATIONAL
CLIENTS
The size and scope of a direct mail company's operations are increasingly
important factors for large, national accounts in the selection of a direct mail
service provider. We have the capabilities and scale to service national, high
volume accounts which may require distributions from multiple locations. Based
on our previous experience in securing national business from our clients, we
believe that we can further leverage our strong franchise, large scale, wide
breadth of operations and national presence to secure new high-volume, national
accounts.
PRINCIPAL EXECUTIVE OFFICE
Our headquarters are located at 5775 Peachtree Dunwoody Road, Suite C-150,
Atlanta, Georgia 30342 (telephone number 404-256-1123).
7
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SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
We are providing the following summary unaudited pro forma consolidated
financial data for our company to give you a better picture of what our business
might have looked like if certain transactions had occurred. The pro forma
information is derived from, and you should read it along with, the "DIMAC
Corporation Unaudited Pro Forma Consolidated Financial Statements" that gives
pro forma effect to
- AmeriComm Holdings' acquisitions of Cardinal Marketing, Inc. and Cardinal
Marketing of New Jersey, Inc.;
- our acquisitions of AmeriComm Holdings and DIMAC Marketing; and
- the refinancing of certain indebtedness assumed in connection with our
acquisitions of AmeriComm Holdings and DIMAC Marketing.
The pro forma statement of operations and other financial data for the year
ended December 31, 1998 and the three months ended March 31, 1998 give effect to
the above listed transactions as if they were consummated on January 1, 1998.
The pro forma financial data do not purport to represent what the financial
position or results of operations of our company and our subsidiaries would
actually have been had AmeriComm Holdings' acquisitions of Cardinal Marketing,
and Cardinal Marketing of New Jersey, our acquisitions of AmeriComm Holdings and
DIMAC Marketing, and the refinancing of certain indebtedness assumed in
connection with the acquisitions of AmeriComm Holdings and DIMAC Marketing in
fact been completed on the assumed dates. Nor do the data purport to project the
financial position or results of operations of our company and our subsidiaries
for any future period or date.
It is important that you read the summary unaudited pro forma consolidated
financial information presented below along with "Management's Discussion and
Analysis of Financial Condition and Results of Operations--DIMAC Corporation,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--AmeriComm Holdings, Inc.," "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- DIMAC Marketing Corporation" and
the consolidated financial statements and the related notes for our company,
AmeriComm Holdings and DIMAC Marketing included elsewhere in this prospectus.
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THREE MONTHS TWELVE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
1998 1998 1999(A)
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(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................... $ 96,200 $ 378,460 $ 367,970
Cost of products sold............................................... 66,622 260,219 254,391
------------- ------------ --------------
Gross profit...................................................... 29,578 118,241 113,579
Selling, general and administrative expenses........................ 25,532 104,295 108,016
------------- ------------ --------------
Operating income.................................................. 4,046 13,946 5,563
Interest expense, net............................................... 8,145 32,931 32,939
------------- ------------ --------------
Loss from continuing operations before income taxes............... (4,099) (18,985) (27,376)
Income tax provision (benefit)...................................... -- -- --
------------- ------------ --------------
Loss from continuing operations................................... $ (4,099) $ (18,985) $ (27,376)
------------- ------------ --------------
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THREE MONTHS TWELVE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
1998 1998 1999(A)
------------- ------------ --------------
(DOLLARS IN THOUSANDS)
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OTHER FINANCIAL DATA:
EBITDA(b)........................................................... $ 10,557 $ 43,666 $ 38,485
Adjusted EBITDA(c).................................................. 12,754 49,837 42,870
Depreciation and amortization(d).................................... 6,487 29,651 32,834
Ratio of earnings to fixed charges(e)............................... -- -- --
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(a) The pro forma data for the twelve months ended March 31, 1999 was derived
from combining the Unaudited Pro Forma and Historical Consolidated Financial
Statements included elsewhere in this prospectus and represent the pro forma
results of operations from April 1, 1998 to March 31, 1999. Data for the
twelve months ended March 31, 1999 was derived by subtracting the pro forma
results of operations for the three months ended March 31, 1998 from the pro
forma results of operations for the year ended December 31, 1998 and then
adding the historical results of operations for the three months ended March
31, 1999 to such pro forma December 31, 1998 results of operations. See
"DIMAC Corporation Unaudited Pro Forma Consolidated Statement of
Operations." Management believes that the most recent twelve-month period is
more representative of its operations as the sales and profitability levels
for the quarter ended March 31, 1999 is more representative of expected
results for 1999 than sales and profitability levels for the quarter ended
March 31, 1998.
(b) EBITDA is defined as operating income plus depreciation, loss on disposal of
equipment, and amortization. EBITDA is presented because we believe that it
provides additional indications of the financial performance of our company
and provides useful information regarding our ability to service debt and
meet certain debt covenants under the indenture. EBITDA does not represent
cash flows from operations or investing and financing activities as defined
by generally accepted accounting principles. EBITDA does not measure whether
cash flows will be sufficient to fund all cash flow needs, including
principal and interest payments on debt and capital lease obligations,
capital expenditures or other investing and financing activities. You should
not construe EBITDA as an alternative to our operating income, net income or
cash flows from operating activities as determined in accordance with
generally accepted accounting principles; nor should you construe it as an
indication of our operating performance or as a measure of our liquidity. In
addition, items excluded from EBITDA, such as depreciation and amortization,
interest and income tax provision (benefit), are significant components in
understanding and assessing our financial performance. Our definition of
EBITDA may be different from the definition of EBITDA used by other
companies. For a complete discussion of our future prospects related to net
income, cash flows from operations and investing and financing activities,
see "Management's Discussion and Analysis of Financial Condition and Results
of Operations--DIMAC Corporation," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--AmeriComm Holdings, Inc." and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- DIMAC Marketing Corporation" included elsewhere in this
prospectus.
(c) Adjusted EBITDA for the periods presented is EBITDA, plus estimated cost
savings as a result of the acquisitions of AmeriComm Holdings and DIMAC
Marketing from the closing of certain duplicate facilities, the production
of certain inventory internally that prior to the acquisitions was purchased
from third-party vendors, the elimination of certain overlapping and
duplicative production, selling, general and administrative functions, and
reductions in external administrative and operating expenses such as
insurance, freight, and telecommunications. The estimated cost savings below
reflect personnel terminations that have occurred or that have been formally
communicated
9
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to employees, production changes that have occurred, closings of duplicate
facilities that have occurred and reductions in external administrative and
operating expenses that have been negotiated.
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THREE MONTHS TWELVE MONTHS
ENDED YEAR ENDED ENDED
MARCH 31, DECEMBER 31, MARCH 31,
1998 1998 1999(A)
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EBITDA.............................................................. $ 10,557 $ 43,666 $ 38,485
Duplicative facilities that have been closed (1).................... 750 1,775 1,124
Salaries and benefits from personnel terminations (2)............... 882 2,398 1,585
Consolidation of certain insurance programs (3)..................... 276 940 820
Third-party service costs that have been reduced (4)................ 69 277 208
Reduction in material costs (5)..................................... 220 781 648
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Adjusted EBITDA..................................................... $ 12,754 $ 49,837 $ 42,870
------------- ------------ --------------
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(1) We have closed three of our facilities enabling us to consolidate such
functions to other facilities. This has resulted in the elimination of
certain fixed facility and payroll costs.
(2) We have reduced or have identified reductions in the number of full-time
employees by approximately 157 persons in a variety of departments.
(3) We have consolidated the property and casualty insurance policies
effective August 1, 1998. In addition, we have identified savings related
to the consolidation of employee benefit insurance programs based upon
certain insurance carrier commitments.
(4) We have negotiated lower rates for our telecommunications services. In
addition, we have standardized our overnight delivery service at the best
rates used historically by either AmeriComm Holdings or DIMAC Marketing.
Finally, effective with the acquisitions of DIMAC Marketing and AmeriComm
Holdings, our management fees due to McCown De Leeuw under our Advisory
Services Agreement have increased by $0.2 million annually.
(5) Prior to the acquisitions of DIMAC Marketing and AmeriComm Holdings,
certain components, such as envelopes, mailers, and labels, used in the
manufacturing of DIMAC Marketing's and AmeriComm Holdings' products were
purchased from third party envelope, mailer and label manufacturers.
Effective July 1998, we began manufacturing these components internally
as incremental volume.
(d) Amounts do not include amortization of financing costs and original
issue discount, which is included in interest expense.
(e) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income (loss) from continuing operations before
income taxes, plus fixed charges. Fixed charges consist of interest
expense on all indebtedness, amortization of financing costs and the
estimated interest portion of rental expenses. For the three months ended
March 31, 1998, year ended December 31, 1998, and the twelve months ended
March 31, 1999, earnings were insufficient to cover fixed charges by $4.1
million, $18.9 million and $27.4 million, respectively.
10
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF DIMAC CORPORATION
The following summary historical financial data of DIMAC Corporation as of
December 31, 1998 and for the period from our inception on May 12, 1998 to
December 31, 1998 has been derived from DIMAC Corporation's audited consolidated
financial statements and the related notes. Summary historical financial data as
of and for the three-month period ended March 31, 1999 has been derived from
DIMAC Corporation's unaudited consolidated financial statements and, in the
opinion of management, includes all adjustments, consisting of only normal
recurring adjustments, that are necessary for a fair presentation of the
operating results for such interim period. Results for the interim period are
not necessarily indicative of the results for the full fiscal year or for any
future period.
It is important that you read the summary historical financial data
presented below along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations--DIMAC Corporation" and the consolidated
financial statements of DIMAC Corporation included elsewhere in this prospectus.
<TABLE>
<CAPTION>
MAY 12, 1998 TO THREE-MONTHS ENDED
DECEMBER 31, 1998(A) MARCH 31, 1999
-------------------- -------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................................................. $ 191,401 $ 85,710
Cost of products sold.................................................. 131,095 60,794
-------- --------
Gross profit......................................................... 60,306 24,916
Selling, general and administrative expenses........................... 51,480 29,253
-------- --------
Operating income (loss).............................................. 8,826 (4,337)
Interest expense, net.................................................. 17,069 8,153
-------- --------
Loss before income taxes and extraordinary item........................ $ (8,243) $ (12,490)
-------- --------
-------- --------
OTHER FINANCIAL DATA:
EBITDA(b).............................................................. $ 24,375 $ 5,376
Depreciation and amortization(c)....................................... 15,505 9,670
Net cash provided by (used in):........................................
Operating activities 14,651 (5,754)
Investing activities................................................. (250,734) (3,964)
Financing activities................................................. 245,852 17,247
Ratio of earnings to fixed charges(d).................................. -- --
Capital expenditures................................................... 7,938 3,965
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................................................ $ 19,714 $ 27,524
Total assets........................................................... 514,438 515,713
</TABLE>
- ------------------------
(a) Reflects the acquisitions of AmeriComm Holdings and DIMAC Marketing. The
acquisitions were accounted for as purchases.
(b) EBITDA is defined as operating income plus depreciation, loss on disposal of
equipment, and amortization. EBITDA is presented because we believe that it
provides additional indications of the historical financial performance of
DIMAC Corporation and provides useful information regarding our ability to
service debt and meet certain debt covenants under the indenture. EBITDA
does not represent cash flows from operations or investing and financing
activities as defined by generally accepted accounting principles. EBITDA
does not measure whether cash flows will be sufficient to fund all cash flow
needs, including principal and interest payments on debt and capital lease
obligations, capital expenditures or other investing and financing
activities. You should not construe EBITDA as an alternative to operating
income, net income or cash flows
11
<PAGE>
from operating activities, as determined in accordance with generally
accepted accounting principles; nor should you construe it as an indication
of operating performance or as a measure of our liquidity. In addition,
items excluded from EBITDA, such as depreciation and amortization, interest
and income tax provision (benefit), are significant components in
understanding and assessing financial performance. Our definition of EBITDA
may be different from the definition of EBITDA used by other companies. For
a complete discussion of our future prospects related to net income, cash
flows from operations and investing and financing activities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--DIMAC Corporation" included elsewhere in this prospectus.
(c) Amounts do not include amortization of financing costs, which is included in
interest expense.
(d) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of financing costs and the estimated interest
portion of rental expenses. For the period from our inception on May 12,
1998 to December 31, 1998 and the three months ended March 31, 1999,
earnings were insufficient to cover fixed charges by $8.2 million and 12.5
million, respectively.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF AMERICOMM HOLDINGS, INC.
The following summary historical financial data of AmeriComm Holdings as of
and for each of the two years in the period ended December 31, 1997 and for the
six-month period ended June 26, 1998 has been derived from AmeriComm Holdings'
audited consolidated financial statements and the related notes. Summary
historical data as of and for the three-month period ended March 31, 1998 has
been derived from AmeriComm Holdings' unaudited consolidated financial
statements and, in the opinion of management, includes all adjustments
consisting of only normal recurring adjustments that are necessary for a fair
presentation of the operating results for such interim period. Results for the
interim periods are not necessarily indicative of the results for the full
fiscal year or for any future periods.
It is important that you read the summary historical financial data
presented below along with "Management's Discussion and Analysis of Financial
Condition and Results of Operations--AmeriComm Holdings, Inc." and the
consolidated financial statements of AmeriComm Holdings included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, THREE MONTHS ENDED
---------------------- ENDED JUNE 26,
1996(A) 1997(B) MARCH 31, 1998(C) 1998(C)
---------- ---------- ----------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 111,342 $ 191,091 $ 46,373 $ 93,081
Cost of products sold................................ 80,215 133,598 33,455 67,992
---------- ---------- -------- ---------------
Gross profit....................................... 31,127 57,493 12,918 25,089
Selling, general and administrative expenses......... 25,200 45,761 11,957 25,622
---------- ---------- -------- ---------------
Operating income (loss)............................ 5,927 11,732 961 (533)
Interest expense, net................................ 8,138 17,023 4,745 9,677
---------- ---------- -------- ---------------
Loss before income taxes and extraordinary item...... $ (2,211) $ (5,291) $ (3,784) $ (10,210)
---------- ---------- -------- ---------------
---------- ---------- -------- ---------------
OTHER FINANCIAL DATA:
EBITDA(d)............................................ $ 12,772 $ 24,502 $ 4,452 $ 7,644
Depreciation and amortization(e)..................... 6,845 12,276 3,467 8,152
Net cash provided by operating activities............ 7,148 1,026 6,481 4,004
Net cash used in investing activities................ (79,838) (38,881) (6,966) (10,407)
Net cash provided by financing activities............ 74,225 37,093 211 6,940
Ratio of earnings to fixed charges(f)................ -- -- -- --
Capital expenditures................................. 3,490 4,563 2,286 5,666
BALANCE SHEET DATA (END OF PERIOD):
Working capital...................................... $ 18,840 $ 25,634 $ 22,109 $ 23,831
Total assets......................................... 132,498 176,662 176,494 176,750
</TABLE>
- ------------------------
(a) Reflects the acquisition of Transkrit Corporation and its subsidiaries on
June 28, 1996. We accounted for this acquisition as a purchase.
(b) Reflects the acquisitions of Label America and AmeriComm Direct Marketing on
February 21, 1997 and April 24, 1997, respectively. We accounted for these
acquisitions as purchases.
(c) Reflects the acquisitions of Cardinal Marketing and Cardinal Marketing of
New Jersey on March 16, 1998. We accounted for these acquisitions as
purchases.
13
<PAGE>
(d) EBITDA is defined as operating income plus depreciation, loss on disposal of
equipment and amortization. EBITDA is presented because we believe that
EBITDA provides additional indications of the historical financial
performance of Americomm Holdings and provides useful information regarding
our ability to service debt and meet certain debt covenants under the
indenture. EBITDA does not represent cash flows from operations or investing
and financing activities as defined by generally accepted accounting
principles. EBITDA does not measure whether cash flows will be sufficient to
fund all cash flow needs, including principal and interest payments on debt
and capital lease obligations, capital expenditures or other investing and
financing activities. EBITDA should not be construed as an alternative to
operating income, net income or cash flows from operating activities as
determined in accordance with generally accepted accounting principles; nor
should you construe it as an indication of operating performance or as a
measure of our liquidity. In addition, items excluded from EBITDA, such as
depreciation and amortization, interest and income tax provision (benefit),
are significant components in understanding and assessing financial
performance. Our definition of EBITDA may be different from the definition
of EBITDA used by other companies. For a complete discussion of our future
prospects related to net income, cash flows from operations and investing
and financing activities, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--AmeriComm Holdings, Inc."
included elsewhere in this prospectus.
(e) Amounts do not include amortization of financing costs, which is included in
interest expense.
(f) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of financing costs and the estimated interest
portion of rental expenses. For the years ended December 31, 1996 and 1997,
the three months ended March 31, 1998 and the six months ended June 26, 1998
earnings were insufficient to cover fixed charges by $2.2 million, $5.3
million, $3.8 million, and $10.2 million, respectively.
14
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA OF DIMAC MARKETING CORPORATION
We derived the following summary historical financial data of DIMAC
Marketing as of and for the eleven months ended December 31, 1996, as of and for
the fiscal year in the period ended December 31, 1997 and as of and for the six
months ended June 26, 1998 from DIMAC Marketing's audited consolidated financial
statements and the notes thereto. We derived the summary historical financial
data as of and for the three months ended March 31, 1998 from DIMAC Marketing's
unaudited consolidated financial statements and, in the opinion of management,
it includes all adjustments consisting of only normal recurring adjustments that
are necessary for a fair presentation of the operating results for such period.
Results for the interim period do not necessarily indicate the results for the
full fiscal year or for any future period. The financial position and results of
operations of DIMAC Marketing for the period from February 1, 1996 to August 31,
1997 and the period from September 1, 1997 to June 26, 1998 are not comparable
in all material respects since each period reflects certain purchase accounting
adjustments that are further discussed in the notes to DIMAC Marketing's
consolidated financial statements included elsewhere in this prospectus. It is
important that you read the selected historical financial data presented below
along with "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- DIMAC Marketing Corporation" and the consolidated
financial statements of DIMAC Marketing included elsewhere in this prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ELEVEN EIGHT
MONTHS MONTHS FOUR MONTHS THREE
ENDED ENDED ENDED MONTHS SIX MONTHS
DECEMBER AUGUST DECEMBER ENDED ENDED
31, 31, 31, MARCH 31, JUNE 26,
1996(A) 1997 1997 1998 1998
----------- --------- ----------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Sales..................................... $ 168,193 $ 118,747 $ 59,200 $ 49,057 $ 93,208
Cost of sales............................. 108,735 77,820 39,722 33,225 61,806
----------- --------- ----------- ----------- -----------
Gross profit............................ 59,458 40,927 19,478 15,832 31,402
Selling, general and administrative
expenses................................ 47,645 37,867 17,083 12,999 26,615
----------- --------- ----------- ----------- -----------
Operating income........................ 11,813 3,060 2,395 2,833 4,787
Interest expense, net..................... 7,525 6,188 2,248 2,247 4,583
----------- --------- ----------- ----------- -----------
Income (loss) before income taxes,
discontinued operations and
extraordinary item...................... $ 4,288 $ (3,128) $ 147 $ 586 $ 204
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
OTHER FINANCIAL DATA:
EBITDA(b)................................. $ 24,228 $ 13,315 $ 6,925 $ 6,322 $ 11,864
Depreciation and amortization(c).......... 12,415 10,255 4,530 3,489 7,077
Net cash provided by (used in) operating
activities.............................. 7,809 4,323 1,310 (345) 1,961
Net cash used in investing activities..... (44,878) (19,944) (7,620) (2,845) (6,387)
Net cash provided by financing
activities.............................. 37,069 15,621 6,310 3,190 4,426
Ratio of earnings to fixed charges(d)..... 1.4x -- 1.1x 1.2x 1.0x
Capital expenditures...................... 9,282 15,885 5,720 1,640 3,166
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit)................. $ (2,540) $ 10,582 $ 7,558 $ 12,820 $ 14,714
Total assets.............................. 350,003 356,108 260,836 260,024 261,940
</TABLE>
- ------------------------
(a) Reflects the acquisitions of Wilcox & Associates Inc. on February 28, 1996
and MBS/Multimode, Inc. on April 30, 1996. We accounted for these
acquisitions as purchases.
(b) EBITDA is defined as operating income plus depreciation, loss on disposal of
equipment and amortization. EBITDA is presented because we believe that it
provides additional indications of the historical financial performance of
DIMAC Marketing and provides useful information regarding our ability to
service debt and meet certain debt covenants under the indenture. EBITDA
does
15
<PAGE>
not represent cash flows from operations or investing and financing
activities as defined by generally accepted accounting principles. EBITDA
does not measure whether cash flows will be sufficient to fund all cash flow
needs, including principal and interest payments on debt and capital lease
obligations, capital expenditures or other investing and financing
activities. You should not construe EBITDA as an alternative to operating
income, net income or cash flows from operating activities as determined in
accordance with generally accepted accounting principles; nor should you
construe it as in indication of operating performance or as a measure of our
liquidity. In addition, items excluded from EBITDA, such as depreciation
amortization, interest and income tax provision (benefit), are significant
components in understanding and assessing financial performance. Our
definition of EBITDA may be different from the definition of EBITDA used by
other companies. For a complete discussion of our future prospects related
to net income, cash flows from operations and investing and financing
activities, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--DIMAC Marketing Corporation" included elsewhere
in this prospectus.
(c) Amounts do not include amortization of financing costs, which is included in
interest expense.
(d) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income (loss) from continuing operations before income taxes,
plus fixed charges. Fixed charges consist of interest expense on all
indebtedness, amortization of financing costs and the estimated interest
portion of rental expenses. For the eight months ended August 31, 1997,
earnings were insufficient to cover fixed charges by $3.1 million.
16
<PAGE>
RECENT DEVELOPMENTS
During the first quarter of 1999, due to our financial performance we became
concerned about our ability to meet our short-term cash obligations. To address
these liquidity concerns, on March 31, 1999, DIMAC Holdings issued $79.9 million
aggregate principal face amount of its 15 1/2% Senior Subordinated Discount
Notes due March 31, 2010 and warrants to purchase 200,000 shares of DIMAC
Holdings' voting common stock to certain affiliates of McCown De Leeuw and other
investors for aggregate consideration of $15.0 million. DIMAC Holdings then
contributed the proceeds from the issuance to us. The senior subordinated
discount notes are unsecured subordinated obligations and will mature on March
31, 2010. Interest on each senior subordinated discount note accrues at a rate
of 15 1/2% per annum and is not payable prior to maturity. Concurrently with the
issuance of the senior subordinated discount notes, we entered into a First
Amendment to our senior secured credit facility which, among other things,
revised certain financial covenants, added a minimum EBITDA covenant and waived
compliance with the minimum fixed charge coverage ratio and maximum leverage
ratio covenants until after December 31, 2000. In addition, the First Amendment
provides that the lenders under our senior secured credit facility have no
obligation to make new revolving loans under our senior secured credit facility
until we comply with certain financial covenants which were in effect prior to
the First Amendment.
On April 14, 1999, we announced certain changes in our senior management.
David King, a managing director of McCown De Leeuw, was appointed Chairman of
the Board of Directors of our company. Martin Lewis resigned from his position
as Chief Executive Officer of our company. John Meneough, formerly an Executive
Vice President of our company, was appointed President of our company. Other
recent resignations include the resignation of Robert Miklas, President of our
company, on March 31, 1999 and Jack Resnick, Executive Vice President of our
company, on May 25, 1999.
On June 4, 1999, during our normal accounting review procedures, we
discovered certain accounting errors at a DMW Worldwide business unit. The
business unit accounted for approximately 18.5% and 1.1% of our net sales and
EBITDA, respectively, for the three-month period ended March 31, 1999.
Subsequent to our discovery of the accounting errors, the Chief Executive
Officer and Chief Financial Officer of DMW Worldwide resigned and we engaged
Arthur Andersen LLP to assist in investigating this matter. We are currently
seeking a new Chief Executive Officer and Chief Financial Officer for DMW
Worldwide. We have restated the unaudited results of operations for the
three-month period ended March 31, 1999 resulting in a reduction of EBITDA of
$0.6 million and believe that the restated statement of operations was compiled
in accordance with appropriate accounting practices.
For the second quarter ended June 30, 1999, net sales and operating income
are expected to be significantly below net sales and operating income for the
same period in 1998. The decrease in net sales and operating income is due to
decreases in sales volume for our direct mail production services business unit
as certain significant customers have reduced their mailing for direct mail
campaigns. In addition, the product mix of our sales volume has changed towards
lower margin business. Additional decreases in operating income for the second
quarter of 1999 has been impacted by additional expenses incurred in corporate
activities.
On July 23, 1999, we entered into a Second Amendment to our senior secured
credit facility to address our continuing liquidity problems. The Second
Amendment, among other things, reduced the revolving loan commitment by $28.3
million, provided for additional term loans and revolving loans available only
on the effective date of the Second Amendment, July 28, 1999, in an aggregate
amount of $30.0 million and revised certain financial covenants and amortization
schedules which will commence in 2001 in the amount of $10.5 million. Funds for
the additional loans were provided by an affiliate of McCown De Leeuw through a
participation agreement. After December 31, 2000, we believe that we will need
to amend or refinance our senior secured credit facility and possibly our other
indebtedness.
17
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND OTHER
INFORMATION APPEARING IN THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE
OFFER.
ABILITY TO SERVICE DEBT--THE FINANCIAL PERFORMANCE OF OUR SUBSIDIARIES MUST
SIGNIFICANTLY IMPROVE TO GENERATE ENOUGH CASH TO SERVICE OUR INDEBTEDNESS.
We are a holding company with no significant independent operations or
assets other than the stock of our subsidiaries. Accordingly, we are dependent
on the cash flows of our subsidiaries to meet our obligations, including the
payment of principal and interest on the notes. If the financial and operating
performance of our subsidiaries does not significantly improve, our subsidiaries
will not generate sufficient cash flow from operations in the future to pay our
indebtedness, including these notes, or to fund other liquidity needs. We cannot
assure you that the financial and operating performance of our subsidiaries will
improve. Our subsidiaries financial and operating performance are, to a certain
extent, subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. We cannot assure you
that if our subsidiaries financial and operating performance does not improve
that future borrowings will be available to us under our senior secured credit
facility in an amount sufficient to enable us to pay our indebtedness, including
these notes. The lenders under our senior secured credit facility are under no
obligation to make new revolving loans to us until we comply with certain
financial ratios and tests contained in the senior secured credit agreement. For
the year ended December 31, 1998 and the twelve months ended March 31, 1999,
after giving effect to AmeriComm Holdings' acquisitions of Cardinal Marketing
and Cardinal Marketing of New Jersey, our acquisitions of AmeriComm Holdings and
DIMAC Marketing, and the refinancing of certain indebtedness assumed in
connection with our acquisitions of AmeriComm Holdings and DIMAC Marketing, as
if they occurred at the beginning of such periods, and the application of the
net proceeds from these transactions, our earnings would have been insufficient
to cover fixed charges by approximately $18.9 million and $27.4 million,
respectively. There are no material restrictions on the ability of our
subsidiaries to make distributions to us.
If we are unable to service our indebtedness, we will be forced to adopt an
alternative strategy. Possible alternative strategies include:
- reducing or delaying capital expenditures;
- selling assets;
- restructuring or refinancing our indebtedness; or
- seeking additional equity capital.
We cannot assure you that we would be able to effect any of these strategies
on satisfactory terms, if at all. For example, our senior secured credit
facility, our indenture and the indenture governing DIMAC Holdings' notes
contain covenants that restrict our ability to take certain of these actions,
including selling assets and using the proceeds from the sale.
If our subsidiaries' financial performance does not significantly improve
and we cannot adopt an alternative strategy, we may need to refinance all or a
portion of our indebtedness, including these notes on or before maturity. We
cannot assure you that we will be able to refinance any of our indebtedness,
including our senior secured credit facility or these notes, on commercially
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
18
<PAGE>
SUBSTANTIAL LEVERAGE--OUR SUBSTANTIAL INDEBTEDNESS ADVERSELY AFFECTS OUR
FINANCIAL HEALTH AND MAY PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER
THESE NOTES.
We have a significant level of indebtedness. Our substantial indebtedness
has important consequences to you. For example, it will:
- make it more difficult for us to satisfy our obligations with respect to
these notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital expenditures,
acquisitions and other general corporate requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, acquisitions and other general corporate purposes;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit, among other things, our ability to borrow additional funds.
As of March 31, 1999, we had outstanding $312.3 million of consolidated
indebtedness (excluding trade payables and other liabilities) and unused
revolving commitments of $61.4 million under our senior secured credit facility.
Although the indenture and our senior secured credit facility limit our ability
to borrow additional money, we are allowed to borrow a significant amount of
additional money under certain circumstances. For more information about our
indebtedness, see the "Description of Other Indebtedness--Senior Secured Credit
Facility," "Description of Notes" and "Summary--Recent Developments" sections of
this prospectus.
SUBSTANTIAL RESTRICTIONS AND COVENANTS--RESTRICTIONS AND COVENANTS IN OUR DEBT
AGREEMENTS LIMIT OUR ABILITY TO TAKE CERTAIN ACTIONS.
The debt agreements governing our notes and DIMAC Holdings' notes contain a
number of significant restrictions and covenants. These covenants limit our
ability, among other things to:
- borrow more money;
- incur liens;
- pay dividends or make certain other restricted payments;
- sell certain assets;
- enter into certain transactions with affiliates; and
- impose restrictions on the ability of any of our subsidiaries to:
- pay dividends or make certain payments to us;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of our assets; and
- make certain acquisitions.
19
<PAGE>
In addition, our senior secured credit facility contains other more
restrictive covenants, including covenants that require us to maintain certain
financial ratios which further limit our operational flexibility. If we are
unable to comply with these restrictions and covenants, we would be in default
under the terms of our debt agreements. An event of default under our debt
agreements would also result in an event of default under our master lease
agreement with General Electric Capital Corporation, relating to the financing
of a $3.1 million equipment line and our lease agreement with the CIT Group,
relating to the financing of a $2.6 million equipment line. If we were unable to
repay the amounts owed under our debt agreements and our lease agreements, such
defaults, if not waived, could result in acceleration of our indebtedness and
our bankruptcy. For more information, see "Summary--Recent Developments,"
"Description of Notes--Certain Covenants", "Description of Other Indebtedness--
Senior Secured Credit Facility" and "--DIMAC Holdings Senior Notes."
RANKING OF THE NOTES--YOUR RIGHT TO RECEIVE PAYMENTS ON THESE NOTES IS JUNIOR TO
ALL SENIOR INDEBTEDNESS AND SECURED INDEBTEDNESS, TO THE EXTENT OF THE
APPLICABLE SECURITY INTERESTS, OF OUR COMPANY OR THE APPLICABLE SUBSIDIARY
GUARANTOR.
The notes are unsecured senior subordinated obligations of our company. The
notes rank junior in right of payment to all of our senior indebtedness,
including our senior secured credit facility, and all of our secured
indebtedness, to the extent of such security interests, and equal in right of
payment to all of our unsecured senior subordinated obligations. Each subsidiary
guaranty of the notes ranks junior in right of payment to each subsidiary
guarantor's senior indebtedness, including each subsidiary guarantor's guarantee
of our obligations with respect to our senior secured credit facility, and each
subsidiary guarantor's secured indebtedness, to the extent of such security
interests, and equal in right of payment to each subsidiary guarantor's
unsecured senior subordinated obligations. Our obligations under our senior
secured credit facility are unconditionally and irrevocably guaranteed by our
present and future domestic subsidiaries.
As a result, upon any distribution to our creditors or the creditors of the
guarantors in a bankruptcy, liquidation or reorganization or similar proceeding
relating to us or the guarantors of our or their property, the holders of senior
indebtedness and secured indebtedness, to the extent of the applicable security
interests, of our company and the guarantors will be entitled to be paid in full
in cash before any payment may be made with respect to these notes or the
subsidiary guarantees.
In addition, all payments on the notes and the guarantees will be blocked in
the event of a payment default on senior indebtedness and may be blocked for
certain periods of time in the event of certain non-payment defaults on senior
indebtedness.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our company or the guarantors, noteholders will
participate with all other holders of subordinate indebtedness of our company
and the guarantors in the assets remaining after we and the subsidiary
guarantors have paid all of our senior indebtedness. However, because the
indenture requires that amounts otherwise payable to noteholders in a bankruptcy
or similar proceeding be paid to holders of senior indebtedness instead,
noteholders may receive less, ratably, than holders of senior indebtedness in
any such proceeding. In any of these cases, we and the subsidiary guarantors may
not have sufficient funds to pay all of our creditors and holders of notes may
receive less, ratably than the holders of senior debt.
As of March 31, 1999, we had $215.0 million of senior indebtedness
outstanding, of which $8.1 million relates to senior indebtedness of our
subsidiaries, and $97.3 million of senior subordinated indebtedness outstanding.
In addition, we will be permitted to borrow substantial additional indebtedness,
including senior indebtedness, in the future under the terms of the indenture.
20
<PAGE>
DEPENDENCE UPON AT&T PROGRAMS--WE ARE RELIANT ON AT&T AS A CUSTOMER. THE LOSS OF
ADDITIONAL AT&T PROGRAMS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
AT&T Corp. accounted for approximately 8.6%, 7.5% and 5.0% of our net sales
in 1997, 1998 and the first three months of 1999, respectively, on a pro forma
basis after giving effect to AmeriComm Holdings' acquisitions of Cardinal
Marketing and Cardinal Marketing of New Jersey, our acquisitions of AmeriComm
Holdings and DIMAC Marketing. We service separate programs at AT&T, each of
which is independently managed within AT&T. The number of separate ongoing
programs at AT&T that we produce has decreased from 27 as of December 31, 1997
to 18 as of March 31, 1999. The four largest AT&T programs, which are not
necessarily the same four programs in each period, comprised approximately 5.7%
and 4.1% and 3.4% of our pro forma net sales in 1997, 1998 and the first three
months of 1999, respectively. Because of our dependence on the AT&T programs,
the loss of any additional large or significant number of smaller AT&T programs
could have a material adverse effect on our business, financial condition or
results of operation.
RISKS RELATED TO INTEGRATION--WE MAY NOT BE ABLE TO INTEGRATE SUCCESSFULLY THE
OPERATIONS OF AMERICOMM HOLDINGS AND DIMAC MARKETING.
We were formed for the purpose of acquiring AmeriComm Holdings and DIMAC
Marketing. We are in the process of integrating the operations of these
businesses. There can be no assurances that we can successfully integrate the
operations of AmeriComm Holdings and DIMAC Marketing. To successfully integrate
the operations of AmeriComm Holdings and DIMAC Marketing we must, among other
things:
- centralize and consolidate financial, operational and administrative
functions;
- combine and train our sales forces on our complimentary products and
services;
- consolidate redundant facilities;
- strengthen our internal contols;
- improve production capacity utilization; and
- establish and implement company-wide corporate policies, standard
operating procedures, accounting policies and integrate the accounting
reporting functions.
Failure to successfully integrate the businesses could have a material
adverse effect on our business, financial condition and results of operations.
INTEREST RATES--AN INCREASE IN INTEREST RATES MAY HAVE A SIGNIFICANT IMPACT ON
OUR FINANCIAL CONDITION.
The interest rates applicable to loans under our senior secured credit
facility are fluctuating interest rates. As of March 31, 1999, we had
outstanding $206.9 million of indebtedness under our senior secured credit
facility. Any increase in these rates could significantly increase the amount we
must pay in interest under our senior secured credit facility and may have a
material adverse effect on our business, financial condition and results of
operations.
YEAR 2000 RISKS--OUR SYSTEMS ARE CURRENTLY NOT YEAR 2000 COMPLIANT. YEAR 2000
ISSUES MAY NEGATIVELY AFFECT OUR OPERATIONS.
The year 2000 issue results from computer programs that identify years with
two digits instead of four. Those programs may recognize the year 2000 as the
year 1900. We are in the process of testing our systems for year 2000 compliance
and have contacted our critical suppliers, customers and key service providers
to determine their level of year 2000 compliance. There can be no assurance that
our systems or the systems of our critical suppliers, customers and key service
providers are year 2000
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<PAGE>
compliant or will be timely converted to year 2000 compliance. We rely on
suppliers and service providers for utilities, telephone service, paper
products, production equipment and other key supplies and services. Our failure
or the failure of our critical suppliers, customers and key service providers to
be year 2000 compliant could disrupt our operations, create adverse relations
with our customers and suppliers and have a material adverse effect on our
business, financial condition or results of operations.
EXPOSURE TO FLUCTUATIONS IN PAPER COSTS AND SUPPLY--AN INTERRUPTION OF PAPER
SUPPLY OR RISING PAPER PRICES COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Our principal raw material is paper. Paper has a historical pattern of
cyclical price change based upon industry capacity and market demand. Prices
during these periods tend to increase, sometimes by significant amounts. Paper
companies may limit the short term supply available. The cyclical nature of the
paper industry could result in an interruption of paper supply and an inability
to fulfill customer orders. We may not be able to pass these increases through
to our customers, reducing our profitability. For example, a substantial
increase in paper prices could affect the advertising budgets of our customers
and have a material adverse effect on our business, financial conditions or
results of operations.
In addition, any liquidity problems that we experience in the future could
result in an interruption of paper supply or an increase in our paper prices.
Our failure to pay our paper suppliers in a timely manner may result in our
paper suppliers terminating any rebate plan that they offer to us or refusing to
supply us with paper. There can be no assurance that in such a case we would be
able to obtain paper from other suppliers on equally favorable pricing terms.
SEASONALITY AND QUARTERLY FLUCTUATIONS--A DECREASE IN NET SALES DURING THE THIRD
AND FOURTH QUARTERS COULD HAVE A GREATER EFFECT UPON OUR PROFITABILITY.
During the third and fourth quarters of each year we historically have
generated greater profitability. We experience this fluctuation because many of
our larger customers are retailers whose own businesses are affected by these
seasonal patterns. During 1998, approximately 51% and 67% of our combined pro
forma net sales and operating income, after giving effect to AmeriComm Holdings'
acquisitions of Cardinal Marketing and Cardinal Marketing of New Jersey and our
acquisitions of AmeriComm Holdings and DIMAC Marketing, occurred in the third
and fourth quarters, respectively. Accordingly, any adverse trend in net sales
for such period could have a greater adverse effect upon our business, financial
condition or results of operations.
POSTAL INVESTIGATION--THE CURRENT POSTAL INVESTIGATION OF US AND ITS RELATED
COSTS COULD FINANCIALLY AND OPERATIONALLY AFFECT OUR BUSINESS.
In June 1997, the United States Attorney's Office for the Eastern District
of Missouri informed DIMAC Marketing that its St. Louis facility was the subject
of a grand jury investigation based upon information supplied by the United
States Postal Service. The investigation concerns whether violations of civil or
criminal statutes may have occurred in connection with its bulk mailing
practices at this facility. We have been engaged in discussions with the
government which have included a possible consensual resolution of this matter.
It is our position that our past bulk mailing practices complied with applicable
laws and regulations.
GOVERNMENTAL REGULATION AND POSTAL RATES--FURTHER INCREASES IN THE POSTAL RATES
OR A POSTAL STRIKE COULD FINANCIALLY AND OPERATIONALLY AFFECT OUR BUSINESS.
The direct marketing industry depends upon the services provided by the
United States Postal Service. For example, any change in the rate structure or
postal rates, could decrease the demand for
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<PAGE>
direct marketing services. A postal strike would affect our ability to provide
direct mail services and could also have a material adverse effect on our
business, financial condition or results of operations.
In July 1997, the United States Postal Service granted DIMAC Marketing's St.
Louis facility a postal privilege that enables the United States Postal Service
to accept our documentation with regard to counts and specific mail
classification weights. This process allows us to bypass the time-consuming and
complex process of documenting the exact weight of each specific package and
saves us substantial time on large volume jobs. Any withdrawal or adverse
modification of this qualification could impact our operations and have a
material adverse effect on our business, financial condition or results of
operations.
FINANCING CHANGE OF CONTROL OFFER--WE MAY NOT HAVE OR BE ABLE TO RAISE THE
NECESSARY FUNDS TO PAY FOR THE NOTES SHOULD WE BE REQUIRED TO REPURCHASE THEM.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to make an offer to repurchase the notes at 101% of their
principal amount plus accrued interest. However, it is possible that we will not
have sufficient funds at the time of the change of control to make the required
repurchase of notes or that restrictions in our senior secured credit facility
will not allow such repurchases. Even if we did have sufficient funds to carry
out such a repurchase, the financial effect of the repurchase could cause us to
default on our other indebtedness. Finally, the indenture pursuant to which the
DIMAC Holdings notes were issued contains similar change of control provisions
and consequences similar to those presented here. See "Description of
Notes--Change of Control" and "Description of Other Indebtedness--Holdings
Notes" sections, of this prospectus for more information.
COMPETITION--INCREASED COMPETITION IN THE FUTURE COULD RESULT IN A LOSS OF
BUSINESS OR PROFITABILITY.
The direct marketing industry is fragmented and highly competitive. We
compete with other national and local manufacturers in many product lines. We
are more highly leveraged than some of our principal competitors and,
consequently, we have less financing and operating flexibility. Increased
competition could result in a loss of business or a reduction in pricing which
could have a material adverse effect on our business, financial condition or
results of operations. See "Business-- Competition."
THE INTERNET--OUR FUTURE SUCCESS MAY DEPEND ON OUR ABILITY TO DEVELOP INTERNET
MARKETING PRODUCTS AND SERVICES.
Use of the internet for direct marketing purposes may increase in the
future. As a result of this increase, our customer's demand for direct mail
products and services may substantially decrease. Our future success may depend
in significant part on our ability to develop and introduce new internet direct
marketing products and services. Our ability to develop new internet direct
marketing products and services may depend upon the financial resources
available to us and our ability to attract key employees with relevant internet
experience. Our failure to develop successfully internet marketing products and
services may have a material adverse effect on our business, financial condition
and results of operations.
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<PAGE>
IMPACT OF ENVIRONMENTAL REGULATION--OUR BUSINESS, BY ITS NATURE, EXPOSES US TO
CERTAIN ENVIRONMENTAL HEALTH AND PROTECTION MATTERS INCLUDING POTENTIAL COSTS
AND LIABILITIES.
Our operations and properties are subject to a wide variety of federal,
state and local laws and regulations relating to environmental protection and
human health and safety including those governing:
- the use, storage, handling, generation, treatment, emission, release,
discharge and disposal of, and exposure to, hazardous and non-hazardous
materials, substances and wastes;
- the remediation of contaminated soil and groundwater; and
- the health and safety of employees.
The nature of our operations exposes us to the risk of claims related to
environmental protection and health and safety matters. We may incur material
costs or liabilities because of any of these claims.
In addition, AmeriComm Holdings has been designated as a potentially
responsible party under the 1980 "Superfund" Act relating to the disposal of
hazardous substances at one off-site location. AmeriComm Holdings could be found
liable for the costs of environmental investigation and cleanup at this site. We
cannot guarantee, that the future cost of compliance with existing environmental
protection and health and safety laws and regulations, and liability for known
claims relating to such matters, will not have a material adverse effect on our
business, financial condition or results of operations. In addition, future
events, such as changes in existing laws and regulations or their
interpretation, or more vigorous enforcement policies of regulatory agencies,
may give rise to additional expenditures or liabilities that could have a
material adverse effect on our business, financial condition or results of
operations. See "Business--Environmental, Health and Safety Matters."
DEPENDENCE ON KEY MANAGEMENT--OUR SUCCESS WILL CONTINUE TO DEPEND TO A
SIGNIFICANT EXTENT ON OUR EXECUTIVES AND OTHER KEY MANAGEMENT PERSONNEL.
Recently we have terminated the employment of a number of executive officers
and a number of executive officers and key personnel have resigned. Due to our
recent performance, we may not be able to recruit new executive officers and key
personnel or retain our existing executive officers and key personnel, including
our President, Chief Financial Officer, Controller, General Managers, business
unit presidents and senior sales personnel.
CONTROLLING STOCKHOLDER--AFFILIATES OF MCCOWN DE LEEUW WILL OWN ENOUGH OF OUR
STOCK TO INDIRECTLY CONTROL OUR AFFAIRS AND THOSE OF OUR SUBSIDIARIES.
Certain affiliates of McCown De Leeuw own a substantial majority of the
voting stock of DIMAC Holdings, which is our sole stockholder. By virtue of such
stock ownership, they will directly control the election of the Board of
Directors and the direction of the affairs of DIMAC Holdings and its
subsidiaries. Consequently, they will indirectly control the election of the
Board of Directors and the direction of our affairs and those of our
subsidiaries. See "Security Ownership."
ABSENCE OF PUBLIC MARKET FOR THE NOTES--YOU CANNOT BE SURE THAT AN ACTIVE
TRADING MARKET WILL DEVELOP FOR THESE NOTES.
We do not intend to apply for listing or quotation of the registered notes
on any exchange. The notes are, however, eligible for trading in PORTAL. Credit
Suisse First Boston Corporation, First Union Capital Markets and Warburg Dillon
Read LLC have advised us that they intend to make a market in the registered
notes, subject to the limits imposed by the securities laws. However, they are
not obligated to do so, and they may discontinue any market making at any time
without notice.
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<PAGE>
Therefore, we do not know the extent to which investor interest will lead to the
development of a trading market or how liquid that market might be.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. The market for the registered notes may be subjected to similar
disruptions. Any such disruptions may have an adverse effect on the registered
noteholders.
ORIGINAL ISSUE DISCOUNT--THE ISSUANCE OF THE REGISTERED NOTES WILL RESULT IN
ADDITIONAL INTEREST INCOME INCLUDABLE IN U.S. HOLDERS' GROSS INCOME FOR
FEDERAL INCOME TAX PURPOSES.
Just as the unregistered notes were considered to be issued with original
issue discount, the notes will be considered to be issued with original issue
discount for U.S. federal income tax purposes. Original issue discount will
accrue from the issue date of the registered notes and generally will be
includable as interest income in a U.S. holder's (as defined in "Certain United
States Tax Considerations") gross income for U.S. federal income tax purposes in
advance of the cash payments to which the income is attributable.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act, covering the registered notes to be issued in the exchange
offer. Please note that this prospectus does not contain all of the information
included in the registration statement. Any statement made in this prospectus
concerning the contents of any contract, agreement or other document is not
necessarily complete. If we have filed any such contract, agreement or other
document as an exhibit to the registration statement, you should read the
exhibit for a more complete understanding of the document or matter involved.
Each statement in this prospectus regarding a contract, agreement or other
document is qualified in its entirety by reference to the actual document.
Following completion of the exchange offer, we will be required to file
periodic reports and other information with the SEC under the Securities
Exchange Act of 1934. Our obligation to file periodic reports with the SEC will
be suspended if the registered notes issued in the exchange offer are held of
record by fewer than 300 holders as of the beginning of any year. However, the
indenture governing the notes nevertheless requires us to file financial and
other information with the SEC for public availability. In addition, the
indenture requires us to deliver to you, at our expense, copies of all reports
that we file with the SEC. We will also furnish such other reports as we may
determine or as the law requires.
You may read and copy the registration statement, including the attached
exhibits, and any reports, statements or other information that we file with the
SEC, at the SEC's public reference rooms in Washington, D.C., Chicago, Illinois
and New York, New York. You can request copies of these documents, upon payment
of a duplicating fee, by writing the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference rooms. Our SEC
filings will also be posted on the SEC Internet site (http://www.sec.gov).
You should rely only on the information provided in this prospectus. No
person is authorized to provide you with different information.
We are not making an offer to exchange unregistered notes in any
jurisdiction where the offer is prohibited.
The information in this prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this prospectus
is accurate as of any other date.
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<PAGE>
COMPANY HISTORY
McCown De Leeuw formed DIMAC Corporation in May 1998 to combine the
businesses of DIMAC Marketing and AmeriComm Holdings and create a direct mail
industry leader.
DIMAC Marketing was founded in 1921 as a commercial printer. In August 1987,
DIMAC Marketing was sold to management and Golder, Thoma & Cressey, a private
equity firm. Golder, Thoma & Cressey and management owned DIMAC Marketing until
November 1993, at which time the business was sold to affiliates of McCown De
Leeuw. Under McCown De Leeuw's ownership, DIMAC Marketing completed an initial
public offering in August 1994 and was ultimately sold to Heritage Media in
February 1996. In August 1997, News Corporation acquired Heritage Media,
including DIMAC Marketing. On June 26, 1998, we bought DIMAC Marketing from
Heritage Media.
Affiliates of McCown De Leeuw have owned AmeriComm Holdings since 1989.
AmeriComm Holdings' predecessor company was formed in 1989 to acquire National
Fiberstok Corporation, a manufacturer of custom file folders. In 1997, National
Fiberstok changed its name to that of a company it acquired, AmeriComm Direct
Marketing, Inc. On June 26, 1998, McCown De Leeuw combined AmeriComm Holdings
with DIMAC Marketing to form DIMAC Corporation.
On December 17, 1998, DMW Worldwide was incorporated under the laws of the
State of Missouri. DMW Worldwide's sole shareholder is DIMAC DIRECT. DMW
Worldwide entered into an Agreement and Plan of Merger under which it merged
with and into Wilcox & Associates and The McClure Group, Inc. DMW Worldwide was
the survivor of the merger. DMW Worldwide, Wilcox & Associates and The McClure
Group were merged together to consolidate our direct marketing agency business.
The following table outlines the recent acquisition history of DIMAC
Marketing and AmeriComm Holdings:
<TABLE>
<CAPTION>
ENTITY
PURCHASER ACQUIRED DATE EXPERTISE
- -------------- ---------------------------------------- ---------------- -------------------------------------
<S> <C> <C> <C>
DIMAC Direct Marketing Group, Inc. May 1994 Strategic and creative services,
MARKETING information processing services
and production.
Palm Coast Data Inc. May 1995 Fulfillment/subscription
management.
The McClure Group Inc. October 1995 Program development services with
an insurance and healthcare
industry specialization.
Wilcox & Associates Inc. March 1996 Transitional marketing services,
primarily for the banking
industry.
MBS/Multimode Inc. May 1996 Database marketing services,
primarily to retail and catalog
industries.
AMERICOMM Transkrit Corporation June 1996 Direct mail, custom mailers and
HOLDINGS custom pressure sensitive labels.
Label America, Inc. February 1997 Custom pressure sensitive labels.
AmeriComm Direct Marketing, Inc. April 1997 Direct marketing products and
services.
Cardinal Marketing, Inc. and Cardinal March 1998 Customer profiling and response
Marketing of New Jersey, Inc. analysis primarily to the
financial services and retail
industries.
</TABLE>
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<PAGE>
THE ACQUISITIONS
On June 26, 1998, we acquired:
- AmeriComm Holdings by purchasing all of its issued and outstanding
capital stock for aggregate consideration of approximately $203.7
million, including assumed indebtedness, consisting of $39.4 million of
cash and $164.3 million of assumed indebtedness; and
- DIMAC Marketing by purchasing all of its issued and outstanding capital
stock for aggregate consideration of approximately $204.0 million,
including assumed indebtedness, consisting of $200.0 million of cash and
$4.0 million of assumed indebtedness.
The total consideration for the acquisitions was $425.8 million including
assumed indebtedness and fees and expenses relating to the acquisitions.
We financed the acquisitions of AmeriComm Holdings and DIMAC Marketing and
related fees and expenses through:
- cash equity capital of $100.0 million provided to DIMAC Holdings by
certain affiliates of McCown De Leeuw;
- borrowings of $157.6 million, consisting of term loans of $150.0 million
and revolving loans of $7.6 million, net of cash available, in each case
under our senior secured credit facility; and
- assumed indebtedness of $168.3 million.
For a more detailed discussion of how we financed these acquisitions, please
read the sections "Security Ownership" and "Description of Other
Indebtedness--Senior Secured Credit Facility".
THE REFINANCING
On October 22, 1999, we entered into certain transactions that enabled us to
redeem or repay certain indebtedness assumed in connection with our acquisitions
of AmeriComm Holdings and DIMAC Marketing.
The sources of funds for this refinancing were:
- $97.2 million of gross proceeds from our notes offering:
- $39.4 million of additional equity consisting of:
- $10.0 million of equity provided to DIMAC Holdings from affiliates of
McCown De Leeuw and other equity investors; and
- $29.4 million of net proceeds received by DIMAC Holdings from the
issuance of $30.0 million aggregate principal amount of its 15 1/2%
Senior Notes due 2009; and
- $45.0 million of additional term loans under our senior secured credit
facility.
We used these proceeds:
- to repay the following indebtedness of AmeriComm Holdings and its
subsidiary, AmeriComm Direct Marketing:
- the AmeriComm Direct Marketing 11 5/8% Senior Notes tendered pursuant
to a tender offer and consent solicitation and the associated tender
premium and consent fee;
- the AmeriComm Holdings 12 1/2% Senior Notes and the associated premium;
and
- the AmeriComm Direct Marketing credit agreement;
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<PAGE>
- to repay the amount of revolving loans outstanding under our senior
secured credit facility; and
- to pay certain fees and expenses related to the issuance of the notes and
the DIMAC Holdings notes and AmeriComm Direct Marketing's tender offer
and consent solicitation.
The AmeriComm Direct Marketing Credit Agreement was established in
connection with the acquisition of Transkrit Corporation and as of June 30,
1998, bore interest at a weighted average rate of 8.01% and had a maturity date
of June 28, 2001. The AmeriComm Direct Marketing 11 5/8% Senior Notes were
issued in connection with the acquisition of Transkrit Corporation, bore
interest at a rate of 11 5/8% and had a maturity date of June 15, 2002. The
AmeriComm Holdings 12 1/2% Senior Notes were issued in connection with the
acquisition of AmeriComm Direct Marketing, Inc., bore interest at rates ranging
from 12 1/2% to 13% and had a maturity date of April 24, 2003.
USE OF PROCEEDS OF THE REGISTERED NOTES
This exchange offer is intended to satisfy our obligations under the
Registration Rights Agreement. We will not receive any proceeds from the
issuance of the registered notes. In consideration for issuing the registered
notes as contemplated in this prospectus, we will receive, in exchange,
unregistered notes in like principal amount. The form and terms of the
registered notes are identical in all material respects to the form and terms of
the unregistered notes except as otherwise described in this prospectus under
the heading "The Exchange Offer--Terms of the Exchange Offer". The unregistered
notes surrendered in exchange for the registered notes will be retired and
cancelled and will not be reissued. Accordingly, we will not increase our
outstanding debt as a result of the exchange offer.
DIMAC Holdings contributed to us $29.4 million of net proceeds from the sale
of its notes, along with $10.0 million of additional equity purchased by its
investors. We used the $39.4 million, along with $97.2 million of net proceeds
from the sale of our notes and additional borrowings under our senior secured
credit facility, to repay indebtedness as described above under "The
Refinancing."
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999. It
is important that you read the table presented below along with "DIMAC
Corporation Unaudited Pro Forma Financial Statements," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of our company, DIMAC Marketing and AmeriComm
Holdings included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31,
1999
---------------
<S> <C>
(IN MILLIONS)
Cash............................................................................................. $ 17.3
------
------
Debt of our company's subsidiaries, including current maturities:
Capital leases................................................................................. $ 8.1
------
Total subsidiary debt...................................................................... 8.1
------
Debt of our company:
Senior secured credit facility
Revolving loans.............................................................................. 11.9(a)
Term loans................................................................................... 195.0(b)
------
Total senior debt of our company........................................................... 206.9
------
Notes.......................................................................................... 97.3(c)
------
Total debt of our company.................................................................. 312.3
------
Common stock..................................................................................... --
Additional paid-in capital....................................................................... 154.2
Accumulated deficit.............................................................................. (30.4)(d)
------
Total stockholder's equity................................................................. 123.8
------
Total capitalization..................................................................... $ 436.1
------
------
</TABLE>
- ------------------------
(a) Pursuant to the First Amendment to our senior secured credit agreement,
lenders party to the senior secured credit agreement are under no obligation
to make new revolving loans until we comply with specified financial ratios
and tests. The unused revolving loan commitment under the revolving credit
facility is $63.1 million.
(b) Consists of $55.0 million of Term A loans, $80.0 million of Term B loans and
$60.0 million of Term C loans.
(c) Net of original issue discount of $2.7 million.
(d) Includes write-off of existing deferred financing costs, tender premium and
consent fee associated with the early retirement of the AmeriComm Direct
Marketing 11 5/8% Senior Notes and the AmeriComm Holdings 12 1/2% Senior
Notes, net of tax benefit.
Our equity, as adjusted, includes $29.4 million and $15.0 milion which DIMAC
Holdings contributed to us from the net proceeds DIMAC Holdings received from
issuing its notes and interest on its notes is not payable in cash until
December 31, 2003 and March 29, 2010, respectively. After this date, DIMAC
Holdings will rely on us to provide it with cash to meet its obligations under
its notes.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into a Registration Rights Agreement in which we agreed to
file a registration statement relating to an offer to exchange the unregistered
notes for registered notes on or before December 21, 1998. The unregistered
notes were issued on October 22, 1998. We also agreed to use our reasonable best
efforts to cause the registration statement to become effective under the
Securities Act on or before March 20, 1999. The registered notes will have terms
substantially identical to the unregistered notes except that the registered
notes will not contain terms with respect to transfer restrictions, registration
rights and liquidated damages.
Under certain circumstances, we will use our reasonable best efforts to
cause the SEC to declare effective a shelf registration statement with respect
to the resale of the unregistered notes and to keep the shelf registration
statement effective until October 22, 2002. These circumstances include the
following:
- applicable interpretations of the SEC prohibiting us from effecting the
exchange offer as contemplated by the registration statement;
- if for any other reason the exchange offer is not consummated on or
before April 20, 1999;
- if the initial purchasers of the unregistered notes so request with
respect to unregistered notes not eligible to be exchanged for registered
notes in the exchange offer; or
- if any holder of the unregistered notes is not eligible to participate in
the exchange offer or does not receive freely tradable registered notes
in exchange for tendered unregistered notes pursuant to the exchange
offer.
In the event that we fail to comply with certain obligations under the
Registration Rights Agreement, we will be required to pay additional interest to
holders of the unregistered notes. Please read the section "Registration Rights
Agreement" for more information.
Each holder of unregistered notes that wishes to exchange such unregistered
notes for freely transferable registered notes in the exchange offer will be
required to represent that:
- any registered notes will be acquired in the ordinary course of its
business;
- the holder has no arrangements or understanding with any person to
participate in the distribution of the registered notes;
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, or if such holder is an affiliate, that it will comply
with applicable registration and prospectus delivery requirements of the
Securities Act;
- if the holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in the distribution of the registered notes; and
- if the holder is a broker-dealer, that it will receive registered notes
for its own account in exchange for unregistered notes that were acquired
as a result of market-making activities or other trading activities and
that it acknowledges that it will deliver a prospectus in connection with
any resale of such registered notes.
RESALE OF REGISTERED NOTES
Based on the SEC's interpretations as set forth in no-action letters issued
to third-parties, we believe that registered notes issued under the exchange
offer in exchange for unregistered notes may be
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<PAGE>
offered for resale, resold and otherwise transferred by any registered
noteholder without compliance with the registration and prospectus delivery
provisions of the Securities Act, if:
- the holder of registered notes is not an "affiliate" of our company
within the meaning of Rule 405 under the Securities Act;
- the registered notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in the distribution of the
registered notes received in the exchange offer.
Any holder who tenders unregistered notes in the exchange offer with the
intention of participating in any manner in a distribution of the registered
notes
- cannot rely on the applicable interpretations of the SEC; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
Unless an exemption from registration is otherwise available, any
securityholder intending to distribute registered notes should be covered by an
effective registration statement containing the selling securityholder's
information required by Item 507 of Regulation S-K under the Securities Act.
This prospectus may be used for an offer to resell, resale or other retransfer
of registered notes only as specifically set forth in this prospectus.
Only broker-dealers who acquired the unregistered notes as a result of
market-making activities or other trading activities may participate in the
exchange offer. Any broker-dealers who acquired the unregistered notes from us
or as a result of market-making activities or other trading activities:
- may not rely on the SEC's interpretations; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act including being named as selling securityholder in
order to resell the unregistered notes or the registered notes.
Please read the section labelled "Plan of Distribution" for more details
regarding the transfer of registered notes.
TERMS OF THE EXCHANGE OFFER
Subject to the terms and conditions set forth in this prospectus and in the
letter of transmittal, we will accept for exchange any unregistered notes
properly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
,1999. We will issue $1,000 principal amount of registered notes in
exchange for each $1,000 principal amount of outstanding unregistered notes
surrendered under the exchange offer. Unregistered notes may be tendered only in
integral multiples of $1,000.
The form and terms of the registered notes will be the same as the form and
terms of the unregistered notes except that the registered notes will be
registered under the Securities Act and will not bear legends restricting their
transfer and will not provide for any additional interest. The registered notes
will evidence the same debt as the unregistered notes. The registered notes will
be issued under and entitled to the benefits of the indenture, which also
authorized the issuance of the unregistered notes. Consequently, both series
will be treated as a single class of debt securities under the indenture. For a
description of the indenture, see "Description of Notes" below.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of unregistered notes being tendered for exchange.
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<PAGE>
As of the date of this prospectus, $100.0 million aggregate principal amount
of the unregistered notes are outstanding. This prospectus and the letter of
transmittal are being sent to all registered holders of unregistered notes.
There will be no fixed record date for determining registered holders of
unregistered notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions of
the Registration Rights Agreement, the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations of the SEC. Unregistered
notes which are not tendered for exchange in the exchange offer will remain
outstanding and continue to accrue interest and will be entitled to the rights
and benefits such holders have under the indenture and the Registration Rights
Agreement. However, upon successful completion of the exchange offer, holders of
unregistered notes will no longer be entitled to receive liquidated damages.
We will be deemed to have accepted for exchange properly tendered
unregistered notes when we have given oral or written notice of the acceptance
to the exchange agent and complied with the provisions of Section 1 of the
Registration Rights Agreement. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the registered notes from us. We
expressly reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any unregistered notes not previously accepted for exchange,
upon the occurrence of any of the conditions specified below in the section
labelled "--Certain Conditions to the Exchange Offer."
Holders who tender unregistered notes in the exchange offer are not 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
unregistered notes. We will pay all charges and expenses, other than certain
taxes described below, related to the exchange offer. It is important that you
read the section labelled "--Fees and Expenses" for more details regarding fees
and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless, in our sole discretion, we extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will mail to the registered holders of
unregistered notes notice of the extensions prior to 9:00 a.m., New York City
time, on the business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting any unregistered notes;
- to extend or terminate the exchange offer if any of the conditions set
forth below under "--Certain Conditions to the Exchange Offer" have not
been satisfied, by giving oral or written notice of such delay, extension
or termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice of the delay to
the registered holders of unregistered notes. If we amend the terms of the
exchange offer in a manner which we determine to constitute a material change,
we will promptly file with the SEC a post-effective amendment to the
registration statement. Additionally, we will promptly disclose the amendment by
means of a prospectus supplement. The supplement will be distributed to the
registered holders of the unregistered notes. Depending upon the significance of
the amendment and the manner of disclosure to the registered holders, we will
extend the exchange offer if it would otherwise expire during such period.
32
<PAGE>
INTEREST ON THE REGISTERED NOTES
The registered notes will bear interest at a rate of 12 1/2% per year,
payable semi-annually, on April 1 and October 1 of each year, beginning on April
1, 1999. Holders of registered notes will receive interest on April 1, 1999
representing interest accrued from the date of initial issuance of the
registered notes, plus an amount equal to the accrued interest on the
unregistered notes. Interest on the unregistered notes accepted for exchange
will cease to accrue upon issuance of the registered notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any registered notes for, any unregistered
notes. We may terminate the exchange offer as provided in this prospectus before
accepting any unregistered notes for exchange, if in our reasonable judgment:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency relating to the exchange offer which,
in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer; or
- any law, rule or regulation is proposed, adopted or enacted, or any
existing law, rule or regulation is interpreted by the SEC, which, in our
reasonable judgment, might materially impair our ability to proceed with
the exchange offer; or
- we must wait for any governmental approval which, in our reasonable
judgment, is necessary for the consummation of the exchange offer.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any unregistered notes by giving oral or written notice of
such extension to their holders. During any such extensions, all unregistered
notes previously tendered will remain subject to the exchange offer, and we may
accept them for exchange. We will return any unregistered notes that we do not
accept for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any unregistered notes not previously accepted for
exchange, upon the occurrence of any of the conditions listed in the first
paragraph of this section. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the unregistered
notes as promptly as practicable. In the case of any extension, the notice will
be issued no later than 9:00 a.m., New York City time, on the business day after
the previously scheduled expiration date.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances which may give rise to them or waive them in whole or in
part at any time or at various times in our sole discretion. We will keep the
exchange offer open for at least five days following any waiver of conditions to
the exchange offer. If we fail at any time to exercise any of the rights
outlined in this section, this failure will not constitute a waiver of any such
right. Each such right is an ongoing right which we may assert at any time or at
various times.
In addition, we will not accept for exchange any unregistered notes
tendered, and will not issue registered notes in exchange for any such
unregistered notes, if at such time any stop order will be threatened or in
effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture under the Trust
Indenture Act of 1939.
33
<PAGE>
PROCEDURES FOR TENDERING
Only a holder of unregistered notes may tender such unregistered notes in
the exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal or a facsimile of the
letter of transmittal; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
such letter of transmittal or facsimile of the letter of transmittal to
the exchange agent prior to 5:00 p.m., New York City time, on
, 1999; or
- comply with The Depository Trust Company's Automated Tender Offer Program
procedures described below.
In addition, either:
- the exchange agent must receive unregistered notes along with the letter
of transmittal; or
- the exchange agent must receive, prior to , 1999:
- a timely confirmation of book-entry transfer of such unregistered
notes, if such procedure is available, into the exchange agent's
account specified by the exchange agent at The Depository Trust Company
according to the procedure for book-entry transfer described below; or
- properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
For a tender of unregistered notes to be effective, the exchange agent must
receive the letter of transmittal and other required documents at the address
set forth below under "The Exchange Offer-- Exchange Agent" prior to 5:00 p.m.,
New York City time, on , 1999.
If a holder does not withdraw unregistered notes which were tendered prior
to 5:00 p.m. New York City time on , 1999 the holder's tender of
unregistered notes is an agreement between the holder and us in accordance with
the terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
THE METHOD OF DELIVERY OF UNREGISTERED NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE HOLDER'S ELECTION
AND RISK. RATHER THAN MAIL THESE ITEMS, WE RECOMMEND THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW
SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. HOLDERS SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR UNREGISTERED NOTES TO
US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.
Any beneficial owner whose unregistered notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct it to
tender on the owner's behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing and executing the
letter of transmittal and delivering such owner's unregistered notes, either:
- make appropriate arrangements to register ownership of the unregistered
notes in such owner's name; or
- obtain a properly completed bond power from the registered holder of
unregistered notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by an "eligible guarantor institution" within the
meaning of Rule 17Ad-15 under the Exchange Act,
34
<PAGE>
which is a member of one of the recognized signature guarantee programs
identified in the letter of transmittal, unless the unregistered notes tendered
pursuant thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of an eligible guarantor institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, the guarantor must be:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or
trust company having an office or correspondent in the United States; or
- an eligible guarantor institution.
If the letter of transmittal is signed by a person other than the registered
holder of any unregistered notes listed on the unregistered notes, such
unregistered notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the unregistered notes and an eligible guarantor
institution must guarantee the signature on the bond power.
If the letter of transmittal or any unregistered notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
Any financial institution that is a participant in The Depository Trust
Company's system may use its Automated Tender Offer Program to tender.
Participants in this program may, instead of physically completing and signing
the letter of transmittal and delivering it to the exchange agent, transmit
their acceptance of the exchange offer electronically. They may do so by having
The Depository Trust Company transfer the unregistered notes to the exchange
agent according to its procedures for transfer. The Depository Trust Company
will then send an Agent's Message to the exchange agent.
The term "Agent's Message" means a message transmitted by The Depository
Trust Company received by the exchange agent and forming part of the book-entry
confirmation, which states that:
- The Depository Trust Company has received an express acknowledgement from
a participant in its Automated Tender Offer Program that is tendering
unregistered notes which are the subject of such book-entry confirmation;
- such participant has received and agrees to be bound by the terms of the
letter of transmittal (or, in the case of an Agent's Message relating to
guaranteed delivery, that such participant has received and agrees to be
bound by the applicable Notice of Guaranteed Delivery); and
- the agreement may be enforced against such participant.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance and withdrawal of tendered
unregistered notes. Our determination will be final and binding. We reserve the
absolute right to reject any unregistered notes not properly tendered or any
unregistered notes if our counsel believes that our acceptance of the notes
would be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular unregistered notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of unregistered notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders
35
<PAGE>
of unregistered notes, neither we, the exchange agent nor any other person will
incur any liability for failure to give such notification. Tenders of
unregistered notes will not be deemed made until such defects or irregularities
have been cured or waived. Any unregistered notes received by the exchange agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable after
5:00 pm., New York City time on , 1999.
In all cases, we will issue registered notes for unregistered notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
- unregistered notes or a timely confirmation of the book entry transfer of
such unregistered notes into the account specified by the exchange agent;
and
- a properly completed and duly executed letter of transmittal and all
other required documents.
If we do not accept any tendered unregistered notes for exchange for any
reason set forth in the terms and conditions of the exchange offer, or if
unregistered notes are submitted for a greater principal amount than the holder
desires to exchange, the unaccepted or non-exchanged unregistered notes will be
returned without expense to their tendering holder. In the case of unregistered
notes tendered into the account specified by the exchange agent by book entry
transfer, we will credit the non-exchanged notes to an account at that
institution. These actions will occur as promptly as practicable after the
expiration or termination of the exchange offer.
BOOK-ENTRY TRANSFER
Within two days of the date of this prospective, the exchange agent will
establish an account for the unregistered notes into which any financial
institution may tender unregistered notes by book-entry transfer by causing the
transfer of such unregistered notes into the account specified by the exchange
agent. The letter of transmittal (or facsimile thereof), must be transmitted
with any required signature guarantees and any other required documents, to the
exchange agent at the address set forth below under "--Exchange Agent" on or
prior to , 1999 or, if the guaranteed delivery procedures described
below are to be complied with, within the time period provided under such
procedures. Please note that delivery of documents to the account specified by
the exchange agent does not constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their unregistered notes but whose unregistered
notes are not immediately available or who cannot deliver their unregistered
notes, the letter of transmittal or any other required documents to the exchange
agent prior to , 1999, may still tender if:
- the tender is made through an eligible guarantor institution;
- prior to , 1999, the exchange agent receives from such eligible
guarantor institution a properly completed and duly executed notice of
guaranteed delivery sent by facsimile transmission, mail or hand
delivery:
- setting forth the name and address of the holder, the registered
number(s) and the principal amount of such unregistered notes tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three New York Stock Exchange trading days
after , 1999, the letter of transmittal, or a facsimile of the
letter of transmittal, together with the unregistered notes or a
confirmation of book entry transfer, and any other documents
36
<PAGE>
required by the letter of transmittal, will be delivered by the
eligible guarantor institution to the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal or facsimile thereof, or properly transmitted Agent's Message
as well as all tendered unregistered notes in proper form for transfer or
a confirmation of book entry transfer, and all other documents required
by the letter of transmittal, within three New York Stock Exchange
trading days after , 1999.
Upon request, the exchange agent will send a notice of guaranteed delivery
to holders who wish to tender using the guaranteed delivery procedures set forth
above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of unregistered
notes may withdraw their tenders at any time prior to 5:00 p.m., New York City
time, on , 1999.
For a withdrawal to be effective:
- the exchange agent must receive a written notice of withdrawal at one of
the addresses set forth below under "--Exchange Agent"; or
- holders must comply with the appropriate procedures of The Depository
Trust Company's Automated Tender Offer Program system.
Any such notice of withdrawal must:
- specify the name of the person who tendered the unregistered notes to be
withdrawn;
- identify the unregistered notes to be withdrawn and state the principal
amount of each; and
- specify the name in which the unregistered notes were registered if
different from that of the withdrawing holder when the certificates for
unregistered notes had already been transmitted to the exchange agent.
If certificates for unregistered notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of the
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
guarantor institution unless the holder is an eligible guarantor
institution.
If unregistered notes have been tendered by book-entry transfer then, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn unregistered
notes and otherwise comply with the procedures of such facility. We will
determine all questions as to the validity, form and eligibility, including time
of receipt, of the notices; and our determination shall be final and binding on
all parties. We will deem any unregistered notes so withdrawn not to have been
validly tendered for exchange for purposes of the exchange offer. Any
unregistered notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to their holder without cost to the
holder. In the case of unregistered notes tendered by book-entry transfer such
unregistered notes will be credited as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
unregistered notes may be retendered by following the procedures listed
in"--Procedures for Tendering" at any time on or prior to , 1999.
37
<PAGE>
EXCHANGE AGENT
We have appointed Wilmington Trust Company as exchange agent of the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent addressed
as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL OR BY BY HAND:
OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust & Administration Window c/o Harris Trust Company of New York,
1100 North Market Street as Agent
Rodney Square North 75 Water Street
Wilmington, Delaware 19890-0001 New York, New York 10004
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
Facsimile: (302) 651-1079
Confirm by Telephone: (302) 651-1562
</TABLE>
If you deliver letters of transmittal or any other documents to an address
or facsimile number other than those listed above, your tender is invalid.
FEES AND EXPENSES
We will pay the expenses of soliciting tenders. The principal solicitation
is being made by mail. We may make additional solicitations by telegraph,
telephone or in person by using our officers and regular employees and the
officers and regular employees of our affiliates.
We have not retained any dealer-manager in connection with this exchange
offer. We will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
The expenses of the exchange offer are estimated to be approximately $0.2
million in the aggregate. They include:
- registration fees;
- fees and expenses of Wilmington Trust Company, as exchange agent and
trustee;
- accounting, legal fees and printing costs; and
- other related fees and expenses.
38
<PAGE>
TRANSFER TAXES
We will pay all applicable transfer taxes for the exchange of unregistered
notes. The tendering holder, however, will be required to pay any transfer taxes
imposed on the registered holder or any other person if:
- the holder instructs us to register registered notes in the name of, or
requests that unregistered notes not tendered or not accepted in the
exchange offer be returned to, a person other than the registered holder;
or
- tendered unregistered notes are registered in the name of any person
other than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than for the exchange of
unregistered notes under the exchange offer.
If satisfactory evidence of payment of applicable transfer taxes is not
submitted with the letter of transmittal, the amount of the applicable transfer
taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of unregistered notes who do not exchange their unregistered notes
for registered notes under the exchange offer will remain subject to the
restrictions on transfer of such unregistered notes:
- as set forth in the legend on the unregistered notes relating to the
issuance of the unregistered notes under an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws; and
- as set forth in the offering circular dated October 16, 1998 distributed
in connection with the offering.
In general, you may not offer or sell the unregistered notes unless they are
registered under the Securities Act or the offer or sale is exempt from the
Securities Act and applicable state securities laws. We do not currently
anticipate registering the unregistered notes under the Securities Act.
39
<PAGE>
DIMAC CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS
The following unaudited pro forma consolidated financial statements are
based on our historical financial statements and those of DIMAC Marketing and
AmeriComm Holdings included elsewhere in this prospectus, adjusted to give
effect to our acquisitions of AmeriComm Holdings and DIMAC Marketing and the
refinancing of certain indebtedness assumed in connection with our acquisitions
of AmeriComm Holdings and DIMAC Marketing described in this prospectus. The pro
forma consolidated financial statements are also adjusted to give pro forma
effect to AmeriComm Holdings' acquisitions of Cardinal Marketing and Cardinal
Marketing of New Jersey consummated during 1998, as if they occurred on January
1, 1998. AmeriComm Holdings acquired Cardinal Marketing and Cardinal Marketing
of New Jersey on March 16, 1998. Accordingly, AmeriComm Holdings Historical
consolidated statements of operations include the results of operations of
Cardinal Marketing and Cardinal Marketing of New Jersey beginning March 17,
1998.
The unaudited pro forma consolidated statements of operations for the year
ended December 31, 1998 and the three-month period ended March 31, 1998 give
effect to the AmeriComm Holdings' acquisitions of Cardinal Marketing and
Cardinal Marketing of New Jersey, our acquisitions of AmeriComm Holdings and
DIMAC Marketing, and the refinancing as if they had occurred on January 1, 1998.
The AmeriComm Holdings acquisitions of Cardinal Marketing and Cardinal
Marketing of New Jersey, our acquisitions of AmeriComm Holdings and DIMAC
Marketing, and the refinancing of certain indebtedness assumed in connection
with our acquisitions of AmeriComm Holdings and DIMAC Marketing and the related
adjustments are described in the accompanying notes. The pro forma adjustments
are based upon available information and certain assumptions that management
believes are reasonable. The pro forma financial statements do not purport to
represent what our results of operations or financial condition would actually
have been had AmeriComm Holdings' acquisitions of Cardinal Marketing and
Cardinal Marketing of New Jersey, our acquisitions of AmeriComm Holdings and
DIMAC Marketing, and the refinancing of certain indebtedness assumed in
connection with our acquisitions of AmeriComm Holdings and DIMAC Marketing in
fact occurred on such dates. Neither do they purport to project our results of
operations or financial condition for any future period or date. It is important
that you read the pro forma financial statements along with our historical
financial statements and those of DIMAC Marketing, AmeriComm Holdings and
AmeriComm Direct Marketing included elsewhere in this prospectus and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The pro forma information with respect to our acquisitions of AmeriComm
Holdings and DIMAC Marketing is based on our historical financial statements,
and those of DIMAC Marketing and AmeriComm Holdings. We have accounted for our
acquisitions of AmeriComm Holdings and DIMAC Marketing under the purchase method
of accounting. The total purchase price for such acquisitions has been allocated
to the tangible and identifiable intangible assets and liabilities of the
acquired business based upon our final calculations of their fair value with the
remainder allocated to goodwill. We do not expect the impact of any adjustments
to the allocation of the purchase price to be material.
We refer to the adjustments presented in the unaudited pro forma financial
statements below for our acquisitions of the AmeriComm Holdings and DIMAC
Marketing as "Acquisitions Adjustments."
40
<PAGE>
DIMAC CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICOMM CARDINAL DIMAC
HOLDINGS MARKETING AND MARKETING DIMAC CORPORATION COMPANY
HISTORICAL CARDINAL HISTORICAL HISTORICAL PRO FORMA
CONSOLIDATED MARKETING CONSOLIDATED CONSOLIDATED CONSOLIDATED
FROM JANUARY OF NEW JERSEY FROM JANUARY FROM MAY 12, 1998 BEFORE
1, 1998 TO ACQUISITIONS 1, 1998 TO TO DECEMBER 31, ACQUISITIONS REFINANCING REFINANCING
JUNE 26, 1998 PRO FORMA(A) JUNE 26, 1998 1998 ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
------------- ------------- ------------- ------------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........ $ 93,081 $ 770 $ 93,208 $ 191,401 $ -- $ 378,460 $ --
Cost of products
sold........... 67,992 452 61,806 131,095 (1,126)(b) 260,219 --
------------- ------ ------------- -------- ----------- ------------ -------------
Gross profit... 25,089 318 31,402 60,306 1,126 118,241 --
Selling, general
and
administrative
expenses....... 25,622 614 26,615 51,480 (36)(b) 104,295 --
------------- ------ ------------- -------- ----------- ------------ -------------
Operating
income
(loss)....... (533) (296) 4,787 8,826 1,162 13,946 --
Interest expense
(income)....... 9,677 72 4,583 17,069 3,349(c) 34,750 (1,819)(d)
------------- ------ ------------- -------- ----------- ------------ -------------
Income (loss)
from
continuing
operations
before income
taxes........ (10,210) (368) 204 (8,243) (2,187) (20,804) 1,819
Income tax
provision
(benefit)...... (3,117) -- 585 (2,329) -- (4,861) 4,861(e)
------------- ------ ------------- -------- ----------- ------------ -------------
Loss from
continuing
operations... $ (7,093) $ (368) $ (381) $ (5,914) $ (2,187) $ (15,943) $ (3,042)
------------- ------ ------------- -------- ----------- ------------ -------------
------------- ------ ------------- -------- ----------- ------------ -------------
<CAPTION>
COMPANY
PRO FORMA
CONSOLIDATED
------------
<S> <C>
Net sales........ $ 378,460
Cost of products
sold........... 260,219
------------
Gross profit... 118,241
Selling, general
and
administrative
expenses....... 104,295
------------
Operating
income
(loss)....... 13,946
Interest expense
(income)....... 32,931
------------
Income (loss)
from
continuing
operations
before income
taxes........ (18,985)
Income tax
provision
(benefit)...... --
------------
Loss from
continuing
operations... $ (18,985)
------------
------------
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
41
<PAGE>
DIMAC CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DIMAC
AMERICOMM CARDINAL MARKETING
HOLDINGS MARKETING HISTORICAL
HISTORICAL AND CONSOLIDATED COMPANY
CONSOLIDATED CARDINAL FROM PRO FORMA
FROM MARKETING JANUARY 1, CONSOLIDATED
JANUARY 1, 1998 OF NEW JERSEY 1998 TO BEFORE
TO ACQUISITIONS MARCH 31, ACQUISITIONS REFINANCING REFINANCING
MARCH 31, 1998 PRO FORMA(A) 1998 ADJUSTMENTS ADJUSTMENTS ADJUSTMENTS
--------------- --------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 46,373 $ 770 $ 49,057 $ -- $ 96,200 $ --
Cost of products sold.............. 33,455 452 33,225 (510)(b) 66,622 --
------- ------- ------------- ------------- ------------- -------------
Gross profit..................... 12,918 318 15,832 510 29,578 --
Selling, general and administrative
expenses......................... 11,957 614 12,999 (38) (b) 25,532 --
------- ------- ------------- ------------- ------------- -------------
Operating income (loss).......... 961 (296) 2,833 548 4,046 --
Interest expense (income).......... 4,745 72 2,247 1,771(c) 8,835 (690)(d)
------- ------- ------------- ------------- ------------- -------------
Income (loss) from continuing
operations before income
taxes.......................... (3,784) (368) 586 (1,223) (4,789) 690
Income tax provision (benefit)..... (1,509) -- 490 -- (1,019) 1,019(e)
------- ------- ------------- ------------- ------------- -------------
Income (loss) from continuing
operations..................... $ (2,275) $ (368) $ 96 $ (1,223) $ (3,770) $ (329)
------- ------- ------------- ------------- ------------- -------------
------- ------- ------------- ------------- ------------- -------------
<CAPTION>
COMPANY
PRO FORMA
CONSOLIDATED
-------------
<S> <C>
Net sales.......................... $ 96,200
Cost of products sold.............. 66,622
-------------
Gross profit..................... 29,578
Selling, general and administrative
expenses......................... 25,532
-------------
Operating income (loss).......... 4,046
Interest expense (income).......... 8,145
-------------
Income (loss) from continuing
operations before income
taxes.......................... (4,099)
Income tax provision (benefit)..... --
-------------
Income (loss) from continuing
operations..................... $ (4,099)
-------------
-------------
</TABLE>
The accompanying notes are an integral part of this pro forma financial
statement.
42
<PAGE>
DIMAC CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(a) CARDINAL MARKETING AND CARDINAL MARKETING OF NEW JERSEY ACQUISITIONS PRO
FORMA
YEAR ENDED DECEMBER 31, 1998
Represents historical results for Cardinal Marketing and Cardinal Marketing
of New Jersey for the period from January 1, 1998 through March 16, 1998,
assuming the Cardinal Marketing and Cardinal Marketing of New Jersey
acquisitions had each occurred on January 1, 1998, adjusted as follows:
<TABLE>
<CAPTION>
CARDINAL MARKETING
AND CARDINAL MARKETING
OF NEW JERSEY
HISTORICAL CARDINAL MARKETING
COMBINED CARDINAL MARKETING AND CARDINAL MARKETING
FROM AND CARDINAL MARKETING OF NEW JERSEY
1/1/98 OF NEW JERSEY ACQUISITIONS
THROUGH ACQUISITIONS PRO FORMA
3/16/98 ADJUSTMENTS COMBINED
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Net sales............................ $ 770 $ -- $ 770
Cost of products sold................ 452 -- 452
----- ----- -----
Gross profit..................... 318 -- 318
Selling, general and administrative
expenses........................... 539 75(1) 614
----- ----- -----
Operating loss................... (221) (75) (296)
Interest (income) expense............ (8) 80(2) 72
----- ----- -----
Loss from continuing operations
before income taxes............ (213) (155) (368)
Income tax provision................. -- -- --
----- ----- -----
Loss from continuing
operations..................... $ (213) $ (155) $ (368)
----- ----- -----
----- ----- -----
</TABLE>
----------------------------
(1) Reflects the following:
<TABLE>
<S> <C>
Additional amortization of goodwill...................................................... $ 19
Additional amortization of noncompete agreements......................................... 56
---
$ 75
---
---
</TABLE>
(2) Reflects additional interest expense associated with borrowings
incurred in connection with the AmeriComm Holdings' acquisitions of
Cardinal Marketing and Cardinal Marketing of New Jersey.
43
<PAGE>
DIMAC CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
(a) CARDINAL MARKETING AND CARDINAL MARKETING OF NEW JERSEY ACQUISITIONS PRO
FORMA (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1998
Represents historical results for Cardinal Marketing and Cardinal Marketing
of New Jersey for the period from January 1, 1998 through March 31, 1998,
assuming the Cardinal Marketing and Cardinal Marketing of New Jersey
acquisitions had occurred on January 1, 1998, adjusted as follows:
<TABLE>
<CAPTION>
CARDINAL MARKETING
AND CARDINAL MARKETING
OF NEW JERSEY
HISTORICAL CARDINAL MARKETING
COMBINED CARDINAL MARKETING AND CARDINAL MARKETING
FROM AND CARDINAL MARKETING OF NEW JERSEY
1/1/98 OF NEW JERSEY ACQUISITIONS
THROUGH ACQUISITIONS PRO FORMA
3/16/98 ADJUSTMENTS COMBINED
------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
Net sales............................ $ 770 $ -- $ 770
Cost of products sold................ 452 -- 452
----- ----- -----
Gross profit..................... 318 -- 318
Selling, general and administrative
expenses........................... 539 75(1) 614
----- ----- -----
Operating loss................... (221) (75) (296)
Interest (income) expense............ (8) 80(2) 72
----- ----- -----
Loss from continuing operations
before income taxes............ (213) (155) (368)
Income tax provision................. -- -- --
----- ----- -----
Loss from continuing
operations..................... $ (213) $ (155) $ (368)
----- ----- -----
----- ----- -----
</TABLE>
----------------------------------
(1) Reflects the following:
<TABLE>
<S> <C>
Additional amortization of goodwill...................................................... $ 19
Additional amortization of noncompete agreements......................................... 56
-------------
$ 75
-------------
-------------
</TABLE>
(2) Reflects additional interest expense associated with borrowings incurred
in connection with AmeriComm Holdings' acquisitions of Cardinal Marketing
and Cardinal Marketing of New Jersey.
44
<PAGE>
DIMAC CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
(b) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1998 MARCH 31, 1998
------------- -----------------
<S> <C> <C>
Increase (decrease) in amortization and depreciation expense based on the
purchase price allocation made in connection with the acquisitions of
AmeriComm Holdings and DIMAC Marketing:
Cost of products sold adjustment:
Represents decrease in depreciation expense based on $78.1 million
estimated fair value of property, plant and equipment over estimated useful
lives of 3-40 years........................................................ $ (1,126) $ (510)
------------- -----
------------- -----
Selling, general and amortization expense adjustment:
Represents increase in goodwill amortization based on $271.8 million of
goodwill over estimated useful life of 40 years............................ $ 377 $ 155
Represents decrease in amortization expense based on $32.7 million
estimated fair value of other intangible assets over estimated useful lives
of 3-7 years............................................................... (131) (66)
Represents decrease in depreciation expense based on $19.5 million
estimated fair value of property, plant and equipment over estimated useful
lives 3-40 years........................................................... (282) (127)
------------- -----
$ (36) $ (38)
------------- -----
------------- -----
</TABLE>
(c) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1998 MARCH 31, 1998
------------- -------------------
<S> <C> <C>
Interest and debt financing associated with borrowings under the senior
secured credit facility in connection with the acquisitions of AmeriComm
Holdings and DIMAC Marketing:
Interest expense associated with Term A loans ($55,000 @ 7.80%)........... $ 2,104 $ 1,073
Interest expense associated with Term B loans ($70,000 @ 8.30%)........... 2,862 1,453
Interest expense associated with Term C loans ($25,000 @ 8.55%)........... 1,069 534
Interest expense associated with revolving loans ($12,400 @ 9.50%)........ 574 295
Additional debt financing amortization associated with the senior secured
credit facility......................................................... 1,118 559
Commitment fees associated with the senior secured credit facility........ 157 78
Elimination of historical DIMAC Marketing interest expense associated with
intercompany debt which we did not assume............................... (4,535) (2,221)
------------- -------
$ 3,349 $ 1,771
------------- -------
------------- -------
</TABLE>
A change of 0.125% for the interest rate on the term loans and the revolving
loans would have an impact on pro forma interest expense of $0.2 million and
$0.1 million for the year ended December 31, 1998 and for the three-month
period ended March 31, 1998, respectively.
45
<PAGE>
DIMAC CORPORATION
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
REFINANCING ADJUSTMENTS
(d) Reflects the following:
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1998 1998
------------- -----------
<S> <C> <C>
Interest expense associated with the notes ($100,000 @ 12.5%)....................... $ 10,417 $ 3,125
Amortization of debt discount associated with the notes............................. 227 68
Interest expense associated with the additional Term B loans ($10,000 @ 8.30%)...... 692 208
Interest expense associated with the additional Term C loans ($35,000 @ 8.55%)...... 2,494 748
Elimination of interest expense on debt repaid in connection with the refinancing of
certain indebtedness in connection with our acquisitions of AmeriComm Holdings and
DIMAC Marketing:
Existing AmeriComm Direct Marketing credit agreement, AmeriComm Holdings Senior
Notes and AmeriComm Direct Marketing Senior Notes................................ (14,347) (4,371)
AmeriComm Holdings acquisitions of Cardinal Marketing and Cardinal Marketing of
New Jersey....................................................................... (80) (80)
Revolving loans................................................................... (969) (242)
Additional commitment fees associated with the senior secured credit facility....... 43 13
Reduction in debt financing amortization in connection with repayment of the
AmeriComm Holdings Senior Notes, the AmeriComm Direct Marketing Senior Notes and
the existing AmeriComm Direct Marketing credit agreement, offset by additional debt
financing amortization in connection with the notes and the Term C loans........... (296) (159)
------------- -----------
$ (1,819) $ (690)
------------- -----------
------------- -----------
</TABLE>
A change of 0.125% for the interest rate on the term loans and the revolving
loans would have an impact on pro forma interest expense of $0.1 million and
$0.1 million for the year ended December 31, 1998 and the three month period
ended March 31, 1998, respectively.
(e) This adjustment to provision (benefit) for income taxes reflects a valuation
allowance related to the historical tax benefit recorded by AmeriComm
Holdings, DIMAC Marketing and DIMAC Corporation.
46
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
DIMAC CORPORATION
The following selected historical financial data of DIMAC Corporation as of
and for the period from our inception on May 12, 1998 to December 31, 1998 has
been derived from DIMAC Corporation's audited consolidated financial statements
and notes. Summary historical financial data as of and for the three-month
period ended March 31, 1999 has been derived from DIMAC Corporation's unaudited
consolidated financial statements and, in the opinion of management, includes
all adjustments, consisting of only normal recurring adjustments, that are
necessary for a fair presentation of the operating results for each interim
period. Results for the interim period are not necessarily indicative of the
results for the full fiscal year or for any future periods. It is important that
you read the selected historical financial data presented below along with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--DIMAC Corporation" and the consolidated financial statements of
DIMAC Corporation included elsewhere in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
INCEPTION TO ENDED
DECEMBER 31, MARCH 31,
1998(A) 1999
------------ -------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................................................... $ 191,401 $ 85,710
Cost of products sold............................................................... 131,095 60,794
------------ -------------
Gross profit...................................................................... 60,306 24,916
Selling, general and administrative expenses........................................ 51,480 29,253
------------ -------------
Operating income (loss) 8,826 (4,337)
Interest expense, net............................................................... 17,069 8,153
------------ -------------
Loss before income taxes and extraordinary item..................................... (8,243) (12,490)
Income tax benefit.................................................................. (2,329) --
------------ -------------
Net loss before extraordinary item.................................................. (5,914) (12,490)
Extraordinary loss on early retirement of debt, net of income
tax benefit of $4,818............................................................. (11,985) --
------------ -------------
Net loss............................................................................ $ (17,899) $ (12,490)
------------ -------------
------------ -------------
OTHER DATA:
EBITDA(b)........................................................................... $ 24,375 $ 5,376
Depreciation and amortization (c)................................................... 15,505 9,670
Net cash provided by (used in):
Operating activities.............................................................. 14,651 (5,754)
Investing activities.............................................................. (250,734) (3,964)
Financing activities.............................................................. 245,852 17,247
Capital expenditures................................................................ 7,938 3,965
Ratio of earnings to fixed charges (d).............................................. -- --
BALANCE SHEET DATA (END OF PERIOD):
Working capital..................................................................... $ 19,714 $ 27,524
Total assets........................................................................ 514,438 515,713
Long-term debt, less current maturities............................................. 307,404 306,963
</TABLE>
- ------------------------------
(a) Reflects the acquisitions of American Holdings and DIMAC Marketing. The
acquisitions were accounted for as a purchase.
(b) EBITDA is defined as operating income plus depreciation, loss on disposal of
equipment and amortization. EBITDA is presented because we believe that it
provides additional indications of the historical financial performance of
DIMAC Corporation and provides useful information regarding our ability to
service debt and meet certain debt covenants under the indenture. EBITDA
does not represent cash flows from operations or investing and financing
activities as defined by generally accepted accounting principles. EBITDA
does not
47
<PAGE>
measure whether cash flows will be sufficient to fund all cash flow needs,
including principal and interest payments on debt and capital lease
obligations, capital expenditures or other investing and financing
activities. You should not construe EBITDA as an alternative to operating
income, net income or cash flows from operating activities as determined in
accordance with generally accepted accounting principles; nor should you
construe it as an indication of operating performance or as a measure of our
liquidity. In addition, items excluded from EBITDA, such as depreciation and
amortization, interest and income tax provision (benefit), are significant
components in understanding and assessing financial performance. Our
definition of EBITDA may be different from the definition of EBITDA used by
other companies. For a complete discussion of our future prospects related
to net income, cash flows from operations and investing and financing
activities, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--DIMAC Corporation" included elsewhere in this
prospectus.
(c) Amounts do not include amortization of financing costs, which is included in
interest expense.
(d) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as loss before income taxes and extraordinary item, plus fixed
charges. Fixed charges consist of interest expense on all indebtedness,
amortization of financing costs and the estimated interest portion of rental
expenses. For the period from our inception to December 31, 1998 and the
three months ended March 31, 1999, earnings were insufficient to cover fixed
charges by $8.2 million and $12.5 million, respectively.
48
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
AMERICOMM HOLDINGS, INC.
We derived the following selected historical financial data of AmeriComm
Holdings as of and for each of two years in the period ended December 31, 1997
and for the six-month period ended June 26, 1998 from AmeriComm Holdings'
audited consolidated financial statements and the notes thereto. We derived the
selected historical financial data as of and for each of the two years in the
period ended December 31, 1995 and as of and for the three-month period ended
March 31, 1998 period from AmeriComm Holdings' unaudited consolidated financial
statements and, in the opinion of management, it includes all adjustments
consisting of only normal recurring adjustments that are necessary for a fair
presentation of the operating results for such periods. Results for the interim
period do not necessarily indicate the results for the full fiscal year or for
any future periods. It is important that you read the selected historical
financial data presented below along with "Management's Discussion and Analysis
of Financial Condition and Results of Operations--AmeriComm Holdings, Inc." and
the consolidated financial statements of AmeriComm Holdings included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
THREE
MONTHS SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------------------ MARCH 31, JUNE 26,
1994 1995 1996(A) 1997(B) 1998(C) 1998(C)
--------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Net sales........................................... $ 65,998 $ 71,257 $ 111,342 $ 191,091 $ 46,373 $ 93,081
Cost of products sold............................... 52,610 55,708 80,215 133,598 33,455 67,992
--------- --------- --------- --------- ----------- -------------
Gross profit...................................... 13,388 15,549 31,127 57,493 12,918 25,089
Selling, general and administrative expenses........ 12,428 13,410 25,200 45,761 11,957 25,622
--------- --------- --------- --------- ----------- -------------
Operating income (loss)............................. 960 2,139 5,927 11,732 961 (533)
Interest expense, net............................... 2,975 3,179 8,138 17,023 4,745 9,677
--------- --------- --------- --------- ----------- -------------
Loss before income taxes and extraordinary item..... (2,015) (1,040) (2,211) (5,291) (3,784) (10,210)
Income tax benefit.................................. -- (1,900) (627) (998) (1,509) (3,117)
--------- --------- --------- --------- ----------- -------------
Net income (loss) before extraordinary item......... (2,015) 860 (1,584) (4,293) (2,275) (7,093)
Extraordinary loss on early retirement of debt, net
of income tax benefit of $461..................... -- -- (798) -- -- --
--------- --------- --------- --------- ----------- -------------
Net income (loss)................................... $ (2,015) $ 860 $ (2,382) $ (4,293) $ (2,275) $ (7,093)
--------- --------- --------- --------- ----------- -------------
--------- --------- --------- --------- ----------- -------------
OTHER DATA:
EBITDA (d).......................................... $ 4,386 $ 5,913 $ 12,772 $ 24,502 $ 4,452 $ 7,644
Depreciation and amortization (e)................... 3,426 3,774 6,845 12,276 3,467 8,152
Net cash provided by (used in) operating
activities........................................ 1,203 (217) 7,148 1,026 6,481 4,004
Net cash used in investing activities............... (268) (1,939) (79,838) (38,881) (6,966) (10,407)
Net cash provided by (used in) financing
activities........................................ (858) 2,317 74,225 37,093 211 6,940
Ratio of earnings to fixed charges (f).............. -- -- -- -- -- --
Capital expenditures................................ 940 2,308 3,490 4,563 2,286 5,666
BALANCE SHEET DATA (END OF PERIOD):
Working capital..................................... $ 7,152 $ 7,182 $ 18,840 $ 25,634 $ 22,109 $ 23,831
Total assets........................................ 37,837 38,116 132,498 176,662 176,494 176,750
Long-term debt, less current maturities............. 21,776 21,412 102,353 152,953 155,536 163,002
</TABLE>
- ------------------------------
(a) Reflects the acquisition of Transkrit Corporation on June 28, 1996. The
acquisition was accounted for as a purchase.
(b) Reflects the acquisitions of Label America and AmeriComm Direct Marketing on
February 21, 1997 and April 24, 1997, respectively. The acquisitions were
accounted for as purchases.
(c) Reflects the acquisitions of Cardinal Marketing and Cardinal Marketing of
New Jersey on March 16, 1998. We accounted for these acquisitions as
purchases.
(d) We define EBITDA as operating income plus depreciation, loss on disposal of
equipment and amortization. EBITDA is presented because we believe that it
provides additional indications of the historical financial performance of
AmeriComm Holdings and provides useful information regarding our ability to
service debt and meet certain debt covenants under the indenture. EBITDA
does not represent cash flows from operations or investing and financing
activities as defined by generally accepted accounting principles. EBITDA
does not
49
<PAGE>
measure whether cash flows will be sufficient to fund all cash flow needs,
including principal and interest payments on debt and capital lease
obligations, capital expenditures or other investing and financing
activities. You should not construe EBITDA as an alternative to operating
income, net income or cash flows from operating activities as determined in
accordance with generally accepted accounting principles; nor should you
construe it as an indication of operating performance or as a measure of our
liquidity. In addition, items excluded from EBITDA, such as depreciation and
amortization, interest and income tax provision (benefit), are significant
components in understanding and assessing financial performance. Our
definition of EBITDA may be different from the definition of EBITDA used by
other companies. For a complete discussion of our future prospects related
to net income, cash flows from operations and investing and financing
activities, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations-AmeriComm Holdings, Inc." included elsewhere in
this prospectus.
(e) Amounts do not include amortization of financing costs, which is included in
interest expense.
(f) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as loss before income taxes and extraordinary item, plus fixed
charges. Fixed charges consist of interest expense on all indebtedness,
amortization of financing costs and the estimated interest portion of rental
expenses. For the years ended December 31, 1994 through 1997, the three
months ended March 31, 1998 and the six months ended June 26, 1998, earnings
were insufficient to cover fixed charges by $2.0 million, $1.0 million, $2.2
million, $5.3 million, $3.8 million and $10.2 million, respectively.
50
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
DIMAC MARKETING CORPORATION
We derived the following selected historical financial data of DIMAC
Marketing as of and for the eleven months ended December 31, 1996, as of and for
the fiscal year in the period ended December 31, 1997 and as of and for the six
months ended June 26, 1998 from DIMAC Marketing's audited consolidated financial
statements and the notes thereto. We derived selected historical financial data
as of and for each of the two years in the period ended December 31, 1995, as of
and for the one month ended January 31, 1996 and as of and for the three months
ended March 31, 1998 from DIMAC Marketing's unaudited consolidated financial
statements and, in the opinion of management, it includes all adjustments
consisting of only normal recurring adjustments that are necessary for a fair
presentation of the operating results for such periods. Results for the interim
periods do not necessarily indicate the results for the full fiscal year or for
any future periods. The financial position and results of operations of DIMAC
Marketing for the period from January 1, 1994 to January 31, 1996, the period
from February 1, 1996 to August 31, 1997, and the period from September 1, 1997
to June 26, 1998 are not comparable in all material respects since each period
reflects certain purchase accounting adjustments that are further discussed in
the notes to DIMAC Marketing's consolidated financial statements included
elsewhere in this prospectus. It is important that you read the selected
historical financial data presented below along with "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- DIMAC Marketing
Corporation" and the consolidated financial statements of DIMAC Marketing
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
EIGHT FOUR
YEAR ENDED DECEMBER ONE MONTH ELEVEN MONTHS MONTHS MONTHS
31, ENDED ENDED ENDED ENDED
-------------------- JANUARY 31, DECEMBER 31, AUGUST 31, DECEMBER 31,
1994(A) 1995(B) 1996 1996(C)(D) 1997(C) 1997(E)
--------- --------- ----------- ------------- ----------- -------------
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Sales........................................... $ 100,012 $ 126,518 $ 10,254 $ 168,193 $ 118,747 $ 59,200
Cost of sales................................... 68,223 82,818 6,900 108,735 77,820 39,722
--------- --------- ----------- ------------- ----------- -------------
Gross profit.................................... 31,789 43,700 3,354 59,458 40,927 19,478
Selling, general and administrative expenses.... 22,224 28,478 3,176 47,645 37,867 17,083
Compensation element of recapitalization........ -- -- -- -- -- --
Nonrecurring merger costs....................... -- 2,359 -- -- -- --
--------- --------- ----------- ------------- ----------- -------------
Operating income................................ 9,565 12,863 178 11,813 3,060 2,395
Interest expense, net........................... 6,069 5,174 532 7,525 6,188 2,248
--------- --------- ----------- ------------- ----------- -------------
Income (loss) before income taxes, discontinued
operations and extraordinary item............. 3,496 7,689 (354) 4,288 (3,128) 147
Income tax provision (benefit).................. 1,309 4,193 (131) 3,789 122 395
--------- --------- ----------- ------------- ----------- -------------
Income (loss) before discontinued operations and
extraordinary item............................ 2,187 3,496 (223) 499 (3,250) (248)
Loss from discontinued operations (net of income
tax benefit of $13 and $3,523,
respectively)................................. -- -- -- (18) (4,669) --
Extraordinary loss on early retirement debt (net
of income tax benefit of $1,459 and $1,087,
respectively)................................. (3,157) (2,379) -- -- -- --
--------- --------- ----------- ------------- ----------- -------------
Net income (loss)............................... $ (970) $ 1,117 $ (223) $ 481 $ (7,919) $ (248)
--------- --------- ----------- ------------- ----------- -------------
--------- --------- ----------- ------------- ----------- -------------
OTHER DATA:
EBITDA (f)...................................... $ 12,665 $ 17,394 $ 642 $ 24,228 $ 13,315 $ 6,925
Depreciation and amortization (g)............... 3,100 4,531 464 12,415 10,255 4,530
Net cash provided by (used in):
Operating activities.......................... 6,381 7,485 3,661 7,809 4,323 1,310
Investing activities.......................... (16,760) (33,666) (240) (44,878) (19,944) (7,620)
Financing activities.......................... 8,442 26,181 (3,421) 37,069 15,621 6,310
Capital expenditures............................ 4,178 3,796 222 9,282 15,885 5,720
Ratio of earnings to fixed charges (h).......... 1.5x 2.1x -- 1.4x -- 1.1x
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit)....................... $ 6,141 $ 3,477 $ 95 $ (2,540) $ 10,582 $ 7,558
Total assets.................................... 64,109 98,918 97,180 350,003 356,108 260,836
Long-term debt, less current maturities......... 36,159 61,925 58,506 113,715 134,879 141,647
<CAPTION>
THREE SIX
MONTHS MONTHS
ENDED ENDED
MARCH 31, JUNE 26,
1998(E) 1998(E)
----------- ---------
STATEMENT OF OPERATIONS DATA:
Sales........................................... $ 49,057 $ 93,208
Cost of sales................................... 33,225 61,806
----------- ---------
Gross profit.................................... 15,832 31,402
Selling, general and administrative expenses.... 12,999 26,615
Compensation element of recapitalization........ -- --
Nonrecurring merger costs....................... -- --
----------- ---------
Operating income................................ 2,833 4,787
Interest expense, net........................... 2,247 4,583
----------- ---------
Income (loss) before income taxes, discontinued
operations and extraordinary item............. 586 204
Income tax provision (benefit).................. 490 585
----------- ---------
Income (loss) before discontinued operations and
extraordinary item............................ 96 (381)
Loss from discontinued operations (net of income
tax benefit of $13 and $3,523,
respectively)................................. -- --
Extraordinary loss on early retirement debt (net
of income tax benefit of $1,459 and $1,087,
respectively)................................. -- --
----------- ---------
Net income (loss)............................... $ 96 $ (381)
----------- ---------
----------- ---------
OTHER DATA:
EBITDA (f)...................................... $ 6,322 $ 11,864
Depreciation and amortization (g)............... 3,489 7,077
Net cash provided by (used in):
Operating activities.......................... (345) 1,961
Investing activities.......................... (2,845) (6,387)
Financing activities.......................... 3,190 4,426
Capital expenditures............................ 1,640 3,166
Ratio of earnings to fixed charges (h).......... 1.2x 1.0x
BALANCE SHEET DATA (END OF PERIOD):
Working capital (deficit)....................... $ 12,820 $ 14,714
Total assets.................................... 260,024 261,940
Long-term debt, less current maturities......... 144,952 146,131
</TABLE>
- ------------------------
(a) Reflects the acquisition of Direct Marketing Group in May 1994. The
acquisition was accounted for as a purchase.
(b) Reflects the acquisitions of Palm Coast Data and The McClure Group in May
and October 1995, respectively. Both acquisitions were accounted for as
purchases.
(c) Reflects a new basis of accounting after the acquisition of DIMAC Marketing
by Heritage Media.
(d) Reflects the acquisitions of Wilcox & Associates in March 1996 and
MBS/Multimode in May 1996. Both were accounted for as purchases.
(e) Reflects a new basis of accounting after the News Corporation acquisition.
(f) EBITDA is defined as operating operating income income plus depreciation,
loss on disposal of equipment and amortization. EBITDA is presented because
we believe that EBITDA provides additional indications of the historical
financial performance of DIMAC Marketing and provides useful information
regarding our ability to service debt and meet certain debt covenants under
the Indenture. EBITDA does not represent cash flows from
51
<PAGE>
operations or investing and financing activities as defined by generally
accepted accounting principles. EBITDA does not measure whether cash flows
will be sufficient to fund all cash flow needs, including principal and
interest payments on debt and capital lease obligations, capital
expenditures or other investing and financing activities. You should not
construe EBITDA as an alternative to operating income, net income or cash
flows from operating activities as determined in accordance with generally
accepted accounting principles; nor should you construe it as an indication
of operating performance or as a measure of our liquidity. In addition,
items excluded from EBITDA, such as depreciation amortization, interest and
income tax provision (benefit), are significant components in understanding
and assessing financial performance. Our definition of EBITDA may be
different from the definition of EBITDA used by other companies. For a
complete discussion of our future prospects related to net income, cash
flows from operations and investing and financing activities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-DIMAC Marketing" included elsewhere in this prospectus.
(g) Amounts do not include amortization of financing costs, which is included in
interest expense.
(h) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income (loss) before income taxes and discontinued
operations, plus fixed charges. Fixed charges consist of interest expense on
all indebtedness, amortization of financing costs and the estimated interest
portion of rental expenses. For the one month ended January 31, 1996 and the
eight months ended August 31, 1997, earnings were insufficient to cover
fixed charges by $0.4 million and $3.1 million, respectively.
52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion along with the consolidated
financial statements of DIMAC Corporation, AmeriComm Holdings and DIMAC
Marketing appearing elsewhere in this prospectus. For information regarding the
pro forma financial condition of DIMAC Corporation, please read the section
labeled "DIMAC Corporation Unaudited Pro Forma Consolidated Statements" included
in this prospectus.
The financial results of DIMAC Marketing for all periods prior to February
1, 1996 reflect the operations of DIMAC Marketing under a prior owner. The
consolidated financial statements for the period from February 1, 1996 to
December 31, 1996 reflect the financial results of DIMAC Marketing under a new
basis of accounting that reflects the fair value of assets acquired and
liabilities assumed, the related financing costs, and all debt incurred in
connection with the purchase of DIMAC Marketing by Heritage Media. Accordingly,
the financial information for DIMAC Marketing before and after the Heritage
Media purchase is not directly comparable in all material respects. We derived
the information relating to DIMAC Marketing's twelve months ended December 31,
1996 by combining the financial results of DIMAC Marketing for the period from
January 1, 1996 to January 31, 1996, while under prior ownership, and for the
period from February 1, 1996 to December 31, 1996, following the Heritage Media
purchase, including purchase accounting adjustments for the Heritage Media
purchase.
The consolidated financial statements for the period from September 1, 1997
to December 31, 1997 reflect the financial results of DIMAC Marketing under a
new basis of accounting that reflects the fair value of assets acquired and
liabilities assumed in connection with the purchase of Heritage Media by News
Corporation. Accordingly, the financial information for DIMAC Marketing before
and after the News Corporation purchase are not directly comparable in all
material respects. We derived the information relating to DIMAC Marketing's
twelve months ended December 31, 1997 by combining the financial results of
DIMAC Marketing for the period from January 1, 1997 to August 31, 1997, while
under Heritage Media ownership, and for the period from September 1, 1997 to
December 31, 1997, following the News Corporation purchase, including purchase
accounting adjustments for the News Corporation purchase. We derived the
information related to DIMAC Marketing's six months ended December 31, 1997 by
combining the financial results of DIMAC Marketing for the period from July 1,
1997 to August 31, 1997 while under Heritage Media ownership, and for the period
from September 1, 1997 to December 31, 1997, following the News Corporation
purchase, including purchase accounting adjustments for the News Corporation
purchase.
DIMAC CORPORATION
OVERVIEW
On June 26, 1998 we completed the acquisitions of AmeriComm Holdings and
DIMAC Marketing for aggregate consideration of $425.8 million (including fees
and expenses relating to these acquisitions and assumed indebtedness). We
financed these acquisitions with $100.0 million of cash equity contributed by
affiliates of McCown De Leeuw, $157.6 million of borrowings under our senior
secured credit facility and $168.3 million of assumed indebtedness.
We refinanced certain of the assumed indebtedness with the proceeds of our
notes offering, DIMAC Holdings' notes offering, an additional equity
contribution from affiliates of McCown De Leeuw and other investors and $45.0
million of additional term loans under our senior secured credit facility. $30.0
million of DIMAC Holdings' notes and $100.0 million of our notes were initially
issued on October 22, 1998 under Rule 144A of the Securities Act. The net
proceeds from the issuance were $29.4 million and $94.2 million, respectively.
As of March 31, 1999, we had debt outstanding of $312.3 million, consisting of
approximately $206.9 million out of a total of $270.0 million senior secured
credit facility, $97.3 million aggregate principal amount of our notes, net of
unamortized original issue discount, and $8.1 million of capital leases.
53
<PAGE>
The following tables summarize results of operations for the three-month
period ended March 31, 1999, the combined predecessor companies, AmeriComm
Holdings and DIMAC Marketing, each for the three month period ended March 31,
1998, the period from our inception on May 12, 1998 through December 31, 1998
and the combined predecessor companies, each for the six-month period ended
December 31, 1997. We had no operating activities from the period from our
Inception to June 26, 1998.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
DIMAC
CORPORATION
AND AMERICOMM DIMAC COMBINED DIMAC
SUBSIDIARIES HOLDINGS MARKETING MARKETING AND
THREE MONTHS THREE MONTHS THREE MONTHS AMERICOMM
ENDED ENDED ENDED HOLDINGS THREE
MARCH 31, MARCH 31, MARCH 31, MONTHS ENDED
1999 1998 1998 MARCH 31, 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
Net sales......................................... $ 85,710 $ 46,373 $ 49,057 $ 95,430
Cost of sales..................................... 60,794 33,455 33,225 66,680
--------------- --------------- --------------- ---------------
Gross profit.................................... 24,916 12,918 15,832 28,750
Selling, general and administrative expenses.... 29,253 11,957 12,999 24,956
--------------- --------------- --------------- ---------------
Operating income (loss)........................... (4,337) 961 2,833 3,794
Interest, net..................................... 8,153 4,745 2,247 6,992
--------------- --------------- --------------- ---------------
Income (loss) before income taxes................. (12,490) (3,784) 586 (3,198)
Income tax provision (benefit).................... -- (1,509) 490 (1,019)
--------------- --------------- --------------- ---------------
Net income (loss)................................. $ (12,490) $ (2,275) $ 96 $ (2,179)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
</TABLE>
PERIOD FROM OUR INCEPTION ON MAY 12, 1998 TO DECEMBER 31, 1998 COMPARED TO THE
SIX MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS ENDED
PERIOD FROM ENDED DEC. DEC. 31, 1997
MAY 12, 1998 31, 1997 SIX MONTHS COMBINED DIMAC
TO DEC. 31 AMERICOMM ENDED DEC. 31, MARKETING AND
1998 DIMAC HOLDINGS 1997 DIMAC AMERICOMM HOLDINGS
CORPORATION (UNAUDITED) MARKETING (UNAUDITED)
------------ ------------- --------------- --------------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
Net sales................................... $ 191.4 $ 104.5 $ 86.5 $ 191.0
Cost of sales............................... 131.1 72.8 57.2 130.0
------------ ------------- --------------- --------------------
Gross profit................................ 60.3 31.7 29.3 61.0
Selling, general and
administrative expenses................... 51.5 24.2 25.9 50.1
------------ ------------- --------------- --------------------
Operating income............................ 8.8 7.5 3.4 10.9
Interest expense, net....................... 17.1 9.6 3.8 13.4
------------ ------------- --------------- --------------------
Income (loss) before income
taxes and discontinued
operations................................ (8.3) (2.1) (0.4) (2.5)
Income tax provision
(benefit)................................. (2.3) (0.4) 0.5 0.1
------------ ------------- --------------- --------------------
Loss before discontinued
operations and extraordinary
item...................................... $ (6.0) $ (1.7) $ (0.9) $ (2.6)
------------ ------------- --------------- --------------------
------------ ------------- --------------- --------------------
</TABLE>
54
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
NET SALES for the three-month period ended March 31, 1999 decreased $9.7
million to $85.7 million, or 10.2%, from the comparable 1998 period. The overall
decrease in net sales was primarily related to a decrease in net sales for both
the direct mail products and services and other printing and converting products
segment. Specifically, the decrease in net sales was due to downturns in volumes
resulting from customer budget reductions and postponements of client campaigns,
the loss of business from certain significant customers and the continued
decline in our impact mailer product.
GROSS PROFIT for the three-month period ended March 31, 1999 decreased $3.8
million to $24.9 million, or 13.3%, from the comparable 1998 period. Gross
profit, as a percent of net sales, decreased to 29.1% for the three-month period
ended March 31, 1999 as compared to 30.1% for the comparable 1998 period. The
decrease in gross profit dollars and as a percent of net sales is mostly
attributable to the decrease in net sales for direct mail products and services
and other printing and converting products discussed above, the change in the
mix of business and higher material costs incurred as part of sample production
work on potential new products.
SELLING AND ADMINISTRATIVE EXPENSES for the three month period ended March
31, 1999 increased $4.3 million to $29.3 million, or 17.2% from the comparable
1998 period. Selling and administrative expenses, as a percent of net sales,
increased to 34.1% for the three-month period ended March 31, 1999 as compared
to 26.2% for the comparable 1998 period. The increase in selling and
administrative expenses is mostly related to the increased amortization expense
from certain acquired intangible assets, costs incurred related to Y2K
compliance, additional corporate and operational wages and impact of charging
the amortizable life of goodwill perspectively from 40 to 20 years in the first
quarter of 1999.
OPERATING INCOME for the three-month period ended March 31, 1999 decreased
by $8.1 million to a $4.3 million operating loss, or 214.3%, from the comparable
1998 period. The decrease in operating income was due to the decrease in gross
profit and the increase in selling and administrative expenses discussed above.
INTEREST EXPENSE for the three-month period ended March 31, 1999 was $8.2
million or 9.5% of net sales as compared to $7.0 million or 7.3% of net sales
for the comparable 1998 period. The increase in interest expense is due to (i)
the increase in the amortization of deferred finance costs and (ii) the increase
in the weighted average interest rate for the three-month period ended March 31,
1999 of 10.6% as compared to 9.5% for the comparable 1998 period. The increase
in the weighted average interest rate is due to the increased cost of funds
under the senior secured credit facility and the senior subordinated
indebtedness as compared to the cost of borrowing for the predecessor companies.
The effective income tax rate was 0% and (31.9)% for the three-month periods
ended March 31, 1999 and 1998, respectively. We have not recognized any benefit
from the future use of net operating losses generated during the three-month
period ended March 31, 1999 because our assumptions of future profitable
operations contain risks that do not provide sufficient assurance to currently
recognize those tax benefits.
PERIOD FROM OUR INCEPTION ON MAY 12, 1998 TO DECEMBER 31, 1998 COMPARED TO THE
SIX MONTHS ENDED DECEMBER 31, 1997
NET SALES for the period ended December 31, 1998 increased $0.4 million to
$191.4 million, or 0.2%, from the comparable 1997 period. The overall increase
in net sales was primarily related to an increase in net sales for direct mail
products and services as net sales for other printing and converting products,
such as custom mailer and pressure sensitive labels, was relatively flat over
this period.
55
<PAGE>
Specifically, the increase in net sales for direct mail products and services
was due to increases in production and program development services.
GROSS PROFIT for the period ended December 31, 1998 decreased $0.7 million
to $60.3 million, or 1.1%, from the comparable 1997 period. Gross profit, as a
percent of net sales, decreased to 31.5% for the six month period ended December
31, 1998 from 31.9% for the comparable 1997 period. The decrease in gross profit
dollars is mostly attributable to the increase in cost of sales for both direct
mail products and services and other printing and converting products. The
decrease in gross profit in dollars and as a percentage of net sales is due to
the erosion of profit margins as a result of lower average paper prices in the
underlying paper market and higher relative material costs due to lower vendor
rebates realized in the 1998 period.
SELLING AND ADMINISTRATIVE EXPENSES for the period ended December 31, 1998
increased $1.4 million to $51.5 million, or 2.8% from the comparable 1997
period. Selling and administrative expenses, as a percent of net sales,
increased to 26.9% for the period ended December 31, 1998 as compared to 26.2%
for the comparable 1997 period. The increase in selling and administrative
expenses is mostly related to the increase in the amortization of certain
acquired intangible assets from the June 26, 1998 acquisitions for AmeriComm
Holdings and DIMAC Marketing.
OPERATING INCOME for the period ended December 31, 1998 decreased by $2.1
million to $8.8 million, or 19.3%, from the comparable 1997 period. The decrease
in operating income was due to the decrease in gross profit and the increase in
selling and administrative expenses discussed above.
INTEREST EXPENSE for the period ended December 31, 1998 was $17.1 million or
8.9% of net sales as compared to $13.4 million or 7.0% of net sales for the
comparable 1997 period. The increase in interest expense is due to (i) the
increase in the amortization of deferred finance costs and (ii) the increase in
the weighted average interest rate for the period ended December 31, 1998 of
10.4% as compared to 9.0% for the comparable 1997 period. The increase in the
weighted average interest rate is due to the increased cost of funds under our
senior secured credit facility and our senior subordinated indebtedness as
compared to the cost of borrowing for the predecessor companies.
INCOME TAX BENEFIT for the period ended December 31, 1998 was $2.3 million
resulting in an effective tax rate of 28%. The income tax benefit was reduced
for certain nondeductible amortization and other expenses and the change in the
valuation reserve.
As of December 31, 1998, $41.9 million of cumulative net operating loss
carryforward benefits may be used to offset future taxable income, subject to
their expirations, beginning in 2004 and continuing through 2018. Utilization of
the net operating losses may be limited to certain subsidiaries and limited by
any future issuance of stock by us.
AMERICOMM HOLDINGS
OVERVIEW
Historically, AmeriComm Holdings has managed its operations by four product
lines: direct mail products, mailer systems, custom pressure sensitive labels
and custom envelopes. Net sales from these product lines are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31, SIX MONTHS
-------------------- SIX MONTHS ENDED ENDED
1996 1997 JUNE 30, 1997 JUNE 26, 1998
--------- --------- ----------------- ---------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
Direct mail products........................................... $ 13.4 $ 45.6 $ 16.0 $ 27.1
Mailer systems................................................. 26.8 43.7 21.4 20.4
Custom pressure sensitive labels............................... 21.3 51.0 24.4 23.8
Custom envelopes............................................... 49.8 50.8 24.8 21.8
--------- --------- ----- -----
$ 111.3 $ 191.1 $ 86.6 $ 93.1
--------- --------- ----- -----
--------- --------- ----- -----
</TABLE>
56
<PAGE>
AmeriComm Holdings' net sales in 1994 were $66.0 million. Since then,
AmeriComm Holdings has pursued an acquisition campaign to enhance its product
offerings. For the period ended December 31, 1997, net sales had grown to $191.1
million, an increase over 1994 levels of 189.5%. The following table outlines
AmeriComm Holdings' acquisitions since 1994.
<TABLE>
<CAPTION>
ENTITY ACQUIRED DATE EXPERTISE
- ----------------------------------------------- ---------------- -----------------------------------------------
<S> <C> <C>
Transkrit Corporation.......................... June 1996 Direct mail, custom mailers, custom pressure
sensitive labels.
Label America, Inc............................. February 1997 Custom pressure sensitive labels.
AmeriComm Direct Marketing, Inc................ April 1997 Direct marketing products and services.
Cardinal Marketing, Inc. and Cardinal Marketing
of New Jersey, Inc........................... March 1998 Customer profiling and response analysis
primarily to the financial services and retail
industries.
</TABLE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
(IN MILLIONS)
<S> <C> <C>
Net sales....................................................... $ 93.1 $ 86.6
Cost of products sold........................................... 68.0 60.8
------ ------
Gross profit.................................................... 25.1 25.8
Selling, general and administrative expenses.................... 25.6 22.0
------ ------
Operating income (loss)......................................... (0.5) 3.8
Interest expense, net........................................... 9.7 7.4
------ ------
Loss before income taxes........................................ (10.2) (3.6)
Income tax benefit.............................................. (3.1) (0.8)
------ ------
Net loss........................................................ $ (7.1) $ (2.8)
------ ------
------ ------
</TABLE>
NET SALES for the six-month period ended June 26, 1998 increased $6.5
million to $93.1 million or 7.5% from the comparable 1997 period. The overall
increase in net sales was due to the acquisitions of AmeriComm Direct Marketing,
Cardinal Marketing and Cardinal Marketing of New Jersey. Specifically, the
increase in net sales for direct mail products was due to the afore-mentioned
acquisitions. Net sales for mailer systems decreased $1.0 million to $20.4
million from the comparable 1997 period. Mailer systems net sales decreased due
to an overall decline in core commercial products. Core commercial products are
mailers that use impact printing technologies which are ready-to-mail,
multi-part spot carbon or carbonless forms. The decrease in net sales for core
commercial products is equally due to a decrease in volume and a decrease in
sales price. The decrease in volume is due to the rapid growth of new
technologies in printing mailer forms. These new technologies include laser,
ink-jet and other non-impact printers. The decrease in sales price is due to
competitive pricing pressures in a declining market. Net sales for custom
pressure sensitive labels decreased $0.6 million to $23.8 million from the
comparable 1997 period. The decrease in net sales for custom pressure sensitive
labels was due to the decrease in volume from a significant customer partially
offset by the impact of AmeriComm Holdings' acquisition of Label America. Net
sales for custom envelopes decreased $3.0 million to $21.8 million from the
comparable 1997 period. The decrease in net sales for custom envelopes of $1.3
million and $1.7 million due to a decline in the underlying paper prices and
units shipped, respectively, reflecting a mildly softer envelope market.
57
<PAGE>
GROSS PROFIT for the six-month period ended June 26, 1998 decreased $0.7
million to $25.1 million, or 2.7%, from the comparable 1997 period. Gross
profit, as a percentage of net sales, decreased to 27.0% for the six-month
period ended June 26, 1998 from 29.8% for the comparable 1997 period. The
decrease in gross profit is primarily due to the reduction in net sales and
reduced margins for mailer systems, custom pressure sensitive labels and custom
envelopes product lines. These decreases were partially offset by the increase
in gross profit due to the increase in net sales for direct mail products and
services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the six month period ended
June 26, 1998 increased $3.6 million to $25.6 million, or 16.4%, from the
comparable 1997 period. Selling, general and administrative expenses, as a
percentage of net sales, increased to 27.5% for the six month period ended June
26, 1998 from 25.4% for the comparable 1997 period. The increase in these costs
is attributable to the amortization of certain intangible assets recorded in
conjunction with the afore-mentioned acquisitions and a planned increase in
staffing of direct mail sales professionals and account executives to execute
our direct mail strategy.
LOSS FROM OPERATIONS for the six month period ended June 26, 1998 was $0.5
million, as compared to income from operations of $3.8 million for the
comparable 1997 period. The decrease in operating income is due to the decrease
in gross profit and increase in selling, general and administrative expenses,
discussed above.
INTEREST EXPENSE for the six month period ended June 26, 1998 was $9.7
million, or 10.4% of net sales, as compared to $7.4 million, or 8.5% of net
sales, for the comparable 1997 period. The increase in interest expense is due
to the increased borrowings on the line of credit to finance the acquisitions of
Cardinal Marketing and Cardinal Marketing of New Jersey and to fund the purchase
of certain direct mail production equipment and the issuance of the AmeriComm
Holdings Senior Notes on April 24, 1997 to fund AmeriComm Holdings' acquisition
of AmeriComm Direct Marketing, Inc. The weighted average interest rate for the
six month periods ended June 26, 1998 and June 30, 1997 was 12.3% and 12.0%,
respectively. The increase in the weighted average interest rate is due to the
AmeriComm Holdings Senior Notes borrowings.
INCOME TAX BENEFIT for the six month period ended June 26, 1998 was $3.1
million as compared to $0.8 million for the comparable 1997 period resulting in
effective tax rates of 30% and 22%, respectively.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
NET SALES for the year ended December 31, 1997 increased $79.8 million to
$191.1 million, or 71.7%, from the comparable 1996 period. The overall increase
in net sales was due to AmeriComm Holdings' acquisitions of Transkrit
Corporation, Label America and AmeriComm Direct Marketing. Net sales for mailer
systems products increased 63.1%, or $16.9 million, from 1996 to 1997 due to the
acquisition of Transkrit Corporation. Net sales for direct mail products
increased 240.3%, or $32.2 million, due to AmeriComm Holdings' acquisition of
AmeriComm Direct Marketing and Transkrit Corporation. Net sales for custom
pressure sensitive labels increased 139.4%, or $29.7 million, due to the
acquisitions of Label America and Transkrit Corporation. Net sales for custom
envelopes increased 2.0%, or $1.0 million from 1996 to 1997. The increase in net
sales for custom envelopes was due to an increase in units shipped by 12.7% or
$6.3 million particularly offset by a decrease in the average unit price of 9.5%
or $5.3 million.
GROSS PROFIT for the year ended December 31, 1997 increased $26.4 million to
$57.5 million, or 84.9%, from the comparable 1996 period. In addition, gross
profit as a percentage of net sales, increased from 27.9% for 1996 to 30.0% for
1997. The increase in gross profit in dollars and as percent of net sales is
mostly attributable to the higher-margin product lines acquired in AmeriComm
Holdings' acquisitions of Label America and AmeriComm Direct Marketing in 1997
and Transkrit Corporation in 1996.
58
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $20.6 million from
1996 to 1997 due to the acquisitions of Transkrit Corporation, Label America and
AmeriComm Direct Marketing. Selling, general and administrative expenses, as a
percent of net sales, increased to 24.0% from 22.6% from the comparable 1996
period. The increase in selling, general and administrative expenses is the
result of the acquisitions of Transkrit Corporation, Label America and AmeriComm
Direct Marketing which historically, because of the nature of their businesses,
incur higher percentage of these costs.
INCOME FROM OPERATIONS for the year ended December 31, 1997 was $11.7
million, or 6.1% of net sales as compared to $5.9 million or 5.3% of net sales
for the comparable 1996 period. The increase of $5.8 million is the result of
AmeriComm Holdings' acquisitions of Transkrit Corporation, Label America and
AmeriComm Direct Marketing. The increase in income from operations as a percent
of net sales from 1996 to 1997 is due to the increase in gross profit from the
acquired product lines reduced, to a lesser extent, by the increase in selling,
general and administrative expenses.
INTEREST EXPENSE for the year ended December 31, 1997 increased $8.9
million, or 109.9%, to $17.0 million from $8.1 million for 1996. The weighted
average interest rate for the year ended December 31, 1997 was 12.5% as compared
to 12.2% for the comparable 1996 period. The increase in the weighted average
interest rate from 1996 to 1997 is due to the issuance of the $100.0 million
AmeriComm Direct Marketing Senior Notes on June 28, 1996.
INCOME TAX benefit for the years ended December 31, 1997 and 1996 was $(1.0)
million and $(0.6) million, respectively, resulting in effective tax rates of
18.9% and 28.3%, respectively. The decrease in the effective tax rate is
primarily related to non-deductible amortization and other expenses and certain
minimum state income taxes.
As of December 31, 1997, $7.9 million of cumulative net operating loss
carryforward benefits have been recognized based upon the expected reversals of
temporary differences into taxable income and management's estimate of future
taxable income for the period prior to the expiration of the net operating loss
carryforwards. We expect to generate taxable income prior to the expiration of
the net operating loss carryforward. Taxable income of $7.9 million would have
to be realized prior to the year ended December 31, 2011 to ensure realizability
of the net operating loss carryforward for federal income tax purposes. The
cumulative net operating loss carryforward, generated from 1989 through 1996,
will begin to expire in 2004 and continue through 2011. The cumulative net
operating loss of $7.9 million at December 31, 1997 has increased from a
cumulative net operating loss carryforward of $7.6 million at December 31, 1996.
59
<PAGE>
DIMAC MARKETING
OVERVIEW
Historically, DIMAC Marketing managed its operations by the following
business units. Sales from these business units are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
SIX MONTHS
DECEMBER 31, ENDED
-------------------- SIX MONTHS ENDED JUNE 26,
1996 1997 JUNE 30, 1997 1998
--------- --------- ----------------- -----------
<S> <C> <C> <C> <C>
(IN MILLIONS)
DIMAC Marketing-St. Louis........................................... $ 81.6 $ 80.3 $ 42.1 $ 43.9
DIMAC Marketing-East
(formerly Direct Marketing Group, Inc.)........................... 18.0 19.6 9.9 7.5
The McClure Group Inc............................................... 37.3 41.6 21.4 20.4
Palm Coast Data Inc................................................. 20.3 22.2 11.4 11.6
MBS/Multimode Inc................................................... 11.0 17.4 8.5 9.9
Wilcox & Associates Inc............................................. 10.1 11.3 6.0 7.5
DIMAC Marketing-West................................................ 10.7 -- -- --
Eliminations........................................................ (10.6) (14.5) (7.9) (7.6)
--------- --------- ----- -----
$ 178.4 $ 177.9 $ 91.4 $ 93.2
--------- --------- ----- -----
--------- --------- ----- -----
</TABLE>
Until May 1994, DIMAC Marketing's business consisted primarily of an
operations facility in St. Louis. In addition to production, DIMAC Marketing-St.
Louis offered program development services, such as creative development and
market planning and information data processing. Sales for 1994 were $100.0
million and centered primarily around the AT&T account. Since 1994, DIMAC
Marketing has embarked upon a strategy to broaden its direct marketing services
by acquiring companies that enhanced its direct mail service offerings and by
building a more diverse customer base. For the twelve months ended December 31,
1997, DIMAC Marketing had $177.9 million in sales, a 77.9% increase over fiscal
1994.
The following table sets forth the acquisitions DIMAC Marketing has
completed since 1994:
<TABLE>
<CAPTION>
ENTITY ACQUIRED DATE EXPERTISE
- -------------------------------------- --------------- --------------------------------------------------------
<S> <C> <C>
Direct Marketing Group, Inc........... May 1994 Strategic and creative services, information processing
services, production.
Palm Coast Data....................... May 1995 Fulfillment/subscription management with a publishing
industry specialization.
The McClure Group..................... October 1995 Full complement of program development services with an
insurance and healthcare industry specialization.
Wilcox & Associates................... March 1996 Transitional marketing services, primarily for the
banking industry.
MBS/Multimode......................... May 1996 Database marketing services, primarily to retail and
catalog industries.
</TABLE>
60
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 26, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------------------
JUNE 26, 1998 JUNE 30, 1997
--------------- ---------------
<S> <C> <C>
(IN MILLIONS)
Sales............................................................................... $ 93.2 $ 91.4
Cost of sales....................................................................... 61.8 60.3
----- -----
Gross profit........................................................................ 31.4 31.1
Selling, general and administrative expenses........................................ 26.6 29.0
----- -----
Operating income.................................................................... 4.8 2.1
Interest expense, net............................................................... 4.6 4.6
----- -----
Income (loss) before income taxes and discontinued operations....................... 0.2 (2.5)
Income tax expense.................................................................. 0.6 --
----- -----
Loss before discontinued operation.................................................. $ (0.4) $ (2.5)
----- -----
----- -----
</TABLE>
SALES for the six months ended June 26, 1998 increased 2.0% to $93.2 million
compared to $91.4 million for the comparable 1997 six month period. Sales growth
in the first six months of 1998 was primarily due to servicing certain new
assignments, primarily at MBS/Multimode. In addition, DIMAC Marketing-East's
revenues decreased and Wilcox & Associates' revenues increased in an equal
amount, reflecting the fact that certain agency services were transferred from
DIMAC Marketing-East to Wilcox & Associates effective January 1, 1998.
GROSS PROFIT for the six months ended June 26, 1998 increased 0.6% to $31.4
million compared to $31.2 million for the comparable period in 1997. Gross
profit as a percentage of sales decreased from 34.1% in the first six months of
1997 to 33.7% in the first six months of 1998. The decrease in gross profit as a
percentage of sales is primarily attributable to a shift in the mix of
production services between work performed internally and work subcontracted
from third-party vendors. Subcontracted services, the need for which can arise
from both capacity or capability constraints, generally result in lower gross
profit margins than services performed internally.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES for the six months ended June
26, 1998 decreased 8.3% to $26.6 million compared to $29.0 million for the
comparable 1997 six month period. As a percent of sales selling, general and
administration expenses decreased from 31.7% in the first six months of 1997 to
28.5% in the first six months of 1998. The decrease in these costs is primarily
attributable to the $1.4 million decrease in amortization of intangible assets.
When News Corporation purchased DIMAC Marketing in August 1997, the recorded
goodwill was reduced by approximately $102.2 million and has resulted in lower
amortization charges in the subsequent periods.
OPERATING INCOME for the six months ended June 26, 1998 increased 128.6% to
$4.8 million compared to $2.1 million for the comparable 1997 six month period.
As a percent of sales, income from operations increased from 2.3% in the first
six months of 1997 to 5.1% in the first six months of 1998. The increase in
operating income is primarily due to the closure of the Hayward production
facility in 1997 (which had losses of $1.3 million in the first six-months of
1997) combined with the decrease in selling, general and administrative expenses
discussed above.
INTEREST EXPENSE for the six months ended June 26, 1998, at $4.6 million,
was relatively stable compared to the comparable 1997 six month period.
INCOME TAX EXPENSE for the six month period ended June 26, 1998 was $0.6
million as compared to $0.0 million for the comparable 1997 period. After giving
consideration to the portion of amortization of intangibles which is
nondeductible for income tax purposes, the effective tax rates for both periods
are relatively consistent.
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TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996
SALES in 1997 decreased 0.3% to $177.9 million compared to $178.4 million in
1996. The decrease in 1997 sales was primarily attributable to a reduction in
program spending from DIMAC Marketing's most significant customer, AT&T. In
addition, in order to secure a longer term contract with up-side potential,
DIMAC Marketing implemented a lower pricing grid for the AT&T account. These
decreases were in part offset by increases at The McClure Group, reflecting the
full year effect of new business generated toward the end of 1996 and the full
year effect of DIMAC Marketing's acquisition of MBS/ Multimode.
GROSS PROFIT in 1997 decreased 3.8% to $60.4 million compared to $62.8
million in 1996. Gross profit as a percentage of sales declined from 35.2% in
1996 to 33.9% in 1997. This decline resulted primarily from lower pricing and
volumes from AT&T and certain other of DIMAC Marketing's customers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES in 1997 increased to $54.9
million compared to $50.8 million in 1996. As a percentage of sales, selling,
general and administrative expenses increased from 28.5% in 1996 to 30.9% in
1997. The addition of sales and client service personnel contributed to the
increase along with higher commission expense. Additionally, general and
administrative expenses grew by 8.1% in 1997 versus 1996 due to a combination of
increased headcount in support functions, salary increases and higher employee
benefit costs.
OPERATING INCOME for the year ended December 31, 1997, was $5.5 million, or
3.1% of sales as compared to $12.0 million or 6.7% of sales for the comparable
1996 period. The decrease in income from operations as a percent of sales from
1997 to 1996 is due to the factors mentioned above.
INTEREST EXPENSE in 1997 increased to $8.4 million, compared to $8.1 million
in 1996.
INCOME TAX EXPENSE for the years ended December 31, 1997, and 1996, was $0.5
million and $3.7 million, respectively. After giving consideration to the
portion of amortization of intangibles which is nondeductible for income tax
purposes, the effective tax rates for both periods are relatively consistent.
LIQUIDITY AND CAPITAL RESOURCES OF OUR COMPANY
Net cash provided by or used in operating activities was $14.7 million and
$(5.8) million for the period from our inception on May 12, 1998 to December 31,
1998 and the three-month period ended March 31, 1999, respectively. Net cash
provided by operating activities for the period from our inception on May 12,
1998 to December 31, 1998 was due to $9.2 million of cash generated from
operations and $5.5 million of cash generated by working capital. Net cash used
in operating activities for the three-month period ended March 31, 1999 was due
to $2.3 million of cash used in operations and a $3.5 million increase in
working capital.
Net cash used in investing activities was ($250.7) million and $(4.0)
million for the period from inception to December 31, 1998 and the three-month
period ended March 31, 1999, respectively. Net cash used in investing activities
for the period from our inception on May 12, 1998 to December 31, 1998 was
primarily due to a $204.0 million payment for the purchase of DIMAC Marketing, a
$38.2 million payment for the purchase of AmeriComm Holdings and $7.9 million of
cash used to purchase property and equipment. Net cash used in investing
activities for the three-month period ended March 31, 1999 is attributable to
purchases of capital expenditures.
Net cash provided by financing activities was $245.9 million and $17.2 for
the period from our inception to December 31, 1998 and the three month period
ended March 31, 1999, respectively. Net cash provided by financing activities
for the period from inception to December 31, 1998 consists of $245.9 million
provided by the issuance of common stock, term loans, and notes used to finance
the merger acquisitions of DIMAC Marketing and AmeriComm Holdings and the
retirement of certain indebtedness. Net cash provided by financing activities
for the three-month period ended March 31,
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1999 was due to a $15.0 million capital infusion by DIMAC Holdings and $2.7
million borrowed on the revolving loan facility.
Our debt capitalization consists of $100.0 million aggregate principal
amount of our notes and a committed $270.0 million senior secured credit
facility of which $63.1 million was available at March 31, 1999. Pursuant to a
First Amendment to the senior secured credit agreement dated March 29, 1999, the
lenders party to the senior secured credit agreement have no obligation to make
additional revolving loans to us until we comply with certain financial ratios
and tests under the senior secured credit agreement. Pursuant to a Second
Amendment to our senior secured credit agreement, dated as of July 23, 1999, we
borrowed $30.0 million in additional term and revolving loans on July 30, 1999.
In addition, the maximum availability on our revolving loan credit facility was
reduced to $46.7 million and initial amortization payments were deferred until
2001 when $10.5 million of principal payments will become due. The borrowings
under the senior secured credit facility and the notes will increase debt
service costs. The notes will accrue interest at 12 1/2% per year and will be
payable semi-annually commencing April 1, 1999. The notes will mature on October
1, 2008. The senior secured credit facility and the notes indenture limit our
ability to incur additional debt, to pay dividends, to redeem capital stock and
to sell certain assets. We may incur additional indebtedness as long as our
consolidated coverage ratio is greater than certain minimum levels or if such
additional indebtedness fits within certain exceptions. The senior secured
credit facility bears interest at various interest rates plus a margin ranging
from 2.75% to 3.50%. Until December 31, 2000, for so long as we are unable to
comply with a leverage test in our senior secured credit agreement, the margin
will be increased by 0.25% in excess of the margin otherwise applicable. Loans
under the senior secured credit facility will mature from June 2004 to December
2006. Interest on DIMAC Holdings' notes is not payable in cash until December
31, 2003. Thereafter, DIMAC Holdings will rely on us to provide it with cash to
meet its principal and interest payment requirements. Management believes that
based on current financial performance and anticipated growth, cash flow from
operations, together with the available sources of funds, will be adequate to
make required payments of interest on our indebtedness, to fund anticipated
capital expenditures and working capital requirements and to enable us to comply
with the terms of our debt agreements through December 31, 2000. After December
31, 2000, management believes that we will need to amend or refinance our senior
secured credit facility and possibly our other indebtedness. We expect that
capital expenditures, exclusive of acquisitions, will be approximately $10.0 to
$15.0 million annually from 1999 and 2004. Our future operating performance and
ability to service or refinance the notes and to extend or refinance the senior
secured credit facility will be subject to future economic conditions and to
financial, business and other factors, many of which are beyond our control.
HISTORICAL LIQUIDITY AND CAPITAL RESOURCES
AMERICOMM HOLDINGS
Net cash provided by operating activities was $4.0 million, $6.5 million,
$1.0 million and $7.1 million for the six-month period ended June 26, 1998, the
three-month period ended March 31, 1998 and the years ended December 31, 1997
and 1996, respectively. Net cash provided by operating activities for the
six-month period ended June 26, 1998 was $1.1 million of cash generated from
operations and $2.9 million of cash from working capital. Net cash generated by
operating activities for the three-month period ended March 31, 1998 was
generated by working capital. The decrease in net cash provided by operating
activities for the year ended December 31, 1997 as compared to December 31, 1996
was due to the increase in working capital of $12.5 million partially offset by
the decrease of $7.0 million of net loss before noncash charges.
Net cash used in investing activities was $10.4 million, $7.0 million, $38.9
million and $79.8 million for the six-month periods ended June 26, 1998, the
three-month period ended March 31, 1998 and the years ended December 31, 1997
and 1996, respectively. Net cash used in investing activities for the six and
three-month periods ended June 26, 1998 and March 31, 1998, respectively,
reflects the purchases of property and equipment. The decrease in net cash used
in investing activities for the year ended
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December 31, 1997 as compared to December 31, 1996 is mostly due to AmeriComm
Holdings' acquisition of Label America for $9.5 million and AmeriComm Direct
Marketing for $25.0 million during the year ended December 31, 1997 as compared
to AmeriComm Holdings' acquisition of Transkrit Corporation for $79.4 million
during the year ended December 31, 1996.
Capital expenditures, excluding acquisitions but including purchases under
capital leases, were $5.7 million, $2.3 million, $4.6 million and $3.5 million
for the six-month period ended June 26, 1998, the three-month period ended March
31, 1998 and for the years ended December 31, 1997 and 1996, respectively.
Capital expenditures for the six and three-month periods ended June 26, 1998 and
March 31, 1998, respectively, were mostly related to direct mail business unit
purchases of production equipment such as printers and finishing lines and
improving operational and financial reporting systems. Capital expenditures made
during 1997 represent direct mail and envelope production equipment such as
label presses and photo-bag equipment and expenditures to improve operational
and financial reporting systems.
Net cash provided by financing activities was $6.9 million, $0.2 million,
$37.1 million and $74.2 million for the six-month period ended June 26, 1998,
the three month period ended March 31, 1998 and for the years ended December 31,
1997 and 1996, respectively. The net cash provided by financing activities for
the six-month period ended June 26, 1998 was due to borrowings on revolving loan
facilities. The decrease in net cash provided by financing activities for the
year ended December 31, 1997 as compared to December 31, 1996 is mostly due to
the issuance of certain notes during 1996 totaling $100.0 million.
DIMAC MARKETING
Net cash provided by or used in operating activities for the six month
period ended June 26, 1998 and the three month period ended March 31, 1998 was
$2.0 million and $0.3 million, respectively. The changes in net cash provided by
or used in operating activities was due to changes in operating income for the
respective periods.
Net cash used in investing activities was $6.4 million and $2.8 million for
the six month period ended June 26, 1998 and the three month period ended March
31, 1998, respectively. The net cash used in investing activities reflects the
purchases of property and equipment and payments for contingent consideration.
Net cash provided by financing activities was $4.4 million and $3.2 million
for the six month period ended June 26, 1998 and the three month period ended
March 31, 1998, respectively. The net cash provided by financing activities is
due to borrowings under revolving credit facilities.
As of June 26, 1998, DIMAC Marketing had $143.9 million payable to News
Corporation in the form of intercompany borrowings. As a subsidiary of News
Corporation, funding needs for fluctuations in working capital or investing
activities were satisfied through intercompany borrowings. DIMAC Marketing had
no lines of credit or committed funding sources with external lending
institutions.
Net cash provided by operating activities for the years ended December 31,
1997 and 1996, was $5.6 million and $11.5 million, respectively. The decrease in
net cash provided by operating activities is primarily a result of the decrease
in operating income discussed in the Management's Discussion and Analysis of
Financial Condition and Results of Operations, and partially offset by an
improvement in cash provided by working capital.
Net cash used in investing activities was $27.6 million and $45.1 million
for the years ended December 31, 1997 and 1996, respectively. The decrease in
net cash in investing activities is due to DIMAC Marketing's acquisitions of
Wilcox & Associates and MBS/Multimode in 1996, reduced by higher construction
expenditures in 1997 on the Central Islip facility.
Net cash provided by financing activities for the years ended December 31,
1997 and 1996, was $21.9 million and $33.6 million, respectively. Concurrent
with the sale of Heritage Media to News
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Corporation, the existing credit agreement was paid off with intercompany
borrowings from News Corporation.
Capital expenditures, excluding acquisitions but including purchases under
capital leases, were $3.2 million, $1.6 million, $22.2 million and $9.5 million
for the six month period ended June 26, 1998, the three month period ended March
31, 1998 and the years ended December 31, 1997 and 1996, respectively. Included
in these four periods were $0.4 million, $0.2 million, $13.3 million and $6.7
million, respectively, in expenditures on a new facility in Central Islip, New
York and a plant expansion project in Palm Coast, Florida. The balance of the
expenditures consisted primarily of investments in computer hardware and
software technology, both for revenue generating services and internal systems,
along with normal investments in production equipment.
INFLATION AND PRICE CHANGES
We believe that inflation, exclusive of paper price increases, has not had a
material impact on our results of operations for the three years ended December
31, 1998 and the three months ended March 31, 1999. We have not engaged in
hedges to offset changes in the cost of paper.
YEAR 2000 RISKS
The Y2K issue refers to the risk that systems, products and equipment using
date-sensitive software or computer chips with two digit date fields will
recognize a date using "00" as the year 1900 rather than the year 2000. If we,
our critical suppliers, customers and key service providers, do not correct a
material Y2K problem, our operations and financial results could be adversely
impacted.
STATE OF READINESS. We have formulated and are in the process of
implementing a Y2K compliance plan. Our plan requires our company and each of
our subsidiaries to assess the scope and extent of Y2K issues in the following
areas:
- information technology systems, such as PCs, mainframes, servers and
software applications;
- non-information technology systems, such as manufacturing equipment,
security and alarm systems, elevators, copiers and building control
systems; and
- compliance by third parties who have a material relationship with our
company or any of our operating subsidiaries.
To implement our plan, we have entered into a contract with TMCO
International, Inc. to provide outsourced senior management staffing with
respect to information technology. As part of the services provided, TMCO
International is responsible to ensure that our information technology is Y2K
compliant by managing the resources designated to implement our plan.
We have organized a Y2K project team which consists of a project manager,
nine managers, ten site project managers, three outside consultants and internal
teams as needed, all of whom are under the direction of the Chief Information
Officer. The responsibilities of team members include:
- identifying all information technology systems and non-information
technology systems to be tested for Y2K compliance;
- assessing all information technology systems and non-information
technology systems for Y2K compliance;
- correcting, replacing or retiring non-compliant systems; and
- developing and implementing a contingency plan.
Each team member is required to provide weekly updates on Y2K compliance
efforts. Systems that are not Y2K compliant are being tracked by the Y2K project
team and status updates are reported on a weekly basis. Compliance audits are
also being conducted to verify that reported compliance levels are actually
achieved. Results of these audits are reported to senior management to assure
proper
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attention. Our Y2K remediation effort has not postponed any significant
information technology projects.
Each site has developed inventory, assessment, remediation and certification
plans. These plans address information technology systems and non-information
technology systems. Our progress to date on a consolidated basis is as follows:
<TABLE>
<S> <C>
- - Identifying systems to be tested 99%
- - Assessing systems for Y2K compliance 95%
- - Remediation of non-compliant systems 80%
- - Testing of remediated systems 50%
</TABLE>
Although one or more teams may progress toward total Y2K compliance at
different rates, we expect to have overall Y2K compliance by the end of the
third quarter.
INFORMATION TECHNOLOGY SYSTEMS. We have upgraded mainframe, server and PC
based systems in most facilities and are conducting the final stages of testing
for these systems. We are awaiting the arrival of vendor upgrades for some other
PC based systems which have not been upgraded. Two of our facilities will
replace an application system for Y2K compliance.
Most of our facilities rely on packaged software applications. We have
purchased new Y2K compliant software applications to replace some of our
non-compliant software applications and received Y2K compliant upgrades for some
of our other software applications. We are currently installing and testing our
new software applications and upgrades. We anticipate that all of our
information technology systems will be Y2K compliant by the end of the third
quarter.
NON-INFORMATION TECHNOLOGY SYSTEMS. We have partially completed remediating
and testing our major non-information technology systems. Manufacturers of our
non-information technology systems are being contacted to determine Y2K
compliance. We anticipate that our non-information technology systems will be
Y2K compliant by the end of the third quarter.
THIRD PARTIES. Our Y2K compliance plan also includes an analysis of the Y2K
readiness of our customers and critical third-party suppliers of materials and
services. Our major customers, vendors and service providers were sent a survey
asking for the status of their Y2K compliance. A follow-up letter was sent if no
response was received. If we did not or do not receive a response to the
follow-up letter, we contacted or will contact the third-party directly. All
mailings and responses are being tracked centrally as well as by each business
unit. To date, our response rate is 95%. Interface and interconnection testing
with major customers has been ongoing over the last six months with good
success. To date, we have identified no problem areas, however, such testing is
not due to be completed until the end of the third quarter.
Although we have contacted critical suppliers, customers and key service
providers to determine their level of Y2K compliance, these companies could
adversely impact our operations. The full extent of any such adverse impact, if
any, is impossible to determine. Failure of our critical suppliers, customers
and key service providers to be Y2K compliant could disrupt our operations and
create adverse relations with our customers and suppliers. We are attempting to
mitigate any possible adverse impact by identifying alternate suppliers where
possible. We will also attempt to increase our inventory of crucial materials in
anticipation of possible disruptions.
Third parties who are crucial to our business include our material paper
products and production equipment suppliers, material customers and key service
providers such as telephone and utility service providers.
COSTS. Our Y2K efforts have been undertaken largely with our existing
personnel. No employees were hired and only one employee was reassigned to
complete the Y2K compliance project. In some instances, outside consultants have
been engaged to provide specific assessment, remediation or other services. As
of March 31, 1999 we had incurred approximately $127,000 in costs for Y2K
compliance
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and expect to incur an additional $633,000 by December 31, 1999. Most of these
costs relate to equipment and software and will be capitalized. All expected
costs are based on our current assessments and may change as additional
assessments and analysis are completed. In addition, estimated costs do not
include any potential costs related to customer or other claims, or potential
amounts related to executing contingency plans, such as costs incurred as a
result of a supplier failure. No assessment of these costs has yet been made,
nor is one anticipated.
RISKS. We believe that our internal remediation efforts will be completed
on a timely basis such that Y2K will not result in significant problems with our
information technology systems and non-information technology systems. We
continue to assess our risk exposure attributable to external factors and
third-party customers and suppliers. Although we have no reason to conclude that
any specific supplier or customer presents a risk, the most likely worst case
scenario would entail production disruption due to the inability of suppliers to
deliver critical materials or a disruption in electrical power or
communications. We are unable to quantify such a scenario, but it could
potentially have a material adverse effect on our results of operations,
liquidity or financial position.
CONTINGENCY PLAN. Because we have not yet completed our overall assessment
of Y2K issues, we have not been able to formulate contingency plans in their
entirety or to determine the total cost of such plans. However, each of our
facilities is developing a contingency plan that addresses each of their
respective Y2K issues. The contingency plan will cover information technology
systems, non-information technology systems and third-parties and will be based
on the assumption that:
- Not every system will be fixed;
- Not every external entity will reach compliance; and
- Corrected systems will have problems.
The contingency plans are scheduled to be completed by the end of the third
quarter. We anticipate completing implementation of these plans by the end of
the fourth quarter. Our contingency plans may require us to purchase additional
critical supplies or power generators.
SEASONALITY AND QUARTERLY FLUCTUATIONS
Our business is affected by a seasonal pattern where we generate a slightly
greater volume and more profitable sales in the third and fourth quarters of
each year. We experience this fluctuation because in some of our businesses many
of our larger customers are retailers whose own businesses are affected by these
seasonal patterns. During 1998, approximately 51% and 67% of our combined pro
forma net sales and operating income, after giving effect to the AmeriComm
Holdings' acquisitions of Cardinal Marketing and Cardinal Marketing of New
Jersey and our acquisitions of AmeriComm Holdings and DIMAC Marketing, occurred
in the third and fourth quarters, respectively. Accordingly, any adverse trend
in net sales for such periods could have a material adverse effect upon our
business, financial condition or results of operations.
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BUSINESS
GENERAL
Our company consists of the businesses of DIMAC Marketing and AmeriComm
Holdings. We provide a comprehensive range of direct marketing services that
emphasize cost-effective production of large, complex, highly personalized
direct mail campaigns. Through our nationwide network of 18 production
facilities, we offer our direct mail customers a wide variety of direct mail
package formats and production services including printing, bindery, addressing,
mail piece insertion and mail distribution services. We also have envelope
production capabilities.
We offer a complete range of pre- and post-production direct marketing
services such as:
- information services including information processing and database
management;
- program development services including strategic market planning,
creative development and program evaluation; and
- fulfillment and telemarketing services including fulfillment,
telemarketing and response tracking.
In addition, to support our direct marketing products and services, we offer
other printing, folding and assembling products such as custom pressure
sensitive labels and custom mailers. For the twelve-month period ended March 31,
1999, on a pro forma basis after giving effect to our acquisitions of AmeriComm
Holdings and DIMAC Marketing, the refinancing of certain indebtedness assumed in
connection with our acquisitions of AmeriComm Holdings and DIMAC Marketing and
AmeriComm Holdings' acquisitions of Cardinal Marketing and Cardinal Marketing of
New Jersey, we would have had net sales and EBITDA of $368.0 million and $38.5
million, respectively. See "DIMAC Corporation Unaudited Pro Forma Financial
Statements."
Our ability to provide comprehensive direct marketing products and services
affords our clients "one-stop shopping" and the flexibility to tailor campaigns
to reach specific target audiences. We can work with our clients from initial
conception through production, response tracking and analysis, including:
- creating a direct mail advertising campaign;
- precisely targeting a specific customer or prospect list;
- producing and distributing the mail packages; and
- tracking and reacting to customer responses.
Clients receive discounted postage rates and improved delivery from our
ability to provide the most timely and cost-efficient point-of-entry into the
United States Postal Service distribution network facilitated by on-site Postal
Service substations located in most of our production facilities and by our
extensive experience with strategic distribution of mail. The Postal Service has
granted our St. Louis facility "Optional Procedures," a designation granted to
fewer than 1% of all mailers in its postal region. "Optional Procedures" allows
us to process mail more quickly into the postal system resulting in improved
delivery.
We primarily target companies that have sophisticated, mid- to high-volume
direct mail requirements. We serve clients in a broad range of industries,
including banking and financial services, telecommunications, publishing,
retail, healthcare, not-for-profit and insurance. Our top 20 clients would have
comprised 31.6% of 1998 pro forma net sales after giving effect to AmeriComm
Holdings' acquisitions of Cardinal Marketing and Cardinal Marketing of New
Jersey, our acquisitions of AmeriComm Holdings and DIMAC Marketing.
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DIRECT MAIL INDUSTRY
Direct mail advertising is a large segment of the direct marketing industry.
Direct marketing is a form of advertising in which companies direct their
advertising specifically to a target market and measure the response. One type
of direct marketing is direct mail advertising. Direct mail advertising involves
sending targeted individuals a letter or other advertising material through the
mail. Direct mail is often regarded as more effective than other forms of mass
advertising, such as television, newspapers, and magazines, because it can be
specifically directed to a target market and the response can be analyzed. This
allows us to refine continually a direct mail program to increase its
effectiveness. Companies use direct mail for a variety of purposes, including
attracting new customers, enhancing existing customer relationships and
exploring market potential for new products and services.
BUSINESS STRATEGY
We offer a comprehensive range of direct marketing products and services
that address all aspects of a client's direct mail campaign from initial
conception through production of mail pieces and tracking and analysis of
responses. By providing this comprehensive range of products and services, we
believe we are strategically positioned to capitalize on customer trends towards
seeking external assistance with direct marketing campaigns and our customers'
preference for doing business with fewer suppliers.
Our business strategy is to enhance our competitive position and to increase
net sales and profitability through the following initiatives:
EMPHASIZE COMPREHENSIVE DIRECT MAIL SOLUTIONS. The ability to provide
"one-stop shopping" for all of our client's direct mail needs may be an
increasingly important factor to clients' selection of a direct mail service
provider. We are well positioned to offer clients "one-stop shopping" because of
our comprehensive range of direct mail products and pre- and post-production
services. This range of services allows us to expand sales by selling products
and services to customers who previously purchased them from third parties. For
example, prior to our acquisition of AmeriComm Holdings, AmeriComm Holdings did
not have the in-house capability to build complete marketing databases from
multiple data sources and track and analyze responses generated from database
driven direct mail campaigns. Presently, through DIMAC Marketing we can offer
these sophisticated services to all AmeriComm Holdings customers. In addition,
our broad range of capabilities allows us to procure products internally that
were previously purchased from third-party suppliers. DIMAC Marketing can now
use AmeriComm Holdings to produce envelopes for a client's direct mail campaign
instead of purchasing these envelopes from a third party. In order to ensure
that we continue to offer comprehensive solutions, we intend to enhance our
product and service offerings by targeted investments in new equipment and new
product development. Management believes as a "single source" supplier offering
comprehensive solutions, we will be able to save our clients both time and
money.
LEVERAGE LARGE SCALE AND NATIONAL PRESENCE TO ATTRACT NEW HIGH VOLUME,
NATIONAL CLIENTS. The size and scope of a direct mail company's operations are
increasingly important to large, national clients. National accounts often have
multiple and complex campaigns requiring access to multiple distribution points.
Management believes that few of our competitors have comparable capabilities and
scale to service and support these national, high volume accounts. Based on our
previous experience in securing national business from companies such as AT&T,
The Chase Manhattan Bank and American Express, we believe that we can further
leverage our strong franchise, large scale, wide breadth of operations and
national presence to secure new high volume business.
PRODUCTS AND SERVICES
We offer our customers comprehensive direct marketing services, including
production services, information services, program development services and
fulfillment and telemarketing. We also offer other printing, folding and
assembling services, including custom pressure sensitive labels and custom
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mailers. This broad array of products and services enables us to control all
aspects of a direct mail campaign and provide our customers with a variety of
cost- and time-effective solutions for their direct mail requirements.
The following table sets forth the pro forma 1998 net sales of our principal
product lines after giving effect to AmeriComm Holdings' acquisitions of
Cardinal Marketing and Cardinal Marketing of New Jersey and our acquisitions of
AmeriComm Holdings and DIMAC Marketing:
<TABLE>
<CAPTION>
PERCENT OF TOTAL
PRO FORMA 1998 PRO FORMA 1998
NET SALES NET SALES PRODUCTS/SERVICES OFFERED
--------------- ----------------- ----------------------------------
<S> <C> <C> <C>
(IN MILLIONS)
DIRECT MARKETING
Production services........................... $ 184.7 48.8% Web, laser, inkjet and sheet
offset printing
Envelope production
Addressing mail pieces
Inserting advertising pieces
into envelopes
Bindery services
Information services.......................... 20.3 5.4 Data entry and file processing
Database management
Mailing list rental
Data analytical services
Program development services.................. 55.6 14.7 Marketing, strategic, creative
and client services
Television commercial
production
Mailing list
buying services
Broadcast, print and
newspaper insert
media buying services
23.5 6.2 Magazine subscription
management
Fulfillment and telemarketing services........
Fulfillment services
Remittance processing
Telemarketing
Tracking of responses
------ -----
Subtotal...................................... 284.1 75.1
------ -----
OTHER PRINTING AND CONVERTING
Custom pressure sensitive labels.............. 49.0 13.0 Flexographic custom labels
Thermal/laser labels
Custom mailers................................ 45.4 11.9 Impact mailers
Non-impact mailers
------ -----
Subtotal...................................... 94.4 24.9
------ -----
TOTAL....................................... $ 378.5 100.0%
------ -----
------ -----
</TABLE>
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DIRECT MARKETING (75.1% OF 1998 PRO FORMA NET SALES). We provide
comprehensive direct marketing services to our clients, including production
services, information services, program development services and fulfillment and
telemarketing services.
[GRAPHIC]
PRODUCTION SERVICES. Our range of production services allows us to provide
a variety of formats and direct mail package designs to meet each customer's
direct mail marketing needs. Pro forma for our acquisitions of AmeriComm
Holdings and DIMAC Marketing, we produce over 3.7 billion direct mail pieces per
year. These pieces, other than those sent to other mailers, such as catalog
binderies, for ultimate mailing, together with pieces received from third
parties, are collated and assembled into the approximately 1.7 billion direct
mail packages we mailed last year.
PRINTING AND CONVERTING. We print direct mail materials on our own
presses which include multi-color heat-set and non heat-set webs as well as
a broad range of high color sheet-fed presses and Halm envelope presses. Our
extensive bindery equipment allows us to produce a variety of self-mailer
and traditional envelope package formats to fulfill our clients' direct
marketing needs.
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We are capable of producing and printing a wide variety of envelopes.
Our equipment allows us to print and fold on high-speed web machines, or
print envelopes in full color and fold paper into envelopes after printing.
Product capabilities range from simple one-color direct mail envelopes to
complex remittance envelopes, film mailers and file-folder products.
Accordingly, we can satisfy almost all of the envelope needs of our clients.
PERSONALIZATION. We use state-of-the-art personalization technologies,
including a wide range of laser printers and ink-jet systems, to personalize
our clients' direct mail packages by printing the recipient's name or other
personal information. These technologies enable us to personalize the
broadest possible array of direct mail products including letters,
envelopes, labels, order forms, inserts, applications and other components
of direct mail packages to ensure optimal response rates for our clients.
MAILING. We use a wide range of systems and software to sort and
distribute mail in ways that maximize postage discounts while minimizing
delivery times. Our production operations allow for high-speed inserting,
stamping or metering of multiple sizes and configurations of direct mail
pieces. In most of our production facilities, an in-house Postal Service
substation accepts the mail, which expedites the mail through the postal
system. Our "Optional Procedures" designation in the St. Louis facility
eliminates the need to weigh mail before it enters the postal system,
reducing our cost for this labor-intensive and time-consuming process.
INFORMATION SERVICES. The goal of our information services division is to
use sophisticated data management, analysis and manipulation to support direct
mail marketing strategies. Advanced data management capabilities are an integral
element in transforming generic mass-marketing campaigns into complex, targeted,
highly personalized direct mail programs. We use our experience and capabilities
to service our customers in a variety of ways ranging from the development and
implementation of customized databases to processing each customer's direct mail
program for maximum deliverability. In addition, we monitor consumer responses
to measure the effectiveness of the direct mail program against client goals and
can store this information for future client use.
In general, we provide our information services by creating, managing,
enhancing or updating databases for direct mail campaigns and then assisting our
clients in evaluating the effectiveness of the mailing by analyzing response
data according to various criteria.
INFORMATION PROCESSING. Generally, our information processing function
begins with mailing databases. We use several kinds of databases in
developing targeted mailing lists for our clients, including:
SPECIALIZED CLIENT DATABASES provided by the client and based on its
customers, subscribers or other information.
RESIDENTIAL ADDRESS DATABASES, which comprise all deliverable
addresses in a given geographic area. We own a residential address
database comprising approximately 39% of the deliverable addresses in the
continental United States. In addition, through our membership in the
National Association of Advertising Distributors, we have access to the
remainder of the U.S. residential addresses. We are the largest owner of
the National Association of Advertising Distributions' database.
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COMPILED NAME DATABASES, which attach names or other information to
residential addresses. We do not own any of these databases and pay fees
to database compilers to use them. In general, these databases are based
on the local white page listings.
We are able to merge different databases and purge them of duplicative
addresses or addressees, as well as to remove from outdated customer
databases addresses or addressees that are no longer valid. These abilities
enable us to minimize postage costs for our clients.
DATABASE MANAGEMENT. We also help our clients analyze response data to
continuously improve their direct marketing campaigns. In some situations,
we will provide this analysis to our clients by tracking responses based on
data such as coupon use or response rate in the form of customized reports.
In other situations, clients will use our desktop data access tool,
Klondike, which allows clients to perform complex ad hoc queries to analyze
data, to refine their own direct mail strategies. Klondike is a relational
database designed to hold all transaction data, generally for retail stores.
Since we house the data, it ties us closely to our clients and creates
cross-selling opportunities. In addition, this data feeds back into our
program development and other information processing units.
We believe that the most effective direct mail campaigns mix-and-match among
these database sources using relational database technology to create a mailing
list comprising addresses which meet a number of criteria. In addition, we
append other demographic data such as age, gender, income level, car ownership,
and other lifestyle and demographic data to these databases, creating a target
audience that meets the client's needs.
PROGRAM DEVELOPMENT SERVICES. We provide strategic planning and full-scale
direct response agency services to help clients develop their brands and
increase their sales. In the initial stages of a client's direct marketing
program, our marketing professionals:
- analyze a client's business objectives;
- formulate strategies;
- identify target markets defined by demographic, psychographic, and
behavioral criteria;
- devise compelling, measurable offers; and
- develop creative concepts.
Our creative department refines the marketing messages and designs and
writes the communications to achieve maximum impact. Our research and media
departments play an integral role in this process, providing list and media
recommendations to target high-potential buyers, and formulating statistically
valid testing plans.
Our program development services include strategic market planning, creative
development and program evaluation.
STRATEGIC MARKET PLANNING: In the initial stage of the development of a
customer's direct mail program, our strategic planning professionals
- analyze the market situation and business goals;
- identify a customer's objectives;
- establish a program's goals; and
- identify a target market.
Depending on our client's needs, we then develop a marketing or
communications plan and media plan, encompassing mail and other media as
appropriate.
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CREATIVE DEVELOPMENT: Creative services range from developing the
overall strategies and concepts for an entire program to creating the
specific copy, layout and art work for a single direct mail piece. We use
advanced graphic arts technology to create high quality "proofs" that can be
repeatedly and rapidly revised for a highly flexible yet cost-effective
product. Further, we have developed our use of this technology so that the
direct mail piece can be directly transmitted from the "proof" stage to the
print stage without the cost and time that were previously required for such
revisions, enabling customers to re-define or re-focus their campaign prior
to its launch.
PROGRAM EVALUATION: Our media and research professionals are involved
throughout the design, production and execution of the client's message. At
the start of a program, these professionals assist the identification of
potential consumers through the use of qualitative research such as focus
groups and in-depth interviews, as well as quantitative research such as
customer and product segmentation analyses. These professionals then provide
list and media recommendations that identify the most appropriate target
market. Additionally, these professionals are typically involved in
designing and coordinating a pre-test of a direct mail campaign to measure
its effectiveness.
FULFILLMENT AND TELEMARKETING SERVICES. We offer a wide array of
fulfillment and telemarketing services to meet the needs of our clients. We
design and operate customized fulfillment programs for clients that involve
sending product samples, literature and coupons to those customers who have
responded to a solicitation. We also provide a broad range of fulfillment and
invoice, subscription and renewal processing services for the publishing
industry and provide inbound and outbound telemarketing services.
FULFILLMENT. We offer fulfillment services primarily from our St.
Louis, Central Islip and Palm Coast locations. In St. Louis, these services
include distribution of gifts and negotiable instruments such as checks and
certificates in as many as ten different languages. In addition, we
specialize in rapid processing, and have the ability to turn around a
project in less than twenty-four hours.
In Palm Coast, we provide a full range of fulfillment services to
magazine publishing clients including receiving and opening subscriber mail,
entering transaction data and storing and retrieving that data on a
mainframe system. We also handle over 1.9 million inbound fulfillment calls
annually, ranging from customer inquiries to address changes. In addition,
we have recently developed an internet capability, enabling our clients to
fill orders over the world-wide web, and have developed modeling
capabilities, enabling magazine publishers to anticipate subscriber
attrition, analyze means of reducing subscriber defections and replace lost
subscribers based on historical tendencies.
TELEMARKETING. We provide clients with in-bound and out-bound phone
support of their marketing programs, including sales support and customer
service applications. We offer telemarketing services primarily from our
Palm Coast, Florida and Clifton, New Jersey facilities.
TRACKING. We have complemented our fulfillment and telemarketing
services with a response tracking system which enables us to monitor and
review the effectiveness of our direct marketing campaigns via telephone,
internet, fax or mail. We leverage our response tracking services as a means
of generating additional long-term revenue by using the tracking results to
create new campaigns and refine existing campaigns.
OTHER PRINTING AND CONVERTING (24.9% OF 1998 PRO FORMA NET SALES)
We also manufacture and sell custom pressure sensitive labels and custom
mailers which complement and support our direct marketing products and services.
These production activities also provide incremental benefits to our direct mail
manufacturing activities through increased raw material purchasing leverage,
graphic pre-press support and printing technology transfer.
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CUSTOM PRESSURE SENSITIVE LABELS. Growth of our custom pressure sensitive
labels revenues has been driven primarily by the advantages that pressure
sensitive labels have over traditional glue-applied labels, such as reduced
wrinkling and superior adhesion and durability. Pressure sensitive labels have a
variety of end-use purposes, including grocery shelf marking, product
identification and distribution bar coding. Pressure sensitive labels are also
widely used as components and enhancements of direct mail pieces. For example,
one of our largest label customers uses high quality pressure sensitive return
address labels as a premium component of a direct mail package.
Our custom pressure sensitive label products are offered in three
categories--short-run orders, catalog sales and large custom orders. Short-run
orders are typically turned around in a 24-hour time frame and usually include
basic labels with one or two plain colors, a limited number of inks and base
label materials. These are primarily sold to quick printers such as Sir Speedy
Printing, Kwik Copy, Minuteman Press and Kinko's. We also produce labels which
are offered in sales catalogs in combinations of predetermined sizes, colors,
materials, and inks, and are generally processed in less than five days. Large
custom orders can be produced in any quantity, design, color, size or material
that the customer requires. In addition to our flexographic labels, we have
introduced a line of stock thermal and laser labels which management believes
are two of the fastest growing products in the label industry. Thermal and laser
labels are used for a wide variety of applications from baggage tags to labeling
of grocery products.
CUSTOM MAILERS. We compete in the U.S. mailer market, which includes both
impact and non-impact mailers and integrated labels. Impact mailers are
ready-to-mail, multi-part spot carbon or carbonless forms which are widely used
to print account statements, invoices, tax notices and utility bills as well as
a range of other applications, and can be printed without opening or sealing the
envelope. Our technology and unique equipment allow us to manufacture some of
the most complete and the most complex impact mailers in the industry.
Management believes that we have a significant competitive advantage because of
our research and development efforts which have produced a number of patented
products. In addition, many of our custom mailer customers are increasingly
seeking external vendors to personalize these forms. This desire leads to
opportunities for us to increase sales of our direct mail services including
personalization, printing and lettershop services.
In addition to multi-part custom impact mailers, we also produce and sell a
proprietary line of single sheet non-impact mailers under the trademark
InfoSeal-Registered Trademark-, which are used in conjunction with laser
printers. Non-impact mailers are laser printer compatible self-mailer forms
which are printed, folded, sealed and mailed for such applications as payroll
checks, direct deposit statements, vendor remittances, invoice statements, and
university grade reports. In addition to marketing non-impact mailer products,
we also market a range of patented folding and sealing machinery. Unlike
competitive products, our InfoSeal-Registered Trademark- technology allows us to
customize our mailers with additional functions and colors, such as windows,
tipped-on cards, personalization, high-color, and blown-on labels. An example of
this is a new line of "ID card" applications. This ID Card technology allows
cards to be attached to a one-piece mailer and then printed with a laser
printer.
Since the early 1990s, the impact mailer market has decreased in size due to
the rapid growth of laser, ink-jet and other non-impact printers which are not
compatible with impact mailers. We expect the non-impact market to continue to
grow more rapidly than impact mailers over the next several years due to their
ease of use and simplicity for a variety of applications. Accordingly, we have
re-focused our product mix on higher growth, non-impact mailers.
Integrated labels are manufactured by combining a custom paper form and a
self-adhesive label. The integrated label system replaces two or more separate
documents, which provides a significant cost advantage to customers, and has a
wide range of applications. We have invested in technology which will allow us
to capitalize on the expected growth of integrated labels.
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SALES AND MARKETING
DIRECT MARKETING
We market our direct marketing capabilities to customers in a number of
ways. Each of our divisions typically employs sales professionals whose
responsibility is to sell the direct marketing services provided by that
division. These sales professionals also provide us with broader opportunities
to sell our other direct marketing services into their customer base. We expect
that these opportunities will increase due to the combined capabilities of
AmeriComm Holdings and DIMAC Marketing.
In addition to these significant divisional resources, we have a number of
professionals primarily responsible for aggressively pursuing national accounts
that require multiple products and services. These individuals cross-sell all of
our direct marketing capabilities, emphasizing the potential for increased cost
effectiveness, reliability and control which result from supplying multiple
services from a single source.
In order to support the divisional and national sales representatives, we
employ sales support professionals. The sales support professionals
responsibilities include obtaining job specifications and monitoring and
coordinating all aspects of the execution of the job. These professionals also
relieve the sales force from certain administrative functions and act as a
customer service center working directly with customers to help close sales,
provide updates on the progress of campaigns and respond to customer inquiries.
OTHER PRINTING AND CONVERTING
CUSTOM PRESSURE SENSITIVE LABELS. Our label business division sells
approximately 42% of its sales directly to customers using a dedicated sales
force which focuses on larger companies such as Winn-Dixie and USA Today. The
remainder of our pressure sensitive label sales are to independent distributors
through regional sales managers based in Atlanta, Boston, Columbus, Dallas,
Philadelphia and San Francisco. In addition, the business unit has a
telemarketing team that supports sales of custom pressure sensitive labels.
Our label marketing organization focuses primarily on marketing to
distributors through trade show attendance, trade publications advertising, and
direct mail campaigns.
CUSTOM MAILERS. The custom mailer business unit sells to more than 3,000
accounts in the independent distributor market. Senior sales representatives are
responsible for calling on the largest custom mailer distributors while a
telemarketing team is responsible for calling on smaller distributors. In
support of the senior sales representatives, the telemarketing team follows up
with customers on price quotes and securing orders.
Custom mailer marketing activities are centered in a marketing department
which is used jointly by both the mailer and direct mail businesses. The
marketing activity primarily consists of developing and launching new products,
distributing samples, developing education and training programs, supporting
industry trade shows, conducting product seminars, creating and placing
advertising in trade publications, and distributing monthly newsletters.
In addition, over the last several years, we have entered into several
marketing alliances which have resulted in new opportunities. Alliances with
Wallace Computer Services and Xerox have opened up additional channels of
distribution, led to new customer relationships, and created opportunities for
our non-impact mailer and ID-card products.
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CLIENT BASE
Over time, we have built solid relationships with key customers across all
of our products and services. For our direct mail products and services, we
primarily target companies that have sophisticated, mid- to high-volume direct
mail requirements. In other printing and folding and assembling services, we
primarily target larger national accounts and independent distributors.
We provide services to clients in a broad range of industries, including
banking and financial services, telecommunications, publishing, retail,
healthcare, not-for-profit and insurance. We generally enjoy long-standing
relationships with customers including AT&T, NationsBank, Time Warner,
Bloomingdales, Macy's and Blue Cross/Blue Shield.
On a combined basis, after giving effect to AmeriComm Holdings acquisitions
of Cardinal Marketing and Cardinal Marketing of New Jersey, our acquisitions of
AmeriComm Holdings and DIMAC Marketing, we estimate that our pro forma 1998 net
sales were realized from the following customer industries:
<TABLE>
<CAPTION>
% OF 1998
CUSTOMER INDUSTRY PRO FORMA NET SALES
- ------------------------------------------------------------------------- ---------------------
<S> <C>
Banking and financial services........................................... 15%
Publishing............................................................... 14%
Retail and catalogue..................................................... 18%
Healthcare............................................................... 7%
Telecommunications....................................................... 8%
Not-for-Profit........................................................... 4%
Insurance................................................................ 5%
Other.................................................................... 29%
-----
Total................................................................ 100%
-----
-----
</TABLE>
Our largest customer, AT&T, would have comprised 7.5% of 1998 pro forma net
sales after giving pro forma effect to AmeriComm Holdings' acquisitions of
Cardinal Marketing and Cardinal Marketing of New Jersey, our acquisitions of
AmeriComm Holdings and DIMAC Marketing. AT&T has been purchasing our products
and services for over thirteen years. No other customer accounted for more than
approximately 5% of 1998 pro forma net sales, after giving effect to AmeriComm
Holdings acquisitions of Cardinal Marketing and Cardinal Marketing of New
Jersey, our acquisitions of AmeriComm Holdings and DIMAC Marketing. Our top 20
clients would have comprised 31.6% of 1998 pro forma net sales, after giving
effect to AmeriComm Holdings' acquisition of Cardinal Marketing and Cardinal
Marketing of New Jersey, our acquisitions of AmeriComm Holdings and DIMAC
Marketing.
COMPETITION
Given our diverse and full-service production capabilities, there are few
true competitors for every service offered. Many of our competitors offer one or
more services that are similar to those we offer, but few offer the same
comprehensive range of direct marketing services.
DIRECT MARKETING
PRODUCTION SERVICES. Competitors range from smaller, single-plant
operations that provide individual products or services, such as printing,
binding or lettershop capabilities, to larger ones which offer a greater breadth
of products or services. Management believes that few other companies offer the
range of direct mail products and services that we offer in our production
services business unit.
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Certain production services competitors include Harte-Hanks, North American
Communications, Moore, CCI, Fala Direct, Webcraft, Wallace, World Color,
Quebecor, R.R. Donnelley, Mail-Well, Atlantic Envelope and Westvaco.
INFORMATION SERVICES. Our information processing services most closely
compete with Advo, Harte-Hanks, Anchor Computer, Direct Tech and Triplex. Our
database processing services compete most directly with Harte-Hanks, Epsilon and
Acxiom, including May & Speh.
PROGRAM DEVELOPMENT SERVICES. Our program development services most closely
compete with direct response agencies such as Blau, Wunderman, Ogilvy One, Gray
Direct, Bronner & Schlossberg, Harte-Hanks and Devon Direct. These competitors
offer services that are similar to ours in terms of program development but
generally sub-contract the production, information services and fulfillment and
telemarketing services.
FULFILLMENT AND TELEMARKETING SERVICES. Our fulfillment services most
closely compete with Centrobe, CDS and Kable. Our telemarketing services most
closely compete with APAC, Sitel, West Telemarketing, ICT and TeleSpectrum.
OTHER PRINTING AND CONVERTING
CUSTOM PRESSURE SENSITIVE LABELS. We and our competitors sell products
directly to end-use customers or through independent distributors. The major
competitors that sell custom pressure sensitive labels directly to end-users
include Standard Register, Moore and Wallace Computer Services. These companies
generally produce commodity labels in addition to custom pressure sensitive
labels. With respect to custom pressure sensitive labels sold through
independent distributors for resale, major competitors include Discount Labels,
Data Labels, Continental Datalabel, Rittenhouse and Lancer Label. Other
competitors in this channel are typically smaller regional and privately-owned
operators with a single production facility.
CUSTOM MAILERS. We sell custom mailers to independent distributors for
resale to end-users. Our main competitors in the independent distributor market
include Poser Business Forms, Goodwin Graphics and Perry Printing Company, none
of which have a product breadth similar to ours. Large manufacturers, which
include Wallace Computer Services, Moore and Standard Register, dominate the
direct channel. These manufacturers generally offer a full range of business
form products and supplement their product offering with mailers produced by
third parties including us. Other competitors are smaller companies that have
recently introduced pressure seal self-mailer products to the distributor
channel.
Our ability to produce large and medium-size runs in custom mailers gives us
a production and pricing advantage when compared to those competitors who sell
to distributors. This advantage results from distributor demand being heavily
concentrated in smaller run sizes made on narrow web presses.
SUPPLIERS
We have a broad base of high quality, national suppliers. Our primary raw
materials are uncoated, coated and specialty papers, plastic films, inks and
adhesives. Paper products of a variety of types represent our single largest
category of raw materials. We have had long-term relationships with most of
these suppliers, which provides for reliability in supply and competitive
prices. Our top ten suppliers include Fasson, International Paper, Union Camp,
Georgia-Pacific, Schweitzer-Maudit, Shaughnessy-Kniep-Hawe, Appleton Papers,
Boise Cascade, UniSource and Intelligence Print. No supplier accounted for 10%
or more of our total 1998 purchases on a pro forma basis after giving effect to
AmeriComm Holdings' acquisitions of Cardinal Marketing and Cardinal Marketing of
New Jersey and our acquisitions of AmeriComm Holdings and DIMAC Marketing.
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While paper represents a large component of material expense and overall
cost, we mitigate the effects of paper price increases through pricing
conventions and purchasing strategies. Customer contracts under which we supply
our products generally include escalator clauses under which price changes are
passed on to the customer. When possible, we obtain a commitment for a specific
tonnage of paper at a predetermined price which eliminates our exposure to price
fluctuations. Additionally, a significant percentage of the paper we purchased
is carbonizing bond and pressure sensitive label stock, which is not subject to
the same price fluctuations experienced in the more cyclical uncoated free sheet
paper market.
MANUFACTURING
DIRECT MARKETING
PRINTING AND CONVERTING. We print direct mail products on a wide variety of
web and sheet offset presses in six different facilities. These include fourteen
web offset presses, five of which utilize ultraviolet drying units for high
color applications. We also run four high volume heat set web offset presses
which have integrated finishing equipment in line. Finally, we operate 11
sheetfed offset presses, including a state-of-the-art Komori press in our St.
Louis facility.
Envelope converting equipment includes eight high speed web and more than 40
die cut envelope printing and folding machines in three facilities located in
the eastern United States. These plants also include a variety of support
equipment such as programmable die cutters, label affixing units and finished
envelope printers.
We also operate 15 forms collators, including six in our Roanoke, Virginia
plant, which are virtually dedicated to direct mail applications. A recently
installed new off-line finishing line will convert offset printed materials into
direct mail pieces, thereby increasing our capacity and flexibility to respond
to requests for short-to-medium run complex self mailers.
PERSONALIZATION. We personalize mail in eight production facilities and
through a number of technologies. These technologies include sheet fed and
continuous laser, inkjet and impact printing and ion deposition lasers. In
total, we operate in excess of 80 different pieces of personalization printing
equipment.
MAILING. Consistent with the personalization capabilities noted above, we
provide mailing services in eight plants. These services include high speed
letter inserting, stamping or metering of multiple sizes and configurations of
direct mail pieces. We perform bindery operations, which are not typically
required for in-line formats such as self-mailers, in six facilities. These
services include equipment such as folders, bursters and document converters. We
also have the ability to pre-sort commingled mail in our Norfolk, Virginia
facility.
OTHER PRINTING AND CONVERTING
CUSTOM PRESSURE SENSITIVE LABELS. We produce pressure sensitive labels in
four plants located strategically throughout the United States. All of these
plants are equipped with flexographic presses and have unique, customized
letterpress equipment designed to cost-effectively produce labels in small order
quantities with quick turnaround. We operate 26 high-speed flexographic presses,
including two presses purchased in 1997. These presses range in size from 6.5"
to 18" in width and print in two to eight colors. A number of these presses can
produce true process printing and are equipped with in-line hot foil stamping
units. In addition to the high speed printing capability, we have ten smaller
customized presses which we can use for shorter runs with fewer colors.
CUSTOM MAILERS. We produce custom mailers in two plants. Our Ft. Smith,
Arkansas plant is dedicated to this product line while our Roanoke, Virginia
plant utilizes its equipment base for both
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direct mail and mailer products. Together, these plants include 16 web offset
printing presses ranging in width from 20.5" to 30.5". Printed rolls from these
presses are then further converted in multi-ply mailer sets on one of fifteen
high-speed collators or into the proprietary laser-compatible non-impact mailer
on one of five converting lines. Additional major pieces of equipment include
three MICR routing encryption lines and two integrated label lines, one of which
was purchased in 1997.
Both the custom pressure sensitive label and custom mailer product lines are
supported by state of the art pre-press and printing platemaking equipment. The
hardware architecture for our pre-press systems is primarily Macintosh and
Windows PC. We utilize a wide range of popular image manipulation and color
separation software.
PATENTS
Our principal patents are Fast Tab II, Fast Tab V, Integrated Self Label,
Promo Pak, Infoseal and Desktop Folders Sealer. We believe that our patents have
significant value. Our patents permit us to compete more effectively by enabling
us to offer products and services that our competitors cannot offer. Provided
that all requisite maintenance fees are paid, our principal patents will expire
between January 15, 2001 and June 20, 2017. We license our Infoseal patent
pursuant to a license agreement with Champion Farms Australia Pty Ltd. The
license agreement automatically renews every five years unless terminated.
FACILITIES
At March 31, 1999, we operated 32 manufacturing, warehouse, sales,
distribution and administrative facilities in the U.S. located in 11 states with
a total floor area of approximately 1,711,000 square feet. Of this total floor
area, approximately 625,000 square feet are owned and approximately 1,086,000
square feet are leased under leases expiring from 1999 through 2011.
EMPLOYEES
As of March 31, 1999, we employed approximately 4,080 people. Approximately
2,619 people work in manufacturing facilities, 1,028 work in sales/service
functions, 419 work in administration and eight work in corporate functions. In
June, 1999, we terminated the employment of approximately 60 employees at our
Roanoke, Virginia, Ft. Smith, Arkansas and Philadelphia, Pennsylvania
facilities. As of March 31, 1999, 75 employees of our 610 employees in our St.
Louis facility were represented by the Graphic Communications International
Union. The current Graphic Communications International Union contract expires
in October 1999. We are currently negotiating a new contract with the Graphic
Communications International Union. In the summer and fall of 1997, the Graphic
Communications International Union attempted to organize approximately 175 mail
plant employees in the St. Louis facility. The Graphic Communications
International Union initiative was defeated in December 1997. A similar
initiative was defeated in 1993, when the Graphic Communication International
Union attempted to organize the information services department in the St. Louis
facility. We believe our relations with employees are good but there can be no
assurances that the Graphic Communications International Union will not attempt
to organize other employees in the St. Louis facility or our other facilities in
the future.
LEGAL PROCEEDINGS
In June 1997, the United States Attorney's Office for the Eastern District
of Missouri informed us that we were the subject of a grand jury investigation
based upon information supplied by the United States Postal Service. The
investigation concerns whether violations of civil or criminal statutes have
occurred in connection with our bulk mailing practices. We have been engaged in
a dialogue with the government, which discussions have included a possible
consensual resolution of this matter. It is our
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position that our bulk mailing practices comply with applicable laws and
regulations. In connection with our acquisition of DIMAC Marketing, we have
entered into an indemnification agreement with Heritage Media and DIMAC
Marketing under which Heritage Media has agreed to indemnify us, subject to
certain limitations, for certain costs, including settlements, judgments and
related fees, in relation to the investigation. We cannot assure you, however,
that the investigation and the costs associated with them will not have a
material adverse effect on our business, financial condition or results of
operations.
We are a party to various other litigation matters incidental to the conduct
of our business. We do not believe that the outcome of any such matters in which
we are currently involved will have a material adverse effect on our financial
condition or results of operations.
ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Our operations and properties are subject to a wide variety of federal,
state and local laws and regulations relating to environmental protection and
human health and safety. These laws and regulations include those governing the
use, storage, handling, generation, treatment, emission, release, discharge and
disposal of, and exposure to, hazardous and non-hazardous materials, substances
and wastes, the cleanup of contaminated soil and groundwater, and the health and
safety of employees. As such, the nature of our operations expose us to the risk
of claims with respect to environmental protection and health and safety
matters. We cannot assure you that material costs or liabilities will not be
incurred in connection with such claims.
In January 1988, the United States Environmental Protection Agency notified
us that we were potentially liable for costs incurred by it in connection with
the Dixie Caverns County Landfill Superfund Site in Roanoke County, Virginia.
Subsequently, Roanoke County filed suit against the twelve potentially
responsible parties, which included us, to recover the funds it expended in
cleaning the site at the date of the suit and for any additional sums it would
expend in the future. Under the Comprehensive Environmental Response,
Compensation, and Liability Act, the potentially responsible parties may be held
strictly, jointly and severally liable for the costs of investigation and
cleanup. However management believes that our potential liability in connection
with this site will not be material, based upon the amount and nature of waste
alleged to be attributable to us, the number of other financially viable the
potentially responsible parties and the total estimated cleanup costs.
Although liabilities, claims and requirements relating to environmental and
health and safety matters have not materially affected us to date, we cannot
assure you that such matters will not have a material adverse effect on our
business, financial condition or results of operations.
81
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and those of DIMAC Holdings are elected annually by the
respective shareholders to serve during the ensuing year or until a successor is
duly elected and qualified. Our executive officers and those of DIMAC Holdings
are duly elected by the respective Board of Directors to serve until their
respective successors are elected and qualified. The following table sets forth
certain information regarding our directors and executive officers and those of
DIMAC Holdings.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ------------------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
David E. King.......................................... 40 Chairman of the Board of Directors and Secretary
Timothy Beffa.......................................... 48 Director
David E. De Leeuw...................................... 55 Director
George E. McCown....................................... 64 Director
Benjamin L. McSwiney................................... 49 Director
John D. Weil........................................... 51 Director
Edward D. Lazarowitz................................... 46 Chief Financial Officer
John F. Meneough....................................... 51 President
Scott P. Ebert......................................... 36 Vice President and Controller
Michael J. Speichinger................................. 32 Vice President and Chief Financial Officer of DIMAC
Marketing
</TABLE>
DAVID E. KING -- Chairman of the Board of Directors and Secretary of our
company and DIMAC Holdings since March 1999. Mr. King is a managing director of
McCown De Leeuw & Co., Inc. Mr. King has been associated with McCown De Leeuw &
Co., Inc. since 1990. He currently serves as a director of Fitness Holdings,
Inc., Outsourcing Solution, Inc. and EM Solutions, Inc. and as Chairman of the
Board of Directors and Secretary of several privately held companies including
AmeriComm Holdings, Inc., AmeriComm Direct Marketing, Inc., DIMAC Marketing
Corporation, DIMAC DIRECT, Inc., Palm Coast Data Inc, MBS/Multimode Inc. and DMW
Worldwide, Inc.
TIMOTHY BEFFA -- Director of our company and DIMAC Holdings since August
1998. Mr. Beffa currently serves as President and Chief Executive Officer of
Outsourcing Solutions, Inc. From May 1989 to August 1996, Mr. Beffa served as
President and Chief Operating Officer of DIMAC Marketing Corporation. Mr. Beffa
joined DIMAC Marketing Corporation as Senior Vice President and Chief Financial
Officer. From April 1981 to May 1989, he served as Vice President of Finance for
the International Division of Pet Inc. Prior to April 1981, Mr. Beffa was
employed by Ernst & Young.
DAVID E. DE LEEUW -- Director of our company and DIMAC Holdings since May
1998. Mr. De Leeuw is a managing director of McCown De Leeuw & Co., Inc. Mr. De
Leeuw co-founded McCown De Leeuw & Co., Inc. with George McCown in 1984. He
currently serves as a director of American Residential Investment Trust, Inc.
and Aurora Foods Inc. which are both public companies, and other privately held
companies including AmeriComm Holdings, Inc., AmeriComm Direct Marketing, Inc.,
DIMAC Marketing Corporation, DIMAC DIRECT, Inc., Palm Coast Data Inc.,
MBS/Multimode Inc. and DMW Worldwide, Inc.
GEORGE E. MCCOWN -- Director of our company and DIMAC Holdings since August
1998. Mr. McCown is a managing director of McCown De Leeuw & Co., Inc. Mr.
McCown co-founded McCown De Leeuw & Co., Inc. with David De Leeuw in 1984. He
currently serves as Chairman of Building Materials Holding Corporation,
Vice-Chairman of Vans, Inc. and Director of FiberMark, Inc. He also serves as
the director of several privately-held companies.
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<PAGE>
BENJAMIN L. MCSWINEY -- Director of our company and DIMAC Holdings since
August 1998. Mr. McSwiney is the former President and Chief Executive Officer of
Bell & Howell Worldwide Mail Handling Systems, a global provider of messaging
solutions including mail inserters and sorters with revenues of $400 million.
Prior to joining Bell & Howell, Mr. McSwiney served as President and Chief
Executive Officer of Duplex Products, a $290 million forms producer, and
WhiteStar Graphics, a holding company with subsidiaries in forms production and
textbook typesetting. Mr. McSwiney also served as Vice President and General
Manager of Williamhouse, a subsidiary of Williamhouse-Regency, Inc. a
manufacturer and printer of specialty paper products. He currently serves as
Executive in Residence at North Carolina State University where he gives
instruction in Strategic Planning and Implementation at both the graduate and
undergraduate levels.
JOHN D. WEIL -- Director of our company and DIMAC Holdings since August
1998. Mr. Weil joined McCown De Leeuw as an operating affiliate to assist in
portfolio management in 1995. From 1982 to 1994 Mr. Weil served as President and
Chief Executive Officer of American Envelope Company. From 1995 to 1997 Mr. Weil
served as Chairman of AmeriComm Holdings. From 1998 to 1999 Mr. Weil served as
President and Chief Executive Officer of International Data Response Corporation
USA, a former McCown De Leeuw portfolio investment. Mr. Weil previously served
as a director of American Envelope Company, AmeriComm Holdings, FiberMark
Corporation, Tiara Motorcoach Corporation, International Data Response
Corporation and the Envelope Manufacturer's Association, where he also served as
Chairman of the association's public affairs committee. Mr. Weil currently
serves as a director of Sage Enterprises, Inc.
EDWARD D. LAZAROWITZ -- Chief Financial Officer of our company and DIMAC
Holdings since September 1998. Prior to joining us, Mr. Lazarowitz served as
Senior Vice President of Finance and Chief Financial Officer for eight years
with the direct marketing division of Harte-Hanks, Inc. In addition to his
financial responsibilities, Mr. Lazarowitz was also responsible for the
operations of certain direct marketing businesses, the operations of the
management information systems group and the development of Harte-Hanks' order
management system. From 1988 to December 1990, Mr. Lazarowitz served as Vice
President of Finance and Administration and Chief Financial Officer of Anderson
& Lembke, Inc., a business to business advertising agency. Mr. Lazarowitz began
his career with Price Waterhouse.
JOHN F. MENEOUGH -- President of our company and DIMAC Holdings since March
1999. Previously, Mr. Meneough was an Executive Vice President of our company
and DIMAC Holdings since June 1998. Prior to joining Palm Coast Data in 1996 as
President and Chief Operating Officer, Mr. Meneough was chief operating officer
for Communications Data Services, one of the leading providers of fulfillment
services in the country. Mr. Meneough joined Communication Data Services in 1980
as an account manager in publisher services when Communication Data Services was
serving 85 magazines and 39 million subscribers. He was named vice president of
the magazine division in 1985 and executive vice president and chief operating
officer in 1986, by which time Communication Data Services was serving 105
magazines and 90 million subscribers. Mr. Meneough currently serves as director
of several privately held companies including AmeriComm Holdings, Inc.,
AmeriComm Direct Marketing, Inc., DIMAC Marketing Corporation, DIMAC DIRECT,
Inc., Palm Coast Data Inc., MBS/ Multimode Inc. and DMW Worldwide, Inc.
SCOTT P. EBERT -- Vice President and Controller of our company and DIMAC
Holdings since June 1998. Mr. Ebert has been the Vice President and Controller
of AmeriComm Holdings since May 1993, where his responsibilities include
maintenance of lender and public relations, review of acquisition opportunities,
external and internal financial reporting, integration of acquired businesses
and working capital management. Previously, Mr. Ebert was a Manager at Arthur
Andersen LLP where he began his service in August 1985.
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<PAGE>
MICHAEL J. SPEICHINGER -- Vice President, Chief Financial Officer and
Treasurer of DIMAC Marketing since July 1998. Mr. Speichinger joined DIMAC
Marketing in September 1996 as Director of Financial Analysis and was promoted
to Corporate Controller of DIMAC Marketing in November 1997. Mr. Speichinger's
responsibilities include financial reporting, budgeting, forecasting, capital
allocation and project analysis, enhancements to the management reporting
systems and development of revenue and new business forecasting tools. Prior to
joining DIMAC Marketing, Mr. Speichinger was a senior manager with KPMG Peat
Marwick, serving mid-size to Fortune 500 clients out of the St. Louis office.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation paid
or accrued for the years ended December 31, 1998, December 31, 1997 and December
31, 1996, as applicable, for the Chief Executive Officer of our company and each
of the four other most highly compensated executive officers of our company.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
<S> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION
----------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING LTIP
NAME AND PRINCIPAL SALARY BONUS(1) COMPENSATION(2) OPTIONS/SARS PAYOUTS
POSITION YEAR ($) ($) ($) (#) ($)
- ------------------------------------- --------- --------- ----------- ----------------- ----------------- -----------
Martin R. Lewis, Chief
Executive Officer.................... 1998 205,802 0 0 0 0
Robert M. Miklas,
President............................ 1998 246,154 117,075 0 0 0
1997 222,754 0 0 0 0
1996 190,144 0 0 0 0
John F. Meneough,
Executive Vice President............. 1998 212,500 40,000 0 0 0
1997 200,000 39,000 0 0 0
1996 118,625 0 0 0 0
Jack Resnick, Executive
Vice President....................... 1998 231,885 13,750 0 0 0
1997 230,409 55,072 55,250 0 0
1996 205,792 67,249 0 58,485 329,039
Scott P. Ebert, Vice
President and Controller............. 1998 106,449 28,422 0 0 0
1997 91,000 0 0 0 0
1996 87,222 7,961 0 0 0
<CAPTION>
<S> <C>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION ($)
- ------------------------------------- -------------
Martin R. Lewis, Chief
Executive Officer.................... 1,890(3)
Robert M. Miklas,
President............................ 696(3)
639(3)
625(3)
John F. Meneough,
Executive Vice President............. 8,298(4)
8,298(4)
8,298(4)
Jack Resnick, Executive
Vice President....................... 565(4)
0
0
Scott P. Ebert, Vice
President and Controller............. 353(3)
0
0
</TABLE>
- ------------------------------
(1) Includes amounts earned and accrued.
(2) Represents the dollar value of annual compensation not properly
characterized as salary or bonus. Perquisites and other personal benefits,
securities or property that are less than the lesser of either $50,000 or
10% of the total of annual salary and bonus reported for the named executive
officer have been omitted from the Summary Compensation Table.
(3) Consists of the taxable portion of group term life insurance premiums paid
for by our company.
(4) Represents lease payments made for an automobile paid for by our company.
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<PAGE>
OPTION EXERCISES
The following table sets forth particular information concerning options to
purchase stock exercised by the named executive officers during 1998.
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
SHARES ACQUIRED VALUE
ON EXERCISE RECEIVED
NAME (#) ($)
- -------------------------------------------------------------------------------- --------------- -------------
<S> <C> <C>
Martin R. Lewis (1)............................................................. 3,450(2) 18,561.00
John F. Meneough (1)............................................................ 10,368(3) 151,943.70
Jack Resnick (1)................................................................ 29,243(2) 126,622.19
</TABLE>
- ------------------------
(1) The executive officer has executed all options that were awarded to him.
(2) Reflects the number of shares of AmeriComm Holdings acquired by the
executive officer under his vested options.
(3) Reflects the number of shares of News Corporation acquired by John Meneough
under his vested options.
DIRECTOR COMPENSATION
Directors who are officers, employees or otherwise affiliates of DIMAC
Holdings or our company do not receive compensation for their services as
directors. Directors of DIMAC Holdings or our company are entitled to
reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the board of directors or
committees thereof. Directors of DIMAC Holdings or our company who are not also
officers, employees or otherwise affiliates of DIMAC Holdings, our company or
McCown De Leeuw receive a $2,000 board attendance fee.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
AmeriComm Direct Marketing and Scott Ebert entered into an agreement dated
May 18, 1998 which sets forth certain terms of employment of Mr. Ebert as Vice
President and Controller of AmeriComm Direct Marketing and AmeriComm Holdings.
This agreement provides for an annual base salary of $115,000 which may be
increased pursuant to an agreed-upon plan subject to the approval of the
Compensation Committee of the Board of Directors of AmeriComm Holdings and
AmeriComm Direct Marketing. The agreement also provides for bonus compensation
based upon Mr. Ebert's performance and the overall profitability of AmeriComm
Direct Marketing with a guaranteed minimum bonus of $20,000 for calendar year
1998. In the event that AmeriComm Direct Marketing terminates Mr. Ebert's
employment under certain circumstances, or if Mr. Ebert terminates his
employment with our company, Mr. Ebert shall be entitled to continuation of his
base compensation for a period of nine months.
STOCK OPTION PLAN
DIMAC Holdings adopted a stock option plan which is administered by the
Compensation Committee of DIMAC Holdings' Board of Directors or such other
committee of the Holdings Board as it may designate. Under its stock option plan
the Compensation Committee may grant options to purchase up to 16% of DIMAC
Holdings common stock, which may be either "incentive stock options", within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, or
stock options other than incentive stock options to executive and other
employees, including officers, directors whether or not also employees and
consultants of DIMAC Holdings and its subsidiaries, including DIMAC Corporation,
and affiliates designated by the Compensation Committee.
85
<PAGE>
SECURITY OWNERSHIP
THE COMPANY
Our authorized capital stock consists of 100 shares of common stock, par
value $0.001 per share, all of which shares are issued and outstanding, have
voting rights and are presently held by DIMAC Holdings.
HOLDINGS
The authorized capital stock of DIMAC Holdings consists of 2,000,000 shares
of voting common stock, par value $0.001 per share, of which 1,092,000 shares
were issued and outstanding as of August 1, 1999, and 200,000 shares of
non-voting common stock, par value $0.001 per share, of which 8,000 shares were
issued and outstanding as of August 1, 1999.
The following table sets forth as of the date hereof the number and
percentage of shares of voting common stock beneficially owned by (i) each
person known to DIMAC Holdings to be the beneficial owner of more than 5% of any
class of DIMAC Holdings' equity securities, (ii) each director and each
executive officer of DIMAC Holdings or our company, and (iii) all directors and
executive officers of DIMAC Holdings of our company as a group.
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE
HOLDINGS OF
VOTING COMMON HOLDINGS
STOCK VOTING
BENEFICIALLY COMMON STOCK
OWNED (1) OUTSTANDING
-------------- ------------
<S> <C> <C>
McCown De Leeuw & Co. IV, L.P. (2)................................................. 934,705 72.60%
McCown De Leeuw & Co. IV Associates, L.P. (2)...................................... 934,705 72.60%
Delta Fund LLC (2)................................................................. 934,705 72.60%
State of Michigan Retirement Systems (3)........................................... 150,000 13.74%
First Union Investors, Inc. (4).................................................... 62,000 5.64%
George E. McCown (2)............................................................... 934,705 72.60%
David E. De Leeuw (2).............................................................. 934,705 72.60%
David E. King (2).................................................................. 934,705 72.60%
Timothy Beffa...................................................................... 250 *
Benjamin L. McSwiney............................................................... 250 *
All directors and executive officers as a group.................................... 935,205 72.64%
</TABLE>
- ------------------------
* Represents less than 1.0%.
(1) Voting common stock is the only class of capital stock of DIMAC Holdings
which has voting rights. Beneficial ownership is determined in accordance
with the rules of the SEC. Shares of capital stock subject to options,
warrants and convertible securities currently exercisable or convertible, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person. Except
as indicated by footnote, the persons named in the table above have sole
voting and investment power with respect to all shares of capital stock
indicated as beneficially owned by them.
(2) Includes 712,789 shares of voting common stock owned and 188,248 shares of
voting common stock that can be acquired by the exercise of 188,248 warrants
by McCown De Leeuw & Co. IV, L.P., an investment partnership whose general
partner is MDC Management Company IV, LLC, 15,176 shares of voting common
stock owned and 4,001 shares of voting common stock that can be acquired by
the exercise of 4,001 warrants by McCown De Leeuw & Co. IV Associates, L.P.,
an
86
<PAGE>
investment partnership whose general partner is MDC Management Company IV,
and 11,285 shares of voting common stock owned and 3,206 shares of voting
common stock that can be acquired by the exercise of 3,206 warrants by Delta
Fund LLC, a California limited liability company. The voting members of
Delta Fund LLC are George E. McCown, David E. De Leeuw, David E. King,
Robert B. Hellman, Jr. and Steven A. Zuckerman, who are also the only
managing members of MDC Management Company IV. Voting and dispositive
decisions regarding the securities are made by a vote or consent of all of
the managing members of MDC Management Company IV. Voting and dispositive
decisions regarding securities owned by Delta Fund LLC are made by a vote or
consent of a majority in number of the voting members of Delta Fund LLC.
Messrs. McCown, De Leeuw, King, Hellman and Zuckerman have no direct
ownership of any securities and disclaim beneficial ownership of such shares
except, in the case of Delta Fund LLC, to the extent of their proportionate
membership interests. The address of each of the above referenced entities
is c/o McCown De Leeuw & Co., Inc., 3000 Sand Hill Road, Building 3, Suite
290, Menlo Park, CA 94025.
(3) The Michigan Department of Treasury, Bureau of Investments manages the State
of Michigan Retirement Systems. The managed funds are: the State Police
Retirement Fund, the State Employees' Retirement Fund, the Public School
Employees' Retirement Fund and the Judges' Retirement Fund. The address of
each of these funds is Michigan Department of Treasury, Bureau of
Investments, P.O. Box 15128, Lansing, MI 48901.
(4) Includes 54,000 shares of voting common stock and 8,000 shares of non-voting
common stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ADVISORY SERVICES AGREEMENT
We maintain an Advisory Services Agreement with MDC Management Company IV,
LLC, an affiliate of each of McCown De Leeuw & Co. IV, L.P., McCown De Leeuw &
Co. IV Associates, L.P. and Delta Fund LLC. Under the Advisory Services
Agreement, MDC Management Company IV provides certain consulting, financial, and
managerial functions to us for an annual fee equal to the greater of (i)
$550,000 and (ii) 1.06% of our pro forma EBITDA for the immediately preceding
fiscal year, such EBITDA to be calculated without any deduction of the annual
fee payable to MDC Management Company IV for the fiscal year. In no event may
the annual fee exceed $1,000,000 in any year. The annual fee for the period
prior to the fiscal year commencing January 1, 1999 was $275,000 which was
calculated by pro rating the $550,000 annual fee by the number of days the
Advisory Services Agreement was in effect during the 1998 calendar year. In
addition, under the Advisory Services Agreement, we paid MDC Management Company
IV a fee equal to $9,900,000 for services rendered in the acquisition of our
company by certain affiliates of McCown De Leeuw. The Advisory Services
Agreement expires June 26, 2003 and is renewable annually after this date,
unless we terminate it for justifiable cause, as defined in the Advisory
Services Agreement. We believe that the fees received for the professional
services rendered are at least as favorable to us as those which could be
negotiated with a third party. We entered into a side letter to the Advisory
Services Agreement with MDC Management Company IV, dated March 31, 1999, under
which MDC Management Company IV agrees that it will not be paid any fees payable
under the Advisory Services Agreement until such fees are permitted to be made
pursuant to the senior secured credit facility. All fees payable under the
Advisory Services Agreement and not paid to MDC Management Company IV shall
accrue and shall be payable by us when permitted by the senior secured credit
facility.
AMERICOMM HOLDINGS AGREEMENT AND PLAN OF MERGER
Under an Agreement and Plan of Merger, dated as of May 18, 1998, AmeriComm
Holdings, which was majority owned by McCown De Leeuw & Co. II, L.P., McCown De
Leeuw Associates, L.P., and
87
<PAGE>
MDC/JAFCO Ventures, L.P. merged into one of our wholly-owned subsidiaries, which
at the time of such acquisition was wholly-owned by McCown De Leeuw & Co. IV,
L.P. and certain of its affiliates. Aggregate merger consideration was
approximately $208.3 million. Each of McCown De Leeuw & Co. II, L.P., McCown De
Leeuw Associates, L.P. and MDC/JAFCO Ventures, L.P. received $17.5 million, $9.4
million and 0.6 million, respectively, in proceeds from the merger. McCown De
Leeuw II, L.P. and McCown De Leeuw IV, L.P. are affiliates and under common
control. The Agreement and Plan of Merger was the result of arms length
negotiations and both we and AmeriComm Holdings believe that the terms of the
Agreement and Plan of Merger were at least as favorable to each such party as
those that could be negotiated with a third party. In addition, we and AmeriComm
Holdings each received an opinion from an investment bank which stated that,
subject to certain assumptions contained therein, the transaction was fair to
the stockholders of such entity from a financial point of view. Under the
Advisory Services Agreement, we paid MDC Management Company IV a fee equal to
$1,331,000 for services rendered in connection with the acquisition of AmeriComm
Holdings.
88
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
SENIOR SECURED CREDIT FACILITY
The following description briefly outlines the provisions of our senior
secured credit facility. We have filed a copy of the senior secured credit
agreement as an exhibit to the registration statement which includes this
prospectus. To find out how to locate the senior secured credit agreement,
please read the section labelled "Where You Can Find More Information" under the
heading "Prospectus Summary."
The description set forth below is not complete and is qualified in its
entirety by reference to certain agreements setting forth the principal terms
and conditions of our senior secured credit facility.
We and DIMAC Holdings entered into an amended and restated credit agreement,
dated as of June 26, 1998 among our company, DIMAC Holdings, the financial
institutions party thereto and Credit Suisse First Boston, as administrative
agent and arranger, Warburg Dillon Read LLC, as syndication agent, and First
Union National Bank, as documentation agent, as amended by that certain First
Amendment, dated as of March 31, 1999, and that certain Second Amendment, dated
as of July 23, 1999. In connection with such financing, Credit Suisse First
Boston is acting as Administrative Agent.
The senior secured credit facility consists of
- a senior secured term facility providing for term loans in an aggregate
principal amount of $223.3 million, consisting of:
- $63.0 million of Term A loans;
- $91.6 million of Term B loans; and
- $68.7 million of Term C loans;
- a senior secured revolving credit facility providing for revolving loans
and the issuance of letters of credit for our account, in an aggregate
principal and stated amount at any time not to exceed $46.7 million (of
which not more than $5.0 million may be represented by letters of
credit).
The Term A loans mature on June 30, 2004, the Term B loans mature on June
30, 2006 and the Term C loans mature on December 31, 2006. The term loans will
be paid quarterly until final maturity as shown in the following table.
<TABLE>
<CAPTION>
SCHEDULED QUARTERLY SCHEDULED QUARTERLY SCHEDULED QUARTERLY
REPAYMENT OF TERM A REPAYMENT OF TERM B REPAYMENT OF TERM C
QUARTERS ENDING: LOANS LOANS LOANS
- ----------------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
March 31, 2001-June 30, 2001................... 4.00% 0.25% 0.25%
September 30, 2001-December 31, 2001........... 4.25% 0.25% 0.25%
March 31, 2002-December 31, 2002............... 7.625% 0.25% 0.25%
March 31, 2003-December 31, 2003............... 8.35% 0.25% 0.25%
March 31, 2004................................. 9.60% 0.25% 0.25%
June 30, 2004.................................. 10.00% 0.25% 0.25%
September 30, 2004-June 30, 2005............... 7.50% 0.25%
September 30, 2005-March 31, 2006.............. 16.00% 0.25%
June 30, 2006.................................. 18.50% 0.25%
September 30, 2006............................. 46.75%
December 31, 2006.............................. 47.75%
</TABLE>
Revolving loans and letters of credit are fully revolving and available at
any time until June 30, 2004, except that as of March 29, 1999 and until we
comply with specified financial ratios and tests
89
<PAGE>
contained in the senior secured credit agreement, the lenders party to the
senior secured credit agreement have no obligation to make new revolving loans,
swingline loans or issue letters of credit to us. The amount of available
revolving loans will be reduced by $15.0 million on June 30, 2003.
We are required to make mandatory prepayments on our senior secured credit
facility under certain circumstances, including upon certain asset sales or
certain issuances of debt or equity securities. We are also required to make
prepayments on the senior secured credit facility and permanently reduce
commitments under the revolving credit facility in an amount equal to a
percentage of our consolidated excess cash flow commencing with the fiscal year
ended December 31, 2000 and upon receipt of cash proceeds from property and
casualty insurance or condemnation awards. At our option, loans may be prepaid,
and revolving credit commitments or letters of credit may be permanently
reduced, in whole or in part at any time without premium or penalty except for
break-funding costs.
Our obligations under our senior secured credit facility are unconditionally
and irrevocably guaranteed by our present and future domestic subsidiaries and
by DIMAC Holdings. In addition, our senior secured credit facility is secured by
a first priority or equivalent security interest in all of our capital stock and
each of our present and future domestic subsidiaries and the tangible and
intangible assets of us and our guarantors. The senior secured credit facility
ranks senior in right of payment to the notes and effectively ranks senior in
right of payment to DIMAC Holdings' notes.
At our option, the interest rate per year applicable to loans under our
senior secured credit facility will be either a rate (grossed-up for maximum
statutory reserve requirements for eurocurrency liabilities) determined by
reference to the British Bankers' Association Interest Settlement Rates for
deposits in dollars for a period equal to an interest period of one, two, three
or six months (as selected by us) (the "Adjusted Eurodollar Rate") or the Base
Rate, in each case plus a margin. Until the later of:
- six months after June 26, 1998; and
- the day on which the financial statements covering the period ending
September 30, 1998 are delivered to the lenders,
the interest rate per year applicable to revolving loans will be either the
Adjusted Eurodollar Rate plus a margin of 2.75% or the Base Rate plus a margin
of 1.75%.
Until November 24, 1998,
- the interest rate per year applicable to revolving loans and Term A loans
was either the Adjusted Eurodollar Rate plus a margin of 2.75% or the
Base Rate plus a margin of 1.75%;
- the interest rate per year applicable to Term B loans was either the
Adjusted Eurodollar Rate plus a margin of 3.25% or the Base Rate plus a
margin of 2.25%; and
- the interest rate per year applicable to Term C loans was either the
Adjusted Eurodollar Rate plus a margin of 3.50% or the Base Rate plus a
margin of 2.50%.
After November 24, 1998, the applicable margin was and will continue to be
subject to a grid based upon our leverage. As of March 26, 1999 and until
December 31, 2000, for so long as our leverage ratio is greater than or equal to
5.50:1.00, the applicable margin will be increased by 0.25% in excess of the
rate otherwise applicable. The Base Rate is the higher of:
- the rate of interest publicly announced by Credit Suisse First Boston as
its prime commercial lending rate in effect at its principal office in
New York City; and
- the federal funds effective rate plus 0.5%.
We paid an annual fee equal to 0.5% on the undrawn portion of the
commitments in respect of our revolving credit facility until November 24, 1998.
After November 24, 1998, the annual fee was and will continue to be subject to a
grid based upon our leverage. We will also pay an annual fee on the
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face amount of all outstanding letters of credit equal to the applicable margin
then in effect with respect to loans under our revolving credit facility bearing
interest based upon the Adjusted Eurodollar Rate.
Our senior secured credit facility contains a number of significant
covenants that, among other things, restrict our ability as well as our
subsidiaries' ability to:
- dispose of assets;
- incur additional indebtedness;
- make capital expenditures;
- repay other indebtedness or amend other debt instruments;
- pay dividends;
- create liens on assets;
- enter into leases or guarantees;
- make investments or acquisitions;
- engage in mergers or consolidations; and
- engage in certain transactions with subsidiaries and affiliates and
otherwise restrict corporate activities.
In addition, under our senior secured credit facility, we are required to comply
with specified financial ratios and tests, including minimum EBITDA and a
limitation on capital expenditures, and after December 31, 2000, minimum fixed
charge coverage, minimum interest coverage and maximum leverage ratios.
Our senior secured credit facility also contains provisions that prohibit
any modification of the indenture in any manner adverse to the lenders and that
will limit our ability to refinance the notes without the consent of such
lenders.
DIMAC HOLDINGS SENIOR NOTES
On October 22, 1998, DIMAC Holdings issued $30.0 million aggregate principal
amount of its 15 1/2% Senior Notes due 2009. Holders of the DIMAC Holdings notes
also received warrants to purchase 28,205 shares of DIMAC Holdings common stock
at a nominal exercise price. The DIMAC Holdings notes are unsecured senior
obligations of DIMAC Holdings and will mature on October 22, 2009. The DIMAC
Holdings notes bear interest at a rate of 15 1/2% per year. Interest on the
DIMAC Holdings notes will accrue and be payable quarterly on March 31, June 30,
September 30 and December 31 of each year beginning December 31, 1998, or if any
such day is not a business day, on the next succeeding business day. For each
installment of interest due on or prior to September 30, 2003, instead of paying
the whole installment in cash, DIMAC Holdings may pay the whole installment, or
a portion of the installment, by issuing additional DIMAC Holdings notes in an
aggregate principal amount equal to the amount of interest due on that interest
payment date but not paid in cash. Interest on the DIMAC Holdings notes will
accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from the date of issuance.
Except as set forth below, the DIMAC Holdings notes are not redeemable at
the option of DIMAC Holdings before October 22, 2002. DIMAC Holdings may redeem
the DIMAC Holdings notes, in whole or in part, at any time on or after October
22, 2002. The redemption price of the DIMAC Holdings notes is equal to the
percentages of the principal amount of the DIMAC Holdings
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notes set forth below, plus accrued and unpaid interest to the redemption date,
if redeemed during the 12-month period beginning October 22 of the years
indicated below.
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2002........................................................................ 109.300%
2003........................................................................ 107.750%
2004........................................................................ 106.200%
2005........................................................................ 104.650%
2006........................................................................ 103.100%
2007........................................................................ 101.550%
2008........................................................................ 100.000%
</TABLE>
At any time before October 22, 2002, DIMAC Holdings may redeem, in whole or
in part, the DIMAC Holdings notes with the proceeds of one or more equity
offerings at a redemption price of 107.75% of the principal amount of the DIMAC
Holdings notes plus accrued and unpaid interest, if any, to the redemption date,
subject to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date.
Upon the occurrence of a Change of Control (as defined in the indenture
under which the DIMAC Holdings notes were issued), DIMAC Holdings is required to
repurchase all or any part of such holder's DIMAC Holdings notes at a purchase
price in cash equal to 101% of the principal amount of the DIMAC Holdings notes
plus accrued and unpaid interest, if any, to the date of purchase, subject to
the right of holders of record on the relevant record date to receive interest
due on the relevant interest payment date.
The indenture under which the DIMAC Holdings notes were issued imposes
certain affirmative covenants and other requirements on DIMAC Holdings and us
and also contains certain negative covenants that include, among other things,
limitations on:
- the amount of indebtedness DIMAC Holdings and its subsidiaries may incur;
- certain payments DIMAC Holdings and its subsidiaries may make;
- restrictions on distributions from subsidiaries;
- sales of assets by DIMAC Holdings and its subsidiaries;
- affiliate transactions;
- investments;
- DIMAC Holdings' ability to merge or consolidate or transfer all or
substantially all of its assets; and
- certain acquisitions by DIMAC Holdings and its subsidiaries.
The indenture under which the DIMAC Holdings notes were issued contains
customary events of defaults, including default in any payment of principal and
interest on any DIMAC Holdings notes when due. If an event of default occurs and
is continuing, Wilmington Trust Company by written notice to DIMAC Holdings, or
the holders of at least 25% in principal amount of the outstanding DIMAC
Holdings notes by notice to DIMAC Holdings and Wilmington Trust Company, may
declare the unpaid principal of and any accrued interest on all of the
outstanding DIMAC Holdings notes to be due and payable. Upon such a declaration,
the principal and interest shall be due and payable immediately.
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DIMAC HOLDINGS SENIOR SUBORDINATED DISCOUNT NOTES
On March 31, 1999 DIMAC Holdings issued $79.9 million aggregate face amount
of its 15 1/2% Senior Subordinated Discount Notes due March 31, 2010 and
warrants to purchase 200,000 shares of its voting common stock pursuant to a
Securities Purchase Agreement, dated as of March 31, 1999, by and among DIMAC
Holdings and the persons listed therein as purchasers. The senior subordinated
discount notes are unsecured senior subordinated obligations of DIMAC Holdings
and will mature on March 31, 2010. Interest on each senior subordinated discount
note accrues at a rate of 15 1/2% per annum and is not payable prior to
maturity. The senior subordinated discount notes are junior in right of payment
to the prior payment in full of the DIMAC Holdings notes. The warrants are
exercisable at any time prior to Mach 31, 2010 in whole or in part, at an
exercise price of $100.00 per share. The number of shares subject to the
warrants and the exercise price per share are subject to anti-dilution
adjustments. The warrants do not, prior to their exercise, confer any right or
privileges of voting common stock.
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DESCRIPTION OF NOTES
GENERAL
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions."
DIMAC Corporation issued the notes under an indenture, dated as of October
15, 1998, between DIMAC Corporation, its subsidiary guarantors and Wilmington
Trust Company, as 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.
The following description is a summary of the material provisions of the
indenture. It does not restate that agreement in its entirety. We urge you to
read the indenture and its appendix because it, and not this description,
defines your rights as a holder of these notes.
We have filed a copy of the indenture as an exhibit to the registration
statement which includes this prospectus. To find out how to locate the
indenture, please read the section labeled "Where You Can Find More Information"
under the heading "Prospectus Summary". You may also review the indenture at the
Trustee's offices at 1100 North Market Street, Rodney Square North, Wilmington,
Delaware.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The notes:
- are unsecured senior subordinated obligations of DIMAC Corporation;
- are subordinated in right of payment to all Senior Indebtedness of DIMAC
Corporation;
- rank equally in right of payment to all other Senior Subordinated
Indebtedness of DIMAC Corporation;
- rank senior in right of payment to any future Subordinated Obligations of
DIMAC Corporation; and
- are unconditionally guaranteed by the Subsidiary Guarantors.
The Guaranties:
The notes are guaranteed by the following subsidiaries of DIMAC
Corporation:
<TABLE>
<S> <C>
DIMAC Marketing Corporation DMW Worldwide, Inc.
DIMAC DIRECT, Inc. AmeriComm Holdings, Inc.
Palm Coast Data Inc. AmeriComm Direct Marketing, Inc.
MBS/Multimode Inc.
</TABLE>
The Guaranties of the notes:
- are senior subordinated obligations of each Subsidiary Guarantor;
- are subordinated in right of payment to all Senior Indebtedness of each
Subsidiary Guarantor;
- are equal in right of payment to all other Senior Subordinated
Indebtedness of each Subsidiary Guarantor; and
- are senior in right of payment to all other Subordinated Obligations of
each Subsidiary Guarantor.
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As of December 31, 1998, DIMAC Corporation and its Subsidiary Guarantors had
total Senior Indebtedness of approximately $213.1 million. As indicated above
and as discussed in detail below under the subheading "Subordination," payments
on the notes and under the guaranties will be subordinated to the payment of
Senior Indebtedness. The indenture will permit DIMAC Corporation and its
Subsidiary Guarantors to incur additional Senior Indebtedness.
As of the date of the indenture, all of our subsidiaries will be "Restricted
Subsidiaries." However, under the circumstances described below we will be
permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the indenture. Unrestricted Subsidiaries will not
guarantee the notes.
PRINCIPAL, MATURITY AND INTEREST
DIMAC Corporation initially issued $100.0 million aggregate principal amount
of notes, but the indenture permits DIMAC Corporation to issue up to $300.0
million aggregate principal amount of notes. DIMAC Corporation will issue notes
in denominations of $1,000 and integral multiples of $1,000. The notes will
mature on October 1, 2008.
Interest on the notes will accrue at the rate of 12 1/2% per annum and will
be payable semi-annually in arrears on October 1 and April 1, commencing on
April 1, 1999. DIMAC Corporation will make each interest payment to the holders
of record of the notes on the immediately preceding September 15 and March 15.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
All payments on certificated notes will be made by mailing a check to the
registered address of each holder of a certificated note. If a holder has given
wire transfer instructions to DIMAC Corporation, DIMAC Corporation will make all
principal, premium and interest payments on those notes in accordance with those
instructions. All payments due and payable to holders of notes whose notes are
represented by a global note will be made by wire transfer of immediately
available funds to the accounts specified by The Depository Trust Company.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee will initially act as Paying Agent and Registrar. DIMAC
Corporation may change the Paying Agent or Registrar without prior notice to the
holders of the notes. DIMAC Corporation or any of its domestically incorporated
Wholly Owned Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A holder of notes may transfer or exchange notes in accordance with the
indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and DIMAC
Corporation may require a holder to pay any taxes and fees required by law or
permitted by the indenture. DIMAC Corporation is not required to transfer or
exchange any note selected for redemption. Also, DIMAC Corporation is not
required to transfer or exchange any note for a period of 15 days before a
selection of notes to be redeemed or 15 days before on interest payment date.
The registered holder of a note will be treated as the owner of it for all
purposes.
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SUBSIDIARY GUARANTIES
The Subsidiary Guarantors will jointly and severally guaranty DIMAC
Corporation's obligations under the notes. Each Subsidiary Guaranty will be
subordinated to the prior payment in full of all Senior Indebtedness of that
Subsidiary Guarantor. The obligations of each Subsidiary Guarantor under its
Subsidiary Guaranty will be limited as necessary to prevent that Subsidiary
Guaranty from constituting a fraudulent conveyance under applicable law.
A Subsidiary Guarantor may sell or otherwise dispose of all or substantially
all of its assets, or consolidate with or merge with or into another Person if:
(1) such sale, merger or consolidation does not violate the provisions of
the indenture described under "Certain Covenants--Merger and
Consolidation"; and
(2) the Person acquiring the property in any such sale or disposition or the
Person formed by or surviving any such consolidation or merger assumes
all the obligations of that Subsidiary Guarantor pursuant to a
supplemental indenture satisfactory to the Trustee.
The Subsidiary Guaranty of a Subsidiary Guarantor will be released:
(1) upon the sale or other disposition, including by way of consolidation or
merger, of a Subsidiary Guarantor or the sale or disposition of all or
substantially all the assets of such Subsidiary Guarantor other than to
DIMAC Corporation or an Affiliate of DIMAC Corporation; or
(2) if at any time a Subsidiary Guarantor no longer has any Senior
Indebtedness outstanding.
SUBORDINATION
The payment of principal, premium and interest, if any, on the notes are
subordinated to the prior payment in full of all Senior Indebtedness of DIMAC
Corporation.
Holders of Senior Indebtedness of DIMAC Corporation shall be entitled to
receive payment in full before holders of notes shall be entitled to receive any
payment of principal of or interest on the notes:
(1) upon any payment or distribution of the assets of DIMAC Corporation to
creditors upon a total or partial liquidation or a total or partial
dissolution of DIMAC Corporation; or
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to DIMAC Corporation or its property.
DIMAC Corporation may not pay the principal of, premium, if any, or interest
on the notes or make any deposit pursuant to the provisions under "--Defeasance"
below and may not otherwise repurchase, redeem or retire any notes if:
(1) any Senior Indebtedness is not paid when due in cash or Cash
Equivalents; or
(2) any other default on Senior Indebtedness occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms unless:
(a) the default has been cured or waived and any such acceleration has
been rescinded; or
(b) such Senior Indebtedness has been paid in full in cash or Cash
Equivalents.
However, DIMAC Corporation may pay any amounts without regard to clauses (1)
or (2) above if DIMAC Corporation and the Trustee receive written notice
approving such payment from the Representatives of the holders of Designated
Senior Indebtedness with respect to which either of the events set forth in
clause (1) or (2) has occurred and is continuing. During the continuance of any
default (other than a default described in clauses (1) or (2) above) with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be accelerated immediately without further
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notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, DIMAC Corporation may not pay
the notes for a period of 179 days or less under certain circumstances (a
"Payment Blockage Period") commencing upon the receipt by the Trustee of written
notice (a "Blockage Notice") of such default from the Representative of such
Designated Senior Indebtedness or from the holders of such Designated Senior
Indebtedness. Unless the holders of such Designated Senior Indebtedness or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, DIMAC Corporation may resume payments on the
notes after termination of such Payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, regardless of
the number of defaults with respect to Designated Senior Indebtedness during
such period. No default or event of default which existed or was continuing on
the date of the commencement of any Payment Blockage Period with respect to the
Designated Senior Indebtedness, initiating such Payment Blockage Period shall
be, or be made, the basis of the commencement of a subsequent Payment Blockage
Period by the Representative of such Designated Senior Indebtedness, whether or
not within a period of 360 consecutive days, unless such default or event of
default shall have been cured or waived for a period of not less than 90
consecutive days.
DIMAC Corporation or the Trustee must promptly notify holders of Senior
Indebtedness or their Representatives if payment of the notes is accelerated
because of an event of default. DIMAC Corporation may not pay the notes until
five business days after such holders or the Representatives of the Designated
Senior Indebtedness receive notice of the acceleration. After five business
days' notice is given, DIMAC Corporation may pay the notes if the subordination
provisions of the indenture permit such payment.
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of DIMAC Corporation, holders of the
notes may recover less ratably than creditors of DIMAC Corporation who are
holders of Senior Indebtedness. See "Risk Factors--Ranking of the Notes."
OPTIONAL REDEMPTION
Prior to October 1, 2001, DIMAC Corporation may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes originally issued
under the indenture at a redemption price of 112.5% of the principal amount
thereof, plus accrued and unpaid interest to the redemption date, with the net
cash proceeds of one or more Equity Offerings; PROVIDED that
(1) at least 65% of the aggregate principal amount of notes remains
outstanding immediately after the occurrence of such redemption; and
(2) the redemption must occur within 60 days of the date of the closing of
such Equity Offering.
Except pursuant to the preceding paragraph, the notes will not be redeemable
at DIMAC Corporation's option prior to October 1, 2003.
On and after October 1, 2003, DIMAC Corporation may redeem all or a part of
these notes upon not less than 30 nor more than 60 days' notice, at the
redemption prices, expressed as percentages of principal amount, set forth below
plus accrued and unpaid interest, if any, to the applicable redemption date, if
redeemed during the twelve-month period beginning on October 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 106.250%
2004............................................................................. 104.167%
2005............................................................................. 102.083%
2006 and thereafter.............................................................. 100.000%
</TABLE>
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require DIMAC Corporation to repurchase all or any part of such holder's notes
in accordance with the terms set forth below at a purchase price in cash equal
to 101% of the principal amount plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
Within thirty days following any Change of Control, unless DIMAC Corporation has
mailed a redemption notice with respect to all the outstanding notes in
connection with such Change of Control, DIMAC Corporation will mail a notice to
each holder of notes with a copy to the Trustee (the "Change of Control Offer")
stating that a change of control has occurred and that such holder has the right
to require DIMAC Corporation to purchase such holder's notes, describing the
circumstances and relevant facts and financial information concerning such
Change of Control and the procedures determined by DIMAC Corporation, consistent
with the indenture that a holder must follow in order to have its notes
purchased. DIMAC Corporation will comply with the requirements of Section 14(e)
of the Exchange Act and any other securities laws and regulations in connection
with the repurchase of the notes as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict with
this section, DIMAC Corporation shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this section by virtue thereof.
On the purchase date, all notes purchased by DIMAC Corporation will be
delivered by the Trustee for cancellation and DIMAC Corporation will pay to the
holders of notes the purchase price plus accrued and unpaid interest, if any.
In the event that at the time of a Change of Control the terms of DIMAC
Corporation's Senior Indebtedness restrict or prohibit the repurchase of the
notes pursuant to this "Change of Control" covenant, then prior to the mailing
of notice to holders of notes described above, but in any event within 30 days
following a Change of Control, DIMAC Corporation will either:
(1) repay in full all such Senior Indebtedness or offer to repay in full all
such Senior Indebtedness and repay such Senior Indebtedness of each
lender who has accepted such offer; or
(2) obtain the requisite consent under the agreements governing such Senior
Indebtedness to permit the repurchase of the notes.
DIMAC Corporation's outstanding Senior Indebtedness currently prohibits
DIMAC Corporation from purchasing any notes, and also provides that certain
change of control events with respect to DIMAC Corporation would constitute a
default under the agreements governing the Senior Indebtedness. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
DIMAC Corporation becomes a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when DIMAC
Corporation is prohibited from purchasing notes, DIMAC Corporation could seek
the consent of its senior lenders to the purchase of notes or could attempt to
refinance the borrowings that contain such prohibition. If DIMAC Corporation
does not obtain such a consent or repay such borrowings, DIMAC Corporation will
remain prohibited from purchasing notes. In such case, DIMAC Corporation's
failure to purchase tendered notes would constitute an event of default under
the indenture which would, in turn, constitute a default under such Senior
Indebtedness. In such circumstances, the subordination provisions in the
indenture would likely restrict payments to the holders of notes.
DIMAC Corporation will not be required to make a Change of Control Offer
upon the occurrence of a Change of Control if a third party makes the Change of
Control offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the indenture applicable to a Change of
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Control Offer made by DIMAC Corporation and purchases all notes validly tendered
and not withdrawn under such Change of Control Offer.
ASSET SALES
DIMAC Corporation will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Disposition unless:
(1) DIMAC Corporation or the Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Disposition at least
equal to the fair market value of the shares and assets sold or otherwise
disposed of;
(2) at least 80% of the consideration received by DIMAC Corporation or such
Restricted Subsidiary is in the form of cash; and
(3) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by DIMAC Corporation or such Restricted
Subsidiary, as the case may be,
(a) FIRST, to the extent DIMAC Corporation elects (or is required by the
terms of any Senior Indebtedness of DIMAC Corporation or Indebtedness
(other than Preferred Stock) of a Wholly Owned Subsidiary), to
prepay, repay or purchase Senior Indebtedness of DIMAC Corporation or
such Indebtedness (other than Preferred Stock) of a Wholly Owned
Subsidiary (in each case other than Indebtedness owed to DIMAC
Corporation or an Affiliate of DIMAC Corporation) within 360 days
after the later of the date of such Asset Disposition or the receipt
of such Net Available Cash;
(b) SECOND, to the extent of the balance of Net Available Cash after
application in accordance with clause (a) above, to the extent DIMAC
Corporation or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional
Assets by a Restricted Subsidiary with Net Available Cash received by
DIMAC Corporation or another Restricted Subsidiary) within 360 days
after the later of the date of such Asset Disposition or the receipt
of such Net Available Cash;
(c) THIRD, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (a) and (b) above, to make an
offer to purchase the notes outstanding under this indenture pursuant
and subject to the conditions of this indenture to the holders at a
purchase price of 100% of the principal amount thereof plus accrued
and unpaid interest to the purchase date; and
(d) FOURTH, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (a), (b) and (c) above, to (x)
acquire Additional Assets (other than Indebtedness and Capital Stock)
or (y) prepay, repay or purchase Indebtedness of DIMAC Corporation
(other than Indebtedness owed to an Affiliate of DIMAC Corporation
and other than Disqualified Stock of DIMAC Corporation) or
Indebtedness of any Restricted Subsidiary (other than Indebtedness
owed to DIMAC Corporation or an Affiliate of DIMAC Corporation), in
each case described in this clause (d) within one year from the
receipt of such Net Available Cash or, if DIMAC Corporation has made
an offer pursuant to clause (c) above, six months from the date such
offer is consummated;
PROVIDED, HOWEVER, that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (a), (c) or (d) above, DIMAC
Corporation or such Restricted Subsidiary shall retire such Indebtedness
and shall cause the related loan commitment, if any, to be permanently
reduced in an amount equal to the principal amount so prepaid, repaid or
purchased.
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Notwithstanding the foregoing provisions of this covenant, DIMAC Corporation
and its Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this covenant except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this covenant at any time exceed $1.0 million. DIMAC Corporation
shall not be required to make an offer for notes pursuant to this covenant if
the Net Available Cash available therefor (after application of the proceeds as
provided in clauses (a) and (b) above) is less than $10.0 million for any
particular Asset Disposition, which lesser amounts shall be carried forward for
purposes of determining whether an offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition.
For the purposes of this covenant, the following will be deemed to be cash:
(1) the assumption of Indebtedness, other than Disqualified Stock, of DIMAC
Corporation or any Restricted Subsidiary and the release of DIMAC
Corporation or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition; and
(2) securities received by DIMAC Corporation or any Restricted Subsidiary of
DIMAC Corporation from the transferee that are promptly converted by
DIMAC Corporation or such Restricted Subsidiary into cash.
In the event of an Asset Disposition that requires the purchase of notes
pursuant to clause (3)(c) above, DIMAC Corporation will be required to purchase
notes tendered pursuant to an offer by DIMAC Corporation for notes at a purchase
price of 100% of their principal amount plus accrued interest to the purchase
date in accordance with the procedures (including prorating in the event of
oversubscription) set forth in the indenture. If the aggregate purchase price of
notes tendered pursuant to the offer is less than the Net Available Cash
allotted to the purchase of notes, DIMAC Corporation will apply the remaining
Net Available Cash in accordance with clause (3)(d) above.
DIMAC Corporation will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of notes pursuant to the
indenture. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, DIMAC Corporation will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the indenture by virtue thereof.
SELECTION AND NOTICE
If fewer than all the notes are to be redeemed, the Trustee shall select the
notes to be redeemed pro rata or by lot or by a method that complies with
applicable legal and securities exchange requirements, if any, and that the
Trustee in its sole discretion shall deem to be fair and appropriate and in
accordance with methods generally used at the time of selection by fiduciaries
in similar circumstances. The Trustee shall make the selection from outstanding
notes not previously called for redemption. The Trustee may select for
redemption portions of the principal of notes that have denominations larger
than $1,000. Notes and portions of them the Trustee selects shall be in amounts
of $1,000 or a whole multiple of $1,000. Provisions of the indenture that apply
to notes called for redemption also apply to portions of notes called for
redemption. The Trustee shall notify DIMAC Corporation promptly of the notes or
portions of notes of DIMAC Corporation to be redeemed. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for
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redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.
BOOK-ENTRY, DELIVERY AND FORM
The notes sold will be issued in the form of a global note. The global note
will be:
(1) deposited with, or on behalf of, The Depository Trust Company; and
(2) registered in the name of The Depository Trust Company or its nominee.
Except as set forth below, the global note may be transferred, in whole and
not in part, only to:
(1) The Depository Trust Company; or
(2) another nominee of The Depository Trust Company.
Investors may hold their beneficial interests in the global note:
(1) directly through The Depository Trust Company if they have an account
with The Depository Trust Company; or
(2) indirectly through organizations which have accounts with The Depository
Trust Company.
Upon the transfer of a note in definitive form, such note will, unless the
global note has previously been exchanged for notes in definitive form, be
exchanged for an interest in the global note representing the principal amount
of notes being transferred.
The Depository Trust Company has advised DIMAC Corporation that it is:
(1) a limited-purpose trust company and organized under the laws of the
State of New York;
(2) a member of the Federal Reserve System;
(3) a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
(4) "a clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
The Depository Trust Company was created to:
(1) hold securities of institutions that have accounts with The Depository
Trust Company ("participants"); and
(2) facilitate the clearance and settlement of securities transactions among
its participants in such securities through electronic book-entry changes
in accounts of the participants, thereby eliminating the need for
physical movement of securities certificates.
The Depository Trust Company's participants include:
(1) securities brokers and dealers (which may include Credit Suisse First
Boston Corporation, First Union Capital Markets and Warburg Dillon Read
LLC);
(2) banks;
(3) trust companies;
(4) clearing corporations; and
(5) certain other organizations.
Access to The Depository Trust Company's book-entry system is also available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, whether directly or
indirectly.
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Upon the issuance of the global note, The Depository Trust Company will
credit, on its book-entry registration and transfer system, the principal amount
of the notes represented by such global note to the accounts of participants.
The accounts to be credited shall be designated by the initial purchasers of
such notes. Ownership of beneficial interests in the global note will be limited
to:
(1) participants; or
(2) persons that may hold interests through participants.
Ownership of beneficial interests in the global note will be shown on, and
the transfer of those ownership interests will be effected only through, records
maintained by The Depository Trust Company, with respect to participants'
interest, and such participants, with respect to the owners of beneficial
interests in the global note other than participants. The laws of some
jurisdictions may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and laws may impair
the ability to transfer or pledge beneficial interests in the global note.
So long as The Depository Trust Company, or its nominee, is the registered
holder and owner of the global note, The Depository Trust Company or such
nominee, as the case may be, will be considered the sole legal owner and holder
of the related notes for all purposes of such notes and the indenture. Except as
set forth below, owners of beneficial interests in the global note:
(1) will not be entitled to have the notes represented by the global note
registered in their names;
(2) will not receive or be entitled to receive physical delivery of
certificated notes in definitive form; and
(3) will not be considered to be the owners or holders of any notes under
the global note.
DIMAC Corporation understands that under existing industry practice, in the
event an owner of a beneficial interest in the global note desires to take any
action that The Depository Trust Company, as the holder of the global note, is
entitled to take, The Depository Trust Company would authorize the participants
to take such action, and that the participants would authorize beneficial owners
owning through such participants to take such action or would otherwise act upon
the instructions of beneficial owners owning through them.
Payment of principal of and interest on notes represented by the global note
registered in the name of and held by The Depository Trust Company or its
nominee will be made to The Depository Trust Company or its nominee, as the case
may be, as the registered owner and holder of the global note.
DIMAC Corporation expects that The Depository Trust Company or its nominee,
upon receipt of any payment of principal of or interest on the global note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the global note as
shown on the records of The Depository Trust Company or its nominee. DIMAC
Corporation also expects that payments by participants to owners of beneficial
interests in the global note held through such participants will be governed by
standing instructions and customary practices and will be the responsibility of
such participants. DIMAC Corporation will not have any responsibility or
liability:
(1) for any aspect of the records relating to, or payments made on account
of, beneficial ownership interests in the global note for any note;
(2) for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests; or
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(3) for any other aspect of the relationship between The Depository Trust
Company and its participants or the relationship between such
participants and the owners of beneficial interests in the global note
owning through such participants.
Unless and until it is exchanged in whole or in part for certificated notes
in definitive form, the global note may not be transferred except as a whole:
(1) by The Depository Trust Company to a nominee of The Depository Trust
Company;
(2) by a nominee of The Depository Trust Company to The Depository Trust
Company; or
(3) by a nominee of The Depository Trust Company to another nominee of The
Depository Trust Company.
Although The Depository Trust Company has agreed to the foregoing procedures
in order to facilitate transfers of interests in the global note among
participants of The Depository Trust Company, it is under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Trustee nor DIMAC Corporation will have
any responsibility for the performance by The Depository Trust Company or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
CERTIFICATED NOTES
The notes represented by the global note are exchangeable for certificated
notes in definitive form of like tenor as such notes in denominations of $1,000
and integral multiples thereof if:
(1) The Depository Trust Company notifies DIMAC Corporation that it is
unwilling or unable to continue as depositary for the global note or if
at any time The Depository Trust Company ceases to be a clearing agency
registered under the Exchange Act and a successor depositary is not
appointed by DIMAC Corporation within 90 days;
(2) DIMAC Corporation in its discretion at any time determines not to have
all of the notes represented by the global note; or
(3) an event of default has occurred and is continuing.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated notes issuable in authorized denominations and
registered in such names as The Depository Trust Company shall direct. Subject
to the foregoing, the global note is not exchangeable, except for a global note
of the same aggregate denomination to be registered in the name of The
Depository Trust Company or its nominee. In addition, such certificates will
bear the legend referred to under "Transfer Restrictions" (unless DIMAC
Corporation determines otherwise in accordance with applicable law) subject,
with respect to such notes, to the provisions of such legend.
Neither DIMAC Corporation nor the Trustee shall be liable for any delay by
The Depository Trust Company or any participant in identifying the beneficial
owners of the related notes and each such person may conclusively rely on, and
shall be protected in relying on, instructions from The Depository Trust Company
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of the notes to be issued).
SAME-DAY PAYMENT
Payments of principal, interest, premium, if any, on the notes must be made:
(1) by wire transfer of immediately available funds to the accounts
specified by the holders thereof; or
(2) by mailing a check to each holder's registered address.
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REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS
Pursuant to a Registration Rights Agreement with Credit Suisse First Boston
Corporation, First Union Capital Markets and Warburg Dillon Read LLC, for the
benefit of the holders of the unregistered notes, that DIMAC Corporation has
agreed that it will, at its cost:
(1) file a registration statement on or prior to December 21, 1998 with the
SEC with respect to a registered exchange offer to exchange the
unregistered notes for new, registered notes of DIMAC Corporation having
terms substantially identical in all material respects to the
unregistered notes, except that the registered notes will not contain
terms with respect to transfer restrictions; and
(2) use its reasonable best efforts to cause the registration statement to
be declared effective under the Securities Act on or prior to March 21,
1999.
Upon the effectiveness of the registration statement, DIMAC Corporation will
offer the registered notes in exchange for surrender of the notes. DIMAC
Corporation will keep the exchange offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of the exchange
offer is mailed to the holders of the notes. For each unregistered note
surrendered to DIMAC Corporation, the holder of such unregistered note will
receive a registered note having a principal amount equal to that of the
surrendered unregistered note. Interest on each registered note will accrue from
the last interest payment date on which interest was paid on the note
surrendered or, if no interest has been paid on such unregistered note, from the
date of its original issue. Under existing SEC interpretations, the registered
notes would be freely transferable by holders other than affiliates of DIMAC
Corporation after the exchange offer without further registration under the
Securities Act if the holder of the registered notes represents:
(1) that it is acquiring the registered notes in the ordinary course of its
business;
(2) that it has no arrangement or understanding with any person to
participate in the distribution of the registered notes; and
(3) that it is not an affiliate of DIMAC Corporation, as such terms are
interpreted by the SEC;
PROVIDED, HOWEVER, that broker-dealers receiving registered notes in the
exchange offer will have a prospectus delivery requirement with respect to
resales of such registered notes. The SEC has taken the position that broker-
dealers may fulfill their prospectus delivery requirements with respect to
registered notes, other than a resale of an unsold allotment from the original
sale of the notes, with the prospectus contained in the registration statement.
Under the Registration Rights Agreement, DIMAC Corporation is required to allow
broker-dealers and other persons, if any, with similar prospectus delivery
requirements to use the prospectus contained in the registration statement in
connection with the resale of such registered notes.
A holder of notes, other than certain specified holders, who wishes to
exchange such unregistered notes for registered notes in the exchange offer will
be required to represent:
(1) that any registered notes to be received by it will be acquired in the
ordinary course of its business;
(2) that at the time of the commencement of the exchange offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of the registered
notes; and
(3) that it is not an "affiliate" of DIMAC Corporation, as defined in Rule
405 of the Securities Act; (or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable).
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If:
(1) applicable interpretations of the staff of the SEC do not permit DIMAC
Corporation to effect such a registered exchange offer;
(2) for any other reason the registered exchange offer is not consummated by
April 20, 1999;
(3) Credit Suisse First Boston Corporation, First Union Capital Markets and
Warburg Dillon Read LLC so request with respect to unregistered notes not
eligible to be exchanged for registered notes in the registered exchange
offer; or
(4) any holder of unregistered notes is not eligible to participate in the
registered exchange offer or does not receive freely tradeable registered
notes in the registered exchange offer.
DIMAC Corporation will, at its cost:
(1) as promptly as practicable, file a shelf registration statement covering
resales of the unregistered notes or the registered notes, as the case
may be;
(2) use its reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act; and
(3) keep the shelf registration statement effective until the time when the
notes covered by the shelf registration statement can be sold pursuant to
Rule 144 without any limitations under clauses (c), (e), (f) and (h) of
Rule 144.
DIMAC Corporation will, in the event a shelf registration statement is
filed, among other things:
(1) provide to each holder for whom such shelf registration statement was
filed copies of the prospectus which is a part of the shelf registration
statement;
(2) notify each such holder when the shelf registration statement has become
effective; and
(3) take certain other actions as are required to permit unrestricted
resales of the notes or the registered notes, as the case may be.
A holder selling such unregistered notes or registered notes pursuant to the
shelf registration statement generally will be:
(1) required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers;
(2) required to deliver information to be used in connection with the shelf
registration statement in order to have its notes included in the shelf
registration statement; and
(3) subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to
such holder, including certain indemnification obligations.
If:
(1) by December 21, 1998, neither the registration statement nor the shelf
registration statement has been filed with the SEC;
(2) by April 20, 1999, the exchange offer is not consummated and, if
applicable, the shelf registration statement is not declared effective;
or
(3) after either the registration statement or the shelf registration
statement is declared effective, such registration statement thereafter
ceases to be effective or usable (subject to certain exceptions) in
connection with resales of unregistered notes or registered notes in
accordance with and during the periods specified in the Registration
Rights Agreement
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(each such event referred to in the immediately preceding clauses (1), (2) and
(3) a "registration default"), additional cash interest will accrue on the
applicable unregistered notes and the registered notes from and including the
date on which any such registration default shall occur to but excluding the
date on which all registration defaults have been cured. The rate of the
additional interest will be 0.50% per annum for the first 90-day period
immediately following the occurrence of a registration default, and such rate
will increase by an additional 0.50% per annum with respect to each subsequent
90-day period until all registration defaults have been cured, up to a maximum
additional interest rate of 2.0% per annum. Such additional interest will be
payable on each regular interest payment date and is in addition to any other
interest payable from time to time with respect to the unregistered notes and
the registered notes.
If DIMAC Corporation effects the registered exchange offer, it will be
entitled to close the registered exchange offer 30 days after the commencement
thereof provided that it has accepted all unregistered notes validly tendered in
accordance with the terms of the exchange offer.
THE SUMMARY HEREIN OF CERTAIN PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT
DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, ALL THE PROVISIONS OF THE REGISTRATION RIGHTS
AGREEMENT, A COPY OF WHICH IS AVAILABLE UPON REQUEST TO DIMAC CORPORATION.
CERTAIN COVENANTS
The indenture contains certain covenants including, among others, the
following:
LIMITATION ON INDEBTEDNESS
DIMAC Corporation shall not, and shall not permit any Restricted Subsidiary
to, Incur, directly or indirectly, any Indebtedness; PROVIDED, HOWEVER, that
DIMAC Corporation and any Restricted Subsidiary may Incur Indebtedness if on the
date thereof the Consolidated Coverage Ratio would be greater than 2.00 to 1.00
if such Indebtedness is Incurred prior to October 1, 2001, or 2.25 to 1.00 if
such Indebtedness is Incurred thereafter.
Notwithstanding the first paragraph of this covenant, DIMAC Corporation and
its Restricted Subsidiaries may Incur the following Indebtedness:
(1) Bank Indebtedness provided that the aggregate principal amount of
Indebtedness Incurred pursuant to this clause (1) does not exceed an
amount outstanding at any time equal to $270.0 million less the aggregate
amount of permanent reductions of commitments to extend credit thereunder
and repayments of principal thereof (without duplication of repayments
required as a result of such reductions of commitments);
(2) Indebtedness (a) of DIMAC Corporation owed to and held by any Wholly
Owned Subsidiary and (b) of any Restricted Subsidiary owed to and held by
DIMAC Corporation or any Wholly Owned Subsidiary; PROVIDED, HOWEVER, that
(i) any subsequent issuance or transfer of any Capital Stock which
results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of such Indebtedness (other than to
DIMAC Corporation or a Wholly Owned Subsidiary) shall be deemed, in each
case, to constitute the Incurrence of such Indebtedness by the obligor
thereon and (ii) if DIMAC Corporation is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all obligations with respect to the notes;
(3) Indebtedness represented by the notes, any Indebtedness (other than the
Indebtedness described in clauses (1) and (2) above) outstanding on the
date of the indenture, including any outstanding notes of AmeriComm
Direct Marketing, Inc., and any Refinancing Indebtedness Incurred in
respect of any Indebtedness described in this clause (3) permitted under
the Consolidated Coverage Ratio test stated above;
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(4) Indebtedness represented by Guarantees of Indebtedness Incurred pursuant
to clause (1) above;
(5) Indebtedness under Currency Agreements and Interest Rate Agreements
which are entered into for bona fide hedging purposes of DIMAC
Corporation or its Restricted Subsidiaries as determined in good faith by
the board of directors or senior management of DIMAC Corporation and
correspond in terms of notional amount, duration, currencies and interest
rates, as applicable, to Indebtedness of DIMAC Corporation or the
Restricted Subsidiaries Incurred without violation of the indenture or to
business transactions of DIMAC Corporation or the Restricted Subsidiaries
on customary terms entered into in the ordinary course of business;
(6) Indebtedness of DIMAC Corporation or any of its Restricted Subsidiaries
attributable to Capitalized Lease Obligations, or Incurred to finance the
acquisition, construction or improvement of fixed or capital assets, or
constituting Attributable Indebtedness in respect of Sale/ Leaseback
Transactions, in an aggregate principal amount at any one time
outstanding not in excess of $10.0 million;
(7) Subsidiary guaranties of the Subsidiary Guarantors;
(8) Permitted Seller Paper in an aggregate principal amount at any one time
outstanding not in excess of $25.0 million; and
(9) Indebtedness of DIMAC Corporation or any of the Restricted Subsidiaries,
which may comprise Bank Indebtedness, in an aggregate principal amount at
any time outstanding not in excess of $10.0 million.
Notwithstanding any other provision of this covenant, DIMAC Corporation and
its Restricted Subsidiaries shall not Incur any Indebtedness:
(1) under clauses (1)-(9) above if the proceeds are used, directly or
indirectly, to repay, prepay, redeem, defease, retire, refund or
refinance any Subordinated Obligations of DIMAC Corporation or any
Restricted Subsidiary unless such Indebtedness shall be subordinated to
the notes or the applicable Subsidiary Guaranty, as the case may be, to
at least the same extent as such Subordinated Obligations; or
(2) if such Indebtedness is subordinate or junior in ranking in any respect
to any Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness.
Notwithstanding any other provision of this covenant, DIMAC Corporation and
its Restricted Subsidiaries shall not Incur any Secured Indebtedness which is
not Senior Indebtedness of the obligor unless provision is made to secure the
notes or the applicable Subsidiary Guaranty, as the case may be, equally and
ratably with such Secured Indebtedness for so long as such Secured Indebtedness
is secured by a Lien.
LIMITATION ON RESTRICTED PAYMENTS
DIMAC Corporation shall not, and shall not permit any Restricted Subsidiary,
to directly or indirectly:
(1) declare or pay any dividend or make any distribution on or in respect of
its Capital Stock, including any payment in connection with any merger or
consolidation involving DIMAC Corporation, except:
(a) dividends or distributions payable in its Capital Stock, other than
Disqualified Stock; and
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(b) dividends or distributions payable to DIMAC Corporation or another
Restricted Subsidiary and, if such Restricted Subsidiary is not a
Wholly Owned Subsidiary, to its other stockholders on a pro rata
basis;
(2) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of DIMAC Corporation or any Restricted Subsidiary held by Persons
other than DIMAC Corporation or another Restricted Subsidiary;
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment, any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition); or
(4) make any Investment other than a Permitted Investment in any Person (any
such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement or Investment being referred to
as a "Restricted Payment"), if at the time DIMAC Corporation or such
Restricted Subsidiary makes such Restricted Payment:
(a) a default shall have occurred and be continuing (or would result
therefrom); or
(b) DIMAC Corporation could not Incur at least an additional $1.00 of
Indebtedness under the Consolidated Coverage Ratio test described in
the "Limitation on Indebtedness" section; or
(c) the aggregate amount of such Restricted Payment and all other
Restricted Payments declared (the amount so expended, if other than
in cash, to be determined in good faith by the board of directors,
whose determination shall be conclusive and evidenced by a resolution
of the board of directors) or made subsequent to the Issue Date would
exceed the sum of:
(i) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the
fiscal quarter during which the Issue Date occurs to the end of
the most recent fiscal quarter ending prior to the date of such
Restricted Payment as to which financial results are available,
but in no event more than 135 days prior to the date of such
Restricted Payment, (or, in case such Consolidated Net Income
shall be a deficit, minus 100% of such deficit);
(ii) the aggregate Net Cash Proceeds received by DIMAC Corporation
from the issue or sale of its Capital Stock, other than
Disqualified Stock, or other cash contributions to its capital
subsequent to the Issue Date, other than an issuance or sale to
a Subsidiary of DIMAC Corporation or an employee stock
ownership plan or other trust established by DIMAC Corporation
or any of its Subsidiaries;
(iii) aggregate Net Cash Proceeds from the issue or sale of its
Capital Stock to an employee stock ownership plan or similar
trust; PROVIDED, HOWEVER, that if such plan or trust Incurs any
Indebtedness to or Guaranteed by DIMAC Corporation to finance
the acquisition of such Capital Stock, such aggregate amount
shall be limited to any increase in the Consolidated Net Worth
of DIMAC Corporation resulting from principal repayments made
by such plan or trust with respect to Indebtedness Incurred by
it to finance the purchase of such Capital Stock;
(iv) the amount by which Indebtedness of DIMAC Corporation or its
Subsidiaries is reduced on DIMAC Corporation's balance sheet
upon the conversion or exchange, other than by a Subsidiary,
subsequent to the Issue Date of any Indebtedness of DIMAC
Corporation or its Subsidiaries convertible or exchangeable for
Capital
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Stock, other than Disqualified Stock, of DIMAC Corporation,
less the amount of any cash, or other property, distributed by
DIMAC Corporation or any Subsidiary upon such conversion or
exchange; and
(v) $5.0 million.
The restrictions above shall not prohibit:
(1) any purchase or redemption of Capital Stock or Subordinated Obligations
of DIMAC Corporation made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of DIMAC Corporation
(other than Disqualified Stock and other than Capital Stock issued or
sold to a Subsidiary or an employee stock ownership plan or other trust
established by DIMAC Corporation or any of its Subsidiaries); PROVIDED,
HOWEVER, that (a) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (b) the Net Cash
Proceeds from such sale shall be excluded from clause 4(c)(ii) above;
(2) any purchase or redemption of Subordinated Obligations of DIMAC
Corporation or any Restricted Subsidiary made by exchange for, or out of
the proceeds of the substantially concurrent sale of, Subordinated
Obligations of DIMAC Corporation or any Restricted Subsidiary as the case
may be; PROVIDED, HOWEVER, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments;
(3) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted under the "Asset Sales" section
above; PROVIDED, HOWEVER, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments;
(4) dividends paid within 60 days after the date of declaration if at such
date of declaration such dividend would have complied with this
provision; PROVIDED, HOWEVER, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
(5) dividends to DIMAC Holdings to the extent required to pay non-deferrable
scheduled cash interest when due on the DIMAC Holdings notes; PROVIDED,
HOWEVER, that (a) no Default shall have occurred and be continuing or
would result therefrom, (b) DIMAC Holdings shall immediately apply any
such dividend to make such cash interest payment and (c) immediately
after giving effect to any such dividend, DIMAC Corporation would be able
to Incur an additional $1.00 of Indebtedness under the Consolidated
Coverage Ratio test described in the "Limitation on Indebtedness"
section; PROVIDED FURTHER, HOWEVER, that such dividends shall be excluded
from the calculation of the amount of Restricted Payments;
(6) payment of dividends or other distributions by DIMAC Corporation for the
purposes set forth in clauses (a) and (b) below; PROVIDED, HOWEVER, that
any such dividend or distribution described in clause (a) will be
excluded in the calculation of the amount of Restricted Payments and any
such dividend or distribution described in clause (b) will be included in
the calculation of the amount of Restricted Payments:
(a) in amounts equal to the amounts required for DIMAC Holdings to pay
franchise taxes and other fees required to maintain its legal
existence and provide for audit, accounting, legal and other
operating costs of up to $1.0 million per fiscal year; and
(b) in amounts equal to amounts expended by DIMAC Corporation or DIMAC
Holdings to repurchase Capital Stock of DIMAC Corporation or DIMAC
Holdings owned by employees, including former employees, of DIMAC
Corporation or its Subsidiaries or their assigns, estates and heirs;
PROVIDED FURTHER, HOWEVER, that the aggregate amount paid, loaned or
advanced pursuant to this clause (b) shall not, in the aggregate,
exceed the sum
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of $2.5 million per fiscal year plus any amounts contributed by DIMAC
Holdings to DIMAC Corporation as a result of resales of such
repurchased shares of Capital Stock;
(7) any repurchase of equity interest deemed to occur upon exercise of stock
options if such equity interests represent a portion of the exercise
price of such options; PROVIDED, HOWEVER, that such repurchase shall be
excluded in the calculation of the amount of Restricted Payments;
(8) payments required to be made by DIMAC Corporation and any of its
Subsidiaries under the Tax Sharing Agreement; PROVIDED, HOWEVER, that
such payments shall be excluded in the calculation of the amount of
Restricted Payments; or
(9) payments required in respect of any Permitted Seller Paper; PROVIDED,
HOWEVER, that such payments shall be excluded in the calculation of the
amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES
DIMAC Corporation shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock or
pay any Indebtedness or other obligation owed to DIMAC Corporation or a
Restricted Subsidiary;
(2) make any loans or advances to DIMAC Corporation or its subsidiaries; or
(3) transfer any of its property or assets to DIMAC Corporation or any other
Restricted Subsidiary except:
(a) any encumbrance or restriction provided in an agreement in effect on
the Issue Date, including those arising under the Senior Credit
Documents, the indenture, the indenture pursuant to which the DIMAC
Holdings notes were issued, the notes and the DIMAC Holdings notes;
(b) any encumbrance or restriction with respect to a Restricted
Subsidiary under an agreement relating to any Indebtedness Incurred
by a Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by DIMAC Corporation (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the
funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary was acquired by DIMAC Corporation);
(c) any encumbrance or restriction with respect to a Restricted
Subsidiary provided in an agreement that refinanced Indebtedness
Incurred in an agreement referred to in clauses (a) or (b) above or
this clause (c) or contained in any amendment, supplement or
modification (including an amendment and restatement) to an agreement
referred to in clauses (a) or (b) above or this clause (c); PROVIDED,
HOWEVER, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment taken as a whole are no less
favorable to the holders of the notes in any material respect than
encumbrances and restrictions contained in such agreements;
(d) in the case of clause (3), any encumbrance or restriction (i) that
restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease,
license, or similar contract, (ii) by virtue of any transfer of,
agreement to transfer, option or right with respect to, or Lien on,
any property or assets of DIMAC Corporation or any Restricted
Subsidiary not otherwise prohibited by the indenture, or (iii)
contained in security agreements securing Indebtedness of a
Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security
agreements;
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(e) any such restriction imposed by applicable law;
(f) any restriction with respect to a Restricted Subsidiary imposed in an
agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition; and
(g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described
in clause (3) above on the property so acquired.
LIMITATION ON AFFILIATE TRANSACTIONS
DIMAC Corporation will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into or conduct any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of DIMAC Corporation (an "Affiliate Transaction")
unless:
(1) the terms of such Affiliate Transaction are no less favorable to DIMAC
Corporation or such Restricted Subsidiary, as the case may be, than those
that could be obtained at the time of such transaction in arm's-length
dealings with a Person who is not such an Affiliate;
(2) in the event such Affiliate Transaction involves an aggregate amount in
excess of $1.0 million, the terms of such transaction have been approved
by a majority of the members of the board of directors of DIMAC
Corporation and by a majority of the disinterested members of such board,
if any, and such majority or majorities, as the case may be, determines
that such Affiliate Transaction satisfies the criteria in (1) above; and
(3) in the event such Affiliate Transaction involves an aggregate amount in
excess of $5.0 million, DIMAC Corporation has received a written opinion
from an independent investment banking firm of nationally recognized
standing that such Affiliate Transaction is fair to DIMAC Corporation or
such Restricted Subsidiary, as the case may be, from a financial point of
view.
Notwithstanding the preceding restrictions, the following Affiliate
Transactions are not prohibited:
(1) any Restricted Payment permitted to be paid under the terms described in
the "Limitation on Restricted Payments" section, and in the case of
Permitted Investments, only those described in clauses (5), (6) and (9)
of the definition of Permitted Investments;
(2) the performance of DIMAC Corporation's or Restricted Subsidiary's
obligations under any employment contract, collective bargaining
agreement, employee benefit plan, related trust agreement or any other
similar arrangement entered into in the ordinary course of business;
(3) payment of compensation to, and indemnity provided on behalf of,
employees, officers, directors or consultants (excluding the Management
Services Agreement) in the ordinary course of business;
(4) maintenance in the ordinary course of business of benefit programs or
arrangements for employees, officers or directors, including vacation
plans, health and life insurance plans, deferred compensation plans, and
retirement or savings plans and similar plans;
(5) any transaction between DIMAC Corporation and a Wholly Owned Subsidiary
or between Wholly Owned Subsidiaries;
(6) the payment of fees and expenses under the Management Services Agreement
as in effect on the Issue Date;
(7) payments by DIMAC Corporation and any of its Restricted Subsidiaries
under the Tax Sharing Agreement; or
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(8) the issuance or sale of any Capital Stock, other than Disqualified
Stock, of DIMAC Corporation.
LIMITATION ON SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES
DIMAC Corporation will not sell or otherwise dispose of any Capital Stock of
a Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell or otherwise dispose of any of its Capital Stock
except:
(1) to DIMAC Corporation or a Wholly Owned Subsidiary;
(2) directors' qualifying shares;
(3) if, immediately after giving effect to such issuance, sale or other
disposition, neither DIMAC Corporation nor any of its Subsidiaries own
any Capital Stock of such Restricted Subsidiary; or
(4) if, immediately after giving effect to such issuance, sale or other
disposition, such Restricted Subsidiary would no longer constitute a
Restricted Subsidiary and any investment in such Person remaining after
giving effect thereto would have been permitted to be made under the
covenant described in the "Limitation on Restricted Payments" section if
made on the date of such issuance, sale or other disposition.
SEC REPORTS
Notwithstanding that DIMAC Corporation may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, DIMAC Corporation shall
(1) file with the SEC; and
(2) provide to the Trustee and the holders at their addresses as set forth
in the register of notes (a) within 15 days after such reports are filed,
if DIMAC Corporation is subject to the reporting requirements of Section
13 or 15(d) of the Exchange Act, or (b) concurrently with the filing of
such reports, if DIMAC Corporation is not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the annual
reports and the information, documents and other reports which are
otherwise required pursuant to Sections 13 and 15(d) of the Exchange Act.
In addition, following the registration of the common stock of DIMAC
Corporation pursuant to Section 12(b) or 12(g) of the Exchange Act, DIMAC
Corporation shall furnish to the Trustee and the holders, promptly upon
their becoming available, copies of DIMAC Corporation's annual report to
stockholders and any other information provided by DIMAC Corporation to
its public stockholders generally.
So long as it is required for an offer or sale of the notes to qualify for
an exemption under Rule 144A, DIMAC Corporation shall, upon request provide the
information required by clause (d)(4) thereunder to each holder and to each
beneficial owner and prospective purchaser of notes identified by any holder of
notes.
FUTURE GUARANTORS
DIMAC Corporation shall cause each domestic Restricted Subsidiary that
Incurs any Senior Indebtedness to execute and deliver to the Trustee a Guaranty
Agreement pursuant to which such Restricted Subsidiary will Guarantee payment of
the notes on the terms and conditions set forth in the indenture.
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LIMITATION ON LINES OF BUSINESS
DIMAC Corporation will not, and will not permit any Restricted Subsidiary
to, engage in any business, other than the business engaged in by DIMAC
Corporation on the Issue Date and such other business activities which are
incidental or related thereto.
MERGER AND CONSOLIDATION
DIMAC Corporation shall not consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person,
unless:
(1) the resulting, surviving or transferee Person (the "Successor Company")
is a corporation organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company if not DIMAC Corporation expressly assumes, by
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all the obligations of DIMAC Corporation
under the notes and the indenture;
(2) immediately after giving effect to such transaction, and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Successor Company as a result of such transaction as
having been Incurred by the Successor Company or such Subsidiary at the
time of such transaction, no default shall have occurred and be
continuing;
(3) immediately after giving effect to such transaction, the Successor
Company would be able to Incur at least an additional $1.00 of
Indebtedness under the Consolidated Coverage Ratio test described in the
"Limitation on Indebtedness" section;
(4) immediately after giving effect to such transaction, the Successor
Company will have a Consolidated Net Worth in an amount which is not less
than the Consolidated Net Worth of DIMAC Corporation immediately prior to
such transaction; and
(5) DIMAC Corporation shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and such
supplemental indenture, if any, comply with the indenture.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of DIMAC Corporation under the indenture, but the
predecessor DIMAC Corporation in the case of a lease of all or substantially all
its assets will not be released from the obligation to pay the principal of and
interest on the notes.
Notwithstanding clauses (2), (3) and (4) above, any Restricted Subsidiary of
DIMAC Corporation may consolidate with, merge into or transfer all or part of
its properties and assets to DIMAC Corporation or another Wholly Owned
Subsidiary of DIMAC Corporation. In addition, DIMAC Corporation may merge with
an Affiliate incorporated solely for the purpose of reincorporating DIMAC
Corporation in another jurisdiction to realize tax or other benefits.
DIMAC Corporation will not permit any Subsidiary Guarantor to consolidate
with or merge with or into, or convey, transfer or lease, in one transaction or
a series of transactions, all or substantially all of its assets to any Person,
other than DIMAC Corporation or a Subsidiary Guarantor, unless:
(1) the resulting, surviving or transferee Person (if not such Subsidiary)
shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and such
Person shall expressly assume, by a Guaranty Agreement, in a form
satisfactory to the Trustee, all the obligations of such Subsidiary, if
any, under its Subsidiary Guaranty;
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(2) immediately after giving effect to such transaction or transactions on a
pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result
of such transaction as having been issued by such Person at the time of
such transaction), no default shall have occurred and be continuing; and
(3) DIMAC Corporation delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and such Guaranty Agreement, if any,
complies with the indenture; PROVIDED, HOWEVER, that the foregoing shall
not be applicable if such consolidation, merger, conveyance, transfer or
lease is in compliance with the covenants described in the "--Repurchase
at the Option of Holders--Asset Sales" section and the Subsidiary
Guarantor will be released from its obligations under the Subsidiary
Guaranty as described in the "Guaranties" section.
EVENTS OF DEFAULT
An event of default is defined in the indenture as:
(1) a default in any payment of interest on any note when due, continued for
30 days;
(2) a default in the payment of principal of any note when due at its Stated
Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise;
(3) the failure by DIMAC Corporation to comply with its obligations
described under the "Certain Covenants--Merger and Consolidation" section
above;
(4) the failure by DIMAC Corporation to comply for 30 days after notice with
any of its obligations under the covenants described in the "Change of
Control" section or under the covenants described under "Certain
Covenants" above (in each case, other than (a) a failure to purchase
notes which shall constitute an event of default under clause (2) above
or (b) a failure to comply with the covenant described under "Certain
Covenants--Merger and Consolidation" which shall constitute an event of
default under clause (3) above);
(5) the failure by DIMAC Corporation to comply for 60 days after notice with
its other agreements contained in the indenture;
(6) Indebtedness of DIMAC Corporation or any Restricted Subsidiary is not
paid within any applicable grace period after final maturity or is
accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $3.0 million
and such failure to pay shall not have been cured or such acceleration
rescinded within a 10-day period (the "cross acceleration provision");
(7) certain events of bankruptcy, insolvency or reorganization of DIMAC
Corporation or a Significant Subsidiary (the "bankruptcy provisions");
(8) any judgment or decree for the payment of money in excess of $3.0
million, not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage, is rendered
against DIMAC Corporation or a Significant Subsidiary and such judgment
or decree shall remain undischarged or unstayed for a period of 60 days
after such judgment becomes final and nonappealable (the "judgment
default provision"); or
(9) the failure of any Subsidiary Guaranty to be in full force and effect,
except as contemplated by the terms thereof, or the denial or
disaffirmation by any Subsidiary Guarantor of its obligations under its
Subsidiary Guaranty if such default continues for 10 days.
However, a default under clauses (4) and (5) above will not constitute an
event of default until the Trustee or the holders of at least 25% in principal
amount of the outstanding notes notify DIMAC
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Corporation of the default and DIMAC Corporation does not cure such default
within the time specified in clauses (4) and (5) above after receipt of such
notice.
If an event of default occurs and is continuing, the Trustee or the holders
of at least 25% in principal amount of the outstanding notes by notice to DIMAC
Corporation may declare the principal of and accrued and unpaid interest on all
the notes to be due and payable. Upon such a declaration, such principal and
accrued and unpaid interest shall be due and payable immediately. If an event of
default relating to certain events of bankruptcy, insolvency or reorganization
of DIMAC Corporation occurs and is continuing, the principal of and accrued and
unpaid interest on all the notes will become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holders.
Under certain circumstances, the holders of a majority in principal amount of
the outstanding notes may rescind any such acceleration with respect to the
notes and its consequences.
Subject to the provisions of the indenture, if an event of default occurs
and is continuing, the Trustee will be under no obligation to exercise any of
the rights or powers under the indenture at the request or direction of any of
the holders unless such holders have offered to the Trustee reasonable indemnity
or security against any loss, liability or expense. Except to enforce the right
to receive payment of principal, premium, if any, or interest when due, no
holder may pursue any remedy with respect to the indenture or the notes unless:
(1) such holder has previously given the Trustee notice that an event of
default is continuing;
(2) holders of at least 25% in principal amount of the outstanding notes
have requested the Trustee to pursue the remedy;
(3) such holders have offered the Trustee reasonable security or indemnity
against any loss, liability or expense;
(4) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity; and
(5) the holders of a majority in principal amount of the outstanding notes
have not given the Trustee a direction that, in the opinion of the
Trustee, is inconsistent with such request within such 60 day period.
Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder or that would involve the Trustee in personal liability. Prior
to taking any action under the indenture, the Trustee shall be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The indenture provides that if a default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder notice of the default
within 90 days after it occurs. Except in the case of a default in the payment
of principal of, premium, if any, or interest on any note, the Trustee may
withhold notice if and so long as a committee of its Trust officers in good
faith determines that withholding notice is in the interests of the holders of
the notes. In addition, DIMAC Corporation is required to deliver to the Trustee,
within 120 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any default that occurred during the
previous year. DIMAC Corporation also is required to deliver written notice to
the Trustee within 30 days after the occurrence of any events which would
constitute certain defaults, their status and what action DIMAC Corporation is
taking or proposes to take.
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AMENDMENTS AND WAIVERS
Subject to certain exceptions, the indenture may be amended with the consent
of the holders of a majority in principal amount of the notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the holders of a majority in principal amount of the notes then
outstanding. However, without the consent of each holder of an outstanding note
affected, no amendment may, among other things:
(1) reduce the amount of notes whose holders must consent to an amendment;
(2) reduce the rate of or extend the time for payment of interest on any
note;
(3) reduce the principal of or extend the Stated Maturity of any note;
(4) reduce the premium payable upon the redemption or repurchase of any note
or change the time at which any note may be redeemed as described under
"Optional Redemption" above;
(5) make any note payable in money other than that stated in the note;
(6) make any change to the subordination provisions of the indenture that
adversely affects the rights of any holder of the notes;
(7) impair the right of any holder to receive payment of principal of and
interest on such holder's notes on or after the due dates or to institute
suit for the enforcement of any payment on or with respect to such
holder's notes;
(8) make any change in the amendment provisions which require each holder's
consent or in the waiver provisions; or
(9) make any change in any Subsidiary Guaranty that would adversely affect
the noteholders.
Without the consent of any holder, DIMAC Corporation and the Trustee may
amend the indenture to:
(1) cure any ambiguity, omission, defect or inconsistency;
(2) to provide for the assumption by a successor corporation of the
obligations of DIMAC Corporation under the indenture;
(3) to provide for uncertificated notes in addition to or in place of
certificated notes, provided that the uncertificated notes are issued in
registered form for purposes of Section 163(f) of the Internal Revenue
Code, or in a manner such that the uncertificated notes are described in
Section 163(f)(2)(B) of the Internal Revenue Code;
(4) to add Guarantees with respect to the notes;
(5) to secure the notes;
(6) to add to the covenants of DIMAC Corporation for the benefit of the
noteholders or to surrender any right or power conferred upon DIMAC
Corporation; or
(7) to make any change that does not adversely affect the rights of any
holder or to comply with any requirement of the SEC in connection with
the qualification of the indenture under the Trust Indenture Act.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Indebtedness
of DIMAC Corporation or the Subsidiary Guarantors then outstanding unless the
holders of such Senior Indebtedness, or any group or representative thereof
authorized to give a consent, consent to such change.
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The consent of the holders is not necessary under the indenture to approve
the particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
After an amendment under the indenture becomes effective, DIMAC Corporation
is required to mail to the holders a notice briefly describing such amendment.
However, the failure to give such notice to all the holders, or any defect
therein, will not impair or affect the validity of the amendment.
DEFEASANCE
DIMAC Corporation at any time may terminate all of its obligations under the
notes and the indenture ("legal defeasance"), except for certain obligations,
including those regarding the defeasance trust and obligations to register the
transfer or exchange of the notes, to replace mutilated, destroyed, lost or
stolen notes and to maintain a registrar and paying agent in respect of the
notes. DIMAC Corporation at any time may terminate its obligations described in
the "Change of Control" section and under the covenants described under "Certain
Covenants" (other than "Merger and Consolidation"), the operation of the cross
acceleration provision, the bankruptcy provisions with respect to Significant
Subsidiaries and the judgment default provision described under "Events of
Default" above and the limitations contained in clauses (3) and (4) under the
first paragraph of "--Certain Covenants--Merger and Consolidation" above
("covenant defeasance").
DIMAC Corporation may exercise its legal defeasance option despite its prior
exercise of its covenant defeasance option. If DIMAC Corporation exercises its
legal defeasance option, payment of the notes may not be accelerated because of
an event of default with respect thereto. If DIMAC Corporation exercises its
covenant defeasance option, payment of the notes may not be accelerated because
of an event of default specified in clause (4), (6), (7) (with respect only to
Significant Subsidiaries), (8) or (9) under "Events of Default" above or because
of the failure of DIMAC Corporation to comply with clause (3) and (4) of the
first paragraph under "Certain Covenants--Merger and Consolidation" above. If
DIMAC Corporation exercises its legal defeasance option or its covenant
defeasance option, each Subsidiary Guarantor will be released from all of its
obligations with respect to its Subsidiary Guaranty.
In order to exercise either defeasance option, DIMAC Corporation must
irrevocably deposit in trust (the "defeasance trust") with the Trustee money or
U.S. Government Obligations for the payment of principal, premium, if any, and
interest on the notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such deposit
and defeasance and will be subject to Federal income tax on the same amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred, and, in the case of legal defeasance
only, such Opinion of Counsel must be based on a ruling of the Internal Revenue
Service or other change in applicable Federal income tax law.
CONCERNING THE TRUSTEE
Wilmington Trust Company is to be the Trustee under the indenture and has
been appointed by DIMAC Corporation as Registrar and Paying Agent with regard to
the notes.
The indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of DIMAC Corporation, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; PROVIDED, HOWEVER, if it acquires any conflicting interest it must
either eliminate such conflict within 90 days, apply to the SEC for permission
to continue or resign.
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The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The indenture provides that if an event of default occurs and is not
cured, the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the indenture at the request of any holder of notes,
unless such holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the indenture.
GOVERNING LAW
The indenture provides that it and the notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Acquisition Closing Date" means June 26, 1998.
"Additional Assets" means:
(1) any property or assets (other than Indebtedness and Capital Stock) to be
used by DIMAC Corporation or a Restricted Subsidiary in a Related
Business;
(2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by DIMAC Corporation or
another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any Person that at
such time is a Restricted Subsidiary;
PROVIDED, HOWEVER, that, in the case of clauses (2) and (3), such Restricted
Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means:
(1) any other Person, directly or indirectly, controlling or controlled by
or under direct or indirect common control with such specified Person; or
(2) any Person who is a director or officer (a) of such Person, (b) of any
Subsidiary of such Person or (c) of any Person described in clause (1)
above.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants described
under "--Repurchase at the Option of Holders--Asset Sales", "--Limitations on
Restricted Payments" and "--Limitation on Affiliate Transactions" only,
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of the Voting Stock, on a fully diluted basis, of
DIMAC Corporation or of rights or warrants to purchase such Voting Stock,
whether or not currently exercisable, and any Person who would be an Affiliate
of any such beneficial owner pursuant to the first sentence hereof.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of a
Restricted Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this definition as a
"disposition") by DIMAC Corporation
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or any Restricted Subsidiary, including any disposition by means of a merger,
consolidation or similar transaction, other than:
(1) a disposition by a Restricted Subsidiary to DIMAC Corporation or by
DIMAC Corporation or a Restricted Subsidiary to a Wholly Owned
Subsidiary;
(2) a disposition of inventory or Temporary Cash Investments in the ordinary
course of business;
(3) a disposition of obsolete equipment or equipment that is no longer
useful in the conduct of the business of DIMAC Corporation or the
applicable Restricted Subsidiary and that is disposed of in each case in
the ordinary course of business;
(4) the sale of other assets so long as the fair market value of the assets
disposed of pursuant to this clause (4) does not exceed $1.0 million in
the aggregate in any fiscal year and $5.0 million in the aggregate prior
to the maturity date of the notes;
(5) for the purposes of the covenant described under "--Certain
Covenants--Limitation on Sales of Assets" only, a disposition subject to
the covenant described under "--Limitation on Restricted Payments"; and
(6) the disposition of all or substantially all of the assets of DIMAC
Corporation in the manner permitted pursuant to the provisions described
under "--Certain Covenants--Merger and Consolidation" or any disposition
that constitutes a Change of Control pursuant to the indenture.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction, including any period for which such
lease has been extended.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing:
(1) the sum of the products of the numbers of years from the date of
determination to the dates of each successive scheduled principal payment
of such Indebtedness or redemption or similar payment with respect to
Preferred Stock multiplied by the amount of such payment by
(2) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Documents and any Indebtedness that is incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) Indebtedness under such Senior Credit Documents
including Indebtedness that refinances such Indebtedness, as amended from time
to time, including principal, premium (if any), interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to DIMAC Corporation whether or not a claim for
postfiling interest is allowed in such proceedings), fees, charges, expenses,
reimbursement obligations, guarantees and all other amounts payable thereunder
or in respect thereof, including, without limitation, cash collateralization of
letters of credit.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in, however designated, equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the
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amount of Indebtedness represented by such obligation shall be the capitalized
amount of such obligation determined in accordance with GAAP and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease prior to the first date such lease may be terminated
without penalty.
"Cash Equivalents" means:
(1) securities issued or directly and fully guaranteed or insured by the
United States Government, or any agency or instrumentality thereof,
having maturities of not more than one year from the date of acquisition;
(2) marketable general obligations issued by any state of the United States
of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition thereof, having a
credit rating of "A" or better from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.;
(3) certificates of deposit, time deposits, eurodollar time deposits,
overnight bank deposits or bankers' acceptances having maturities of not
more than one year from the date of acquisition thereof issued by any
domestic commercial bank the long-term debt of which is rated at the time
of acquisition thereof at least "A" or the equivalent thereof by Standard
& Poor's Ratings Group, or "A" or the equivalent thereof by Moody's
Investors Service, Inc., and having capital and surplus in excess of
$500.0 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (1), (2) and (3)
above entered into with any bank meeting the qualifications specified in
clause (3) above;
(5) commercial paper rated at the time of acquisition thereof at least "A-2"
or the equivalent thereof by Standard & Poor's Ratings Group or "P-2" or
the equivalent thereof by Moody's Investors Service, Inc., or carrying an
equivalent rating by a nationally recognized rating agency, if both of
the two named rating agencies cease publishing ratings of investments,
and in either case maturing within 270 days after the date of acquisition
thereof; and
(6) interests in any investment company which invests solely in instruments
of the type specified in clauses (1) through (5) above.
"Change of Control" means the occurrence of any of the following:
(1) prior to the first public offering of Voting Stock of DIMAC Corporation
or DIMAC Holdings, as the case may be, the Permitted Holders cease to be
the "beneficial owner" (as defined in rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of majority voting power of the
Voting Stock of DIMAC Corporation, whether as a result of issuance of
securities of DIMAC Corporation or DIMAC Holdings, as the case may be,
any merger, consolidation, liquidation or dissolution of DIMAC
Corporation or DIMAC Holdings, as the case may be, any direct or indirect
transfer of securities by any Permitted Holder or otherwise. For purposes
of this clause (1) and clause (2) below, the Permitted Holders will be
deemed to beneficially own any Voting Stock of a Person (the "specified
corporation") held by any other Person (the "parent corporation") so long
as the Permitted Holders beneficially own, as so defined, directly or
indirectly, a majority of the voting power of the Voting Stock of the
parent corporation;
(2) following the first public offering of Voting Stock of DIMAC Corporation
or DIMAC Holdings, as the case may be, any "person" (as such term is used
in Section 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in
clause (1) above, except that a Person shall be deemed to have
"beneficial
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ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of DIMAC Corporation or DIMAC Holdings, as the
case may be; PROVIDED, HOWEVER, that the Permitted Holders beneficially
own, as defined in clause (1) above, directly or indirectly, in the
aggregate a lesser percentage of the total voting power of the Voting
Stock of DIMAC Corporation or DIMAC Holdings, as the case may be, than
such other person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of
the board of directors of DIMAC Corporation or DIMAC Holdings, as the
case may be; for purposes of this clause (2), such other person shall be
deemed to beneficially own any Voting Stock of a specified corporation
held by a parent corporation, if such other person "beneficially owns"
(as defined in this clause (2)), directly or indirectly, more than 35% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (1) above),
directly or indirectly, in the aggregate a lesser percentage of the
voting power of the Voting Stock of such parent corporation and do not
have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of such
parent corporation);
(3) individuals who on the Issue Date constituted the board of directors,
together with any new directors whose election by such board of directors
or whose nomination for election by the shareholders of DIMAC Corporation
was approved by a vote of a majority of the directors of DIMAC
Corporation then still in office who were either directors on the Issue
Date or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the board of
directors then in office; or
(4) the merger or consolidation of DIMAC Corporation with or into another
Person or the merger of another Person with or into DIMAC Corporation, or
the sale of all or substantially all the assets of DIMAC Corporation to
another Person, other than a Person that is controlled by the Permitted
Holders, and, in the case of any such merger or consolidation, the
securities of DIMAC Corporation that are outstanding immediately prior to
such transaction and which represent 100% of the aggregate voting power
of the Voting Stock of DIMAC Corporation are changed into or exchanged
for cash, securities or property, unless pursuant to such transaction
such securities are changed into or exchanged for, in addition to any
other consideration, securities of the surviving corporation that
represent immediately after such transaction, at least a majority of the
aggregate voting power of the Voting Stock of the surviving corporation.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus, to the extent deducted in calculating such Consolidated
Net Income:
(1) income tax expense;
(2) Consolidated Interest Expense;
(3) depreciation expense;
(4) amortization expense, in each case for such period;
(5) other noncash charges reducing Consolidated Net Income (excluding any
such noncash charge to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a
prepaid cash expense that was paid in a prior period), in each case for
such period less, to the extent not deducted in calculating such
Consolidated Net Income; and
(6) the aggregate amount of contingent and "earnout" payments in respect of
any acquisition by DIMAC Corporation or any Restricted Subsidiary that
are paid in cash during such period.
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Despite the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent, and in the same proportion, that the
net income of such Restricted Subsidiary was included in calculating
Consolidated Net Income and only if a corresponding amount would be permitted at
the date of determination to be dividend to DIMAC Corporation by such Restricted
Subsidiary without prior approval, that has not been obtained, pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to such
Restricted Subsidiary or its stockholders.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (a) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination to (b) Consolidated Interest Expense for such four fiscal
quarters; PROVIDED, HOWEVER, Consolidated Cash Flow and Consolidated Interest
Expense shall be calculated using the pro forma consolidated statements of
operations of DIMAC Corporation contained in this prospectus, which pro forma
statements of operations shall give effect to the acquisition of AmeriComm
Holdings, Inc. and DIMAC Marketing Corporation and their respective subsidiaries
as if they occurred at the beginning of such period; PROVIDED, HOWEVER, that
(1) if DIMAC Corporation or any of its Restricted Subsidiaries has incurred
any Indebtedness since the beginning of such period that remains
outstanding or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or
both, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving effect on a pro forma basis to
such Indebtedness as if such Indebtedness had been Incurred on the first
day of such period and the discharge of any other Indebtedness repaid,
repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of
such period;
(2) if DIMAC Corporation or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness since the
beginning of such period or if any Indebtedness is to be repaid,
repurchased, defeased or otherwise discharged, in each case other than
Indebtedness Incurred under any revolving credit facility unless such
Indebtedness has been permanently repaid and has not been replaced or the
related commitment permanently reduced, on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage Ratio,
Consolidated Cash Flow and Consolidated Interest Expense for such period
shall be calculated on a pro forma basis as if such repayment,
repurchase, defeasance or discharge had occurred on the first day of such
period and as if DIMAC Corporation or such Restricted Subsidiary has not
earned the interest income actually earned during such period in respect
of cash or Temporary Cash Investments used to repay, repurchase, defease
or otherwise discharge such Indebtedness;
(3) if since the beginning of such period DIMAC Corporation or any of its
Restricted Subsidiaries shall have made any Asset Disposition,
Consolidated Cash Flow for such period shall be reduced by an amount
equal to the Consolidated Cash Flow, if positive, attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow, if negative,
attributable thereto for such period, and Consolidated Interest Expense
for such period shall be reduced by an amount equal to the Consolidated
Interest Expense attributable to any Indebtedness of DIMAC Corporation or
any of its Restricted Subsidiaries repaid, repurchased, defeased or
otherwise discharged with respect to DIMAC Corporation and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for
such period (or, if the Capital Stock of any Restricted Subsidiary is
sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the
extent DIMAC Corporation and its continuing Restricted Subsidiaries are
no longer liable for such Indebtedness after such sale);
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(4) if since the beginning of such period DIMAC Corporation or any of its
Restricted Subsidiaries, by merger or otherwise, shall have made an
Investment in any Restricted Subsidiary, or any Person which becomes a
Restricted Subsidiary, or an acquisition of assets, including any
Investment in a Restricted Subsidiary or any acquisition of assets
occurring in connection with a transaction causing a calculation to be
made hereunder, which constitutes all or substantially all of an
operating unit of a business, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto (including the Incurrence of any Indebtedness and
including the pro forma expenses and cost reductions calculated on a
basis consistent with Regulation S-X of the Securities Act, it being
understood that all cost reductions set forth in note (c) to the
unaudited pro forma consolidated statements of operations contained in
this prospectus shall be deemed to be calculated on a basis consistent
with Regulation S-X) as if such Investment or acquisition occurred on the
first day of such period; and
(5) if since the beginning of such period any Person that subsequently
became a Restricted Subsidiary or was merged with or into DIMAC
Corporation or any Restricted Subsidiary since the beginning of such
period shall have made any Asset Disposition or any Investment or
acquisition of assets that would have required an adjustment pursuant to
clause (3) or (4) above if made by DIMAC Corporation or a Restricted
Subsidiary during such period, Consolidated Cash Flow and Consolidated
Interest Expense for such period shall be calculated after giving pro
forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of
this definition, whenever pro forma effect is to be given to an
acquisition of assets, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations
shall be determined in good faith by a responsible financial or
accounting Officer of DIMAC Corporation. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the
interest expense on such Indebtedness shall be calculated as if the rate
in effect on the date of determination had been the applicable rate for
the entire period, taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months.
"Consolidated Interest Expense" means, for any period, the total interest
expense of DIMAC Corporation and its Restricted Subsidiaries, plus, to the
extent not included in such interest expense but Incurred by DIMAC Corporation
or its Restricted Subsidiaries:
(1) interest expense attributable to Capitalized Lease Obligations and
imputed interest with respect to Attributable Indebtedness;
(2) amortization of debt discount and debt issuance cost, other than those
debt discounts and debt issuance costs incurred on June 26, 1998, the
Issue Date and the date of issuance of any other notes under the
indenture;
(3) capitalized interest;
(4) noncash interest expense;
(5) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing;
(6) interest actually paid by DIMAC Corporation or any such Restricted
Subsidiary under any Guarantee of Indebtedness or other obligation of any
other Person;
(7) net costs associated with Currency Agreements and Interest Rate
Agreements, including amortization of fees;
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(8) the product of (a) all Preferred Stock dividends in respect of all
Preferred Stock of Restricted Subsidiaries of DIMAC Corporation and
Disqualified Stock of DIMAC Corporation held by Persons other than DIMAC
Corporation or a Wholly Owned Subsidiary multiplied by (b) a fraction,
the numerator of which is one and the denominator of which is one minus
the then current combined Federal, state and local statutory tax rate of
DIMAC Corporation, expressed as a decimal, in each case, determined on a
consolidated basis in accordance with GAAP; and
(9) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to
pay interest or fees to any Person, other than DIMAC Corporation, in
connection with Indebtedness Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
DIMAC Corporation and its consolidated Restricted Subsidiaries; PROVIDED,
HOWEVER, that there shall not be included in such Consolidated Net Income:
(1) any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (a) subject to the limitations contained in
clause (4) below, DIMAC Corporation's equity in the net income of any
such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Person during such period to DIMAC Corporation or a Restricted Subsidiary
as a dividend or other distribution, subject, in the case of a dividend
or other distribution to a Restricted Subsidiary, to the limitations
contained in clause (3) below and (b) DIMAC Corporation's equity in a net
loss of any such Person for such period shall be included in determining
such Consolidated Net Income;
(2) any net income (loss) of any person acquired by DIMAC Corporation or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition;
(3) any net income (loss) of any Restricted Subsidiary, other than AmeriComm
Holdings, Inc. or AmeriComm Direct Marketing, Inc. for the period prior
to the Issue Date, if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or the
making of distributions by such Restricted Subsidiary, directly or
indirectly, to DIMAC Corporation, except that (a) subject to the
limitations contained in (4) below, DIMAC Corporation's equity in the net
income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of
cash that could have been distributed by such Restricted Subsidiary
during such period to DIMAC Corporation or another Restricted Subsidiary
as a dividend (subject, in the case of a dividend that could have been
made to another Restricted Subsidiary, to the limitation contained in
this clause) and (b) DIMAC Corporation's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in determining
such Consolidated Net Income;
(4) any gain, but not loss, realized upon the sale or other disposition of
any assets of DIMAC Corporation or its consolidated Subsidiaries,
including pursuant to any Sale/Leaseback Transaction, which are not sold
or otherwise disposed of in the ordinary course of business and any gain
or loss realized upon the sale or other disposition of any Capital Stock
of any Person;
(5) any extraordinary gain or loss; and
(6) the cumulative effect of a change in accounting principles.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of DIMAC Corporation and its consolidated subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of DIMAC Corporation ending prior to the taking of any action for
the purpose of which the determination is being made as
(1) the par or stated value of all outstanding Capital Stock of DIMAC
Corporation plus
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(2) paid-in capital or capital surplus relating to such Capital Stock plus
(3) any retained earnings or earned surplus less (a) any accumulated deficit
and (b) any amounts attributable to Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Designated Senior Indebtedness" means:
(1) the Bank Indebtedness; and
(2) after repayment in full of the Bank Indebtedness, any other Senior
Indebtedness of DIMAC Corporation which, at the date of determination,
has an aggregate principal amount outstanding of, or under which, at the
date of determination, the holders thereof are committed to lend up to,
at least $25.0 million and is specifically designated by DIMAC
Corporation in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of the
indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by its terms, or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of holder, or upon the
happening of any event:
(1) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
(2) is convertible or exchangeable at the option of the holder for
Indebtedness or Disqualified Stock; or
(3) is redeemable at the option of the holder thereof, in whole or in part,
in each case on or prior to 123 days after the Stated Maturity of the
notes.
"Equity Offering" means any public or private sales of equity securities,
excluding Disqualified Stock, of DIMAC Corporation or DIMAC Holdings.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in:
(1) the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants;
(2) statements and pronouncements of the Financial Accounting Standards
Board; and
(3) such other statements by such other entity as approved by a significant
segment of the accounting profession. All ratios and computations based
on GAAP contained in the indenture shall be computed in conformity with
GAAP as in effect on the Issue Date.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation of any other Person,
whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise;
or
(2) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee
against loss in respect thereof, in whole or in part;
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PROVIDED, HOWEVER, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guaranty Agreement" means a supplemental indenture under which a Subsidiary
Guarantor guarantees DIMAC Corporation's obligations described in the notes and
the indenture.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary, whether by merger,
consolidation, acquisition or otherwise, shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The accretion of principal of a
non-interest bearing or other discount security shall not be deemed the
Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person on any date of
determination, without duplication:
(1) the principal of and premium, if any, in respect of indebtedness of such
Person for borrowed money;
(2) the principal of and premium, if any, in respect of obligations of such
Person evidenced by bonds, debentures, notes or other similar
instruments;
(3) all obligations of such Person in respect of letters of credit or other
similar instruments including reimbursement obligations with respect
thereto (other than obligations with respect to letters of credit
securing obligations (other than obligations described in clauses (1),
(2) and (4)) entered into in the ordinary course of business of such
Person to the extent that such letters of credit are not drawn upon or,
if and to the extent drawn upon, such drawing is reimbursed no later than
the third business day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit);
(4) all obligations of such Person to pay the deferred and unpaid purchase
price of property or services (other than (a) Trade Payables and accrued
expenses incurred in the ordinary course of business and (b) contingent
and "earnout" payments in respect of any acquisition by DIMAC Corporation
or any Restricted Subsidiary so long as, following the occurrence of the
contingency giving rise to the obligation connected therewith, payment
thereof is made when due), which purchase price is due more than six
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services;
(5) all Capitalized Lease Obligations and all Attributable Indebtedness of
such Person;
(6) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, HOWEVER, that the amount of Indebtedness of such Person shall
be the lesser of (a) the fair market value of such asset at such date of
determination and (b) the amount of such Indebtedness of such other
Persons;
(7) all Indebtedness of other Persons to the extent Guaranteed by such
Person;
(8) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of DIMAC Corporation, any Preferred Stock,
but excluding, in each case, any accrued dividends; and
(9) to the extent not otherwise included in this definition, obligations of
such Person under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above as such
amount would be reflected on a balance sheet in accordance with GAAP and the
maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date.
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"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement, but excluding
any debt or extension of credit represented by a bank deposit other than a time
deposit) or capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account or
use of others), or any purchase or acquisition of Capital Stock, Indebtedness or
other similar instruments issued by such Person. For purposes of the definition
of "Unrestricted Subsidiary", the definition of "Restricted Payment" and the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments":
(1) "Investment" shall include the portion, proportionate to DIMAC
Corporation's equity interest in such Subsidiary, of the fair market
value of the net assets of any Subsidiary of DIMAC Corporation at the
time that such Subsidiary is designated an Unrestricted Subsidiary;
PROVIDED, HOWEVER, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, DIMAC Corporation shall be deemed to continue to
have a permanent "Investment" in an Unrestricted Subsidiary equal to an
amount, if positive, equal to (a) DIMAC Corporation's "Investment" in
such Subsidiary at the time of such redesignation less (b) the portion,
proportionate to DIMAC Corporation's equity interest in such Subsidiary,
of the fair market value of the net assets of such Subsidiary at the time
of such redesignation; and
(2) any property transferred to or from an Unrestricted Subsidiary shall be
valued at its fair market value at the time of such transfer, in each
case as determined in good faith by the board of directors.
"Issue Date" means the date on which the note were originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind including any conditional sale or other title retention
agreement or lease in the nature thereof.
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom, including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form, in each case net of:
(1) all legal, title and recording tax expenses, commissions and other fees
and expenses incurred, and all Federal, state, foreign and local taxes
required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition;
(2) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any
Lien upon such assets, or which must by its terms, or in order to obtain
a necessary consent to such Asset Disposition, or by applicable law, be
repaid out of the proceeds from such Asset Disposition;
(3) all distributions and other payments required to be made to any Person
owning a beneficial interest in assets subject to sale or minority
interest holders in Subsidiaries or joint ventures as a result of such
Asset Disposition;
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(4) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with
the assets disposed of in such Asset Disposition and retained by DIMAC
Corporation or any Restricted Subsidiary of DIMAC Corporation after such
Asset Disposition; and
(5) any portion of the purchase price from an Asset Disposition placed in
escrow, whether as a reserve for adjustment of the purchase price, for
satisfaction of indemnities in respect of such Asset Disposition or
otherwise in connection with such Asset Disposition;
PROVIDED, HOWEVER, that upon the termination of such escrow, Net Available Cash
shall be increased by any portion of funds therein released to DIMAC Corporation
or any Restricted Subsidiary.
"Net Cash Proceeds", with respect to any issuance or sale of Capital Stock
or Indebtedness, means the cash proceeds of such issuance or sale net of
attorneys' fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result of such issuance or sale.
"Officer" means the Chairman of the Board, the President, the Chief
Executive Officer, any Vice President, the Treasurer, the Chief Financial
Officer, or the Secretary or any Assistant Secretary of DIMAC Corporation.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to DIMAC
Corporation or the Trustee.
"Permitted Holders" means the equity owners of DIMAC Holdings on October 22,
1998 and their respective Affiliates.
"Permitted Investment" means:
(1) any Investment in a Restricted Subsidiary or a Person which will, upon
making such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a
Related Business;
(2) any Investment in another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, DIMAC Corporation or a
Restricted Subsidiary of DIMAC Corporation; PROVIDED, HOWEVER, that such
Person's primary business is a Related Business;
(3) any Investment in Temporary Cash Investments;
(4) receivables owing to DIMAC Corporation or any of its Restricted
Subsidiaries, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
(5) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
(6) loans or advances to employees made in the ordinary course of business
of DIMAC Corporation or such Restricted Subsidiary;
(7) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to DIMAC Corporation or any
Restricted Subsidiary or in satisfaction of judgments or claims;
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(8) Investments the payment for which consists exclusively of equity
securities, exclusive of Disqualified Stock, of DIMAC Corporation;
(9) loans or advances to employees and directors to purchase equity
securities of DIMAC Corporation or DIMAC Holdings; PROVIDED that the
aggregate amount of such loans and advances shall not exceed $2.0 million
at any time outstanding;
(10) any Investment in another Person to the extent such Investment is
received by DIMAC Corporation or any Restricted Subsidiary as
consideration for Asset Disposition effected in compliance with the
covenant under "Certain Covenants--Limitations on Sales of Assets";
(11) prepayment and other credits to suppliers made in the ordinary course
of business consistent with the past practices of DIMAC Corporation and
its Restricted Subsidiaries;
(12) Investments in connection with pledges, deposits, payments or
performance bonds made or given in the ordinary course of business in
connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations; and
(13) any Investment in another Person; PROVIDED, HOWEVER, that the aggregate
amount of all such Investments made pursuant to this clause (13) shall
not exceed in the aggregate $5.0 million at any one time outstanding,
measured as of the date made and without giving effect to subsequent
changes in value.
"Permitted Seller Paper" means Indebtedness of DIMAC Corporation and or any
Restricted Subsidiary Incurred in connection with an acquisition of a business
or assets in respect of the balance deferred and unpaid of the purchase price of
any property and payable to the seller in connection therewith.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Refinance" means, in respect of any Indebtedness, to refinance, replace,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue
other Indebtedness in exchange or replacement for, such indebtedness.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Refinancing Indebtedness" means Indebtedness that Refinances any
Indebtedness existing on the date of the Indenture or Incurred in compliance
with the Indenture, including Indebtedness of DIMAC Corporation that Refinances
Refinancing Indebtedness; PROVIDED, HOWEVER, that:
(1) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced;
(2) the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced; and
(3) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the sum of the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted
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value) then outstanding of the Indebtedness being refinanced, plus the
amount of any premium required to be paid in connection therewith and
plus reasonable fees and expenses in connection therewith;
PROVIDED FURTHER that Refinancing Indebtedness shall not include (a)
Indebtedness of a Subsidiary which Refinances Indebtedness of DIMAC Corporation
or (b) Indebtedness of DIMAC Corporation or a Restricted Subsidiary that
Refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means the business engaged in by DIMAC Corporation on the
Issue Date and such other business activities which are incidental or related
thereto.
"Representative" means any trustee, agent or representative, if any, of an
issue of Senior Indebtedness of DIMAC Corporation.
"Restricted Subsidiary" means any Subsidiary of DIMAC Corporation that is
not an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby DIMAC Corporation or a Restricted Subsidiary
transfers such property to a Person and DIMAC Corporation or a Restricted
Subsidiary leases it from such Person.
"Secured Indebtedness" means any Indebtedness of DIMAC Corporation secured
by a Lien.
"Senior Credit Documents" means the collective reference to the senior
secured credit agreement and the notes issued pursuant thereto, each as defined
in the Senior Credit Agreement, and each of the mortgages and other security
agreements, guarantees and other instruments and documents executed and
delivered pursuant to any of the foregoing, in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including (1) increasing the amounts of available borrowing
thereunder; PROVIDED, HOWEVER, that such increase in borrowing is permitted by
the covenant described under the caption "--Certain Covenants--Limitation on
Indebtedness" or (2) adding Restricted Subsidiaries of DIMAC Corporation as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means, with respect to any Person, the principal of,
premium, if any, and interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization of such Person
regardless of whether post-filing interest is allowed in such proceeding) on,
and fees and other amounts owing in respect of, the Bank Indebtedness and all
other Indebtedness of such Person, whether outstanding on the Issue Date or
thereafter issued, unless, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that the obligations
in respect of such Indebtedness are not superior in right of payment to the
notes; PROVIDED, HOWEVER, that Senior Indebtedness will not include:
(1) any obligation of such Person to any Subsidiary of such Person;
(2) any liability for Federal, state, foreign, local or other taxes owed or
owing by such Person;
(3) any accounts payable or other liability to trade creditors arising in
the ordinary course of business, including Guarantees thereof or
instruments evidencing such liabilities;
(4) any Indebtedness, Guarantee or obligation of such Person that is
expressly subordinate or junior in right of payment to any other
Indebtedness, Guarantee or obligation of such Person, including any
Senior Subordinated Indebtedness and any Subordinated Obligations; or
(5) any Capital Stock.
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"Senior Subordinated Indebtedness" means:
(1) with respect to DIMAC Corporation, the notes and any other Indebtedness
of DIMAC Corporation that ranks equal with the notes in right of payment
and is not subordinated by its terms in right of payment to any
Indebtedness or other obligation of DIMAC Corporation which is not Senior
Indebtedness of DIMAC Corporation; and
(2) with respect to each Subsidiary Guarantor, its Subsidiary guaranty of
the notes and any other Indebtedness of such Person that ranks equal with
its applicable Subsidiary Guaranty in respect of payment and is not
subordinated by its terms in respect of payment to any Indebtedness or
other obligation of such Person which is not Senior Indebtedness of such
Person.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Issue Date.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"Subordinated Obligation" means any Indebtedness of DIMAC Corporation or any
Subsidiary Guarantor, whether outstanding on the Issue Date or thereafter
Incurred, which is subordinate or junior in right of payment, in the case of
DIMAC Corporation, to the notes or, in the case of a Subsidiary Guarantor, its
Subsidiary Guaranty pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests, including partnership interests,
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such Person; or
(3) one or more Subsidiaries of such Person. Unless otherwise specified
herein, each reference to a Subsidiary shall refer to a Subsidiary of
DIMAC Corporation.
"Subsidiary Guarantor" means any domestic Restricted Subsidiary of DIMAC
Corporation that Guarantees DIMAC Corporation's obligations with respect to the
notes pursuant to the terms of the indenture.
"Subsidiary Guaranty" means a Guarantee by a Subsidiary Guarantor of DIMAC
Corporation's obligations with respect to the notes pursuant to the terms of the
indenture.
"Tax Sharing Agreement" means the existing agreement among DIMAC Corporation
and DIMAC Holdings and any other tax allocation agreement among DIMAC
Corporation, any of its Subsidiaries or any direct or indirect shareholder of
DIMAC Corporation with respect to consolidated or combined tax returns including
DIMAC Corporation or any of its Subsidiaries but only to the extent that amounts
payable from time to time by DIMAC Corporation or any such Subsidiary under any
such agreement do not exceed the corresponding tax payments that DIMAC
Corporation or such Subsidiary would have been required to make to any relevant
taxing authority had DIMAC Corporation or such Subsidiary not joined in such
consolidated or combined return, but instead had filed returns including only
DIMAC Corporation or its Subsidiaries.
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"Temporary Cash Investments" means any of the following:
(1) any Investment in direct obligations of the United States of America or
any agency thereof or obligations Guaranteed by the United States of
America or any agency thereof;
(2) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the
laws of the United States of America, any state thereof or any foreign
country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $250.0 million, or
the foreign currency equivalent thereof, and whose long-term debt, or
whose parent holding company's long-term debt, is rated "A", or such
similar equivalent rating, or higher by at least one nationally
recognized statistical rating organization, as defined in Rule 436 under
the Securities Act;
(3) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with a bank meeting the qualifications described in clause (2)
above; or
(4) Investments in commercial paper, maturing not more than 180 days after
the date of acquisition, issued by a corporation, other than an Affiliate
of DIMAC Corporation, organized and in existence under the laws of the
United States of America or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "A-1" or higher according to Moody's Investors
Service, Inc. or "P-1" or higher according to Standard and Poor's Ratings
Group.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Trustee" means the party named as such in the indenture until a successor
replaces it and, thereafter, means the successor.
"Unrestricted Subsidiary" means:
(1) any Subsidiary of DIMAC Corporation that at the time of determination
shall be designated an Unrestricted Subsidiary by the board of directors
in the manner provided below; and
(2) any Subsidiary of an Unrestricted Subsidiary.
The board of directors may designate any Subsidiary of DIMAC Corporation,
including any newly acquired or newly formed Subsidiary, to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital
Stock or Indebtedness of, or holds any Lien on any property of, DIMAC
Corporation or any Restricted Subsidiary of DIMAC Corporation that is not a
Subsidiary of the Subsidiary to be so designated; PROVIDED, HOWEVER, that either
(a) the Subsidiary to be so designated has total assets of $1,000 or less or (b)
if such Subsidiary has assets greater than $1,000, such designation would be
permitted under the covenant described under "--Certain Covenants--Limitation on
Restricted Payments." The board of directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that immediately
after giving effect to such designation (x) DIMAC Corporation could Incur $1.00
of additional Indebtedness under the Consolidated Coverage Ratio test described
under "--Certain Covenants--Limitation on Indebtedness" and (y) no default shall
have occurred and be continuing. Any such designation by the board of directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution of the board of directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
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"U.S. Government Obligations" means direct obligations, or certificates
representing an ownership interest in such obligations, of the United States of
America, including any agency or instrumentality thereof, for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests, including partnership interests, of such Person then outstanding and
normally entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of DIMAC
Corporation, all of the Capital Stock of which, other than directors' qualifying
shares, is owned by DIMAC Corporation or another Wholly Owned Subsidiary.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
In the opinion of White & Case LLP, our special tax counsel, the following
summary describes the principal U.S. federal income tax consequences relating to
the exchange of unregistered notes for registered notes in the exchange offer.
This discussion is based upon the provisions of the Internal Revenue Code of
1986, as amended, the Treasury regulations promulgated under the Internal
Revenue Code and judicial and administrative interpretations thereof, all as in
effect and available as of the date hereof and all of which are subject to
change (possibly on a retroactive basis). The opinion of White & Case LLP is not
binding on the Internal Revenue Service. We cannot assure you that the Internal
Revenue Service will not challenge one or more of the tax consequences described
in this prospectus. We have not obtained, nor do we intend to obtain, a ruling
from the Internal Revenue Service with respect to the U.S. federal income tax
consequences of the exchange offer. This discussion does not purport to address
all aspects of U.S. federal income taxation that may be relevant to particular
holders in light of their personal circumstances or to holders subject to
special treatment under the Internal Revenue Code (for example, life insurance
companies, tax exempt organizations, financial institutions, dealers or traders
in securities or currencies, holders subject to the alternative minimum tax,
holders holding unregistered notes or that will hold registered notes as a part
of a position in a straddle or as part of a hedging, conversion or integrated
transaction for U.S. federal income tax purposes, or holders with a functional
currency other than the U.S. dollar). This discussion does not address the
effect of any applicable U.S. federal estate and gift tax laws or state, local
or foreign tax laws. Moreover, this description addresses only the U.S. federal
income tax considerations of an initial purchaser that purchased unregistered
notes for their original issue price, holds such unregistered notes as capital
assets and will hold the registered notes issued in the exchange offer as
capital assets. INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR TO
DETERMINE THEIR PARTICULAR TAX CONSEQUENCES OF THE EXCHANGE OFFER UNDER U.S.
FEDERAL AND APPLICABLE STATE, LOCAL AND FOREIGN TAX LAWS.
For purposes of this summary, a "U.S. Holder" means a beneficial owner of
unregistered notes or registered notes that is for U.S. federal income tax
purposes:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any State of the United States (including the
District of Columbia);
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source;
- a trust if:
- a court within the United States is able to exercise primary
supervision over the administration of the trust; and
- one or more United States persons have the authority to control all
substantial decisions of the trust; or
- a person that otherwise is subject to U.S. federal income tax on a net
income basis with respect to the unregistered notes.
EXCHANGE OFFER
The exchange of unregistered notes for registered notes pursuant to the
exchange offer should not constitute a material modification of the terms of the
unregistered notes and, therefore, such exchange should not constitute an
exchange for U.S. federal income tax purposes. Accordingly, you should have no
U.S. federal income tax consequences from such exchange and, further, you should
be required to continue to include interest on the registered notes in gross
income in the manner and to the extent as such U.S. Holder would have been under
the unregistered notes. Your holding period with respect to
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the registered notes will include the holding period of the unregistered notes
and your basis in the registered notes will be the same as your basis in the
unregistered notes immediately before the exchange.
If, however, the Internal Revenue Service were to successfully assert that
the exchange of an unregistered note by a U.S. Holder for a registered note
should be treated as a taxable exchange for U.S. federal income tax purposes, a
U.S. Holder generally would be subject to the rules described below under
"--Sale, Exchange or Redemption of the Registered Notes" with respect to such
exchange.
THE REGISTERED NOTES
INTEREST ON THE REGISTERED NOTES
The interest paid on a registered note will be includible in your gross
income as ordinary interest income at the time it is paid or accrued in
accordance with your usual method of tax accounting.
SALE, EXCHANGE OR REDEMPTION OF THE REGISTERED NOTES
If you sell or exchange your registered notes (including a redemption of
your registered notes for cash) you will recognize gain or loss equal to the
difference between (1) the amount realized on the sale or exchange of the
registered notes (other than cash received in payment of accrued but unpaid
interest which will be taxable as interest income) and (2) your adjusted tax
basis in the registered notes. Your adjusted tax basis in a registered note
generally will equal the initial purchase price. The gain or loss will be a
capital gain or loss. If you are not a corporation and your holding period for a
registered note exceeds one year, the maximum marginal U.S. federal income tax
rate applicable to such gain will be lower than the maximum U.S. federal income
tax rate applicable to ordinary income. The deductibility of capital losses is
subject to limitations.
BACKUP WITHHOLDING TAX AND INFORMATION REPORTING
A 31% backup withholding tax and information reporting requirements may
apply in the case of particular non-corporate United States persons to certain
payments of principal of, and interest on, an obligation, and of proceeds of the
sale of an obligation before maturity. If you are a United States person that is
not a corporation, backup withholding will apply to you only if you fail to
furnish your taxpayer identification number which, in the case of an individual,
is your social security number, or otherwise fail to comply with such backup
withholding requirements.
Treasury regulations issued on October 6, 1997, and an Internal Revenue
Service Notice issued on April 29, 1999, would modify some of the rules
discussed above generally with respect to payments on the registered notes made
after December 31, 2000. In the case of payments to foreign partnerships other
than payments to foreign partnerships that qualify as withholding foreign
partnerships within the meaning of such Treasury regulations and payments to
foreign partnerships that are effectively connected with the conduct of a trade
or business in the United States, the partners of such partnerships will be
required to provide the certification discussed above in order to establish an
exemption from backup withholding tax and information reporting requirements.
Moreover, a payor may rely on a certification provided by a Non-United States
Holder only if such payor does not have actual knowledge or a reason to know
that any information or certification stated in such certificate is unreliable.
THE ABOVE DESCRIPTION IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
ALL TAX CONSEQUENCES RELATED TO THE EXCHANGE OFFER. ACCORDINGLY, YOU SHOULD
CONSULT WITH YOUR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL TAX CONSEQUENCES
OF THE EXCHANGE OFFER WITH RESPECT TO YOUR PARTICULAR SITUATION, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
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UNREGISTERED NOTES REGISTRATION RIGHTS AGREEMENT
DIMAC Corporation and Credit Suisse First Boston Corporation, First Union
Capital Markets and Warburg Dillon Read, LLC entered into a Registration Rights
Agreement on October 16, 1998. Under the Registration Rights Agreement, we
agreed to:
- file a registration statement for an exchange of the unregistered notes
for registered notes under the Securities Act with the SEC by December
21, 1998; and
- use our reasonable best efforts to ensure that the SEC declares the
registration statement effective under the Securities Act by March 20,
1999.
As soon as practicable after the registration statement becomes effective, we
will offer the holders of unregistered notes, who are not prohibited by any law
or policy of the SEC from participating in this exchange offer, the opportunity
to exchange their unregistered notes for notes registered under the Securities
Act that are identical in all material respects to the unregistered notes,
except that the registered notes will not contain terms with respect to transfer
restrictions, registration rights and penalties. We will keep this exchange
offer open for at least 30 days after we mail the exchange offer notice to the
holders of the unregistered notes.
Under the following circumstances we will use our reasonable best efforts to
file with the SEC a shelf registration statement to cover resales of the
unregistered notes by those holders who satisfy certain conditions relating to
the provision of information in connection with that shelf registration
statement:
- if we are not permitted to effect this exchange offer because of a change
in law or applicable interpretations of the law by the SEC's staff;
- if the exchange offer is not consummated by April 20, 1999;
- if Credit Suisse First Boston, First Union, Capital Markets or Warburg
Dillon Read so requests with respect to unregistered notes which are
ineligible for exchange under this exchange offer;
- if any holder is ineligible to participate in this exchange offer; or
- if anyone who participates in this exchange offer does not receive freely
transferable registered notes in exchange for tendered unregistered
notes.
In the preceding paragraphs the term "unregistered notes" means each note
until:
- the date on which that unregistered note has been exchanged by a person
other than a broker-dealer for a freely transferable registered note in
this exchange offer;
- the note has been sold to a purchaser who received a copy of this
prospectus on or before the sale from a broker-dealer that exchanged the
notes in this exchange offer;
- the date on which the note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf registration
statement; or
- the date on which the note is distributed to the public according to Rule
144 of the Securities Act or is saleable under Rule 144(k) of the
Securities Act.
We will use our reasonable best efforts to have the SEC declare this
registration statement or, if applicable, the shelf registration statement,
effective as promptly as practicable after filing it. We will use our reasonable
best efforts to consummate this exchange offer as promptly as practicable. If
applicable, we will use our reasonable best efforts to keep the shelf
registration statement effective until October 22, 2002.
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A registration default will occur if:
- by December 21, 1998 this registration statement or shelf registration
statement is not filed with the SEC;
- by April 20, 1999 the exchange offer is not consummated or the shelf
registration statement is not declared effective; or
- after either this registration statement or the shelf registration
statement is declared effective, the applicable registration statement
ceases to be effective or the applicable registration statement or the
related prospectus ceases to be useable to resell the unregistered notes.
If any registration default occurs, we will be obligated to pay additional
interest to each holder of unregistered notes during the period of default as
follows:
- 0.50% per year for the first 90 days after the default; and
- 0.50% per year for each subsequent 90 day period until all defaults have
been cured or the interest rate on the unregistered notes has increased
by 2.0% per year.
The Registration Rights Agreement also provides that we will make this
prospectus available for 90 days after the consummation of this exchange offer
to any broker-dealer to use in connection with any resale of any registered
notes. The Registration Rights Agreement further obligates us to pay all
expenses connected to this exchange offer, including the expense of one counsel
to the holders of the notes, and to indemnify certain holders of the notes
against certain liabilities, including liabilities under the Securities Act. A
broker-dealer who delivers this prospectus to purchasers in connection with such
resales will be subject to the relevant civil liability provisions of the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement, including certain indemnification rights and obligations.
Each holder of unregistered notes who wishes to exchange the unregistered
notes for registered notes in this exchange offer will be required to make
certain representations, including:
- that any registered notes that such holder will receive will be acquired
in the ordinary course of business;
- that such holder has no arrangements or understanding with any person to
participate in the distribution of the registered notes;
- that such holder is not an "affiliate" of our company, as defined in Rule
405 under the Securities Act, or if such holder is an affiliate, that it
will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable;
- if such holder is not a broker-dealer, that it is not engaged in, and
does not intend to engage in, distribution of the registered notes; and
- if such holder is a broker-dealer, that it will receive registered notes
for its own account in exchange for unregistered notes that were acquired
as a result of market-making activities or other trading activities and
that it will be required to acknowledge that it will deliver a prospectus
in connection with any resale of the registered notes.
Holders of the unregistered notes will be required to make these
representations to us in order to participate in this exchange offer and will be
required to deliver information to be used in connection with the shelf
registration statement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding additional
interest set forth in the preceding paragraphs. A holder who sells unregistered
notes pursuant to the shelf registration statement generally will be required to
be named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers. Such a holder will also be subject to certain of the
civil liability provisions
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under the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement which are applicable to such a
holder, including certain indemnification obligations.
For so long as the notes are outstanding, we will continue to provide to
holders of the notes and to their prospective purchasers the information
required by Rule 144A(d)(4) under the Securities Act.
The description of the Registration Rights Agreement contained in this
section is a summary only. For more information, you may review the provisions
of the Registration Rights Agreement that we filed with the SEC as an exhibit to
the registration statement of which this prospectus is a part.
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BOOK-ENTRY; DELIVERY AND FORM
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTE
Except as set forth below, the registered notes will be represented by one
permanent global registered note in global form, without interest coupons. The
global note will be deposited with, or on behalf of, The Depository Trust
Company and registered in the name of Cede & Co., as nominee of The Depository
Trust Company, or will remain in the custody of Wilmington Trust Company
according to the FAST Balance Certificate Agreement between The Depository Trust
Company and Wilmington Trust Company.
We are providing the following descriptions of the operations and procedures
of The Depository Trust Company, Euroclear and Cedel solely as a matter of
convenience. These operations and procedures are solely within the control of
the respective settlement systems and are subject to change by them from time to
time. Neither we nor Credit Suisse First Boston Corporation, First Union Capital
Markets and Warburg Dillon Read LLC take any responsibility for these operations
or procedures. If you wish to discuss these matters, we urge you to contact the
relevant system or its participants directly.
The Depository Trust Company has advised us that it is:
- a limited purpose trust company organized under the laws of the State of
New York;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended; and
- a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
The Depository Trust Company was created to hold securities for its
participants. It facilitates the clearance and settlement of securities
transactions between participants through electronic book-entry changes to the
accounts of its participants. This system eliminates the need for physical
transfer and delivery of certificates. The Depository Trust Company's
participants include:
- securities brokers and dealers (including Credit Suisse First Boston
Corporation, First Union Capital Markets and Warburg Dillon Read LLC);
- banks and trust companies;
- clearing corporations; and
- certain other organizations.
Indirect access to The Depository Trust Company's system is also available
to other entities. These indirect participants include banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly. Investors who are not participants
may beneficially own securities held by or on behalf of The Depository Trust
Company only through participants or indirect participants.
We expect that under the procedures established by The Depository Trust
Company:
- upon deposit of the global note, The Depository Trust Company will credit
the accounts of participants designated by Credit Suisse First Boston
Corporation, First Union Capital Markets and Warburg Dillon Read LLC with
an interest in the global note; and
- ownership of the notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by The
Depository Trust Company and the records of participants and the indirect
participants.
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The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the notes represented by the
global note to such persons may be limited. In addition The Depository Trust
Company can act only on behalf of its participants, who in turn act on behalf of
persons who hold interests through participants. Consequently, the ability of a
person having an interest in notes represented by the global note to pledge or
transfer such interest to persons or entities that do not participate in The
Depository Trust Company's system, or to otherwise take actions in respect of
such interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as The Depository Trust Company or its nominee is the registered
owner of the global note, The Depository Trust Company or its nominee, as the
case may be, will be considered the sole owner or holder of the notes
represented by the global note for all purposes under the indenture. Except as
provided below, owners of beneficial interests in the global note:
- will not be entitled to have notes represented by the global note
registered in their names;
- will not receive or be entitled to receive physical delivery of
certificated notes; and
- will not be considered the owners or holders of notes under the indenture
for any purpose, including with respect to the giving of any direction,
instruction or approval to Wilmington Trust Company.
Accordingly, each holder owning a beneficial interest in the global note
must rely on the procedures of The Depository Trust Company. If the holder is
not a participant or an indirect participant, then it must rely on the
procedures of the participant through which such holder owns its interest in
order to exercise any rights of a noteholder under the indenture or the global
note. We understand that under existing industry practice, in the event that we
request any action of noteholders, or a holder that is an owner of a beneficial
interest in the global note desires to take any action that The Depository Trust
Company, as the holder of the global note, is entitled to take, The Depository
Trust Company would authorize the participants to take action and the
participants would authorize holders owning through the participants to take
action or would otherwise act upon the instruction of holders. Neither our
company nor Wilmington Trust Company will have any responsibility or liability
for any aspect of the records relating to or payments made on account of notes
by The Depository Trust Company, or for maintaining, supervising or reviewing
any records of The Depository Trust Company relating to the notes.
Payments with respect to the principal of, and premium, if any, and interest
on, any notes represented by the global note registered in the name of The
Depository Trust Company or its nominee on the applicable record date will be
payable by Wilmington Trust Company to, or at the direction of, The Depository
Trust Company or its nominee in its capacity as the registered holder of the
global note representing the notes under the indenture. Under the terms of the
indenture, we and Wilmington Trust Company may treat the persons in whose names
the notes, including the global note, are registered as the owners of the notes
for the purpose of receiving payment on the notes and for any and all other
purposes whatsoever. Accordingly, neither our company nor Wilmington Trust
Company has or will have any responsibility or liability for the payment of such
amounts to owners of beneficial interests in a global note, including principal,
premium, if any, and interest. Payments by the participants and the indirect
participants to the owners of beneficial interests in a global note will be
governed by standing instructions and customary industry practice and will be
the responsibility of the participants or the indirect participants and The
Depository Trust Company.
Transfers between participants in The Depository Trust Company will be
effected in accordance with The Depository Trust Company's procedures, and will
be settled in same-day funds. Transfers between participants in Euroclear or
Cedel will be effected in the ordinary way in accordance with their respective
rules and operating procedures.
140
<PAGE>
Subject to compliance with the transfer restrictions applicable to the
notes, cross-market transfers between the participants in The Depository Trust
Company and Euroclear or Cedel participants will be effected through The
Depository Trust Company in accordance with its rules on behalf of Euroclear or
Cedel by its respective depositary. However, such cross-market transactions will
require delivery of instructions to Euroclear or Cedel by the counterparty in
such system in accordance with the rules and procedures and within the
established deadlines of such system. Euroclear or Cedel will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant global notes in The Depository
Trust Company, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to The Depository Trust
Company. Euroclear participants and Cedel participants may not deliver
instructions directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in the global note from a participant
in The Depository Trust Company will be credited, and any such crediting will be
reported to the relevant Euroclear or Cedel participant, during the securities
settlement processing day which must be a business day for Euroclear and Cedel
immediately following the settlement date of The Depository Trust Company. Cash
received in Euroclear or Cedel as a result of sales of interests in the global
note by or through a Euroclear or Cedel participant to a participant in The
Depository Trust Company will be received with value on the settlement date of
The Depository Trust Company but will be available in the relevant Euroclear or
Cedel cash account only as of the business day for Euroclear or Cedel following
The Depository Trust Company's settlement date.
Although The Depository Trust Company, Euroclear and Cedel have agreed to
the foregoing procedures to facilitate transfers of interests in the global note
among participants in The Depository Trust Company, 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. Neither our company nor
Wilmington Trust Company will have any responsibility for the performance by The
Depository Trust Company, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED NOTES
Certificated notes will be issued to each person that The Depository Trust
Company identifies as the beneficial owner of the notes represented by the
global note if the following events occur:
- The Depository Trust Company notifies us that it is no longer willing or
able to act as a depositary or The Depository Trust Company ceases to be
registered as a clearing agency under the Exchange Act and a successor
depositary is not appointed within 90 days of such notice or cessation;
- we, at our option, notify Wilmington Trust Company in writing that we
elect to cause the issuance of certificated notes under the indenture; or
- if an event of default, as provided in the indenture, occurs and is
continuing, then, upon surrender by The Depository Trust Company of the
global note.
Upon any issuance, Wilmington Trust Company shall register such certificated
notes in the name of such person or persons, or any nominee, and deliver the
certificated notes as instructed.
Neither us nor Wilmington Trust Company shall be liable for any delay by The
Depository Trust Company or any participant or indirect participant in
identifying the beneficial owners of the related notes. Each person may
conclusively rely on, and shall be protected in relying on, instructions from
The
141
<PAGE>
Depository Trust Company for all purposes, including with respect to the
registration and delivery, and the respective principal amounts, of the notes to
be issued.
PLAN OF DISTRIBUTION
Based on interpretations by the SEC set forth in no-action letters issued to
third parties, we believe that registered notes issued under the exchange offer
in exchange for unregistered notes may be transferred by holders without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that:
- the holder acquires the registered notes in the ordinary course of that
holder's business; and
- the holder 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 registered notes;
provided that broker-dealers receiving registered notes in the exchange offer
will be subject to a prospectus delivery requirement with respect to resales of
the registered notes. However, the above exemption does not apply to any holder
which is:
- an "affiliate" within the meaning of Rule 405 under the Securities Act;
- a broker-dealer who acquired notes directly from us; or
- broker-dealers who acquired notes as a result of market-making or other
trading activities.
To date, the SEC has taken the position that participating broker-dealers
may fulfill their prospectus delivery requirements with respect to transactions
involving an exchange of securities such as this exchange offer, other than a
resale of an unsold allotment from the original sale of the unregistered notes,
with the prospectus contained in the exchange offer registration statement.
Pursuant to the Registration Rights Agreement, we have agreed to permit
participating broker-dealers to use this prospectus in connection with the
resale of registered notes. We have agreed that, for a period of at least 90
days after the expiration of the exchange offer, we will make this prospectus,
and any amendment or supplement to this prospectus, available to any
broker-dealer that requests such documents in the letter of transmittal.
Each holder of the unregistered notes who wishes to exchange its
unregistered notes for registered notes in the exchange offer will be required
to make certain representations to us as set forth in "The Exchange
Offer--Purpose and Effect of the Exchange Offer" of this prospectus. In
addition, each holder who is a broker-dealer and who receives registered notes
for its own account in exchange for unregistered notes that were acquired by it
as a result of market-making activities or other trading activities, will be
required to acknowledge that it will deliver a prospectus in connection with any
resale by it of such registered notes.
We will not receive any proceeds from any sale of registered notes by
broker-dealers. Broker-dealers who receive registered notes for their own
account pursuant to the exchange offer may sell them 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 registered notes or a combination
of such methods of resale;
- at market prices prevailing at the time of resale; or
- at prices related to such prevailing market prices or negotiated prices.
Any 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 broker-dealer or the purchasers of
142
<PAGE>
any registered notes. Any broker-dealer that resells registered notes it
received for its own account pursuant to the exchange offer and any broker or
dealer that participates in a distribution of such registered notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any resale of registered notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the unregistered notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act, as set forth in the
Registration Rights Agreement.
LEGAL MATTERS
The validity of the registered notes offered in this prospectus will be
passed upon for DIMAC Corporation by White & Case LLP, New York, New York. White
& Case LLP has also provided a tax opinion. Please read "Certain United States
Federal Tax Considerations" for more information.
EXPERTS
The audited consolidated financial statements of DIMAC Corporation and
subsidiaries as of December 31, 1998 and for the period from inception (May 12,
1998) to December 31, 1998, included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
included in this prospectus in reliance upon the authority of said firm as
experts in giving said report.
The audited consolidated financial statements of DIMAC Marketing Corporation
and subsidiaries as of December 31, 1997 and for the eleven months ended
December 31, 1996, eight months ended August 31, 1997, four months ended
December 31, 1997 and six months ended June 26, 1998, included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included in this prospectus in reliance
upon the authority of said firm as experts in giving said reports.
The audited consolidated financial statements of AmeriComm Holdings, Inc.
and subsidiary as of December 31, 1997 and for each of the two years in the
period ended December 31, 1997 and for the six-month period ended June 26, 1998,
included in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included in this
prospectus in reliance upon the authority of said firm as experts in giving said
report.
The consolidated financial statements of AmeriComm Direct Marketing, Inc. as
of December 31, 1995 and 1996 and for the years then ended included in this
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein, and are included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.
143
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DIMAC CORPORATION AND SUBSIDIARIES
Report of Independent Public Accountants................................................................... F-3
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999 (unaudited)......................... F-4
Consolidated Statements of Operations for the period from Inception (May 12, 1998) to December 31, 1998 and
the three-month period ended March 31, 1999 (unaudited).................................................. F-6
Consolidated Statement of Stockholder's Equity for the period from Inception (May 12, 1998) to December 31,
1998 and the three-month period ended March 31, 1999 (unaudited)......................................... F-7
Consolidated Statements of Cash Flows for the period from Inception (May 12, 1998) to December 31, 1998 and
the three-month period ended March 31, 1999 (unaudited).................................................. F-8
Notes to Consolidated Financial Statements................................................................. F-9
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
(Predecessor to our company)
The consolidated financial statements for the four-month period ended December 31, 1997 and the six-month
period ended June 26, 1998 reflect the operations of DIMAC Marketing following the purchase of Heritage
Media by News Corporation.
Report of Independent Public Accountants................................................................... F-31
Consolidated Balance Sheet as of December 31, 1997......................................................... F-32
Consolidated Statements of Operations for the four months ended December 31, 1997, the three months ended
March 31, 1998 (unaudited) and the six months ended June 26, 1998........................................ F-33
Consolidated Statements of Stockholder's Equity for the four months ended December 31, 1997 and the six
months ended June 26, 1998............................................................................... F-34
Consolidated Statements of Cash Flows for the four months ended December 31, 1997, the three months ended
March 31, 1998 (unaudited) and the six months ended June 26, 1998........................................ F-35
Notes to Consolidated Financial Statements................................................................. F-36
The consolidated financial statements for the eleven-month period ended December 31, 1996 and for the
eight-month period ended August 31, 1997 reflect the financial results of DIMAC Marketing under a new
basis of accounting that reflects the fair value of assets acquired and liabilities assumed, the related
financing costs, and all debt incurred in connection with purchase of DIMAC Marketing by Heritage Media.
Report of Independent Public Accountants................................................................... F-45
Consolidated Statements of Operations for the eleven months ended December 31, 1996 and the eight months
ended August 31, 1997.................................................................................... F-46
Consolidated Statements of Stockholder's Equity for the eleven months ended December 31, 1996 and the eight
months ended August 31, 1997............................................................................. F-47
Consolidated Statements of Cash Flows for the eleven months ended December 31, 1996 and the eight months
ended August 31, 1997.................................................................................... F-48
Notes to Consolidated Financial Statements................................................................. F-49
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
(Predecessor to our Company)
Report of Independent Public Accountants................................................................... F-55
Consolidated Balance Sheet as of December 31, 1997......................................................... F-56
Consolidated Statements of Operations for the years ended December 31, 1996 and 1997, the three-month
period ended March 31, 1998 (unaudited) and the six-month period ended June 26, 1998..................... F-58
Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1996 and 1997
and the six-month period ended June 26, 1998............................................................. F-59
Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1997, the three-month
period ended March 31, 1998 (unaudited) and the six-month period ended June 26, 1998..................... F-60
Notes to Financial Statements.............................................................................. F-62
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AMERICOMM DIRECT MARKETING, INC.
(Acquired by AmeriComm Holdings, Inc. on April 24, 1997)
Independent Auditors' Report............................................................................... F-83
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997 (unaudited)............................. F-84
Statements of Income for the years ended December 31, 1995 and 1996 and the three-month periods ended March
31, 1996 and 1997 (unaudited)............................................................................ F-85
Statements of Stockholders' Equity for the years ended December 31, 1995 and 1996.......................... F-86
Statements of Cash Flows for the years ended December 31, 1995 and 1996 and the three-month periods ended
March 31, 1996 and 1997 (unaudited)...................................................................... F-87
Notes to Financial Statements.............................................................................. F-88
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DIMAC Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheet of DIMAC
Corporation (a Delaware corporation) and subsidiaries as of December 31, 1998
and the related consolidated statements of operations, stockholder's equity and
cash flows for the period from Inception (May 12, 1998) to December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of DIMAC Corporation and
subsidiaries as of December 31, 1998 and the results of their operations and
their cash flows for the period from Inception (May 12, 1998) to December 31,
1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 30, 1999
(except with respect to
the matters discussed in
Notes 1 and 10,
as to which the date is
August 10, 1999)
F-3
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
ASSETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 9,769 $ 17,298
Accounts receivable, net.................................................... 59,511 59,819
Inventories................................................................. 14,560 13,458
Deferred income taxes....................................................... 5,973 5,973
Other....................................................................... 5,203 5,520
-------- --------------
Total current assets...................................................... 95,016 102,068
-------- --------------
PROPERTY AND EQUIPMENT:
Land........................................................................ 5,200 5,200
Buildings................................................................... 28,125 28,125
Machinery and equipment..................................................... 50,902 55,725
Office equipment, furniture and fixtures.................................... 12,026 12,420
Leasehold improvements...................................................... 1,388 1,301
Vehicles.................................................................... 216 222
Construction in progress.................................................... 7,928 6,196
-------- --------------
105,785 109,189
Less accumulated depreciation............................................... (8,594) (12,584)
-------- --------------
Total property and equipment, net......................................... 97,191 96,605
-------- --------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $3,380 and $6,832,
respectively.............................................................. 269,258 265,876
Other intangible assets, net of accumulated amortization of $3,858 and
$5,942, respectively...................................................... 49,221 47,137
Other....................................................................... 3,752 4,027
-------- --------------
Total other assets........................................................ 322,231 317,040
-------- --------------
Total assets............................................................ $ 514,438 $ 515,713
-------- --------------
-------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND MARCH 31, 1999 (UNAUDITED)
LIABILITIES AND STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
CURRENT LIABILITIES:
Current portion of long-term debt........................................... $ 2,863 $ 5,331
Bank overdraft.............................................................. 10,942 11,228
Accounts payable............................................................ 14,231 10,149
Advances from customers..................................................... 8,595 7,056
Accrued employee compensation............................................... 7,051 9,677
Other accrued expenses...................................................... 31,620 31,103
-------- --------------
Total current liabilities................................................. 75,302 74,544
-------- --------------
DEFERRED INCOME TAXES......................................................... 5,973 5,973
-------- --------------
NONCURRENT LIABILITIES........................................................ 4,460 4,424
-------- --------------
LONG-TERM DEBT................................................................ 307,404 306,963
-------- --------------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
STOCKHOLDER'S EQUITY:
Common stock $.001 par value, 100 shares authorized, issued and
outstanding............................................................... -- --
Additional paid-in capital.................................................. 139,198 154,198
Accumulated deficit......................................................... (17,899) (30,389)
-------- --------------
Total stockholder's equity................................................ 121,299 123,809
-------- --------------
Total liabilities and stockholder's equity.............................. $ 514,438 $ 515,713
-------- --------------
-------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-5
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------- MARCH 31, 1999
--------------
(UNAUDITED)
<S> <C> <C>
Net sales..................................................................... $ 191,401 $ 85,710
Cost of sales................................................................. 131,095 60,794
-------- --------------
Gross profit.................................................................. 60,306 24,916
-------- --------------
Operating expenses:
Selling..................................................................... 19,629 10,008
General and administrative.................................................. 26,140 14,614
Amortization of intangible assets........................................... 5,711 4,631
-------- --------------
Total operating expenses.................................................. 51,480 29,253
-------- --------------
Income (loss) from operations................................................. 8,826 (4,337)
Interest expense.............................................................. 17,069 8,153
-------- --------------
Loss before income tax benefit and extraordinary item......................... (8,243) (12,490)
Income tax benefit............................................................ (2,329) --
-------- --------------
Net loss before extraordinary item............................................ (5,914) (12,490)
Extraordinary loss on retirement of debt, net of income tax benefit of
$4,818...................................................................... (11,985) --
-------- --------------
Net loss...................................................................... $ (17,899) $ (12,490)
-------- --------------
-------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN ACCUMULATED
SHARES PAR VALUE CAPITAL DEFICIT TOTAL
----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, Inception (May 12, 1998)...................... -- $ -- $ -- $ -- $ --
Issuance of common stock............................... 100 -- 100,000 -- 100,000
Capital contribution................................... -- -- 39,198 -- 39,198
Net loss............................................... -- -- -- (17,899) (17,899)
--- ----- ---------- ------------ ----------
Balance, December 31, 1998............................. 100 -- 139,198 (17,899) 121,299
Capital contribution................................... -- -- 15,000 -- 15,000
Net loss............................................... -- -- -- (12,490) (12,490)
--- ----- ---------- ------------ ----------
Balance, March 31, 1999 (unaudited).................... 100 $ -- $ 154,198 $ (30,389) $ 123,809
--- ----- ---------- ------------ ----------
--- ----- ---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................................... $ (17,899) $ (12,490)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Extraordinary loss on early retirement of debt, net of income tax
benefit................................................................. 11,985 --
Interest paid with in-kind notes.......................................... 1,317 --
Depreciation and amortization............................................. 16,317 10,113
Deferred income tax benefit............................................... (2,429) --
Imputed interest.......................................................... 46 69
Loss on disposal of property and equipment................................ 44 45
Prepaid pension asset..................................................... (193) (14)
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable..................................................... 2,742 907
Inventories............................................................. 1,572 (574)
Other assets............................................................ 123 (880)
Accounts payable........................................................ 4,773 (4,082)
Accrued expenses and other.............................................. (3,747) 1,152
----------------- --------------
Net cash provided by (used in) operating activities................... 14,651 (5,754)
----------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for the purchase of the outstanding stock of AmeriComm Holdings,
Inc., net of cash acquired................................................ (38,186) --
Payment for the purchase of the outstanding stock of DIMAC Marketing, net of
cash acquired............................................................. (203,959) --
Payment for contingent consideration on previous acquisitions............... (818) --
Purchases of property and equipment......................................... (7,938) (3,965)
Proceeds from the disposal of property and equipment........................ 167 1
----------------- --------------
Net cash used in investing activities................................... (250,734) (3,964)
----------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in bank overdraft, net............................................. 5,410 286
Net (repayments) borrowings on revolving loan facilities.................... (9,655) 2,700
Additional capital contribution............................................. 39,198 15,000
Proceeds from issuance of the DIMAC Corporation Notes....................... 97,233 --
Payments on capital leases.................................................. (1,650) (739)
Repayment of senior notes................................................... (158,536) --
Proceeds from issuance of common stock...................................... 100,000 --
Proceeds from issuance of term loans........................................ 195,000 --
Payments of deferred financing costs........................................ (21,148) --
----------------- --------------
Net cash provided by financing activities................................. 245,852 17,247
----------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS..................................... 9,769 7,529
CASH AND CASH EQUIVALENTS, INCEPTION (MAY 12, 1998)........................... -- 9,769
----------------- --------------
CASH AND CASH EQUIVALENTS, DECEMBER 31, 1998.................................. $ 9,769 $ 17,298
----------------- --------------
----------------- --------------
SUPPLEMENTAL DISCLOSURES:
Assets acquired by assuming liabilities..................................... $ 168,200 $ --
----------------- --------------
----------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-8
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND
DIMAC Corporation (the "Company"), a wholly owned subsidiary of DIMAC
Holdings, Inc. ("Holdings"), was formed on May 12, 1998 ("Inception") for the
purpose of acquiring DIMAC Marketing Corporation and its subsidiaries (DIMAC
DIRECT, Inc., Wilcox and Associates, Inc., The McClure Group, Inc., Palm Coast
Data, Inc. and MBS/Multimode, Inc., collectively referred to as "DIMAC
Marketing"), and AmeriComm Holdings, Inc. and its subsidiary (AmeriComm Direct
Marketing, Inc. or "ADMI", collectively referred to as "AHI"). On June 26, 1998,
the Company acquired the outstanding capital stock of DIMAC Marketing for
$200,000 plus transaction costs and assumed indebtedness of $4,000. Simultaneous
with the DIMAC Marketing acquisition, the Company acquired the outstanding
capital stock of AHI for $35,849 plus transaction costs and assumed indebtedness
of $164,200. The acquisitions were funded through revolving and term loan
facilities (Note 3) and a capital contribution from Holdings (Note 5).
Both acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the results of operations of DIMAC Marketing and
AHI have been included in the results of operations of the Company since June
27, 1998. The total purchase price for DIMAC Marketing and AHI has been
preliminarily allocated to the tangible and identifiable intangible assets and
liabilities of the acquired companies based on the Company's preliminary
estimates of their fair value with the remainder allocated to goodwill. The
excess of the consideration paid for DIMAC Marketing and AHI over the estimated
fair value of net assets acquired of $162,377 and $109,443, respectively.
The following table represents the final allocation of values assigned to
assets acquired (liabilities assumed) of DIMAC Marketing and AHI:
<TABLE>
<CAPTION>
DIMAC
MARKETING AHI
---------- -----------
<S> <C> <C>
Cash................................................................. $ -- $ 739
Accounts receivable.................................................. 37,802 24,451
Inventories.......................................................... 2,284 13,847
Other current assets................................................. 7,142 4,829
Property plant and equipment......................................... 44,448 52,767
Intangibles.......................................................... 177,803 127,855
Prepaid pension cost................................................. -- 3,101
Other assets......................................................... -- 1,690
Bank Overdraft....................................................... (1,523) (4,009)
Accounts payable..................................................... (3,387) (6,071)
Accrued expenses and other current liabilities....................... (41,528) (10,845)
Long-term debt....................................................... (3,999) (164,266)
Other non-current liabilities........................................ (15,083) (4,660)
---------- -----------
Purchase Price....................................................... $ 203,959 $ 39,428
---------- -----------
---------- -----------
</TABLE>
F-9
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND (CONTINUED)
The Company has experienced an accumulated deficit of $30,667 since
Inception to March 31, 1999 and is projecting losses for the remainder of fiscal
1999. In addition, on March 26, 1999, the Company and the lenders (collectively,
"CSFB") party to the credit agreement (the "Credit Agreement") entered into a
First Amendment to the Credit Agreement which provided that CSFB is under no
obligation to provide new revolving loans. (Note 9). To satisfy a condition
precedent to the effectiveness of the First Amendment and to fund immediate
working capital and other cash needs, on March 31, 1999 Holdings issued $15,000
aggregate principal amount of notes to affiliates of McCown De Leeuw & Co. IV,
L.P. ("McCown De Leeuw") (Holdings' majority stockholder) and certain other
investors (Note 9). The Company and CSFB entered into a second amendment, dated
as of July 23, 1999, which provided for a one-time additional borrowing of
$30,000 allocated among Term A, B, and C loans ("Term Loans A," "Term Loans B,"
and "Term Loans C") and the Revolving loan facility ("Revolving Loan Facility").
The funds for the additional borrowings were provided by an affiliate of McCown
De Leeuw through a participation agreement. Management believes that sufficient
funds will be available to support the Company's operations throughout fiscal
1999. However, there can be no assurance that future operations will be
successful or that further financing, if necessary, will be available to the
Company.
INTEGRATION PLAN
In conjunction with the acquisitions of DIMAC Marketing and AHI, management
has approved and committed the Company to a plan to combine and integrate the
operations of DIMAC Marketing and AHI (the "Integration Plan"). The Integration
Plan resulted in the elimination of duplicative functions and standardized
business practices.
The Company has identified and communicated all aspects of the Integration
Plan. While the Integration Plan will consolidate certain functions, the Company
is not eliminating any services it currently provides. The Integration Plan will
result in the elimination of 157 employees during 1998 and 1999 of which 120
employees had been involuntary terminated pursuant to the Integration Plan as of
December 31, 1998. The employee groups that are primarily affected include
executive management, finance, information systems, sales management and
representatives and manufacturing supervision. The Integration Plan also
included the closure of three facilities. Two facilities were closed in 1998 and
the other facility was closed in the second quarter of 1999. The Integration
Plan also includes the consolidation of the risk management and employee benefit
insurance plans. The risk management insurance plans were consolidated in August
1998 and the employee benefit insurance plans were consolidated in June 1999.
Other third-party services, such as telecommunications and freight services,
were consolidated by December 1998.
The Company has recorded approximately $7.4 million of liabilities related
to the Integration Plan, all of which have been recorded as part of the purchase
price allocation of DIMAC Marketing and AHI. Of this amount, $5.6 million
represented termination benefits and plant closure costs and $1.8 million
represented other exit costs (such as employee benefit insurance plans
termination and
F-10
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
1. BACKGROUND (CONTINUED)
relocation costs). As of December 31, 1998, $3.3 million has been paid and
charged to the Integration Plan accruals relating to severance, relocation and
plant closure costs.
The following presents, on an unaudited pro forma basis, the Company's
summary results of operations for the year ended December 31, 1997 and 1998 as
though the acquisitions of DIMAC Marketing and AHI, AHI's previous acquisitions
of Label America, Inc., AmeriComm Direct Marketing, Inc., Cardinal Marketing,
Inc., and Cardinal Marketing of New Jersey, Inc., and related transactions
occurred on January 1, 1997:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Net sales............................................................. $ 386,665 $ 378,460
Income from operations................................................ 18,540 13,946
Loss before income taxes.............................................. (15,667) (18,985)
Net loss before extraordinary item.................................... (12,445) (18,985)
</TABLE>
The Company (consisting of the operations of DIMAC Marketing and AHI)
provides a comprehensive range of direct marketing services that emphasize
cost-effective production of large, complex, highly personalized direct mail
campaigns. Through its nationwide network of production facilities, the Company
offers its direct mail customers a wide variety of formats, printing and
converting capabilities, personalization and customization alternatives and
mailing and distribution services. To complement and help drive its production
volume, the Company offers a complete range of pre- and post-production direct
marketing services such as Information Services (information processing and
database management), Program Development Services (strategic market planning,
creative development and program evaluation) and Fulfillment and Telemarketing
Services. In addition, to support its direct marketing products and services,
the Company offers other printing and converting products such as custom
pressure sensitive labels and custom mailers. The Company markets its products
and services to customers throughout the United States primarily through its
major facilities in the following locations: Fort Smith, AR, San Carlos, CA,
Denver, CO, Gainesville and Palm Coast, FL, Austell and Tucker, GA, Louisville,
KY, St. Louis, MO, Wilton, NH, Mountainside, NJ, Central Islip and New York, NY,
Philadelphia, PA, Houston, TX and Norfolk and Roanoke, VA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated.
FISCAL PERIOD
The Company's fiscal period ended on December 31.
F-11
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
RESTATEMENT
On November 23, 1998, the Company announced that it was initiating a review
into the accuracy of previously released financial statements. This review has
been completed and, as a result of its findings, previously issued financial
statements of its predecessor company, AHI, have been restated. In addition,
such review had no impact on the Company's financial statements.
REVENUE RECOGNITION
Revenues are recorded as products are shipped or services are performed. The
Company also provides services for certain clients in accordance with
contractual orders which contain project specifications. Revenues are accrued as
services are performed based on the proportion of the services performed to date
in relation to the total services to be provided as outlined in the customer
order. Revenues accrued are reviewed and adjusted to reflect actual results for
client projects based on subsequent determination of total services ultimately
provided and billed. Customer contracts generally contain termination provisions
which enable the Company to collect for all services expended prior to any
termination decision.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of financial statements as well as during the reporting period. Actual
results could differ from these estimates.
CASH EQUIVALENTS
For the purpose of reporting cash flows, the Company considers all highly
liquid debt instruments with a maturity date of purchase of three months or less
to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company provides an allowance for doubtful accounts for the estimated
losses that will be incurred in the collection of receivables. The estimated
losses are based on historical collection experience coupled with a review of
the current status of the existing receivables. Included in accounts receivable
is $9,727 representing unbilled revenues for services performed prior to and as
of December 31, 1998.
F-12
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
A summary of changes in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Balance, beginning of period............................................... $ --
Acquired balance from DIMAC Marketing...................................... 1,240
Acquired balance from AHI.................................................. 707
Provisions................................................................. 282
Recoveries................................................................. 30
Write-offs................................................................. (601)
------
Balance, end of period..................................................... $ 1,658
------
------
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market. Cost of raw materials
are determined using the first-in, first-out ("FIFO") method. Costs (net of an
obsolescence reserve) of work in process, finished goods, and customized stock
(consisting of products which have been produced and held for certain customers
under short-term delayed-shipping arrangements) are determined using the average
cost (which approximates FIFO), or FIFO method.
Inventories consist of the following at December 31, 1998 and March 31,
1999, respectively:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999
----------------- --------------
<S> <C> <C>
(UNAUDITED)
Raw materials............................................. $ 6,349 $ 6,640
Work in process........................................... 2,354 1,482
Finished goods............................................ 3,485 3,872
Customized stock.......................................... 2,372 1,464
------- -------
$ 14,560 $ 13,458
------- -------
------- -------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost or at estimated fair value at
date of acquisition (Note 1) if acquired as part of a business combination. Cost
includes major expenditures for improvements and replacements that extend useful
lives or increase capacity and interest costs associated with
F-13
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
significant capital additions. For the period from Inception to December 31,
1998, the Company capitalized interest of $304. For financial statement
purposes, property and equipment is depreciated using the straight-line method
over the following lives:
<TABLE>
<S> <C>
25 to 40
Buildings.................................................... years
Machinery and equipment...................................... 3 to 11 years
Office equipment, furniture and fixtures..................... 3 to 7 years
Vehicles..................................................... 3 to 5 years
</TABLE>
Leasehold improvements are depreciated over the lesser of the useful lives
of the assets or the lease term.
The Company's policy is to remove the cost and accumulated depreciation of
retirements from the accounts and recognize the related gain or loss upon the
disposition of assets. Depreciation expense for the period from Inception to
December 31, 1998 was $8,718.
INTANGIBLE ASSETS
The Company continually evaluates the propriety of the carrying amount of
goodwill and other long-lived assets as well as the related amortization or
depreciation periods to determine whether current events and circumstances
warrant adjustments to the carrying values and/or revised estimates of useful
lives. This evaluation is based on the Company's projection of the undiscounted
operating income before depreciation, amortization and interest over the
remaining useful lives of the related goodwill and other long-lived assets. The
projections are based on the historical trend line of actual results since the
commencement of operations and adjusted for expected changes in operating
results. To the extent such projections indicate that the undiscounted operating
income (as defined above) is not expected to be adequate to recover the carrying
amounts of goodwill and other long-lived assets, such carrying amounts are
written down by charges to expense in amounts equal to the excess of the
carrying amount of the related assets over their estimated fair value. Effective
January 1, 1999, the Company changed its goodwill amortization period from 40 to
20 years. This change was applied on a prospective basis. The Company changed
it's policy based on management's estimate of expected future cash flows.
GOODWILL Goodwill represents the cost of the acquired businesses in excess
of net identifiable tangible and intangible assets and is amortized on a
straight-line basis over 20 years.
PATENTS The Company has acquired several patents related to certain products
through the acquisition of DIMAC Marketing and AHI. These patents have been
recorded at their estimated fair value at the date of acquisition. These amounts
are being amortized on a straight-line basis over the life (two to nineteen
years) of the patents. The carrying value of patents at December 31, 1998 was
$13,648.
F-14
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
COVENANTS NOT TO COMPETE Covenants not to compete have been recorded at cost
and are being amortized on a straight-line basis over the terms (three to four
years) of the agreements. The carrying value of the covenants not to compete at
December 31, 1998 was $1,846.
RESIDENT AND CUSTOMER ADDRESS LISTS The Company has acquired and maintains
national residential and customer-specific address lists used by its customers
in making saturation or targeted mailings. The address lists have been recorded
at their estimated fair value at the date of acquisition. These amounts are
being amortized on a straight-line basis over the life (ranging from four to six
years) of the address lists. The carrying value of the address lists at December
31, 1998 was $16,604.
TRAINED WORK FORCE The Company acquired a trained work force in connection
with its acquisitions that has been recorded at its estimated fair value at the
date of acquisition. This amount is being amortized on a straight-line basis
over six years. The carrying value of the trained work force at December 31,
1998 was $2,542.
DEFERRED FINANCING COSTS Deferred financing costs represent costs incurred
to raise financing and are amortized over the related terms of the borrowings
(Note 3). The carrying value of the deferred financing costs at December 31,
1998 was $14,514.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
for recognition of deferred tax consequences of temporary differences, net
operating losses, and tax credits by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
CONCENTRATION OF RISKS
For the period from Inception to December 31, 1998, the Company's 5 largest
customers accounted for 13% of total Company sales. No individual customer
accounted for more than 5% of sales during the period. In management's opinion,
the loss of the Company's largest or a group of large customers could have a
material impact on the Company's financial position or results of operations.
The Company's largest purchased raw material is paper. While the Company
utilizes multiple paper suppliers, 5 suppliers provided 11% of its requirements
for the period from Inception to December 31, 1998. Further, the supply and
price of paper are cyclical in nature. As a result, the Company is subject to
the risk that pricing may significantly impact results of operations and that it
may be unable to purchase sufficient quantities of paper to meet production
requirements during times of tight supply. While the Company believes that it
could obtain other suppliers of paper, paper industry conditions may have a
material effect on the Company's results of operations.
F-15
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable and debt. The carrying amounts of cash, accounts
receivable, and accounts payable approximate their fair values because of the
short-term maturity of such instruments. The carrying value of certain long-term
debt instruments approximate their fair value, because interest rates on such
debt are periodically adjusted and approximate current market rates. The fair
value of the 12.5% senior subordinated notes ("DIMAC Corporation Senior Notes")
(Note 3) approximated its carrying value and was estimated using a quote from a
broker.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements as of March 31, 1999 and for the
three-month period ended March 31, 1999 are unaudited. In the opinion of the
management of the Company, these financial statements reflect all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial statements. Certain information and footnote
disclosures usually found in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. The
results of operations for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999 or for any other future periods.
NEW ACCOUNTING PRONOUNCEMENTS
On May 12, 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which establishes
standards for reporting and disclosure of comprehensive income and its
components. The adoption of this standard was not material to the Company's
financial position or results of operations.
On May 12, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures
about Pension and Other Post Retirement Benefits," which standardizes the
disclosure requirements for pensions and other post retirement benefits and
expands disclosures on changes in benefit obligations and fair values of plan
assets. The adoption of this standard was not material to the Company's
financial position or results of operations (Note 7).
F-16
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. LONG-TERM DEBT
Long-term debt consists of the following as of December 31, 1998:
<TABLE>
<S> <C>
Term Loans A payable to CSFB, $55,000 bearing interest at the Eurodollar rate
plus 2.75% (7.78% at December 31, 1998). Quarterly principal payments
commence March 31, 2000, as defined......................................... $ 55,000
Term Loans B payable to CSFB, $80,000 bearing interest at the Eurodollar rate
plus 3.25% (8.28% at December 31, 1998). Quarterly principal payments
commence March 31, 2000, as defined......................................... 80,000
Term Loans C payable to CSFB, $60,000 bearing interest at the Eurodollar rate
plus 3.50% (8.53% at December 31, 1998). Quarterly principal payments
commence March 31, 2000, as defined......................................... 60,000
Revolving Loan Facility payable to CSFB, principal payable in full upon the
earlier of termination, as defined, or June 30, 2004, $9,150 bearing
interest at Prime plus 1.75% (9.50% at December 31, 1998)................... 9,150
12.5% DIMAC Corporation Senior Notes, interest payable semi-annually
commencing April 1, 1999, maturing October 2008............................. 100,000
Capital lease payable to The CIT Group/Equipment Financing, Inc. ("CIT"),
monthly principal and interest payments of $48 through June 2001 with a
balloon payment of $513 due June 2001, interest at 10.2%.................... 1,670
Capital leases payable to General Electric Capital Corporation ("GE"), monthly
principal and interest payments of $54 through November 1999, declining to
$44 commencing December 1999 through October 2001 with balloon payments
totaling $1,615 due November 2001, interest at 9.36%........................ 2,645
Capital leases payable to Leasetec Corporation ("LTC"), monthly principal and
interest payments ranging from $4 to $92 until lease termination on December
2000, interest ranging from 8.25% to 9.75%.................................. 1,161
Other......................................................................... 3,363
---------
312,989
Less unamortized portion of discount due to value assigned to the original
issue discount for the DIMAC Corporation Senior Notes....................... (2,722)
---------
310,267
Less current portion.......................................................... (2,863)
---------
$ 307,404
---------
---------
</TABLE>
F-17
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt and capital lease obligations at December 31,
1998 are as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 2,863
2000.............................................................. 12,266
2001.............................................................. 13,723
2002.............................................................. 15,352
2003.............................................................. 16,435
2004 and thereafter............................................... 252,350
---------
$ 312,989
---------
---------
</TABLE>
On June 28, 1996, ADMI issued $100,000 aggregate principal amount of senior
unsecured notes (the "AmeriComm Senior Notes") due June 15, 2002. Interest was
payable semi-annually on June 15(th) and December 15(th) at 11.625%.
On April 24, 1997, AHI issued $35,000 aggregate 12.5% principal amount of
senior notes (the "AmeriComm Holdings Senior Notes") due April 24, 2003. The
initial quarterly interest installments through September 30, 1998 were paid by
the issuance of "Payment in Kind" Notes ("PIK Notes") totaling $6,858.
On June 28, 1996, ADMI opened a revolving loan facility with Heller
Financial, Inc. (the "Heller Revolver") due June 28, 2001. The Heller Revolver
provided borrowings based upon the lesser of qualified accounts receivable and
inventories, as defined, or $25,000. The Heller Revolver bore interest at the 30
to 180 day LIBOR plus 2.25% or Prime plus 1%.
Concurrent with the consummation of the acquisitions of DIMAC Marketing and
AHI discussed in Note 1, the Company entered into the Credit Agreement with
CSFB. Under the terms of the Credit Agreement, the Company entered into Term
Loans A and B. In addition, the terms of the Credit Agreement provide for the
Revolving Loan Facility whereby the Company can borrow a maximum of $75,000
reduced by the amount outstanding under any letter of credits or swing line
loans, as defined. The maximum allowable borrowing on the Revolving Loan
Facility is reduced to $60,000 effective June 30, 2003. Borrowings outstanding
under the Credit Agreement are guaranteed by Holdings, and each subsidiary of
the Company. In addition, borrowings under the Credit Agreement are secured by
essentially all of the assets of the Company and its subsidiaries. The initial
interest rate on Term Loans A and the Revolving Loan Facility is the Applicable
Base Rate (the higher of Prime Rate or the rate which is 1/2% in excess of the
Federal Funds Effective Rate, hereafter referred to as "ABR") plus 1.25% or the
Applicable Eurodollar Rate (British Bankers' Association Interest Settlement
Rate, hereafter referred to as "AER") plus 2.25%. Borrowings under the Credit
Agreement are subject to certain financial covenants that include, among others,
limitations on additional indebtedness and capital expenditures, minimum
interest and fixed charge coverage ratios and maximum leverage ratio, as defined
and limitations on the payments of dividends, as defined. In addition, the
Credit Agreement may require prepayments, as defined.
F-18
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. LONG-TERM DEBT (CONTINUED)
On July 29, 1998, the Company and CSFB amended the Credit Agreement creating
a Term Loans C whereby, effective with the amendment, Term Loans A were reduced
by $20,000 to $55,000, Term Loans B were reduced by $5,000 to $70,000 and Term
Loans C had an outstanding balance of $25,000. In addition, under the terms of
the amendment, an additional $25,000 of Term Loans C is available. The initial
interest rate on Term Loans C is the ABR plus 2.00% or the AER plus 3.00%.
On October 22, 1998, the Company completed the offering (the "Offering") of
the DIMAC Corporation Senior Notes. Net proceeds from the Offering were $97.2
million, net of original issue discount of $2.8 million. The DIMAC Corporation
Senior Notes represent senior obligations of the Company and rank PARI PASSU in
right of payment to all existing subsidiaries of the Company and future senior
indebtedness. The DIMAC Corporation Senior Notes are guaranteed by each of the
existing subsidiaries of the Company. The indenture to the DIMAC Corporation
Senior Notes limits the incurrence of certain levels of additional indebtedness
by the Company, limits the payment of certain transactions, limits the sale of
certain assets, limits transactions with affiliates and limits the sale of
capital stock, as defined. The DIMAC Corporation Senior Notes are redeemable at
the option of the Company commencing October 2003 at certain defined prices. In
addition, based upon a change of control, as defined, the Company may be
required to redeem a portion or all of the DIMAC Corporation Senior Notes at
certain prices, as defined.
Concurrent with the Offering, the Company and CSFB entered into the Amended
and Restated Credit Agreement, whereby, the initial interest rate on Term Loans
A and the Revolving Loan Facility is the ABR plus 1.75% or the AER plus 2.75%
and can be adjusted downward to the ABR plus 1.00% or the AER plus 2.00% based
upon the Company's leverage ratio, as defined. The initial interest rate on Term
Loans B is the ABR plus 2.25% or the AER plus 3.25% and can be adjusted downward
to the ABR plus 2.00% or the AER plus 3.00% based upon the Company's leverage
ratio, as defined. The initial interest rate on Term Loans C is ABR plus 2.50%
or AER plus 3.50% and can be adjusted downward to the ABR plus 2.25% or the AER
plus 3.25% based upon the Company's leverage ratio, as defined. In addition, the
Company borrowed an additional $10,000 and $35,000 under terms of Term Loans B
and Term Loans C, respectively.
Concurrent with the Offering, the additional borrowings on Term Loans B and
Term Loans C, and a $39,198 capital contribution from Holdings (Note 5), the
Company repaid the existing AmeriComm Senior Notes and the related accrued
interest and prepayment penalty totaling $114,062, repaid the existing AmeriComm
Holdings Senior Notes and the related accrued interest and prepayment penalty
totaling $44,794, and repaid the existing Heller Revolver and the related
accrued interest totaling $15,333. Subsequently, the agreements related to the
AmeriComm Senior Notes, AmeriComm Holdings Senior Notes and Heller Revolver were
terminated. The Company recorded an extraordinary loss on early retirement of
debt of $16,803, net of $4,818 income tax benefit, related to the payment of the
prepayment penalties, unaccreted discounts and the elimination of related
unamortized deferred financing costs.
F-19
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
3. LONG-TERM DEBT (CONTINUED)
Under the CIT capital lease payable, CIT has a first-perfected security
interest in certain equipment. At the end of the lease term, the Company will
have the option to purchase the equipment for $513. Under the GE capital leases
payable, GE has a first-perfected security interest in certain equipment. At the
end of each lease term, the Company will have the option to purchase the
equipment for an aggregate of $1,615. The CIT and GE capital leases are
cross-defaulted with other loan agreements if such default is not cured within
90 days following the default.
Under the LTC capital lease payable, LTC has a first-perfected security
interest in certain equipment. At the end of the lease term, the Company will
have the option to purchase the equipment for fair market value, as defined.
Interest expense on long-term debt and capital leases was approximately
$17,069 which includes $812 of deferred financing cost amortization and $46 of
original issue discount accretion.
4. INCOME TAXES
The income tax benefit for the period ended December 31, 1998 represents the
deferred income tax benefit from operating losses adjusted by a valuation
allowance.
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate for the period from Inception to December 31, 1998 is
as follows:
<TABLE>
<S> <C>
Federal tax benefit at statutory rate.............................. $ (2,803)
State, net of federal benefit...................................... (598)
Non-deductible amortization........................................ 862
Change in valuation allowance...................................... 427
Non-deductible expenses............................................ 146
Other, net......................................................... (363)
---------
Actual income tax benefit.......................................... $ (2,329)
---------
---------
Effective tax rate................................................. (28)%
---------
---------
</TABLE>
F-20
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
4. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred taxes as of December
31, 1998:
DEFERRED TAX ASSETS (LIABILITIES):
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Net operating loss carryforwards........................................... $ 18,167
Book basis in property over tax basis...................................... (13,172)
Address lists.............................................................. (6,134)
Patents.................................................................... (416)
Inventories................................................................ (316)
Goodwill................................................................... (2,185)
Prepaid pension cost....................................................... (1,252)
Trained work force......................................................... (1,042)
Covenants not to compete................................................... 1,248
Employee benefit accruals.................................................. 3,032
Liabilities not currently deductible....................................... 3,708
Allowance for doubtful accounts............................................ 590
Deferred revenue........................................................... (474)
Other, net................................................................. 66
--------
1,820
Valuation allowance........................................................ (1,820)
--------
Net deferred taxes......................................................... $ --
--------
--------
</TABLE>
The net operating loss carryforwards of $47,000 will be used to offset
future taxable income of certain subsidiaries of the Company, subject to their
expirations, beginning in 2004 and continuing through 2018. Any future issuance
of stock by the Company could result in an ownership change, as defined by the
Tax Reform Act of 1986, and could limit utilization of net operating loss
carryforwards. Also, benefits derived from using net operating loss
carryforwards to offset any taxes calculated as alternative minimum tax could be
less than the recorded amount of the net operating loss carryforwards. The
Company has established a valuation reserve in the event net operating losses
are not realized within the allowed time period.
5. CAPITAL STOCK
Concurrent with the acquisitions of DIMAC Marketing and AHI (Note 1),
Holdings made a capital contribution of $100,000 to the Company for 100 shares
of common stock.
Concurrent with the Offering (Note 3), Holdings made an additional capital
contribution of $39,198. To provide funds for the capital contribution, Holdings
issued $30,000 aggregate principal amount of 15.5% notes ("Holdings Notes") due
October 2009 and issued shares of Holdings common stock for $10,000. As an
inducement for accepting the Holdings Notes, Holdings issued warrants to
purchase 28,205 shares of Holdings' common stock at $0.01 per share. Interest on
the Holdings Notes is not payable in cash until December 2003. Thereafter,
Holdings will be reliant upon the Company to provide it with cash to meet its
obligations under the Holdings Notes. The indenture to the Holdings
F-21
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
5. CAPITAL STOCK (CONTINUED)
Notes place limitations on the Company's ability to pay dividends, make loans or
transfer assets to and from Holdings, incur additional indebtedness, and limits
the Company's ability to make acquisitions.
6. RELATED-PARTY TRANSACTIONS
FEES TO AFFILIATE
Effective July 1, 1998, the Company entered into an Advisory Services
Agreement (the "Agreement") with MDC Management Company IV, L.P. ("MDC") an
affiliate of the Company. Under the Agreement, MDC provides certain consulting,
financial, and managerial functions for a fee. The annual fee for the period
from July 1, 1998 to December 31, 1998 was $275. Thereafter, the annual fee will
equal the greater of (i) $550 and (ii) 1.06% of the pro forma EBITDA (earnings
before interest, income taxes, depreciation and amortization, as defined) of the
Company for the immediate preceding fiscal year, as defined. No payments shall
be made by the Company to MDC under the Agreement if there is an event of
default, as defined, under certain loan agreements (Note 3). The Agreement
expires July 2003 and is renewable thereafter, unless terminated by the Company
for justifiable cause, as defined.
For services related to the acquisitions of DIMAC Marketing and AHI (Note
1), the Company paid MDC and its affiliates $11,231, which has been included in
the purchase price of DIMAC Marketing and AHI.
STOCKHOLDERS AGREEMENT
Certain officers and key employees of the Company purchased and own an
aggregate of 33,750 shares of Holdings common stock. The stock was purchased at
a price of $100 per share, the fair value at the date of such purchases.
Certain stockholders are subject to the terms of a stockholders' agreement.
This agreement restricts the stockholders' ability to sell, transfer, and assign
the common stock, with Holdings having the first right of purchase. The holders
of the stock may be required to sell their shares of common stock to the
Holdings under certain conditions. In addition, upon expiration of a
stockholder's employment with the Company, the Holdings has the option to buy
back the stockholder's common stock at a specified price based on a stated
return of 5% per annum over the cost of the shares of Holdings.
7. EMPLOYEE BENEFIT PLANS
Concurrent with the acquisitions of DIMAC Marketing and AHI, the Company
assumed the benefit obligations associated with The Employees Retirement Plan of
National Fiberstok Corporation and The Transkrit Corporation Employees Pension
Plan.
During 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about
Pension and Other Post Retirement Benefits." This statement requires additional
disclosure information on changes in plan assets and benefit obligations. All
disclosures related to the Company's pension plans have been prepared in
accordance with SFAS No. 132.
F-22
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
DEFINED BENEFIT PLANS
The Company has a defined benefit pension plan ("The Employees' Retirement
Plan of National Fiberstok Corporation") covering certain employees. On December
20, 1993, AHI amended the plan, freezing future participation by any new
employee of the Company effective December 31, 1993. Effective December 31,
1994, AHI again amended the plan, freezing future accrual of benefits for all
participants. In conjunction with this amendment, all participants of the plan
were retroactively vested.
The change in the projected benefit obligation of the plan for the six-month
period ended December 31, 1998 consisted of the following:
<TABLE>
<S> <C>
Change in benefit obligations:
Benefit obligation at June 27, 1998 (Note 1)..................... $ 18,355
Interest cost.................................................... 619
Actuarial gain................................................... (43)
Benefits paid.................................................... (755)
---------
Benefit obligation at end of period................................ $ 18,176
---------
---------
</TABLE>
The change in plan assets and funded status of the plan for the six-month
period ended December 31, 1998 and as of December 31, 1998, respectively,
consisted of the following:
<TABLE>
<S> <C>
Change in plan assets:
Fair value of plan assets at June 27, 1998
(Note 1)....................................................... $ 19,963
Actual return on plan assets..................................... 630
Plan expenses.................................................... (30)
Benefits paid.................................................... (755)
---------
Fair value of plan assets at end of period......................... $ 19,808
---------
---------
Funded status:
Funded status.................................................... $ 1,631
Unrecognized actuarial loss...................................... 220
---------
Prepaid pension cost............................................... $ 1,851
---------
---------
</TABLE>
The weighted average discount rate used to measure the accumulated projected
benefit obligation was 7%. The expected long-term rate of return on assets was
9%.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------
<S> <C>
Components of net periodic benefit income:
Interest cost............................................................ $ 619
Expected return on plan assets........................................... (863)
-----
Net periodic benefit income................................................ $ (244)
-----
-----
</TABLE>
F-23
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
At December 31, 1998, plan assets consisted primarily of U.S. corporate,
government and mortgage bonds and U.S. corporate stocks.
The Company has another defined benefit pension plan ("The Transkrit
Corporation Employees' Pension Plan") covering certain employees. Effective
April 30, 1997, AHI amended the plan, freezing future benefits for participants
at certain locations. In conjunction with this amendment, the participants with
frozen future benefits were retroactively vested. Normal retirement age is 65,
but a provision is made for early retirement. Benefits are based on the
employee's compensation level and years of service.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Change in benefit obligations:
Benefit obligation at June 27, 1998 (Note 1)............................. $ 4,502
Service cost............................................................. 217
Interest cost............................................................ 152
Actuarial loss........................................................... 38
Benefits paid............................................................ (509)
------
Benefit obligation at end of period........................................ $ 4,400
------
------
</TABLE>
The change in plan assets and funded status of the plan for the six-month
period ended December 31, 1998 and as of December 31, 1998, respectively,
consisted of the following:
<TABLE>
<S> <C>
Change in plan assets:
Fair value of plan assets at June 27, 1998
(Note 1)........................................................ $ 6,051
Actual return on plan assets...................................... 491
Plan expenses..................................................... (28)
Benefits paid..................................................... (509)
---------
Fair value of plan assets at end of period.......................... $ 6,005
---------
---------
</TABLE>
<TABLE>
<S> <C>
Funded status:
Funded status..................................................... $ 1,605
Unrecognized actuarial gain....................................... (162)
---------
Prepaid pension benefit cost........................................ $ 1,443
---------
---------
</TABLE>
F-24
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
7. EMPLOYEE BENEFIT PLANS (CONTINUED)
The weighted average discount rate used to measure the accumulated projected
benefit obligation was 7%. The expected long-term rate of return on assets was
9%. The weighted average rate of compensation increases was 4%.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------
<S> <C>
Components of net periodic benefit cost:
Service cost............................................................. $ 217
Interest cost............................................................ 152
Expected return on plan assets........................................... (263)
-----
Net periodic benefit cost.................................................. $ 106
-----
-----
</TABLE>
At December 31, 1998, plan assets consisted primarily of U.S. corporate,
government and mortgage bonds and U.S. corporate stocks.
MULTI-EMPLOYER PENSION PLAN
The Company is also a member of a multi-employer pension plan covering
approximately 100 union employees. The plan is not administered by the Company
and contributions are determined in accordance with provisions of a negotiated
labor contract. The Company contributed and charged to expense approximately $78
during 1998. The Company's share of the actuarial present value of accumulated
plan benefits and net assets available for benefits is not available.
DEFINED CONTRIBUTION PLANS
The Company sponsors several voluntary 401(k) savings plans covering all
eligible, non-union, employees at certain locations. The plans include
provisions which allow employees to make pretax contributions ranging from 1% to
20% of the employee's wages. Maximum pretax contributions are capped at percents
ranging from 6% to 20% of wages, depending on the location. The Company matches
between 10% and 100% of employee contributions up to 4% to 10% of eligible
employee's wages, which varies by location. Company matching contributions vest,
at periods ranging from immediately to six years. The Company contributed
approximately $907 to these plans for the period ended December 31, 1998.
8. COMMITMENTS AND CONTINGENCIES
Concurrent with the acquisitions of DIMAC Marketing and AHI, the Company
assumed certain commitments and potential liabilities associated with
contingencies. Major commitments and contingencies are discussed below.
F-25
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
OPERATING LEASES
The Company has certain non-cancelable operating leases for office and plant
facilities and office equipment. Total rental expense was $4,055 in 1998.
Minimum annual rental payments remaining under non-cancelable operating leases
as of December 31, 1998 are as follows:
<TABLE>
<S> <C>
1999............................................................... $ 6,242
2000............................................................... 4,773
2001............................................................... 3,433
2002............................................................... 2,783
2003............................................................... 2,343
2004 and thereafter................................................ 4,457
---------
$ 24,031
---------
---------
</TABLE>
ENVIRONMENTAL LIABILITIES
In January 1988, AHI was notified by the United States Environmental
Protection Agency ("EPA") that it was potentially liable for costs incurred by
the EPA in responding to the Dixie Caverns County Landfill in Roanoke County,
Virginia. Subsequently, Roanoke County expended its funds to clean the Dixie
Cavern Site to satisfy the EPA's notification. Roanoke County then filed suit
against the potentially responsible parties ("PRP's"), which included AHI, to
recover the funds it had expended in cleaning the site. Management believes that
the Company's potential liability in connection with this site will not be
material based upon the amount and nature of the waste alleged to be
attributable to it and the number of other financially viable PRP's.
LEGAL PROCEEDINGS
In June 1997, DIMAC Marketing was informed by the United States Attorney's
Office for the Eastern District of Missouri that it was the subject of a grand
jury investigation based upon information supplied by the United States Postal
Service. The investigation concerns whether violations of civil or criminal
statutes may have occurred in connection with DIMAC Marketing's bulk mailing
practices. The Company has been engaged in a dialogue with the Government, which
discussions have included a possible consensual resolution of this matter;
however as of the date hereof, no settlement has been reached. It is the
Company's position that its bulk mailing practices of DIMAC Marketing comply
with applicable laws and regulations. In connection with the DIMAC Marketing
acquisition, Heritage, the Company and DIMAC Marketing entered into an
indemnification agreement pursuant to which Heritage has agreed to indemnify the
Company for certain costs, including settlements, judgments and related fees, in
relation to the USPS investigation. There can be no assurance, however, that the
investigation and the costs associated therewith will not have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company is a party to various other litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any
such matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company.
F-26
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
9. BUSINESS SEGMENTS
The Company provides a comprehensive range of direct marketing services with
continuing operations in two business segments--direct mail products and
services and other printing and converting.
The Company's direct mail products and services segment provides a
comprehensive range of direct mail services that emphasizes cost-effective
production of large, complex, highly personalized direct mail campaigns. The
Company primarily targets companies that have sophisticated, mid- to high-volume
direct mail requirements. The Company services customers in a broad range of
industries, including banking and financial services, telecommunications,
publishing, retail, healthcare, not-for-profit and insurance.
In addition, to support the direct mail products and services, the Company
offers other printing and converting products such as custom pressure sensitive
labels and custom mailers. The Company primarily targets larger national
accounts and independent distributors for this business segment.
Included in corporate activities are general administrative corporate
expenses, goodwill amortization, taxes and interest expense.
Information as to the operations of the Company in different business
segments is set forth below based on the nature of services offered. The
accounting policies of the business segments are the same as those described in
the summary of significant accounting policies (Note 2).
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION FOR THE THREE-MONTH
(MAY 12, 1998) TO PERIOD ENDED
DECEMBER 31, 1998 MARCH 31, 1999
-------------------- -------------------
<S> <C> <C>
(UNAUDITED)
Net sales-
Direct mail products and services............... $ 141,519 $ 64,289
Other printing and converting................... 49,882 21,421
-------- --------
$ 191,401 $ 85,710
-------- --------
-------- --------
Operating income (loss)-
Direct mail products and services............... $ 8,279 $ (2,620)
Other printing and converting................... 2,969 788
Corporate activities............................ (2,422) (2,505)
-------- --------
$ 8,826 $ (4,337)
-------- --------
-------- --------
Depreciation and amortization-
Direct mail products and services............... $ 10,414 $ 8,111
Other printing and converting................... 3,803 1,529
Corporate activities............................ 2,100 473
-------- --------
$ 16,317 $ 10,113
-------- --------
-------- --------
</TABLE>
F-27
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
9. BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION FOR THE THREE-MONTH
(MAY 12, 1998) TO PERIOD ENDED
DECEMBER 31, 1998 MARCH 31, 1999
-------------------- -------------------
(UNAUDITED)
<S> <C> <C>
Total assets-
Direct mail products and services............... $ 248,120 $ 263,214
Other printing and converting................... 115,140 92,429
Corporate activities............................ 151,178 160,758
-------- --------
$ 514,438 $ 516,401
-------- --------
-------- --------
Capital Expenditures-
Direct mail products and services............... $ 6,857 $ 3,603
Other printing and converting................... 1,017 329
Corporate activities............................ 64 33
-------- --------
$ 7,938 $ 3,965
-------- --------
-------- --------
</TABLE>
10. SUBSEQUENT EVENTS
AMENDMENTS TO THE CREDIT AGREEMENT
On March 26, 1999, the Company and CSFB amended the Credit Agreement under
the First Amendment to the Amended and Restated Credit Agreement ("First Amended
Credit Agreement") whereby, CSFB is under no obligation to provide additional
borrowings on the Revolving Loan Facility until the Company complies with
certain financial covenants described in the First Amended Credit Agreement. As
of March 31, 1999, the balance outstanding on the Revolving Loan Facility was
$11,850. In addition, the amendment increased the initial interest rates on Term
Loans A and the Revolving Loan Facility to the ABR plus 2.00% or the AER plus
3.00%, Term Loans B to the ABR plus 2.50% or the AER plus 3.50% and Term Loans C
to the ABR plus 2.75% or the AER plus 3.75% through December 31, 2000.
Thereafter, the above mentioned interest rates will decrease by 0.25%. The above
interest rates can be adjusted downward if the Company's Leverage Ratio, as
defined, meets certain minimum levels. Commencing fiscal year ending December
31, 2000, the Company will be required to prepay the Revolving Loan Facility and
Term Loans A, B and C by 50% of the excess amount of Consolidated Excess Cash
Flow, as defined, over certain minimum stipulated levels. The amendment also
revised certain financial covenants, established minimum levels of EBITDA
(earnings before interest, income taxes, depreciation and amortization, as
defined) and eliminated the fixed charge and leverage covenants, as defined.
On March 31, 1999, Holdings made a $15,000 capital contribution to the
Company. To provide funds for the capital contribution, Holdings issued $15,000
aggregate principal amount of 15.5% senior subordinated discount notes to
certain other investors and affiliates of McCown De Leeuw (collectively, the
"Purchasers") ("MDC Notes"). As an inducement for purchasing the MDC Notes,
Holdings issued warrants to the Purchasers to purchase 200,000 shares of
Holdings' common stock at $100 per share. The MDC Notes mature in March 2010.
Interest on the MDC Notes is not payable in cash until March
F-28
<PAGE>
DIMAC CORPORATION AND SUBSIDIARIES
(A WHOLLY OWNED SUBSIDIARY OF DIMAC HOLDINGS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE PERIOD FROM INCEPTION (MAY 12, 1998) TO DECEMBER 31, 1998 AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
10. SUBSEQUENT EVENTS (CONTINUED)
2010. Holdings will be reliant upon the Company to provide it with cash to meet
its obligations under the MDC Notes.
On July 23, 1999, the Company and CSFB entered into a Second Amendment to
the Amended and Restated Credit Agreement (the "Second Amended Credit
Agreement"). Pursuant to the Second Amended Credit Agreement, the Company
borrowed $30,000 as additional term and revolving loans. Subsequent to the
$30,000 borrowing, the outstanding balances on Term Loans A, B and C and the
Revolving Loan Facility were $62,977, $91,603, $68,702 and $13,568,
respectively. The maximum borrowings allowed on the Revolving Loan Facility was
reduced from $75,000 to $46,719. CSFB remains under no obligation to provide
additional funds on the Revolving Loan Facility until the Company complies with
certain financial covenants described in the Second Amended Credit Agreement.
The Second Amended Credit Agreement also revised the principal repayment
schedules as it pertains to the term loans and the Revolving Loan Facility. Term
loan repayments will begin on March 31, 2001 and term loan repayments due in
2001 are $10,475. The amendment also revised certain financial covenants and
eliminated the interest coverage ratio covenant until January 1, 2001.
HOLDINGS STOCK OPTION PLAN
Effective February 18, 1999, the board of directors adopted the DIMAC
Holdings, Inc. 1998 Stock Option Plan (the "Plan") for directors, certain
employees and consultants of the Company. The Plan allows for 218,300 shares of
Holdings' common stock to be granted; provided that 196,078 shares of common
stock are available for grant to employees of the Company. The options vest
based on time and based upon the profitability of the Company or in the event of
a change in control of the Company, as defined. No options have been granted as
of August 11, 1999.
F-29
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
The consolidated financial statements for the four month period ended
December 31, 1997 and the six months ended June 26, 1998 reflect the financial
results of DIMAC Marketing Corporation under a new basis of accounting that
reflects the fair value of assets acquired and liabilities assumed in connection
with the purchase of Heritage by News Corporation.
F-30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DIMAC Marketing Corporation and Subsidiaries:
We have audited the accompanying consolidated balance sheet of DIMAC Marketing
Corporation and Subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, stockholder's equity and cash flows for
the four months ended December 31, 1997 and six months ended June 26, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of DIMAC
Marketing Corporation and subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their cash flows for the four
months ended December 31, 1997, and six months ended June 26, 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 27, 1999
F-31
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ --
Accounts receivable, net of allowance for doubtful accounts of $972............. 35,916
Inventories..................................................................... 3,452
Income taxes receivable-Parent Company.......................................... 3,816
Deferred income taxes........................................................... 8,376
Other current assets............................................................ 1,560
---------
Total current assets.......................................................... 53,120
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS.................................... 45,119
INTANGIBLE ASSETS................................................................. 162,597
---------
Total assets................................................................ $ 260,836
---------
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................................................ $ 7,815
Advances from customers......................................................... 10,087
Accrued liabilities............................................................. 25,878
Current maturities of long-term capital lease obligations....................... 1,782
---------
Total current liabilities..................................................... 45,562
LONG-TERM CAPITAL LEASE OBLIGATIONS............................................... 2,822
DEFERRED LEASE LIABILITY.......................................................... 2,004
DEFERRED INCOME TAXES............................................................. 14,071
PAYABLE TO PARENT COMPANY......................................................... 138,825
---------
Total liabilities........................................................... 203,284
---------
---------
STOCKHOLDER'S EQUITY:
Series preferred stock, $.01 par value; 10,000,000 shares authorized; none
issued........................................................................ --
Common stock, $.01 par value; 20,000,000 shares authorized; issued 1,000........ --
Additional paid-in capital...................................................... 57,800
Retained deficit................................................................ (248)
---------
Total stockholder's equity.................................................... 57,552
---------
---------
Total liabilities and stockholder's equity.................................. $ 260,836
---------
---------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-32
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997,
THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 26,
1997 1998 1998
------------ ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
Net sales.................................................................. $ 59,200 $ 49,057 $ 93,208
Cost of sales.............................................................. 39,722 33,225 61,806
------------ ----------- ---------
Gross profit............................................................... 19,478 15,832 31,402
------------ ----------- ---------
Operating expenses:
Sales expenses........................................................... 6,404 5,049 10,180
General and administrative expenses...................................... 8,011 6,047 12,639
Amortization of intangibles.............................................. 2,668 1,903 3,796
------------ ----------- ---------
Total operating expenses............................................... 17,083 12,999 26,615
------------ ----------- ---------
Income from operations..................................................... 2,395 2,833 4,787
Interest expense........................................................... 2,248 2,247 4,583
------------ ----------- ---------
Income before income taxes................................................. 147 586 204
Income tax provision....................................................... 395 490 585
------------ ----------- ---------
Net income (loss).......................................................... $ (248) $ 96 $ (381)
------------ ----------- ---------
------------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-33
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL
COMMON COMMON PAID-IN RETAINED
STOCK STOCK CAPITAL DEFICIT TOTAL
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1997.............................. 1,000 $ -- $ 57,800 $ -- $ 57,800
Net loss................................................ -- -- -- (248) (248)
----- ----------- ----------- ----- ---------
BALANCE AT DECEMBER 31, 1997.............................. 1,000 -- 57,800 (248) 57,552
Net loss................................................ -- -- -- (381) (381)
----- ----------- ----------- ----- ---------
BALANCE AT JUNE 26, 1998.................................. 1,000 $ -- $ 57,800 $ (629) $ 57,171
----- ----------- ----------- ----- ---------
----- ----------- ----------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-34
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997,
THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 26,
1997 1998 1998
------------ ----------- ---------
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (248) $ 96 $ (381)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization expense................................... 4,530 3,489 7,077
Deferred income tax benefit............................................. 289 196 1,029
Changes in net assets and liabilities:
Accounts receivable................................................... 234 888 (2,061)
Inventories........................................................... 349 614 1,168
Other current assets.................................................. 507 (572) 58
Accounts payable...................................................... 665 (2,103) (2,743)
Advances from customers............................................... 171 (231) 3,499
Accrued liabilities................................................... (5,187) (2,722) (5,685)
------------ ----------- ---------
Net cash provided by (used in) operating activities................. 1,310 (345) 1,961
------------ ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for contingent consideration and other intangibles............... (1,900) (1,205) (3,221)
Purchase of property, equipment and leasehold improvements................ (5,720) (1,640) (3,166)
------------ ----------- ---------
Net cash used in investing activities................................. (7,620) (2,845) (6,387)
------------ ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations..................................... (432) (181) (655)
Net borrowings from Parent Company........................................ 6,742 3,371 5,081
------------ ----------- ---------
Net cash provided by financing activities............................. 6,310 3,190 4,426
------------ ----------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS..................................... -- -- --
CASH AND CASH EQUIVALENTS, beginning of period.............................. -- -- --
------------ ----------- ---------
CASH AND CASH EQUIVALENTS, end of period.................................... $ -- $ -- $ --
------------ ----------- ---------
------------ ----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................................. $ 2,321 $ 2,247 $ 4,583
------------ ----------- ---------
------------ ----------- ---------
Income taxes paid......................................................... $ -- $ -- $ 10
------------ ----------- ---------
------------ ----------- ---------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-35
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
DIMAC Marketing Corporation (DIMAC or the Company) is one of the largest
full-service, vertically integrated direct marketing services companies in the
United States. DIMAC creates and implements comprehensive, custom-tailored
marketing programs that enable clients nationwide to focus their marketing
expenditures on a highly targeted potential customer base. As a full-service,
vertically integrated firm, DIMAC provides every component of a complete direct
marketing program, including customized market research, strategic and creative
planning, creation and management of relational data bases, telemarketing, media
buying, production services, fulfillment services and subsequent program
analysis.
The consolidated financial statements include the accounts of DIMAC and its
wholly owned subsidiary DIMAC DIRECT Inc. (DIMAC DIRECT) (including its wholly
owned subsidiaries Palm Coast Data Inc., The McClure Group Inc., Wilcox &
Associates Inc. and MBS/Multimode Inc.). DIMAC's operations are located in St.
Louis, New York, Palm Coast, Philadelphia, Houston, Los Angeles and Boston. All
significant intercompany balances and transactions have been eliminated.
In August 1997, all of the common stock of Heritage Media Corporation
(Heritage), the parent company of DIMAC, was acquired by News America
Corporation Ltd. (News Corp.) in a cash purchase transaction. The acquisition by
News Corp. has been accounted for as a purchase and the purchase price allocated
to DIMAC of approximately $190,000 has been pushed down to the Company. Goodwill
of approximately $145,000 resulting from this acquisition is being amortized on
a straight-line basis over 40 years.
The consolidated financial statements as of December 31, 1997 and for the
four months then ended include an amount due to News Corp. of $138,825, and
intercompany interest expense to News Corp. of $2,123. For the six months ended
June 26, 1998, intercompany interest expense to News Corp. was $4,548.
Intercompany interest is charged at 8.5%, calculated monthly.
CASH AND CASH EQUIVALENTS
All highly liquid debt investments purchased with a maturity of three months
or less are classified as cash equivalents.
ACCOUNTS RECEIVABLE
The Company provides an allowance for doubtful accounts for the estimated
losses that will be incurred in the collection of receivables. The estimated
losses are based on historical collection experience coupled with a review of
the current status of the existing receivables. Included in receivables is
$13,336 representing unbilled revenues for services performed prior to December
31, 1997.
F-36
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A summary of changes in the allowance for doubtful accounts for the four
months ended December 31, 1997 and the six months ended June 26, 1998 is as
follows:
<TABLE>
<CAPTION>
FOUR MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 26, 1998
--------------------- -----------------
<S> <C> <C>
Balance, beginning of year............................ $ 981 $ 972
Provisions............................................ 45 106
Recoveries............................................ 6 2
Write-offs............................................ (60) (14)
----- ------
Balance, end of year.................................. $ 972 $ 1,066
----- ------
----- ------
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market, and include appropriate elements of material, labor and overhead.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost.
Property and equipment are depreciated using the straight-line method over the
respective asset's estimated useful life. Leasehold improvements are amortized
using the straight-line method over the lesser of the respective asset's
estimated useful life or the lease term.
The Company continually evaluates the propriety of the carrying amounts of
property and equipment and the estimated useful lives used for depreciation.
INTANGIBLE ASSETS
The cost of acquired companies is allocated first to identifiable assets and
liabilities based on estimated fair market values. The excess of cost over
identifiable assets and liabilities is recorded as goodwill with amortization
over 40 years. Costs allocated to identifiable intangible assets are amortized
over the remaining estimated useful lives of the assets as determined by
underlying contract terms or independent appraisals.
The Company continually reevaluates the propriety of the carrying amount of
goodwill as well as the related amortization period to determine whether current
events and circumstances warrant adjustments to the carrying values or revised
estimates of useful lives. This evaluation is based on the Company's projection
of the undiscounted operating income before depreciation, amortization and
interest over the remaining lives of the amortization periods of related
goodwill. The projections are based on the historical trend line of actual
results since the commencement of operations and adjusted for expected changes
in operating results. To the extent such projections indicate that the
undiscounted operating income (as defined above) is not expected to be adequate
to recover the carrying amounts of
F-37
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
goodwill, such carrying amounts are written down by charges to expense in
amounts equal to the excess of the carrying amount of intangible assets over the
related fair value of the assets. The Company believes that no significant
impairment of the goodwill and other intangibles has occurred and that no
reduction of the estimated useful lives is warranted.
REVENUE RECOGNITION
The Company recognizes revenue at the time the service is rendered. The
Company provides services for clients in accordance with contractual customer
orders which contain project specifications. Revenues are accrued as services
are performed based on the proportion of the services performed to date in
relation to the total services to be provided as outlined in the customer order.
Revenues accrued are reviewed and adjusted to reflect actual results for the
client projects based on subsequent determination of total services ultimately
provided and billed. Customer contracts generally contain termination provisions
which enable the Company to collect for all services expended prior to any
termination decision.
FAIR VALUE OF FINANCIAL INSTRUMENTS
A financial instrument is defined as cash or a contract that imposes on one
entity a contractual obligation to deliver cash or another financial instrument
to a second entity, and conveys to that second entity a contractual right to
receive cash or another financial instrument from the first entity. The carrying
amount of accounts receivable, accounts payable and accrued liabilities
approximates fair value due to the short-term maturity of these instruments.
INCOME TAXES
Income tax expense is reported as the total of current year income tax
liability and the change in deferred taxes which are provided for temporary
differences. Deferred income taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
current enacted tax rates.
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
F-38
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<S> <C>
Raw materials....................................................... $ 1,000
Work-in-process..................................................... 1,062
Finished goods...................................................... 38
Postage............................................................. 1,352
---------
$ 3,452
---------
---------
</TABLE>
3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
The estimated useful lives and the amounts of property, equipment and
leasehold improvements are as follows:
<TABLE>
<CAPTION>
USEFUL LIFE
IN YEARS
-----------
<S> <C> <C>
Land................................................................... -- $ 3,790
Buildings and leasehold improvements................................... 10-40 16,497
Machinery and equipment................................................ 3-11 19,266
Furniture and fixtures................................................. 5-7 4,125
Data processing software............................................... 3-5 2,778
---------
46,456
Less-Accumulated depreciation.......................................... 1,862
---------
44,594
Construction-in-process................................................ 525
---------
$ 45,119
---------
---------
</TABLE>
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
USEFUL LIFE
IN YEARS
-------------
<S> <C> <C>
Goodwill............................................................. 40 $ 147,203
Customer list........................................................ 8-11 14,493
Other intangibles.................................................... 5-8 3,569
----------
165,265
Less-Accumulated amortization........................................ 2,668
----------
$ 162,597
----------
----------
</TABLE>
F-39
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
5. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<S> <C>
Accruals related to discontinued operations........................ $ 2,626
Compensation....................................................... 3,967
Accrued production costs........................................... 4,323
Other.............................................................. 14,962
---------
$ 25,878
---------
---------
</TABLE>
6. CAPITAL LEASE OBLIGATIONS
Maturities of capital leases at December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998................................................................ $ 2,578
1999................................................................ 1,568
2000................................................................ 716
2001................................................................ 196
2002................................................................ 91
2003 and thereafter................................................. --
---------
Total payments.................................................... 5,149
---------
Less: amounts representing interest................................. 545
---------
Present value of minimum lease payments........................... 4,604
Less: current portion............................................... 1,782
---------
$ 2,822
---------
---------
</TABLE>
7. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes.
F-40
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
7. INCOME TAXES (CONTINUED)
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 26,
1997 1998
--------------- -----------
<S> <C> <C>
Current:
Federal............................................................ $ -- $ --
State.............................................................. -- --
----- -----
-- --
----- -----
Deferred:
Federal............................................................ 343 508
State.............................................................. 52 77
----- -----
395 585
----- -----
$ 395 $ 585
----- -----
----- -----
</TABLE>
Differences between the amount of the income tax provision recorded and the
amount computed by applying the federal income tax statutory rate to income
before income taxes are explained as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 26,
1997 1998
--------------- -----------
<S> <C> <C>
Provision at statutory rates......................................... $ 51 $ 71
Federal.............................................................. 9 12
State................................................................ 335 502
----- -----
Income tax provision............................................... $ 395 $ 585
----- -----
----- -----
</TABLE>
Significant components of the Company's deferred income tax liabilities and
assets at December 31, 1997 are as follows:
<TABLE>
<S> <C>
Deferred income tax liabilities:
Other intangibles (excluding goodwill)........................... $ (8,618)
Tax over book depreciation and amortization...................... (5,016)
Deferred revenue................................................. (437)
---------
(14,071)
Deferred income tax assets:
Accrued liabilities.............................................. 7,879
Other............................................................ 497
---------
8,376
---------
Net deferred tax liability......................................... $ (5,695)
---------
---------
</TABLE>
F-41
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
8. EMPLOYEE BENEFIT PLAN
The Company has defined contribution plans which provide retirement benefits
to substantially all employees not covered by collective bargaining agreements.
The Company matches a portion of employee contributions to the plans. Company
contributions to these plans charged to expense were $369 for the four month
period ended December 31, 1997, and $672 for the six month period ended June 26,
1998.
9. LEASE COMMITMENTS
Equipment acquired under capital leases is included in property, equipment
and leasehold improvements, and the related obligations are in capital lease
obligations (see Note 6). Related amortization is included in depreciation.
Total rental expense for office and warehouse space, including short-term
rentals and rentals under noncancelable operating leases (primarily office and
warehouse space and production equipment), was $1,916 for the four month period
ended December 31, 1997, and $2,868 for the six month period ended June 26,
1998.
The Company's landlord granted lease incentives to the Company in 1990,
amounting to approximately $1,700, as an inducement to enter into the lease of
the St. Louis facility. Rent payments on the St. Louis facility, net of the
lease incentive, are scheduled to increase periodically and are recognized as
expense on a straight-line basis over the life of the lease. The difference
between rent payments made and rental expense is recorded as deferred lease
liability.
The future minimum rental commitments required under noncancelable operating
leases at
December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 3,776
1999............................................................... 3,387
2000............................................................... 2,772
2001............................................................... 2,501
2002............................................................... 2,386
2003 and thereafter................................................ 6,596
---------
$ 21,418
---------
---------
</TABLE>
10. TRANSACTIONS WITH MAJOR CUSTOMERS
The Company provides creative, media, printing, mailing services and
magazine subscription fulfillment to companies in diversified industries. The
Company performs periodic credit evaluations of its customers' financial
condition, and requires advance payments for postage and other services.
Transactions with one customer, which is a Fortune 50 company involved in
the communication industry, accounted for 15% of sales for the four month period
ended December 31, 1997 and 17% of
F-42
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE FOUR MONTHS ENDED DECEMBER 31, 1997
AND THE SIX MONTHS ENDED JUNE 26, 1998
(DOLLARS IN THOUSANDS)
10. TRANSACTIONS WITH MAJOR CUSTOMERS (CONTINUED)
sales for the six month period ended June 26, 1998. Accounts receivable from
this customer amounted to $4,325 as of December 31, 1997.
11. COMMITMENTS AND CONTINGENCIES
The Company has contingent payment obligations based on the attainment of
certain financial performance targets of businesses acquired in prior years.
Total contingent consideration paid related to all acquisitions was $1,900 for
the four month period ended December 31, 1997, and $3,221 for the six month
period ended June 26, 1998. Contingent payment obligations are accounted for as
additional goodwill and are payable through December 1999.
In June 1997 the Company was informed by the United States Attorney's Office
for the Eastern District of Missouri that it was the subject of a grand jury
investigation based upon information supplied by the United States Postal
Service. The investigation concerns whether violations of civil or criminal
statutes may have occurred in connection with the Company's bulk mailing
practices. The Company has been engaged in a dialogue with the Government, which
discussions have included a possible consensual resolution of this matter,
however, as of the date hereof, no settlement has been reached. It is the
Company's position that its bulk mailing practices comply with applicable laws
and regulations. The Company and Heritage have entered into an indemnification
agreement pursuant to which Heritage has agreed to indemnify the Company for
certain costs, including settlements, judgments and related fees, in relation to
the USPS investigation. There can be no assurance, however, that the
investigation and the costs associated therewith will not have a material
adverse effect on the Company's business, financial condition or results of
operations.
The Company is a party to various other litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any
such matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company.
12. SUBSEQUENT EVENTS
On June 26, 1998, News Corp. sold their interest in the Company, including
the payable to Parent Company, to McCown De Leeuw & Co. for $204,000, including
$4,000 of assumed indebtedness.
F-43
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
The consolidated financial statements for the eleven month period ended
December 31, 1996 and for the eight month period ended August 31, 1997 reflect
the financial results of DIMAC Marketing Corporation under a new basis of
accounting that reflects the fair value of assets acquired and liabilities
assumed, the related financing costs, and all debt incurred in connection with
purchase of DIMAC Marketing Corporation by Heritage.
F-44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To DIMAC Marketing Corporation and Subsidiaries:
We have audited the accompanying consolidated statements of operations,
stockholder's equity and cash flows for the eleven months ended December 31,
1996 and the eight months ended August 31, 1997 of DIMAC Marketing Corporation
and Subsidiaries. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows for the eleven months ended December 31, 1996 and the eight
months ended August 31, 1997 of DIMAC Marketing Corporation and Subsidiaries in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
July 2, 1998
F-45
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1996 1997
------------ ----------
<S> <C> <C>
Net sales.............................................................................. $ 168,193 $ 118,747
Cost of sales.......................................................................... 108,735 77,820
------------ ----------
Gross profit........................................................................... 59,458 40,927
------------ ----------
Operating expenses:
Sales expenses....................................................................... 17,859 13,767
General and administrative expenses.................................................. 20,688 17,151
Amortization of intangibles.......................................................... 9,098 6,949
------------ ----------
Total operating expenses........................................................... 47,645 37,867
------------ ----------
Income from operations................................................................. 11,813 3,060
Interest expense....................................................................... 7,525 6,188
------------ ----------
Income (loss) before income taxes and discontinued operations.......................... 4,288 (3,128)
Income tax provision................................................................... 3,789 122
------------ ----------
Net income (loss) before discontinued operations....................................... 499 (3,250)
Discontinued operations:
Loss from operations of discontinued joint venture (net of income tax benefit of $13
and $581).......................................................................... (18) (770)
Loss on disposal of discontinued joint venture, including provision for operating
losses during phase-out period (net of income tax benefit of $2,942)............... -- (3,899)
------------ ----------
Net income (loss)...................................................................... $ 481 $ (7,919)
------------ ----------
------------ ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-46
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SHARES OF ADDITIONAL RETAINED
COMMON COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT) TOTAL
----------- ------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT FEBRUARY 1, 1996.............................. 1,000 $ -- $ 175,000 $ -- $ 175,000
Net income............................................. -- -- -- 481 481
----- --- ---------- ----------- ----------
BALANCE AT DECEMBER 31, 1996............................. 1,000 -- 175,000 481 175,481
Net loss............................................... -- -- -- (7,919) (7,919)
----- --- ---------- ----------- ----------
BALANCE AT AUGUST 31, 1997............................... 1,000 $ -- $ 175,000 $ (7,438) $ 167,562
----- --- ---------- ----------- ----------
----- --- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-47
<PAGE>
DIMAC MARKETING CORPORATION
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1996 1997
--------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................................. $ 481 $ (7,919)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Loss from discontinued operations................................................ 18 770
Loss on disposal of discontinued operations...................................... -- 3,899
Depreciation and amortization.................................................... 12,827 10,414
Deferred income tax benefit...................................................... 2,480 1,884
Other............................................................................ 25 --
Changes in net assets and liabilities, net of acquisitions:
Accounts receivable............................................................ (7,750) (733)
Inventories.................................................................... 66 340
Other current assets........................................................... 522 (541)
Accounts payable............................................................... (428) (3,445)
Advances from customers........................................................ 1,872 314
Accrued liabilities............................................................ (3,584) (660)
Income taxes................................................................... 1,280 --
------- -----------
Net cash provided by operating activities.................................... 7,809 4,323
------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net assets of acquired businesses.................................................. (28,678) --
Proceeds from sale of fixed assets................................................. 58 --
Payments for contingent consideration and other intangibles........................ (6,976) (4,059)
Purchase of property, equipment and leasehold improvements......................... (9,282) (15,885)
------- -----------
Net cash used in investing activities........................................ (44,878) (19,944)
------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments to extinguish credit agreement............................................ -- (50,000)
Payments to capital lease obligations.............................................. (1,653) (1,360)
Net borrowings (payments) under revolving credit facilities........................ 31,000 (31,000)
Net borrowings from Parent Company................................................. 7,722 97,981
------- -----------
Net cash provided by financing activities.................................... 37,069 15,621
------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS.............................................. -- --
CASH AND CASH EQUIVALENTS, beginning of period....................................... -- --
------- -----------
CASH AND CASH EQUIVALENTS, end of period............................................. $ -- $ --
------- -----------
------- -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid...................................................................... $ 7,314 $ 6,321
------- -----------
------- -----------
Income taxes paid.................................................................. $ 730 $ 59
------- -----------
------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
DIMAC Marketing Corporation (DIMAC or the Company) is one of the largest
full-service, vertically integrated direct marketing services companies in the
United States. DIMAC creates and implements comprehensive, custom-tailored
marketing programs that enable clients nationwide to focus their marketing
expenditures on a highly targeted potential customer base. As a full-service,
vertically integrated firm, DIMAC provides every component of a complete direct
marketing program, including customized market research, strategic and creative
planning, creation and management of relational data bases, telemarketing, media
buying, production services, fulfillment services and subsequent program
analysis.
The consolidated financial statements include the accounts of DIMAC and its
wholly owned subsidiary DIMAC DIRECT Inc. (DIMAC DIRECT) (including its wholly
owned subsidiaries Palm Coast Data Inc., The McClure Group Inc., Wilcox &
Associates Inc., MBS/Multimode Inc. and the accounts of KCET/DIMAC Communication
LLC, in which DIMAC DIRECT has a 60% interest). DIMAC's operations are located
in St. Louis, San Francisco, New York, Palm Coast, Philadelphia, Houston, Los
Angeles, and Boston. All significant intercompany balances and transactions have
been eliminated.
On February 21, 1996, all of the common stock of the Company was acquired by
Heritage Media Corporation (Heritage), effective February 1, 1996, for cash of
approximately $190,000. The acquisition has been accounted for as a purchase and
the purchase accounting has been pushed down to the Company. Goodwill resulting
from this transaction of approximately $220,000 is being amortized on a
straight-line basis over 40 years.
The consolidated financial statements include an amount due to Heritage of
$34,102 as of December 31, 1996 and intercompany interest expense of $1,439 and
$922 for the eleven months ended December 31, 1996 and the eight months ended
August 31, 1997, respectively.
CASH AND CASH EQUIVALENTS
All highly liquid debt investments purchased with a maturity of three months
or less are classified as cash equivalents.
ACCOUNTS RECEIVABLE
The Company provides an allowance for doubtful accounts for the estimated
losses that will be incurred in the collection of receivables. The estimated
losses are based on historical collection experience coupled with a review of
the current status of the existing receivables. Receivables include $7,587
representing unbilled revenues for services performed prior to December 31,
1996.
F-49
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
A summary of changes in the allowance for doubtful accounts for the eleven
months ended December 31, 1996 and the eight months ended August 31, 1997 is as
follows:
<TABLE>
<CAPTION>
ELEVEN MONTHS ENDED EIGHT MONTHS ENDED
DECEMBER 31, 1996 AUGUST 31, 1997
----------------------- ---------------------
<S> <C> <C>
Balance, beginning of year......................... $ 696 $ 862
Acquired balance from MBS.......................... 150 --
Provisions......................................... 63 158
Recoveries......................................... 24 39
Write-offs......................................... (71) (78)
----- -----
Balance, end of year............................... $ 862 $ 981
----- -----
----- -----
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market, and include appropriate elements of material, labor and overhead.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements are recorded at cost.
Property and equipment are depreciated using the straight-line method over the
respective asset's estimated useful life. Leasehold improvements are amortized
using the straight-line method over the lesser of the respective asset's
estimated useful life or the lease term.
The Company continually evaluates the propriety of the carrying amounts of
property and equipment and the estimated useful lives used for depreciation.
INTANGIBLE ASSETS
The cost of acquired companies is allocated first to identifiable assets and
liabilities based on estimated fair market values. The excess of cost over
identifiable assets and liabilities is recorded as goodwill with amortization
over periods ranging from 25 to 40 years. Costs allocated to identifiable
intangible assets are amortized over the remaining estimated useful lives of the
assets as determined by underlying contract terms or independent appraisals.
The Company continually reevaluates the propriety of the carrying amount of
goodwill as well as the related amortization period to determine whether current
events and circumstances warrant adjustments to the carrying values or revised
estimates of useful lives. This evaluation is based on the Company's projection
of the undiscounted operating income before depreciation, amortization and
interest over the remaining lives of the amortization periods of related
goodwill. The projections are based on the historical trend line of actual
results since the commencement of operations and adjusted for expected changes
in operating results. To the extent such projections indicate that the
undiscounted operating income (as defined above) is not expected to be adequate
to recover the carrying amounts of goodwill, such carrying amounts are written
down by charges to expense in amounts equal to the excess of the carrying amount
of intangible assets over the related fair value of the assets. The Company
F-50
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
believes that no significant impairment of the goodwill and other intangibles
has occurred, and that no reduction of the estimated useful lives is warranted.
REVENUE RECOGNITION
The Company recognizes revenue at the time the service is rendered. The
Company provides services for clients in accordance with contractual customer
orders which contain project specifications. Revenues are accrued as services
are performed based on the proportion of the services performed to date in
relation to the total services to be provided as outlined in the customer order.
Revenues accrued are reviewed and adjusted to reflect actual results for client
projects based on subsequent determination of total services ultimately provided
and billed. Customer contracts generally contain termination provisions would
enable the Company to collect for all services expended prior to any termination
decision.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company discloses estimated fair values for its financial instruments. A
financial instrument is defined as cash or a contract that imposes on one entity
a contractual obligation to deliver cash or another financial instrument to a
second entity, and conveys to that second entity a contractual right to receive
cash or another financial instrument from the first entity. The carrying amount
of accounts receivable, accounts payable and accrued liabilities approximates
fair value due to the short-term maturity of these instruments. The carrying
amount of long-term debt approximates fair value due to the variable interest
rates attached to the debt.
LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." This standard
requires that long-lived assets, certain intangibles and goodwill related to
those assets to be held and used, be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. This standard also requires that long-lived assets and certain
identifiable intangibles to be disposed of be reported at the lower of carrying
amount or fair value less cost to sell. The Company adopted this statement in
fiscal 1996. See Note 3 for the estimated loss on disposal of the Company's
investment in joint venture operations. The Company determined that no
additional impairment loss needs to be recognized.
INCOME TAXES
Income tax expense is reported as the total of current year income tax
liability and the change in deferred taxes which are provided for temporary
differences. Deferred income taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
current enacted tax rates.
F-51
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. ACQUISITIONS
On February 28, 1996, DIMAC DIRECT acquired substantially all of the assets
of Wilcox & Associates, Inc. (Wilcox). Wilcox was a subchapter S corporation
with marketing offices in New York and San Francisco primarily providing direct
response services to financial institutions. The purchase price for the
acquisition was $3,905 plus certain contingent payment obligations based on the
attainment of certain financial performance targets by the newly formed Wilcox &
Associates subsidiary over the next four years. Goodwill resulting from the
purchase price allocation of $3,214 is being amortized over 25 years. Future
contingent payment obligations, if any, will be accounted for as additional
goodwill as the payments are made. The acquisition was accounted for as a
purchase and the Company has included the financial results of Wilcox beginning
March 1, 1996.
On April 30, 1996, DIMAC DIRECT acquired substantially all of the assets of
MBS/Multimode, Inc. (MBS). MBS was a subchapter S corporation located in Long
Island, New York, providing database marketing services primarily to the retail
industry. The purchase price for the acquisition was $24,714. Goodwill resulting
from the purchase price allocation of $22,767 is being amortized over 25 years.
The acquisition was accounted for as a purchase and the Company has included the
financial results of MBS beginning May 1, 1996.
In addition to the two contingent payment obligations described above, DIMAC
has similar obligations related to acquisitions of companies completed in prior
years based on attainment of certain financial performance targets by the
acquired entities. Total contingent consideration paid related to all
acquisitions was $4,451 for the eleven months ended December 31, 1996 and $3,968
for the eight months ended August 31, 1997. These contingent payment obligations
have been accounted for as additional goodwill and extend for various periods
through December 1999.
Pro forma information relating to the acquisitions has not been presented as
their impact on the financial statements is insignificant.
3. DISCONTINUED JOINT VENTURE
In September 1996, DIMAC DIRECT and Community Television of Southern
California (CTSC), a public television station, formed a joint venture to
provide videotape distribution and fund-raising services for public television
stations and not-for-profit clients. DIMAC DIRECT has a 60% interest in the
joint venture and contributed a license agreement purchased for $2,000. Certain
contingent payment obligations are due based on the attainment of certain
financial performance targets over the next for years.
During 1997, the Company adopted a plan to discontinue the joint venture.
Accordingly, the Company's interest in the joint venture is reported as a
discontinued operation for all periods presented.
F-52
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
3. DISCONTINUED JOINT VENTURE (CONTINUED)
The estimated loss on disposal of the Company's investment in the joint
venture is $3,899 (net of income tax benefit of $2,942), consisting of an
estimated loss on disposal of the investment of $3,461 and a provision of $438
for anticipated losses until disposal. Net revenues of the joint venture were
$4,074 and $6,317 for the eleven months ended December 31, 1996 and the eight
months ended August 31, 1997, respectively.
4. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes, and the amounts used for income tax purposes.
The components of the income tax provision attributable to continuing
operations are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1996 1997
------------- ---------------
<S> <C> <C>
Current:
Federal........................................................ $ 1,074 $ --
State.......................................................... 235 --
------ -----
1,309 --
------ -----
Deferred:
Federal........................................................ 2,354 106
State.......................................................... 126 16
------ -----
2,480 122
------ -----
$ 3,789 $ 122
------ -----
------ -----
</TABLE>
Differences between the amount of the income tax provision (benefit)
recorded and the amount computed by applying the federal income tax statutory
rate to income (loss) before income taxes and discontinued operations are
explained as follows:
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1996 1997
------------- ------------
<S> <C> <C>
Provision (benefit) at statutory rates............................................... $ 1,458 $ (1,063)
State and local taxes................................................................ 189 (138)
Nondeductible expenses (primarily goodwill).......................................... 2,142 1,323
------ ------------
Income tax provision............................................................. $ 3,789 $ 122
------ ------------
------ ------------
</TABLE>
5. EMPLOYEE BENEFIT PLAN
The Company has defined contribution plans which provide retirement benefits
to substantially all employees not covered by collective bargaining agreements.
The Company matches a portion of employee contributions to the plans. Company
contributions to these plans charged to expense were $598 and $764 for the
eleven month period ended December 31, 1996, and the eight month period ended
August 31, 1997, respectively.
F-53
<PAGE>
DIMAC MARKETING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1996 AND
THE EIGHT MONTHS ENDED AUGUST 31, 1997
(DOLLARS IN THOUSANDS)
6. LEASE COMMITMENTS
Equipment acquired under capital leases is included in property, equipment
and leasehold improvements, and the related obligations are in capital lease
obligations. Related amortization is included in depreciation.
Total rental expense for office and warehouse space, including short-term
rentals and rentals under noncancelable operating leases (primarily office and
warehouse space and production equipment), was $6,049 and $4,008 for the eleven
month period ended December 31, 1996, and the eight month period ended August
31, 1997, respectively.
The Company's landlord granted lease incentives to the Company in 1990,
amounting to approximately $1,700, as an inducement to enter into the lease of
the St. Louis facility. Rental payments on the St. Louis facility, which are
scheduled to increase periodically, net of the lease incentive, are recognized
as expense on a straight-line basis over the life of the lease. The difference
between rental payments made and rental expense is recorded as a deferred lease
liability.
The future minimum rental commitments required under noncancelable operating
leases as of December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997.................................................................. $ 5,058
1998.................................................................. 4,692
1999.................................................................. 4,261
2000.................................................................. 3,608
2001.................................................................. 3,082
2003 and thereafter................................................... 9,141
---------
$ 29,842
---------
---------
</TABLE>
7. TRANSACTIONS WITH MAJOR CUSTOMERS
The Company provides creative, media, printing, mailing services and
magazine subscription fulfillment to companies in diversified industries. The
Company performs periodic credit evaluations of its customers' financial
condition, and requires advance payments for postage and other services.
Transactions with one customer, which is a Fortune 50 company involved in
the communication industry, accounted for 24% and 21% of sales for the eleven
month period ended December 31, 1996, and the eight month period ended August
31, 1997, respectively. Accounts receivable from this customer amounted to
$5,838 as of December 31, 1996.
8. COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company is involved in various
lawsuits which, in the opinion of management, are not expected to have a
material effect on either the financial position or operating results of the
Company.
9. ACQUISITION OF PARENT COMPANY
In August 1997, the common stock of Heritage Media Corporation was acquired
by News America Corporation Ltd.
F-54
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AmeriComm Holdings, Inc. and Subsidiary:
We have audited the accompanying consolidated balance sheet of AmeriComm
Holdings, Inc. (a Delaware corporation, formerly known as DEC International,
Inc.) and subsidiary as of December 31, 1997 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the two years in the period ended December 31, 1997 and for the six-month
period ended June 26, 1998 (1997 restated, see Notes 2 and 10). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AmeriComm Holdings, Inc. and
subsidiary as of December 31, 1997 and the results of their operations and their
cash flows for each of the two years in the period ended December 31, 1997 and
for the six-month period ended June 26, 1998 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 30, 1999
(except with respect to
the matters discussed in
Notes 1 and 10 as to which
the date is August 10, 1999)
F-55
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................................ $ 1,217,770
Accounts receivable, net of allowance for doubtful accounts................. 27,943,109
Income taxes receivable..................................................... 497,565
Inventories................................................................. 13,330,921
Deferred income taxes....................................................... 508,664
Other....................................................................... 2,997,693
-----------
Total current assets...................................................... 46,495,722
-----------
PROPERTY AND EQUIPMENT:
Land........................................................................ 1,852,686
Buildings................................................................... 12,149,009
Machinery and equipment..................................................... 45,571,274
Office equipment, furniture, and fixtures................................... 5,375,241
Leasehold improvements...................................................... 1,201,024
Vehicles.................................................................... 219,703
Construction in progress.................................................... 1,708,944
-----------
68,077,881
Less accumulated depreciation and amortization.............................. (16,884,196)
-----------
Net property and equipment................................................ 51,193,685
-----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $2,253,195..................... 46,326,266
Patents, net of accumulated amortization of $3,119,740...................... 16,324,260
Resident address lists, net of accumulated amortization of $971,471......... 6,314,552
Deferred financing costs, net of accumulated amortization of $1,544,515..... 5,130,124
Covenants not to compete, net of accumulated amortization of $6,050,824..... 1,840,000
Prepaid pension cost........................................................ 2,133,828
Other....................................................................... 903,657
-----------
Total other assets........................................................ 78,972,687
-----------
Total assets............................................................ $176,662,094
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-56
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current portion of long-term debt........................................... $ 864,487
Bank overdraft.............................................................. 5,066,163
Accounts payable............................................................ 4,898,701
Accrued employee compensation............................................... 4,872,591
Other accrued expenses...................................................... 5,159,439
-----------
Total current liabilities................................................. 20,861,381
-----------
NONCURRENT LIABILITIES........................................................ 6,166,567
-----------
LONG-TERM DEBT:
11.625% senior unsecured notes.............................................. 100,000,000
12.5% Senior Notes.......................................................... 37,697,372
Revolving loan facility..................................................... 10,761,083
Other....................................................................... 4,494,423
-----------
Total long-term debt...................................................... 152,952,878
-----------
COMMITMENTS AND CONTINGENCIES (NOTE 9)
STOCKHOLDERS' DEFICIT:
Common stock:
Class A, $.0001 par value, 4,000,000 shares authorized, 2,752,287 shares
issued and 2,690,467 shares outstanding................................. 275
Class B, $.0001 par value, 300,000 shares authorized, no shares issued or
outstanding............................................................. --
Additional paid-in capital.................................................. 13,957,185
Warrants outstanding........................................................ 347,465
Accumulated deficit......................................................... (16,750,369)
Treasury stock, at cost (61,820 shares of Class A common stock)............. (286,345)
Notes receivable due from stockholders...................................... (586,943)
-----------
Total stockholders' deficit............................................... (3,318,732)
-----------
Total liabilities and stockholders' deficit............................... $176,662,094
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-57
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED),
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 26,
------------------------------ 1998 -------------
1996 1997 (UNAUDITED) 1998
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES......................................... $ 111,342,230 $ 191,090,864 $ 46,373,437 $ 93,081,183
COST OF PRODUCTS SOLD............................. 80,215,498 133,598,403 33,455,007 67,992,463
-------------- -------------- ------------- -------------
Gross profit.............................. 31,126,732 57,492,461 12,918,430 25,088,720
-------------- -------------- ------------- -------------
OPERATING EXPENSES:
Selling......................................... 10,716,599 18,194,512 4,699,385 9,818,593
General and administrative...................... 11,949,210 24,174,618 6,332,301 12,989,839
Amortization:
Goodwill...................................... 459,560 963,167 295,571 613,397
Patents....................................... 1,038,940 2,080,800 520,200 1,933,400
Covenants not to compete...................... 1,035,472 347,611 109,954 267,190
-------------- -------------- ------------- -------------
Total operating expenses.................... 25,199,781 45,760,708 11,957,411 25,622,419
-------------- -------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS..................... 5,926,951 11,731,753 961,019 (533,699)
INTEREST EXPENSE.................................. 8,138,110 17,022,602 4,744,742 9,677,101
-------------- -------------- ------------- -------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM... (2,211,159) (5,290,849) (3,783,723) (10,210,800)
INCOME TAX BENEFIT................................ (626,739) (998,465) (1,509,584) (3,117,436)
-------------- -------------- ------------- -------------
LOSS BEFORE EXTRAORDINARY ITEM.................... (1,584,420) (4,292,384) (2,274,139) (7,093,364)
EXTRAORDINARY LOSS ON RETIREMENT OF DEBT, NET OF
TAX BENEFIT OF $460,864......................... (797,903) -- -- --
-------------- -------------- ------------- -------------
NET LOSS.......................................... (2,382,323) (4,292,384) (2,274,139) (7,093,364)
REDEEMABLE CUMULATIVE PREFERRED STOCK ACCRETION
AND DIVIDENDS................................... 488,000 864,000 -- --
-------------- -------------- ------------- -------------
NET LOSS ATTRIBUTABLE TO COMMON STOCK............. $ (2,870,323) $ (5,156,384) $ (2,274,139) $ (7,093,364)
-------------- -------------- ------------- -------------
-------------- -------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-58
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK NOTES
SHARES PAR VALUE ADDITIONAL RECEIVABLE
------------------ ----------------- PAID-IN WARRANTS ACCUMULATED DUE FROM
CLASS A CLASS B CLASS A CLASS B CAPITAL OUTSTANDING DEFICIT STOCKHOLDERS
--------- ------- ------- ------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
December
31,
1995.... 2,512,551 -- $251 $-- $13,434,703 $1,297,292 $(8,055,027 ) $ --
Purchase
of
outstanding
warrants.. -- -- -- -- -- (1,297,292) (641,170 ) --
Issuance
of
warrants
to
purchase
132,240
shares
of
Class
A
common
stock... -- -- -- -- -- 320,000 -- --
Purchase
of
84,294
shares
of
Class
A
common
stock
for
treasury... -- -- -- -- -- -- -- --
Issuance
of
28,868
shares
of
Class
A
common
stock
upon
exercise
of
options... 28,868 -- 3 -- 26,266 -- -- --
Net loss
attributable
to common
stock... -- -- -- -- -- -- (2,870,323 ) --
--
--------- ------- ------- ----------- ----------- ------------ ------------
BALANCE,
December
31,
1996.... 2,541,419 -- 254 -- 13,460,969 320,000 (11,566,520 ) --
Issuance
of
210,868
shares
of
Class
A
common
stock... 210,868 -- 21 -- 499,979 -- -- --
Issuance
of
warrants
to
purchase
11,349
shares
of
Class
A
common
stock... -- -- -- -- -- 27,465 (27,465 ) --
Purchase
of
stockholder
notes
receivable... -- -- -- -- -- -- -- (493,132)
Accrued
interest
on
stockholder
notes
receivable... -- -- -- -- -- -- -- (15,745)
Acceptance
of
notes
receivable
from
stockholders... -- -- -- -- -- -- -- (78,066)
Issuance
of
22,474
shares
of
Class
A
common
stock
from
treasury.. -- -- -- -- (3,763) -- -- --
Net loss
attributable
to common
stock... -- -- -- -- -- -- (5,156,384 ) --
--
--------- ------- ------- ----------- ----------- ------------ ------------
BALANCE,
December
31,
1997.... 2,752,287 -- 275 -- 13,957,185 347,465 (16,750,369 ) (586,943)
Net loss
attributable
to common
stock... -- -- -- -- -- -- (7,093,364 ) --
Payment
by
stockholders
on notes
receivable... -- -- -- -- -- -- -- 40,742
Accrued
interest
on
stockholder
notes
receivable... -- -- -- -- -- -- -- (13,098)
--
--------- ------- ------- ----------- ----------- ------------ ------------
BALANCE,
June 26,
1998.... 2,752,287 -- $275 $-- $13,957,185 $ 347,465 $(23,843,733) $(559,299)
--
--
--------- ------- ------- ----------- ----------- ------------ ------------
--------- ------- ------- ----------- ----------- ------------ ------------
<CAPTION>
TREASURY
STOCK TOTAL
--------- ------------
<S> <C> <C>
BALANCE,
December
31,
1995.... $ -- $ 6,677,219
Purchase
of
outsta
warran -- (1,938,462)
Issuance
of
warrants
to
purchase
132,240
shares
of
Class
A
common
stock... -- 320,000
Purchase
of
84,294
shares
of
Class
A
common
stock
for
treasu (390,421) (390,421)
Issuance
of
28,868
shares
of
Class
A
common
stock
upon
exercise
of
options... -- 26,269
Net loss
attribut
to com
stock... -- (2,870,323)
--------- ------------
BALANCE,
December
31,
1996.... (390,421) 1,824,282
Issuance
of
210,868
shares
of
Class
A
common
stock... -- 500,000
Issuance
of
warrants
to
purchase
11,349
shares
of
Class
A
common
stock... -- --
Purchase
of
stockh
notes
receiv -- (493,132)
Accrued
interest
on
stockh
notes
receiv -- (15,745)
Acceptance
of
notes
receivable
from
stockh -- (78,066)
Issuance
of
22,474
shares
of
Class
A
common
stock
from
treasury.. 104,076 100,313
Net loss
attribut
to com
stock... -- (5,156,384)
--------- ------------
BALANCE,
December
31,
1997.... (286,345) (3,318,732)
Net loss
attribut
to com
stock... -- (7,093,364)
Payment
by
stockh
on not
receiv -- 40,742
Accrued
interest
on
stockh
notes
receiv -- (13,098)
--------- ------------
BALANCE,
June 26,
1998.... $(286,345) $(10,384,452)
--------- ------------
--------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-59
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED),
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 26,
----------------------------- 1998 -------------
1996 1997 (UNAUDITED) 1998
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $ (2,382,323) $ (4,292,384) $ (2,274,139) $ (7,093,364)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary loss on early retirement of debt,
net of income tax benefit..................... 797,903 -- -- --
Depreciation and amortization................... 7,409,137 13,145,739 3,742,144 8,702,672
Deferred income tax benefit..................... (626,739) (1,204,784) (1,509,584) (3,117,436)
Interest paid with in-kind notes................ -- 3,074,676 -- 2,465,930
Net (gain) loss on disposal of property and
equipment..................................... (294,000) 440,898 24,287 23,959
Amortization of prepaid pension asset........... (45,865) (149,699) 68,030 80,300
Imputed interest................................ 72,757 106,422 17,595 35,199
Changes in operating assets and liabilities, net
of effects of acquisitions:
Accounts receivable............................. 2,045,704 (5,747,677) 3,482,684 3,946,791
Income taxes receivable......................... -- 717,202 11,157 11,157
Inventories..................................... 1,017,197 (610,123) (87,184) (412,978)
Other assets.................................... (226,946) (935,200) 153,486 (578,569)
Accounts payable................................ 534,704 (1,560,048) 1,366,031 1,045,421
Accrued expenses and other...................... (1,153,699) (1,959,073) 1,486,835 (1,104,778)
-------------- ------------- ------------- -------------
Net cash provided by operating activities..... 7,147,830 1,025,949 6,481,342 4,004,304
-------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment............... (3,490,447) (4,562,731) (2,286,020) (5,666,368)
Proceeds from sale of property and equipment...... 423,428 106,123 -- 12,509
Proceeds from investment securities............... 2,620,000 -- -- --
Payment for the purchase of the outstanding stock
of Transkrit Corporation, net of cash
acquired........................................ (79,390,682) -- -- --
Payment for the purchase of the outstanding stock
of AmeriComm Direct Marketing, Inc., net of cash
acquired........................................ -- (24,954,538) -- --
Payment for the purchase of the outstanding stock
of Label America, Inc., net of cash acquired.... -- (9,469,418) -- --
Payment for the purchase of the outstanding stock
of Cardinal Marketing, Inc. and Cardinal
Marketing of New Jersey, Inc., net of cash
acquired........................................ -- -- (4,679,663) (4,752,955)
-------------- ------------- ------------- -------------
Net cash used in investing activities......... (79,837,701) (38,880,564) (6,965,683) (10,406,814)
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
</TABLE>
F-60
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED),
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, JUNE 26,
------------------------------ 1998 ------------
1996 1997 (UNAUDITED) 1998
-------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in bank overdraft, net......... (2,758,170) 3,560,460 (1,222,623) (666,499)
Payment on term loans.............................. (16,900,000) -- -- --
Dividends paid on redeemable cumulative preferred
stock............................................ (450,000) (285,000) -- --
Payment on officer note............................ (61,647) -- -- --
Purchase of outstanding warrants................... (1,938,462) -- -- --
Proceeds from issuance of Class A common stock..... 26,269 500,000 -- --
Purchase of Class A common stock for treasury...... (390,421) -- -- --
Redemption of redeemable cumulative preferred
stock............................................ -- (10,000,000) -- --
Purchase of stockholder notes receivable........... -- (493,132) -- --
Proceeds from issuance of treasury stock........... -- 22,247 -- --
Payments on capital leases......................... (216,888) (536,489) (222,008) (437,683)
Net (payments) borrowings on revolving loan
facilities....................................... (7,050,000) 10,761,083 1,655,826 8,043,750
Increase in deferred financing costs............... (5,738,712) (936,277) -- --
Proceeds from issuance of notes.................... 100,000,000 34,500,000 -- --
Proceeds from issuance of redeemable cumulative
preferred stock and warrants, net of issuance
costs............................................ 9,702,973 -- -- --
-------------- -------------- ------------ ------------
Net cash provided by financing activities...... 74,224,942 37,092,892 211,195 6,939,568
-------------- -------------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.......................................... 1,535,071 (761,723) (273,146) 537,058
CASH AND CASH EQUIVALENTS, beginning of year......... 444,422 1,979,493 1,217,770 1,217,770
-------------- -------------- ------------ ------------
CASH AND CASH EQUIVALENTS, end of year............... $ 1,979,493 $ 1,217,770 $ 944,624 $ 1,754,828
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest............................. $ 7,744,000 $ 12,835,000 $ 6,699,000
-------------- -------------- ------------
-------------- -------------- ------------
Cash paid for income taxes......................... $ -- $ 107,000 $ 55,000
-------------- -------------- ------------
-------------- -------------- ------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Capital lease obligations incurred................. $ 2,799,000 $ 3,085,000 $ --
-------------- -------------- ------------
-------------- -------------- ------------
</TABLE>
F-61
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
1. BACKGROUND
AmeriComm Holdings, Inc. ("AHI," formerly known as DEC International, Inc.)
and its wholly owned subsidiary, AmeriComm Direct Marketing, Inc. ("AmeriComm,"
formerly known as National Fiberstok Corporation) (collectively or individually,
the "Company"), is a leading provider of products and services focused primarily
on the direct marketing industry. The Company's principal strategy is to offer a
comprehensive line of direct marketing products and services while continuing to
participate in the rapidly growing markets for custom pressure sensitive labels
and nonimpact self-mailers. The Company markets its products to customers
throughout the United States through operations in Norfolk, Roanoke, and Salem,
Virginia; Austell, and Tucker, Georgia; Louisville, Kentucky; Gainesville,
Florida; Wilton, New Hampshire; Sparks, Nevada; San Carlos, California; Fort
Smith, Arkansas; Mountainside, New Jersey; and Denver, Colorado.
On June 28, 1996, the Company acquired all of the issued and outstanding
capital stock of Transkrit Corporation ("Transkrit") for $86,500,000 plus
transaction costs. Subsequent to the acquisition, Transkrit and all of its
subsidiaries were merged into the Company. The Transkrit acquisition has been
accounted for using the purchase method of accounting, and accordingly, the
results of operations of Transkrit have been included in the results of
operations of the Company since June 29, 1996. The purchase price was allocated
to assets and liabilities based on their estimated fair value as of the date of
the acquisition. The excess of the consideration paid over the estimated fair
value of net assets acquired of $17,542,000 has been recorded as goodwill and is
being amortized on the straight-line basis over 40 years.
On February 21, 1997, the Company acquired all of the issued and outstanding
capital stock of Label America, Inc. ("LAI") for $8,500,000, less outstanding
indebtedness, plus transaction costs. Additional consideration of $700,000 was
paid to the principal stockholder for a noncompete agreement. Upon consummation
of the acquisition, LAI was merged into the Company. The LAI acquisition has
been accounted for using the purchase method of accounting, and accordingly, the
results of operations of LAI have been included in the results of operations of
the Company since February 22, 1997. The excess of the consideration paid over
the estimated fair value of net assets acquired of $6,636,000 has been recorded
as goodwill and is being amortized on the straight-line basis over 40 years.
On April 24, 1997, the Company acquired all of the issued and outstanding
stock of AmeriComm Direct Marketing, Inc. ("ADMI") for $23,635,000 plus
transaction costs. Additional consideration of $1,000,000 was paid to the
principal stockholder for a noncompete agreement. Upon consummation of the
acquisition, ADMI was merged into the Company. The ADMI acquisition has been
accounted for using the purchase method of accounting, and accordingly, the
results of operations of ADMI have been included in the results of operations of
the Company since April 25, 1997. The excess of the consideration paid over the
estimated fair value of net assets acquired of $15,273,000 has been recorded as
goodwill and is being amortized on the straight-line basis over 40 years.
On March 16, 1998, the Company acquired all of the issued and outstanding
capital stock of Cardinal Marketing, Inc. and Cardinal Marketing of New Jersey,
Inc. (collectively referred to as "Cardinal") for $4,000,000 plus transaction
costs, which was funded through borrowings on its revolving loan facility.
Additional consideration of $600,000 will be paid to the stockholders of
Cardinal for noncompete agreements, of which $200,000 was paid on March 16, 1998
and the remaining $400,000 will be
F-62
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
1. BACKGROUND (CONTINUED)
paid in two equal annual installments commencing March 16, 1999. Upon
consummation of this acquisition, Cardinal was merged into the Company.
The following presents, on an unaudited pro forma basis, the Company's
results of operations for the years ended December 31, 1996, and 1997 and the
six-month period ended June 26, 1998 as though the acquisitions of Transkrit,
LAI and ADMI and related transactions had occurred on January 1, 1996 and the
acquisition of Cardinal and related transactions had occurred on January 1, 1998
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, SIX-MONTH
---------------------- PERIOD ENDED
1996 1997 JUNE 26, 1998
---------- ---------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 202,033 $ 201,500 $ 93,851
Operating income (loss)................................ 11,740 12,396 (755)
Net loss before extraordinary item..................... (539) (5,307) (7,306)
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
AHI and its subsidiary. All significant intercompany transactions and balances
have been eliminated.
REVENUE RECOGNITION
Sales are recorded as products are shipped.
RESTATEMENT
On November 23, 1998, the Company announced that it was initiating a review
into the accuracy of previously released financial statements. This review has
been completed and, as a result of its findings, the Company has restated its
previously issued audited financial statements for 1997. In addition, the
Company had previously released unaudited financial statements as of and for the
six-month period ended June 26, 1998. These previously unaudited financial
statements have also been restated as a result of the Company's review (Note
10).
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements as well as during the reporting period.
Actual results could differ from these estimates.
F-63
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
CASH EQUIVALENTS
For purposes of the reporting of cash flows, the Company considers all
highly liquid debt instruments with a maturity at date of purchase of three
months or less to be cash equivalents.
The Company does not believe it is exposed to any significant credit risk on
money market funds with commercial banks because its policy is to make such
deposits only with highly rated institutions.
ACCOUNTS RECEIVABLE
A summary of changes in the allowance for doubtful accounts for the years
ended December 31, 1996 and 1997 and for the six-month period ended June 26,
1998 is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, SIX-MONTH
---------------------- PERIOD ENDED
1996 1997 JUNE 26, 1998
---------- ---------- -------------
<S> <C> <C> <C>
Balance, beginning of year............................. $ 171,950 $ 611,170 $ 963,130
Acquired balance from Transkrit (Note 1)............... 495,154 -- --
Acquired balance from ADMI (Note 1).................... -- 209,789 --
Acquired balance from LAI (Note 1)..................... -- 47,176 --
Provisions............................................. 215,455 385,282 62,290
Recoveries............................................. 75,028 40,148 72,425
Write-offs............................................. (346,417) (330,435) (391,269)
---------- ---------- -------------
Balance, end of year................................... $ 611,170 $ 963,130 $ 706,576
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
INVENTORIES
Inventories are stated at the lower of cost or market. Costs of raw
materials are determined using the first-in, first-out ("FIFO") method. Costs
(net of an obsolescence reserve) of work in process, finished goods, and
customized stock (consisting of products which have been produced and held for
certain customers under short-term delayed-shipping arrangements) are determined
using the average cost (which approximates FIFO) or FIFO method.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
-------------
<S> <C>
Raw materials.................................................................. $ 7,351,264
Work in process................................................................ 1,585,171
Finished goods................................................................. 3,350,315
Customized stock............................................................... 1,044,171
-------------
$ 13,330,921
-------------
-------------
</TABLE>
F-64
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost or at estimated fair value at
date of acquisition (Note 1), if acquired as part of a business combination, and
are depreciated using the straight-line method over the following lives:
<TABLE>
<S> <C>
25 to 30
Buildings.................................................... years
Machinery and equipment...................................... 3 to 7 years
Office equipment, furniture and fixtures..................... 3 to 7 years
Vehicles..................................................... 3 to 5 years
</TABLE>
Leasehold improvements are depreciated over the lesser of the useful lives
of the assets or the lease term.
The Company's policy is to remove the cost and accumulated depreciation of
retirements from the accounts and recognize the related gain or loss upon the
disposition of assets. Depreciation expense for the years ended December 31,
1996 and 1997 and for the six-month period ended June 26, 1998 was approximately
$4,313,000, $7,717,000 and $4,623,000, respectively.
GOODWILL
Goodwill represents the cost of acquired businesses in excess of net
identifiable assets and is amortized over 15 to 40 years using the straight-line
method. The recoverability of goodwill is periodically reviewed by management
based on current and anticipated conditions. The amount of goodwill considered
realizable, however, could be reduced in the near term if changes occur in
anticipated conditions. Based on a review of projected undiscounted cash flow
from operations and other pertinent information, management is of the opinion
that there has been no diminution in the value assigned to goodwill.
PATENTS
The Company has been granted several patents related to certain products
manufactured by the Company. Patents acquired through the acquisition of
Transkrit were recorded at their estimated fair value at the date of
acquisition. These amounts are being amortized on a straight-line basis over the
life (4 to 21 years) of the patents.
COVENANTS NOT TO COMPETE
Covenants not to compete have been recorded at cost and are being amortized
on a straight-line basis over the terms (three to five years) of the agreements.
RESIDENT ADDRESS LISTS
The Company has purchased and maintains national residential address lists
used by its customers in making saturation or targeted mailings. Resident
address lists acquired through the acquisition of
F-65
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
ADMI were recorded at their estimated fair value at the date of acquisition.
These amounts are being amortized on a straight-line basis over the life (six
years) of the resident address lists. Amortization expense for the year ended
December 31, 1997 and for the six-month period ended June 26, 1998 of
approximately $971,000 and $713,000, respectively, is included in costs of
products sold in the accompanying consolidated statement of operations.
DEFERRED FINANCING COSTS
Deferred financing costs represent costs incurred to raise financing and are
amortized over the related terms of the borrowings (Note 3).
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
for recognition of deferred tax consequences of temporary differences, net
operating losses, and tax credits by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts, and to the tax bases of existing assets and liabilities.
CONCENTRATION OF RISK
During the years ended 1996 and 1997 and the six-month period ended June 26,
1998, the Company's ten largest customers accounted for 18%, 16% and 11%,
respectively, of total Company sales. No individual customer accounted for more
than 6% of sales in any year. In management's opinion, a loss of any one
individual customer would not have a material impact on the Company's financial
position or results of operations.
The Company's largest purchased raw material is paper. While the Company
utilizes multiple paper suppliers, two suppliers provided 30%, 41% and 21% of
its requirements for the years ended 1996 and 1997 and for the six-month period
ended June 26,1998, respectively. Further, the supply and price of paper are
cyclical in nature. As a result, the Company is subject to the risk that pricing
may significantly impact results of operations and that it may be unable to
purchase sufficient quantities of paper to meet production requirements during
times of tight supply. While the Company believes that it could obtain other
suppliers of paper, paper industry conditions may have a material effect on the
Company's results of operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, and debt. The carrying amounts of cash, accounts
receivable, and accounts payable approximate their fair values because of the
short-term maturity of such instruments. The fair value of the senior unsecured
notes (Note 3) at 1997 was approximately $106,000,000 and was estimated using a
quote from a broker. At December 31, 1997, the carrying value of the other
long-term debt approximated its fair value, because interest rates on such debt
are periodically adjusted or approximated current market rates.
F-66
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements for the three-month period ended March
31, 1998 are unaudited. In the opinion of the management of the Company, these
financial statements reflect all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
statements. Certain information and footnote disclosures usually found in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The results of operations for the
three-month period ended March 31, 1998 are not necessarily indicative of the
results that may be expected for future periods.
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997:
<TABLE>
<CAPTION>
1997
--------------
<S> <C>
11.625% senior unsecured notes, interest payable semiannually commencing December 15, 1996........ $ 100,000,000
12.5% senior notes, including PIK notes, interest payable quarterly commencing June 30, 1997, net
of unamortized discount of $377,304............................................................. 37,697,372
Revolving loan facility with Heller Financial, Inc., principal payable in full upon the earlier of
termination, as defined, or June 28, 2001, bearing interest at the 30 to 180 day London
Interbank Offered Rate plus 2.25% or Prime plus 1% (8.35% and 9.5% at December 31, 1997,
respectively)................................................................................... 10,761,083
Capital lease payable to The CIT Group/Equipment Financing, Inc. ("CIT"), monthly principal and
interest payments of $48,250 commencing July 1996 through June 2001 with a balloon payment of
$513,485 due June 2001, interest at 10.2%....................................................... 2,056,883
Capital leases payable to General Electric Capital Corporation ("GE"), monthly principal and
interest payments of $53,867 commencing December 1997 through November 1999, declining to
$44,073 commencing December 1999 through October 2001 with a balloon payment of $1,615,077 due
November 2001, interest at 9.36%................................................................ 3,025,154
Other............................................................................................. 276,873
--------------
153,817,365
Less current portion.............................................................................. (864,487)
--------------
$ 152,952,878
--------------
--------------
</TABLE>
F-67
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
3. LONG-TERM DEBT (CONTINUED)
Maturities of long-term debt and capital lease obligations at December 31,
1997 are as follows:
<TABLE>
<S> <C>
1998.......................................................................... $ 864,487
1999.......................................................................... 995,543
2000.......................................................................... 819,774
2001.......................................................................... 13,440,189
2002 and thereafter........................................................... 138,074,676
-----------
$154,194,669
-----------
-----------
</TABLE>
Prior to the issuance of the 11.625% senior unsecured notes (the "Senior
Notes"), the Company maintained agreements under which the Company had certain
term loans and a revolving line-of-credit facility (the "Line"). As additional
consideration for the term loans and the Line, the Company issued stock warrants
to purchase 413,457 and 254,435 shares of Class A and Class B common stock,
respectively (Note 6). Concurrent with the issuance of the Senior Notes on June
28, 1996 discussed below, the Company repaid the term loans and the Line,
purchased the outstanding warrants, and paid a prepayment penalty, all of which
aggregated to approximately $25,100,000. As a result of the early retirement of
debt, the Company incurred an extraordinary loss of $797,903, net of income tax
benefit of $460,864, during 1996. Subsequently, the agreements were terminated.
Concurrent with the consummation of the Transkrit acquisition discussed in
Note 1, AmeriComm issued $100,000,000 aggregate principal amount of Senior Notes
due June 15, 2002. Interest is payable semiannually commencing December 31,
1996. The Senior Notes are senior obligations of AmeriComm and will be PARI
PASSU in right of payment to all future senior indebtedness. The indenture to
the Senior Notes limits the incurrence of additional debt by AmeriComm, does not
allow AmeriComm to pay any common stock dividends, and limits AmeriComm's
ability to redeem capital stock and to sell its assets, as defined. AmeriComm
may incur additional indebtedness, as defined, as long as its fixed charge
coverage ratio, as defined, is greater than certain minimum levels.
Concurrent with the ADMI acquisition on April 24, 1997 as discussed in Note
1, AHI issued $35,000,000 aggregate principal amount of 12.5% senior notes
("Notes") due April 24, 2003. As inducement for accepting the Notes, the holders
of the Notes were issued 210,868 shares of Class A common stock (Note 6). The
common stock was valued at its fair value of $500,000 and recorded as a discount
to the face value of the Notes. The proceeds from the Notes were used to
purchase the outstanding 9% redeemable cumulative preferred stock (the
"Preferred Stock") (Note 5), pay transaction costs, and fund the ADMI
acquisition. The effective interest rate on the Notes, after considering the
above discount, is 12.74%.
The Notes place certain restrictions on the Company's ability to incur
additional indebtedness or make future acquisitions. In addition, future
interest and principal payments by AHI are dependent primarily on the operations
of AmeriComm through payments to AHI as permitted under the Senior Notes. As a
result, the Company may pay a portion or all of any six quarterly interest
installments prior to April 24, 1999 by issuing additional notes ("PIK Notes")
with interest rates ranging from 12.5% to 13%. The initial interest installments
due June 30, 1997, September 30, 1997, and December 31, 1997
F-68
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
3. LONG-TERM DEBT (CONTINUED)
were paid by the issuance of PIK Notes at 12.5% interest. The PIK Notes must be
redeemed prior to April 24, 2003. Borrowings under the Notes are subject to a
financial covenant with which the Company was in compliance as of December 31,
1997.
Concurrent with the consummation of the Transkrit acquisition discussed in
Note 1, the Company entered into a revolving loan facility with Heller. The
facility provides borrowings based on the lesser of qualified accounts
receivable and inventories, as defined, or $25,000,000. Borrowings under the
revolving loan facility are subject to certain financial covenants that include,
among others, minimum fixed-charge coverage and total indebtedness to operating
cash flow ratio, as defined. The Company was in compliance with each covenant as
of December 31, 1997. As of December 31, 1997, $14,238,917 was available on the
revolving loan facility.
Under the CIT capital lease payable, CIT has a first-perfected security
interest in certain equipment. At the end of the lease term, the Company will
have the option to purchase the equipment for $513,485. Under the GE capital
leases payable, GE has a first-perfected security interest in certain equipment.
At the end of each lease term, the Company will have the option to purchase the
equipment for an aggregate of $1,615,077. The capital leases are cross-defaulted
with other loan agreements if such default is not cured within 90 days following
the default.
Interest expense on long-term debt and capital leases for the years ended
December 31, 1996 and 1997 and for the six-month period ended June 26, 1998 was
approximately $8,138,000, $17,023,000 and $9,677,000, respectively, including
$564,000, $1,067,000 and $552,000, respectively, of deferred finance cost
amortization.
4. INCOME TAXES
The income tax benefits for the years ended December 31, 1996 and 1997 and
for the six-month period ended June 26, 1998 represent the income tax benefit
from operating losses. For the year ended December 31, 1996, the income tax
benefit presented consisted of deferred tax benefits. For the year ended
December 31, 1997, the income tax benefit presented consisted of a deferred tax
benefit of $1,205,134 and a current tax provision of $206,669. For the six-month
period ended June 26, 1998, the income tax benefit presented consisted of a
deferred tax benefit of $3,163,361 and a current tax provision of $45,925.
F-69
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
AND THE SIX-MONTH PERIOD ENDED JUNE 26, 1998
4. INCOME TAXES (CONTINUED)
The reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate for the years ended December 31, 1996 and 1997 and for
the six-month period ended June 26, 1998 for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX-MONTH
-------------------------- PERIOD ENDED
1996 1997 JUNE 26, 1998
----------- ------------- -------------
<S> <C> <C> <C>
Federal tax benefit at statutory rate.................................. $ (751,794) $ (1,798,889) $ (3,471,672)
State, net of federal benefit.......................................... (59,378) 206,669 45,925
Nondeductible amortization............................................. 164,139 367,460 176,921
Nondeductible expenses................................................. 42,854 69,920 286,227
Other, net............................................................. (22,560) 156,375 (154,837)
----------- ------------- -------------
----------- ------------- -------------
Actual income tax benefit.............................................. $ (626,739) $ (998,465) $ (3,117,436)
----------- ------------- -------------
----------- ------------- -------------
Effective tax rate..................................................... 28% 19% 31%
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
F-70
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
4. INCOME TAXES (CONTINUED)
Significant components of the Company's net deferred tax liabilities as of
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1997
-------------
<S> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards............................................. $ 3,348,135
Book basis in property over tax basis........................................ (6,932,000)
Resident address lists....................................................... (2,400,000)
Patents...................................................................... (998,000)
Inventories.................................................................. (497,000)
Goodwill..................................................................... (261,000)
Prepaid pension cost......................................................... (774,000)
Covenant not to compete...................................................... 1,413,000
Interest paid with in-kind notes............................................. 1,169,000
Employee benefit accruals.................................................... 917,000
Liabilities not currently deductible......................................... 402,000
Allowance for doubtful accounts.............................................. 309,000
Other, net................................................................... (159,954)
-------------
Net deferred tax liabilities................................................. $ (4,463,819)
-------------
-------------
</TABLE>
The net operating loss carryforwards of $15,926,000 will be used to offset
future taxable income, subject to their expirations, beginning in 2004 and
continuing through 2013. Any future issuance of stock by the Company could
result in an ownership change, as defined by the Tax Reform Act of 1986, and
could limit utilization of net operating loss carryforwards. Also, benefits
derived from using net operating loss carryforwards to offset any taxes
calculated as alternative minimum tax could be less than the recorded amount of
the net operating loss carryforwards. Although realization is not assured,
management believes all net operating loss carryforwards will be realized.
5. REDEEMABLE 9% CUMULATIVE PREFERRED STOCK
On June 28, 1996, the Company issued 10,000 shares of 9% redeemable
cumulative preferred stock (the "Preferred Stock") and warrants (Note 6) to the
preferred shareholders for $10,000,000, less issuance costs. The Preferred Stock
had no voting rights and was recorded at fair value on the date of the issuance,
less transaction costs. The excess of the liquidation preference over the
carrying value was being accreted over the life of the Preferred Stock resulting
in charges of approximately $38,000 and $19,000 for the year ended December 31,
1996 and 1997, respectively. Dividends of $450,000 and $285,000 were paid in
1996 and 1997, respectively.
In conjunction with the issuance of the Notes, the Preferred Stock was
redeemed for $10,000,000 in April 1997. As a result of the redemption of the
Preferred Stock, the Company incurred a charge of
F-71
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
5. REDEEMABLE 9% CUMULATIVE PREFERRED STOCK (CONTINUED)
approximately $560,000 for the excess of the liquidation value over the carrying
value which was reflected in the consolidated statements of operations as
additional dividends.
6. CAPITAL STOCK AND WARRANTS
Each share of Class B common stock is convertible into one share of Class A
common stock at the option of the holder. All dividends declared by the board of
directors are shared ratably by Class A and B stockholders. Upon liquidation,
the Class A and B stockholders would share ratably in any proceeds. Class B
common stock is nonvoting.
In conjunction with certain credit agreements existing prior to June 28,
1996, the Company issued warrants to purchase 413,457, and 254,435 shares of
Class A and Class B common stock, respectively, at an exercise price of $.01
(Note 3). The warrants were valued at their fair value, as determined by the
board of directors on the date of grant. The difference between the fair market
value of the warrants at the issue date and the estimated redemption value was
accreted as a direct charge to accumulated deficit. In conjunction with the
issuance of the Senior Notes on June 28, 1996 (Note 3), the Company purchased
the outstanding warrants for $1,938,402 and recorded a charge of $641,170 to
accumulated deficit.
In conjunction with the issuance of 10,000 shares of Preferred Stock (Note
5), the Company issued warrants to the preferred shareholders to purchase
132,240 shares of Class A common stock. The warrants were valued at their fair
value, as determined by the board of directors on the date of the grant, and
recorded as a discount to the Preferred Stock. In conjunction with the issuance
of the Notes (Note 3), the Company issued additional warrants to purchase 11,349
shares of Class A common stock. The warrants were valued at their fair value, as
determined by the board of directors, on the date of the grant and were recorded
as a charge to accumulated deficit. The 143,589 warrants may be exercised at any
time through June 30, 2004 at $.01 per share, subject to adjustment pursuant to
the terms of the warrant agreement. The Company has reserved 143,589 shares of
its Class A common stock for the exercise of these warrants.
During 1997, the Company purchased aggregate principle and interest 6%
nonrecourse notes from MDC Management Company II, L.P. ("MDC"), an affiliate,
for $493,132. The holders of these notes are shareholders of the Company, and
accordingly, the notes and all accrued interest have been recorded as an
increase to stockholders' deficit.
Effective June 28, 1996, the board of directors adopted the AmeriComm
Holdings, Inc. 1996 Stock Option Plan. During 1996 and 1997, the board of
directors granted options to purchase 244,889 and 39,265 shares, respectively,
of Class A common stock at an exercise price ranging from $2.62 to $5.38 per
share, the estimated fair value at the date of grant, to certain employees and
directors of the Company. As of December 31, 1997, there are 255,286 options
outstanding. The options vest based on time and based upon the profitability and
the liquidation value of the Company if it is sold to a third party. During 1996
and 1997, 28,868 and 0 options vested and were exercised, respectively.
F-72
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
6. CAPITAL STOCK AND WARRANTS (CONTINUED)
Effective January 28, 1997, the board of directors adopted the AmeriComm
Holdings, Inc. 1997 Stock Option Plan for Directors. During 1997, the board of
directors granted options to purchase 10,350 shares of Class A common stock at
an exercise price of $5.38 per share, the estimated fair value at the date of
grant, to certain directors of the Company. The options vest based on time or in
the event of a change in control of the Company, as defined. As of December 31,
1997, 2,898 options were vested and are exercisable.
The Company accounts for its stock option plans in accordance with
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees," under which no compensation was recognized during 1996, 1997 and
1998. In 1996, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," for disclosure
purposes. In accordance with the disclosure requirements of SFAS No. 123, the
Company is required to calculate pro forma compensation cost of all stock
options granted using an option-pricing model. Accordingly, the fair value of
the stock option grants has been estimated as of the grant dates under the
minimum value method using the following weighted average assumptions for 1996,
1997 and 1998: a risk-free interest rate of approximately 6.4%, dividend yield
of 0%, volatility of 0%, and expected life of 4.5 years. Using these
assumptions, the fair value of the stock options at the dates of grant was $0.
As a result, there is no pro forma compensation expense.
7. RELATED-PARTY TRANSACTIONS
FEES TO AFFILIATE
The Company maintains an Advisory Services Agreement (the "Agreement") with
MDC. Under the Agreement, MDC provides certain consulting, financial, and
managerial functions for a $250,000 annual fee through June 28, 1996 and a
$350,000 annual fee thereafter. In 1996 and 1997, $862,000 and $350,000,
respectively, were paid. For the six-month period ended June 26, 1998, $175,000
was paid. No payments shall be made by the Company to MDC under the Agreement if
there is an event of default, as defined, under the revolving loan facility,
Senior Notes, or the Notes (Note 3). As of December 31, 1997, there are no such
events of default. The Agreement expires December 31, 2000 and is renewable
thereafter, unless terminated by the Company for justifiable cause, as defined.
During 1996, for services related to the acquisition of Transkrit (Note 1)
and the issuance of the Senior Notes (Note 3), the Company paid MDC $500,000, of
which $350,000 has been recorded as deferred financing costs. In addition, for
services related to the acquisition of ADMI in 1997 (Note 1) and the issuance of
the Senior Notes (Note 3), the Company paid MDC $652,000, of which $100,000 has
been recorded as deferred financing costs.
STOCKHOLDERS' AGREEMENT
Certain officers and former officers of the Company purchased and own as of
December 31, 1997 an aggregate of 259,421 shares of Class A common stock,
representing 10% of the voting common stock of the Company for the periods
shown. The stock was purchased at a price ranging from $4.33 to $4.63 per share,
the fair value at the date of such purchases. Such stock was purchased through a
cash
F-73
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
7. RELATED-PARTY TRANSACTIONS (CONTINUED)
payment and the acceptance of 6% nonrecourse notes by MDC in 1996 and prior and
by the Company in 1997 (Note 6).
All stockholders are subject to the terms of a stockholders' agreement. This
agreement restricts the stockholders' ability to sell, transfer, and assign the
common stock, with the Company having the first right of purchase. The holders
of the stock may be forced to sell the shares to the Company under certain
conditions. In addition, on expiration of a stockholder's employment with the
Company, the Company has the option to buy back the stockholder's common stock
at a specified price primarily based on either the cost of the shares or the
book value of the Company.
8. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PLANS
The Company has a defined benefit pension plan ("The Employees' Retirement
Plan of National Fiberstok Corporation") covering certain employees. On December
20, 1993, the Company amended the plan, freezing future participation to any new
employees of the Company effective December 31, 1993. Effective December 31,
1994, the Company again amended the plan, freezing future accrual of benefits
for all participants. In conjunction with this agreement, all participants of
the plan were retroactively vested.
The funded status of the plan as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997
--------------
<S> <C>
Accumulated projected benefit obligation...................................... $ (18,292,100)
Plan assets at fair value..................................................... 19,510,900
--------------
Plan assets greater than projected benefit obligation......................... 1,218,800
Unrecognized net loss from past experience.................................... 209,300
--------------
Prepaid pension cost.......................................................... $ 1,428,100
--------------
--------------
</TABLE>
The weighted average discount rate used to measure the accumulated projected
benefit obligation was 7.25% for 1997. The expected long-term rate of return on
assets was 9% for 1997.
F-74
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension costs for the years ended December 31, 1996 and 1997
and for the six-month period ended June 26,1998 include the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX-MONTH
---------------------------- PERIOD ENDED
1996 1997 JUNE 26, 1998
------------- ------------- -------------
<S> <C> <C> <C>
Service cost-benefits earned during the period....................... $ -- $ -- $ --
Interest cost on projected benefit obligation........................ 1,266,209 1,242,200 618,900
Actual return on plan assets......................................... (1,252,658) (1,556,899) (862,800)
Net amortization on plan assets...................................... (204,216) -- --
------------- ------------- -------------
$ (190,665) $ (314,699) $ (243,900)
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The Company has another defined benefit pension plan ("The Transkrit
Corporation Employees' Pension Plan") covering certain employees. Effective
April 30, 1997, the Company amended the plan, freezing future benefits for
participants at certain locations. In conjunction with this agreement, the
participants with frozen future benefits were retroactively vested. Normal
retirement age is 65, but a provision is made for early retirement. Benefits are
based on the employee's compensation level and years of service. The Company
makes annual contributions to the plan equal to the maximum amount that can be
deducted for income tax purposes.
The 1997 projected benefit obligation was computed using the projected unit
credit method, assuming a discount rate on benefit obligations of 7.25% in 1997.
The expected long-term rate of return on plan assets is 9% for 1997 and annual
salary increases is 4% over the remaining service lives of the employees in the
plan for 1997.
The funded status of the plan as of December 31, 1997 is as follows:
<TABLE>
<CAPTION>
1997
-------------
<S> <C>
Actuarial present value of benefit obligations:
Accumulated projected benefit obligation, including vested benefits of
$2,679,000................................................................. $ (2,817,000)
-------------
-------------
Projected benefit obligation................................................... $ (4,470,000)
Plan assets at fair value...................................................... 5,631,000
-------------
Plan assets greater than projected benefit obligation.......................... 1,161,000
Unrecognized net gain.......................................................... (508,000)
-------------
Prepaid pension cost........................................................... $ 653,000
-------------
-------------
</TABLE>
F-75
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic pension costs for the years ended December 31, 1996 and 1997
and for the six-month period ended June 26, 1998 include the following:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Service cost-benefits earned during the period............................. $ 230,000 $ 415,000 $ 197,400
Interest cost on projected benefit obligation.............................. 143,000 287,000 137,800
Actual return on plan assets............................................... (227,000) (444,000) (236,200)
Recognition of curtailment gain............................................ -- (93,000) --
Net amortization on plan assets............................................ 52,000 -- (9,500)
----------- ----------- -----------
$ 198,000 $ 165,000 $ 89,500
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
DEFERRED COMPENSATION PLANS
The Company has unfunded deferred compensation plans that provide retirement
benefits to certain current and former employees. The plans provide retirement
benefits generally based on the service provided by the employees to the
Company. Benefits are vested as service is provided. The Company provides for
these plans during the related service lives of the participants at amounts
sufficient to accrue the present value of benefits earned to their retirement
dates. Effective December 31, 1994, the Company froze future benefit accruals
under certain of these deferred compensation agreements. Included in the
accompanying consolidated balance sheets are liabilities of $592,000 for these
plans as of December 31, 1997.
DEFINED CONTRIBUTION PLANS
The Company sponsors several voluntary 401(k) savings plans covering all
eligible employees at certain locations. The plans include provisions that allow
employees to make pretax contributions ranging from 1% to 15% of the employee's
wages. Maximum pretax contributions are capped at 10% or 15% of the employee's
wages, depending on the location. The Company matches between 15% and 60% of
employee contributions up to 4% to 6% of the eligible employee's wages, which
varies by location. The Company recorded an expense of approximately $421,000
and $979,000 for the years ended December 31, 1996 and 1997, respectively, and
$643,000 for the six-month period ended June 26, 1998 as a result of
contributions to the plan.
Effective January 1, 1998, the Company consolidated its various 401(k)
savings plans into a single plan. Substantially all of the benefits available to
participants of the plan have been standardized as of January 1, 1998, with the
exception of the Company's matching contribution, which varies by location.
POSTRETIREMENT BENEFITS
The Company provides certain health care and life insurance benefits for
certain retired individuals. The Company accounts for these benefits in
accordance with SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions." The plan was frozen in 1993, and all eligible
F-76
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
8. EMPLOYEE BENEFIT PLANS (CONTINUED)
participants in the plan are retired. The accrued postretirement benefit
obligation at December 31, 1997 was $478,000.
Assumptions used in the computation of postretirement benefit expense and
the related obligation are as follows:
<TABLE>
<CAPTION>
1997
---------
<S> <C>
Discount rate used to determine accumulated postretirement benefit obligation............................. 7.75%
Initial health care cost trend rate....................................................................... 13%
Ultimate health care cost trend rate...................................................................... 5%
Year ultimate health care cost trend rate reached......................................................... 2009
</TABLE>
If the health care trend rates increased 1% for all future years, the
accumulated postretirement benefit obligation as of December 31, 1997 would have
increased by 4%. The effect of such a change on the interest cost for 1997 would
have been an increase of approximately $17,000.
9. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has certain noncancelable operating leases for office and plant
facilities and office equipment. The total rental expense was $826,000,
$1,669,000 and $1,271,000 for the years ended December 31, 1996 and 1997 and for
the six-month period ended June 26, 1998, respectively. Minimum annual rental
payments remaining under noncancelable operating leases as of June 26, 1998 are
as follows:
<TABLE>
<S> <C>
1998............................................................................ $1,254,000
1999............................................................................ 1,905,000
2000............................................................................ 1,104,000
2001............................................................................ 534,000
2002............................................................................ 273,000
---------
$5,070,000
---------
---------
</TABLE>
ENVIRONMENTAL LIABILITY
In January 1988 the Company was notified by the United States Environmental
Protection Agency ("EPA") that it was potentially liable for costs incurred by
the EPA in responding to the Dixie Caverns County Landfill in Roanoke County,
Virginia. Subsequently, Roanoke County expended its funds to clean the Dixie
Cavern site to satisfy the EPA's notification. Roanoke County then filed suit
against the potentially responsible parties ("PRP's"); which included the
Company, to recover the funds it has expended in cleaning the site. Management
believes that the Company's potential liability in connection with this site
will not be material, based upon the amount and nature of the waste alleged to
be attributable to it and the number of other financially viable PRP's.
F-77
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
The Company is party to various litigation matters incidental to the conduct
of its business. The Company does not believe that the outcome of any of the
matters in which it is currently involved will have a material adverse effect on
the financial condition or results of operations of the Company.
10. RESTATEMENT
Subsequent to the issuance of the Company's consolidated financial
statements for the year ended December 31, 1997 and the six-month period ended
June 26, 1998 (previously issued as unaudited), it was determined that the
reported statements of operations were inflated by the misstatement of various
assets and liabilities. As a result, the accompanying consolidated financial
statements as of December 31, 1997 and for the year then ended and as of June
26, 1998 and for the six-month period then ended, present the restated results.
F-78
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
10. RESTATEMENT (CONTINUED)
A summary of the effects of the restatements follows (amounts in thousands):
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
AS
PREVIOUSLY AS
REPORTED RESTATED
(AUDITED) (AUDITED)
------------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................................................ $ 1,314 $ 1,218
Accounts receivable, net............................................................ 27,943 27,943
Income tax receivable............................................................... 497 497
Inventories......................................................................... 13,331 13,331
Deferred income taxes............................................................... 509 509
Other............................................................................... 3,037 2,997
------------- -----------
Total current assets.............................................................. 46,631 46,495
------------- -----------
PROPERTY AND EQUIPMENT, NET........................................................... 51,194 51,194
------------- -----------
OTHER ASSETS.......................................................................... 78,793 78,973
------------- -----------
Total assets...................................................................... $ 176,618 $ 176,662
------------- -----------
------------- -----------
CURRENT LIABILITIES:
Current portion of long-term debt................................................... $ 864 $ 864
Bank overdraft...................................................................... 4,624 5,066
Accounts payable.................................................................... 4,899 4,899
Accrued employee compensation....................................................... 4,873 4,873
Other accrued expenses.............................................................. 4,767 5,160
------------- -----------
Total current liabilities......................................................... 20,027 20,862
------------- -----------
NONCURRENT LIABILITIES................................................................ 6,502 6,166
------------- -----------
LONG-TERM DEBT........................................................................ 152,943 152,953
------------- -----------
STOCKHOLDERS' DEFICIT:
Common stock........................................................................ -- --
Additional paid-in capital.......................................................... 13,957 13,957
Warrants outstanding................................................................ 347 347
Accumulated deficit................................................................. (16,285) (16,750)
Treasury stock...................................................................... (286) (286)
Notes receivable due from stockholders.............................................. (587) (587)
------------- -----------
Total stockholders' deficit....................................................... (2,854) (3,319)
------------- -----------
Total liabilities and stockholders' deficit..................................... $ 176,618 $ 176,662
------------- -----------
------------- -----------
</TABLE>
F-79
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
10. RESTATEMENT (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
AS
PREVIOUSLY AS
REPORTED RESTATED
(AUDITED) (AUDITED)
------------- -----------
<S> <C> <C>
Net sales............................................................................. $ 191,091 $ 191,091
Cost of products sold................................................................. 133,598 133,598
------------- -----------
Gross profit.......................................................................... 57,493 57,493
Operating expenses.................................................................... 44,985 45,761
------------- -----------
Income from operations................................................................ 12,508 11,732
Interest expense...................................................................... 17,023 17,022
------------- -----------
Loss before income tax benefit........................................................ (4,515) (5,290)
Income tax benefit.................................................................... (688) (998)
------------- -----------
Net loss.............................................................................. (3,827) (4,292)
Redeemable cumulative preferred stock accretion and dividends......................... 864 864
------------- -----------
Net loss attributable to common stock................................................. $ (4,691) $ (5,156)
------------- -----------
------------- -----------
</TABLE>
F-80
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
10. RESTATEMENT (CONTINUED)
CONSOLIDATED BALANCE SHEET
AS OF JUNE 26, 1998
<TABLE>
<CAPTION>
AS
PREVIOUSLY AS
REPORTED RESTATED
(AUDITED) (AUDITED)
------------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................................................ $ 2,554 $ 1,755
Accounts receivable, net............................................................ 24,451 24,451
Income tax receivable............................................................... 487 487
Inventories......................................................................... 13,847 13,847
Deferred income taxes............................................................... 802 802
Other............................................................................... 3,059 3,009
------------- -----------
Total current assets.............................................................. $ 45,200 44,351
------------- -----------
PROPERTY AND EQUIPMENT, NET........................................................... 52,767 52,767
------------- -----------
OTHER ASSETS.......................................................................... 79,408 79,632
------------- -----------
Total assets...................................................................... $ 177,375 $ 176,750
------------- -----------
------------- -----------
</TABLE>
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt..................................... $ 920 $ 922
Bank overdraft........................................................ 3,658 4,400
Accounts payable...................................................... 6,071 6,071
Accrued employee compensation......................................... 3,169 3,169
Other accrued expenses................................................ 5,344 5,958
--------- ---------
Total current liabilities........................................... 19,162 20,520
--------- ---------
NONCURRENT LIABILITIES.................................................. 4,423 3,612
--------- ---------
LONG-TERM DEBT.......................................................... 162,983 163,002
--------- ---------
STOCKHOLDERS' DEFICIT:
Common stock.......................................................... -- --
Additional paid-in capital............................................ 13,957 13,957
Warrants outstanding.................................................. 347 347
Accumulated deficit................................................... (22,652) (23,843)
Treasury stock........................................................ (286) (286)
Notes receivable due from stockholders................................ (559) (559)
--------- ---------
Total stockholders' deficit......................................... (9,193) (10,384)
--------- ---------
Total liabilities and stockholders' deficit......................... $ 177,375 $ 176,750
--------- ---------
--------- ---------
</TABLE>
F-81
<PAGE>
AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, AND 1997,
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED) AND
THE THREE-MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
10. RESTATEMENT (CONTINUED)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX-MONTHS ENDED JUNE 26, 1998
<TABLE>
<CAPTION>
AS
PREVIOUSLY AS
REPORTED RESTATED
(AUDITED) (AUDITED)
------------- -----------
<S> <C> <C>
Net sales............................................................................. $ 93,081 $ 93,081
Cost of products sold................................................................. 67,992 67,992
------------- -----------
Gross profit........................................................................ 25,089 25,089
Operating expenses.................................................................... 24,413 25,622
------------- -----------
Income (loss) from operations......................................................... 676 (533)
Interest expense...................................................................... 9,677 9,677
------------- -----------
Loss before income tax benefit........................................................ (9,001) (10,210)
Income tax benefit.................................................................... (2,634) (3,117)
------------- -----------
Net loss.............................................................................. $ (6,367) $ (7,093)
------------- -----------
------------- -----------
</TABLE>
11. SUBSEQUENT EVENT
SALE OF AMERICOMM HOLDINGS, INC. AND SUBSIDIARY
On May 12, 1998, McCown De Leeuw & Co. IV, L.P. ("MDC IV"), an affiliated
fund of the Company's majority shareholder, formed DIMAC Holdings Inc.,
("Holdings"). Holdings then formed a wholly owned subsidiary, DIMAC Corporation
("DIMAC"). In addition, DIMAC formed a wholly owned subsidiary, DMAC Merger
Corporation ("DMC"). On June 26, 1998, warrants to purchase 210,868 shares of
Class A common stock and options to purchase 147,398 shares of Class A common
stock were exercised. Concurrently, DMC acquired all of the issued and
outstanding capital stock of the Company for $203.8 million plus transaction
costs, including assumed indebtedness of $164.2 million. DMC then merged into
the Company.
F-82
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
AmeriComm Direct Marketing, Inc.
We have audited the accompanying balance sheets of AmeriComm Direct
Marketing, Inc. as of December 31, 1995 and 1996, and the related statements of
income, stockholders' equity and of cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of AmeriComm Direct Marketing, Inc. as of
December 31, 1995 and 1996 and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Louisville, Kentucky
February 21, 1997
F-83
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996 AND MARCH 31, 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31,
-------------------- 1997
1995 1996 (UNAUDITED)
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 770 $ 3,836 $ 4,373
Debt security................................................................ 1,073
Receivables:
Trade (net of allowance for doubtful accounts of $211, $169 and $202,
respectively)............................................................ 3,520 4,266 3,594
Other...................................................................... 106 132 119
Postage permits, meters and deposits......................................... 642 383 690
Supply inventory............................................................. 445 340 251
Deferred tax assets.......................................................... 242 -- --
Other........................................................................ 107 125 148
--------- --------- -----------
Total current assets....................................................... 6,905 9,082 9,175
PROPERTY AND EQUIPMENT--net.................................................... 1,920 2,066 2,153
INVESTMENT IN EQUITY SECURITIES................................................ 707 1,072 1,048
OTHER ASSETS................................................................... 552 364 304
--------- --------- -----------
TOTAL.......................................................................... $ 10,084 $ 12,584 $ 12,680
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................. $ 1,340 $ 1,900 $ 1,572
Accrued expenses............................................................. 807 1,135 1,009
Customer postage advances.................................................... 702 499 690
Current maturities of:
Obligations under capital leases........................................... 45 26 19
Notes payable.............................................................. 134 133 133
--------- --------- -----------
Total current liabilities................................................ 3,028 3,693 3,423
--------- --------- -----------
LONG-TERM DEBT:
Obligations under capital leases............................................. 29 -- --
Notes payable................................................................ 268 138 105
--------- --------- -----------
Total long-term debt....................................................... 297 138 105
--------- --------- -----------
Total liabilities.......................................................... 3,325 3,831 3,528
--------- --------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, no par; 3 shares authorized.................................... 5 5 5
Retained earnings............................................................ 6,754 8,748 9,147
--------- --------- -----------
Total stockholders' equity................................................. 6,759 8,753 9,152
--------- --------- -----------
TOTAL........................................................................ $ 10,084 $ 12,584 $ 12,680
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-84
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- --------------------
<S> <C> <C> <C> <C>
1995 1996 1996 1997
--------- --------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES................................................................ $ 21,013 $ 26,485 $ 5,714 $ 6,524
COST OF SALES........................................................... 14,937 18,140 4,002 4,421
--------- --------- --------- ---------
GROSS PROFIT............................................................ 6,076 8,345 1,712 2,103
SELLING EXPENSES........................................................ 2,129 2,439 515 606
GENERAL AND ADMINISTRATIVE EXPENSES..................................... 2,319 3,376 665 866
--------- --------- --------- ---------
OPERATING INCOME........................................................ 1,628 2,530 532 631
--------- --------- --------- ---------
OTHER INCOME (EXPENSES):
Consulting and other fees............................................. 1,325 21 21 --
Interest expense...................................................... (50) (45) (14) (6)
Other................................................................. (18) 140 20 (26)
--------- --------- --------- ---------
Net other income (expense).......................................... 1,257 116 27 (32)
--------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES................................ 2,885 2,646 559 599
PROVISION FOR INCOME TAXES.............................................. 1,100 390 390 --
--------- --------- --------- ---------
NET INCOME.............................................................. $ 1,785 $ 2,256 $ 169 $ 599
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-85
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
------------------------
NUMBER OF RETAINED
SHARES AMOUNT EARNINGS TOTAL
----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995............................................. 1 5 4,969 4,974
Net income........................................................... -- 1,785 1,785
----- ----- ----------- ---------
BALANCE, DECEMBER 31, 1995............................................. 1 5 6,754 6,759
Distributions to stockholder......................................... -- (262) (262)
Net income........................................................... -- 2,256 2,256
----- ----- ----------- ---------
BALANCE, DECEMBER 31, 1996............................................. 1 $ 5 $ 8,748 $ 8,753
----- ----- ----------- ---------
----- ----- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-86
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE THREE-MONTH PERIODS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------- --------------------
1995 1996 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................. $ 1,785 $ 2,256 $ 599 $ 169
Adjustments to reconcile net income to net cash provided by operating
activities:
Deferred taxes........................................................... (61) 390 -- 390
(Gain) loss on sales of property and equipment........................... (4) 5 50 --
Depreciation and amortization............................................ 605 754 172 159
Changes in assets and liabilities:
Receivables.............................................................. (459) (772) 685 (391)
Postage permits, meters and deposits..................................... (167) 259 (307) (87)
Supply inventory......................................................... (172) 105 89 22
Other current assets..................................................... 32 (18) (23) (34)
Other assets............................................................. (359) 3
Accounts payable......................................................... 879 560 (328) 62
Accrued expenses......................................................... (181) 328 (126) (116)
Customer postage advances................................................ 156 (203) 191 214
--------- --------- --------- ---------
Net cash provided by operating activities.............................. 2,054 3,667 1,002 388
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of debt security.................................................. -- 1,073 -- 1,073
Proceeds from the sales of property and equipment.......................... 8 1 0 0
Purchases of equipment..................................................... (797) (869) (249) (425)
Purchases of investments................................................... (1,423) (365) 24 (45)
--------- --------- --------- ---------
Net cash provided by (used in) investing activities.................... (2,212) (160) (225) 603
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments:
Notes payable............................................................ (100) (131) (33) (31)
Obligations under capital leases......................................... (94) (48) (7) (14)
Proceeds from issuance of notes payable.................................... 135 -- -- --
Distributions to stockholder............................................... -- (262) (200) --
--------- --------- --------- ---------
Net cash used in financing activities.................................. (59) (441) (240) (45)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (217) 3,066 537 946
CASH AND CASH EQUIVALENTS:
Beginning of period...................................................... 987 770 3,836 770
--------- --------- --------- ---------
End of period............................................................ $ 770 $ 3,836 $ 4,373 $ 1,716
--------- --------- --------- ---------
--------- --------- --------- ---------
SUPPLEMENTAL INFORMATION:
Cash paid for interest................................................... $ 50 $ 45
--------- ---------
--------- ---------
Cash paid for income taxes............................................... $ 1,277
---------
---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-87
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION--AmeriComm Direct Marketing, Inc. (Company) provides direct
mail services, including database management and printing, to a widely dispersed
customer base concentrated primarily in the retail and advertising industries
and the not-for-profit sector. Credit sales are generally made on an
uncollateralized basis.
The Company conducts its operations primarily in Virginia, New Jersey,
Kentucky and Colorado. The Company began its New Jersey operations in 1995. In
connection therewith, the Company acquired certain assets for a purchase price
of approximately $430.
Prior to January 1, 1996, the Company's operations were conducted through
four wholly-owned subsidiary corporations. Effective January 1, 1996, the
Company elected to be treated as a Subchapter S Corporation for income tax
purposes. Concurrent with this election, the Company merged its wholly-owned
subsidiaries into the parent company and dissolved the related corporations. The
1995 financial statements include the accounts of AmeriComm Direct Marketing,
Inc. and its wholly-owned subsidiaries, with all significant intercompany
transactions eliminated.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include cash in banks
and securities having original maturities when acquired of ninety days or less.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Beginning balance..................................................... $ 176,285 $ 211,571
Provisions............................................................ 128,184 215,550
Recoveries............................................................ (2,400) (10,859)
Write-offs............................................................ (90,498) (246,893)
---------- ----------
Ending balance........................................................ $ 211,571 $ 169,369
---------- ----------
---------- ----------
</TABLE>
INVESTMENTS--All equity securities are classified as available for sale and
are reported at fair value which approximates cost. The debt security is
classified as held-to-maturity and is reported at amortized cost.
SUPPLY INVENTORY--Supply inventory is stated at the lower of cost (first-in,
first-out method) or market.
PROPERTY AND EQUIPMENT--Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives of the respective assets, which range from three to seven years. Leasehold
improvements and equipment under capital leases are amortized over the life of
the leases or the estimated useful life of the improvements or lease, whichever
is shorter. Repairs and maintenance are charged to operations when incurred and
are approximately $570 and $600 in 1995 and 1996, respectively.
RESIDENT ADDRESS LISTS--Resident address lists, which are included in other
assets, are stated at cost and are amortized using the straight-line method over
ten years.
F-88
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS--In 1996, the Company adopted Statement of Financial
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of," which establishes accounting standards for
the impairment of property and equipment and resident address lists, whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. There was no effect of the standard on the Company's
financial statements.
REVENUE RECOGNITION--Revenues are recognized as products are shipped or as
services are performed.
USE OF ESTIMATES--Financial statements prepared in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
RECLASSIFICATIONS--Certain reclassifications were made to the 1995 financial
statements to conform with the 1996 presentation, primarily to record brokered
sales revenues and operating expenses at gross amounts.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Building and leasehold improvements........................................ $ 351 $ 480
Equipment.................................................................. 4,888 5,349
Equipment under capital lease.............................................. 208 208
--------- ---------
Total...................................................................... 5,447 6,037
Less accumulated depreciation and amortization............................. 3,527 3,971
--------- ---------
Net........................................................................ $ 1,920 $ 2,066
--------- ---------
--------- ---------
</TABLE>
3. INVESTMENTS
Investments consist of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Debt security: U.S. Treasury Bill, due 1/12/96, 7.10%...................... $ 1,073
---------
---------
Equity securities:
Investment in Gibraltar Bank common stock................................ $ 384 $ 384
Investment with McCown De Leeuw & Co., III, L.P.......................... 323 688
--------- ---------
Total equity securities.................................................... $ 707 $ 1,072
--------- ---------
--------- ---------
</TABLE>
F-89
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
3. INVESTMENTS (CONTINUED)
At December 31, 1996, the Company has a five year commitment to invest up to
$1,000 with McCown De Leeuw & Co., III, L.P. (Partnership). At December 31,
1996, the Company had invested $688 in the Partnership. The balance is due
within 60 days of request from the Partnership. The Partnership's objective is
to invest in equity securities of companies with the potential for increased
shareholder value.
4. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Resident address lists, net of accumulated amortization of $25 and $62 in 1995
and 1996, respectively...................................................... $ 350 $ 313
Net deferred non-current tax assets........................................... 148 --
Rental property............................................................... 50 50
Other......................................................................... 4 1
--------- ---------
Total......................................................................... $ 552 $ 364
--------- ---------
--------- ---------
</TABLE>
5. DEBT
At December 31, 1996, the Company had no borrowings outstanding under a
$1,000 line of credit that expires on May 3, 1997, which bears interest at a
rate of prime (8.25% at December 31, 1996). Amounts, if any, outstanding under
the line of credit are secured by accounts receivable.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Note payable to bank, interest at prime (8.25% at December 31, 1996) plus
1/2%........................................................................ $ 268 $ 168
Note payable to bank, interest at 8.4%........................................ 134 103
--------- ---------
Total......................................................................... 402 271
Less current maturities....................................................... 134 133
--------- ---------
Long-term maturities.......................................................... $ 268 $ 138
--------- ---------
--------- ---------
</TABLE>
The notes payable to bank are secured by certain property and equipment. The
Company is required to comply with covenants under the note agreements including
a restriction on the sale of the Company's assets other than in the normal
course of business. The Company was in compliance with its covenants at December
31, 1996.
F-90
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
5. DEBT (CONTINUED)
At December 31, 1996, maturities of long-term debt were as follows:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
1997.................................................................................. $ 133
1998.................................................................................. 103
1999.................................................................................. 35
---------
Total................................................................................. $ 271
---------
---------
</TABLE>
The carrying amount of debt approximates its fair value.
6. LEASES
The Company leases operating facilities, office space and equipment under
long-term noncancelable operating leases with various renewal terms and a
capital lease. Rent expense under operating leases was approximately $580 and
$920 in 1995 and 1996, respectively.
Future minimum lease payments under the capital lease and noncancelable
operating leases consist of the following at December 31, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASE LEASES
----------- -----------
<S> <C> <C>
1997......................................................................................... $ 27 $ 976
1998......................................................................................... -- 979
1999......................................................................................... -- 509
2000......................................................................................... -- 214
--- -----------
Total minimum lease payments................................................................. 27 $ 2,678
-----------
-----------
Less amounts representing interest and executory costs....................................... 1
---
Present value of net minimum lease payments.................................................. 26
Less current maturities...................................................................... 26
---
Long-term maturities......................................................................... $ --
---
---
</TABLE>
The Company is also the lessor of a building and land under a noncancelable
operating lease for a period of five and one half years. At the end of the lease
term, the lessee is required to purchase, and the Company is required to sell,
the leased property for $450 in cash. The Company may not encumber the property
during the term of the lease in an amount in excess of $450. The rental income
from such lease was $60 for 1995 and 1996. Remaining annual rentals are $60 in
1997 and $20 in 1998.
F-91
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
7. INCOME TAXES
The provision for income taxes includes the following components:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Current...................................................................... $ 1,161
Deferred..................................................................... (61) $ 390
--------- ---------
Provision for income taxes................................................... $ 1,100 $ 390
--------- ---------
--------- ---------
</TABLE>
Due to the election of Subchapter S Corporation status in 1996, deferred tax
assets of $390 were eliminated from the Company's balance sheet, resulting in an
income tax expense of $390.
The tax effects of the significant temporary differences, which comprise the
deferred tax assets and liabilities at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Deferred current tax assets:
Accrued vacation.................................................................... $ 86
Allowance for doubtful accounts..................................................... 99
Accrued health self-insurance....................................................... 44
Phantom stock agreements............................................................ 13
---------
Total deferred current tax assets..................................................... $ 242
---------
---------
Deferred non-current tax asset--
Rental property treated as an installment sale for tax purposes..................... $ 198
Deferred long-term tax liability--Depreciation........................................ (50)
---------
Net deferred non-current tax asset, included in other assets.......................... $ 148
---------
---------
</TABLE>
The Company's income tax expense for the year ended December 31, 1995,
differed from amounts computed by applying the U.S. Federal income tax rate of
34% to the Company's income before income taxes as a result of the following:
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Statutory income tax expense......................................................... $ 981
Increase in income tax expense resulting from:
State and other tax expense........................................................ 110
Other, net......................................................................... 9
---------
Reported income tax expense.......................................................... $ 1,100
---------
---------
</TABLE>
F-92
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1995 AND 1996 AND FOR THE
YEARS ENDED DECEMBER 31, 1995 AND 1996 (IN THOUSANDS)
8. BENEFIT PLAN
On January 6, 1995, the Company established a defined contribution savings
plan under the provisions of Section 401(k) of the Internal Revenue Code that
provides benefits to substantially all employees. The Company's contribution,
which is based upon management discretion, was approximately $95 and $150 in
1995 and 1996, respectively.
Prior to January 6, 1995, the Company sponsored a defined contribution plan
that covered substantially all employees. The Company's annual contribution to
the Plan, in an amount up to 25% of the Company's income before income taxes,
was determined by its Board of Directors.
9. PHANTOM STOCK AGREEMENTS
The Company has entered into Phantom Stock Agreements (Agreements) with
certain executives of the Company. The Agreements allow the executives to earn
additional amounts based on the performance of the Company. Compensation under
the Agreements is based on the difference between the executives' interest in
the value of the Company, as defined in the Agreements, and the executives'
basis in their interests. Amounts are deferred until termination of the
executive or sale of the Company. Compensation expense recorded under these
Agreements was approximately $10 and $120 in 1995 and 1996, respectively.
10. SELF-INSURANCE HEALTH CARE PLAN
The Company maintains a self-insurance program for that portion of
employees' health care costs not covered by the Company's stop loss insurance
policy, which sets the maximum cash outlays for annual claims for each employee
or employee's dependents at $30 and for aggregate annual claims up to $450 at
December 31, 1996. Health care costs recorded in 1995 and 1996 were
approximately $215 and $400, respectively.
11. SALE OF COMPANY
On February 20, 1997, the Company and National Fiberstok Corporation (now
known as AmeriComm Direct Marketing, Inc.) entered into a Stock Purchase
Agreement (Agreement) whereby National Fiberstok Corporation will acquire all of
the outstanding common stock of the Company for cash. The Agreement stipulates
that prior to closing, the Company's cash balances, as determined under the
Agreement, investment in equity securities and certain other assets of the
Company will be distributed by, or assigned by, the Company to the stockholders
of the Company. The Agreement also stipulates that on or prior to the closing,
the Company will satisfy certain liabilities of the Company. The Agreement can
be terminated any time prior to the closing by written mutual consent of
National Fiberstok Corporation and the Company.
F-93
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information. This prospectus does not offer to sell
or to buy any of the securities in any jurisdiction where it is unlawful. The
information in this prospectus is current as of , 1999 .
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 17
Company History................................. 26
The Acquisitions................................ 27
The Refinancing................................. 27
Use of Proceeds of the Registered Notes......... 28
Capitalization.................................. 29
The Exchange Offer.............................. 30
DIMAC Corporation Unaudited Pro Forma
Consolidated Statements of Operations......... 39
Selected Historical Financial Data AmeriComm
Holdings, Inc................................. 54
Selected Historical Financial Data DIMAC
Marketing Corporation......................... 56
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 58
Business........................................ 70
Management...................................... 86
Security Ownership.............................. 90
Certain Relationships and Related
Transactions.................................. 91
Description of Other Indebtedness............... 92
Description of Notes............................ 96
Certain United States Federal Income Tax
Considerations................................ 130
Unregistered Notes Registration Rights
Agreement..................................... 131
Book-Entry; Delivery and Form................... 134
Plan of Distribution............................ 137
Legal Matters................................... 138
Experts......................................... 138
Index to Financial Statements................... F-1
</TABLE>
Until , 1999, 25 days after the date of this prospectus, all
dealers that buy, sell or trade these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
[LOGO]
Offer to Exchange
12 1/2% Series B Senior
Subordinated Notes
Due 2008
for all outstanding
12 1/2% Senior
Subordinated Notes
due 2008
-----------------------
PROSPECTUS
-----------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information below briefly outlines the provisions of Section 102(b)(7)
of the General Corporation Law of the State of Delaware, Article Eight of our
Certificate of Incorporation and Article IV of our By-Laws. For more
information, you may review the provisions of our Certificate of Incorporation
and By-Laws that we filed with the SEC. To find out how to locate our
Certificate of Incorporation and By-Laws, please read the section labelled
"Where You Can Find More Information" under the heading "Prospectus Summary."
ELIMINATION OF LIABILITY
Section 102(b)(7) of Delaware's corporation law gives each Delaware
corporation the power to eliminate or limit its directors' personal liability to
the corporation or its stockholders for monetary damages for certain breaches of
fiduciary duty as a director, except:
- for any breach of the director's duty of loyalty to the corporation or
its stockholders;
- for acts or omissions in bad faith, or involving intentional misconduct
or a knowing violation of the law;
- under Section 174 of Delaware's corporation law (providing for liability
of directors for the unlawful payment of dividends or unlawful stock
purchases or redemptions); or
- for any transaction from which a director derived an improper personal
benefit.
You should know that our Certificate of Incorporation eliminates the
personal liability of our directors to the fullest extent permitted by Section
102(b)(7) of Delaware's corporation law.
INDEMNIFICATION
Section 145 of Delaware's corporation law grants each Delaware corporation
the power to indemnify its directors and officers against liability for certain
of their acts.
Our By-Laws provide, among other things, that under certain circumstances we
are required or permitted to indemnify any officer or director of our company
(or such person's estate):
- who was or is a party (or is threatened to be made a party) to a
threatened, pending or completed action, suit or other proceeding;
- whether or not the action, suit or other proceeding was or is in the
right of our company;
- regardless of whether the suit or other proceeding was or is civil,
criminal, administrative or investigative in nature; and
- by reason of the fact that he or she is or was one of our directors or
officers, or is or was serving at our request as a director or officer of
another corporation, partnership or other enterprise.
Unless otherwise permitted by applicable laws, our By-Laws require us to
make a case-specific determination, in accordance with applicable laws, that
indemnification is proper in the circumstances. Our By-Laws only require us to
indemnify an officer or director if he or she acted in good faith and in a
manner he or she reasonably believed to be consistent with our best interests.
Moreover, with respect to any criminal action or proceeding, one of our officers
or directors is only entitled to indemnification if he or she had no reasonable
cause to believe his or her conduct was unlawful. We are not required
II-1
<PAGE>
to indemnify, or advance expenses to any person in connection with any action,
suit or other proceeding (including any counterclaim) initiated by or on his or
her behalf.
You should know, however, that in the event that an officer or director of
our company is entitled to indemnification under our By-Laws, we may be required
to indemnify him or her against expenses (including, for example, attorneys'
fees, judgments, penalties, fines and settlement amounts actually and reasonably
incurred and not recovered related to such officer or director's investigation,
preparation to defend or defense of such action, suit, or other proceeding). You
should also know that, to the extent permitted by our By-Laws, our By-Laws
authorize us to pay any such expenses in advance of the final disposition of the
action, suit or other proceeding in question. Our By-Laws also authorize us to
make, to the extent permitted by law, such advance payments even if the officer
or director in question is alleged to have failed to meet the "good faith"
standard of conduct discussed above, or is alleged to have committed conduct
which, if true, would prevent us from indemnifying such officer or director.
Before making any advance payment, our By-Laws require us to receive an
undertaking by or on behalf of the director or officer in question to repay the
advance if it is ultimately determined that he or she is not entitled to
indemnification.
Finally, our By-Laws authorize us, to the extent permitted by law, to
purchase and maintain insurance for any person who may be entitled to
indemnification thereunder.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Purchase Agreement, dated as of October 16, 1998, among DIMAC Corporation, the subsidiary guarantors
named therein, Credit Suisse First Boston Corporation, First Union Capital Markets and Warburg Dillon
Read LLC.
2.1 Stock Purchase Agreement, dated as of May 17, 1998, by and between, Heritage Media Corporation and DIMAC
Corporation (formerly DMAC Acquisition Corp.).
2.2 Agreement and Plan of Merger, dated as of May 18, 1998, by and among DIMAC Holdings, Inc. (formerly DMAC
Holdings, Inc.), DMAC Merger Corp. and AmeriComm Holdings, Inc.
2.3* Certificate of Merger, dated June 26, 1998, of DMAC Merger Corp. with and into AmeriComm Holdings, Inc.
3.1* Certificate of Incorporation of DIMAC Corporation, filed with the Secretary of State of the State of
Delaware.
3.2 By-Laws, as amended, of DIMAC Corporation.
4.1* Indenture, dated as of October 15, 1998, between DIMAC Corporation, the subsidiary guarantors named
therein and Wilmington Trust Company.
4.2* Specimen Certificates of the 12 1/2% Senior Subordinated Note Due 2008 and 12 1/2% Series B Senior
Subordinated Note Due 2008 (included in Exhibit 4.1 hereto).
4.3 First Supplemental Indenture, dated as of January 4, 1999, between DIMAC Corporation, DMW Worldwide,
Inc. and Wilmington Trust Company.
4.4 Registration Rights Agreement, dated as of October 16, 1998, among DIMAC Corporation, the subsidiary
guarantors named therein and Credit Suisse First Boston Corporation, First Union Capital Markets and
Warburg Dillon Read LLC.
</TABLE>
- ---------
* Previously filed with the Commission.
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
5.1* Opinion of White & Case LLP regarding the legality of the registered notes.
8.1* Opinion of White & Case LLP regarding certain tax matters.
10.1 Employment Agreement, dated June 15, 1995, between Scott Ebert and National Fiberstok Corporation.
</TABLE>
<TABLE>
<C> <S>
10.2* Employment Agreement, dated May 19, 1998, between Scott Ebert and AmeriComm Direct
Marketing, Inc. which amended the Employment Agreement, dated June 15, 1995,
between Scott Ebert and National Fiberstok Corporation.
10.3 Amended and Restated Credit Agreement, dated as of October 22, 1998, by and among
DIMAC Corporation, as Borrower, the Lenders listed therein, Credit Suisse First
Boston Corporation, as Administrative Agent and Arranger, Warburg Dillon Read LLC,
as Syndication Agent and First Union National Bank, as Documentation Agent.
10.4 Securities Purchase Agreement, dated as of October 22, 1998, by and among DIMAC
Holdings, Inc., DIMAC Corporation and the purchasers listed on the signature pages
thereto.
10.5* Subordination Agreement, dated as of October 22, 1998, among DIMAC Corporation and
the purchasers listed therein.
10.6* Advisory Services Agreement, dated as of June 26, 1998, by and between DIMAC
Corporation and MDC Management Company IV, LLC.
10.7 Side Letter to the Advisory Services Agreement, dated March 31, 1999, between DIMAC
Corporation and MDC Management Company IV, LLC.
10.8 DIMAC Holdings, Inc. 1998 Stock Option Plan
10.9 Tax Sharing Agreement, dated as of October 18, 1998, between DIMAC Holdings, Inc.,
DIMAC Corporation, DIMAC Marketing Corporation, AmeriComm Holdings, Inc., DIMAC
DIRECT, Inc., The McClure Group Inc., MBS/Multimode Inc., Wilcox & Associates
Inc., Palm Coast Data Inc. and AmeriComm Direct Marketing, Inc.
10.10 First Amendment, dated as of March 26, 1999, to the Amended and Restated Credit
Agreement, dated as of October 22, 1998, by and among DIMAC Corporation, DIMAC
Holdings, Inc., the Credit Support Parties listed on the signature pages thereto,
the financial institutions party thereto, Credit Suisse First Boston, as
Administrative Agent and Arranger, Warburg Dillon Read LLC, as Syndication Agent,
and First Union National Bank, as Documentation Agent.
10.11 Second Amendment, dated as of July 23, 1999, to the Amended and Restated Credit
Agreement, dated as of October 22, 1998, as amended by the First Amendment, dated
as of March 26, 1999, by and among DIMAC Corporation, DIMAC Holdings, Inc., the
Credit Support Parties listed on the signature pages thereto, the financial
institutions party thereto, Credit Suisse First Boston, as Administrative Agent
and Arranger, Warburg Dillon Read LLC, as Syndication Agent, and First Union
National Bank, as Documentation Agent.
12.1 Statement re computation of ratios.
21.1 Subsidiaries of DIMAC Corporation, as amended.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Deloitte & Touche LLP.
</TABLE>
- ---------
* Previously filed with the Commission.
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
<C> <S> <S>
23.4* Consent of White & Case LLP (included in Exhibit 5.1 hereto).
23.5* Consent of White & Case LLP (included in Exhibit 8.1 hereto).
24.1*+ Power of Attorney (see pages II-6 through II-14).
25.1* Statement of eligibility of trustee.
99.1 Form of Letter of Transmittal for registered notes.
99.2* Form of Notice of Guaranteed Delivery for registered notes.
99.3 Letter to Brokers.
99.4 Letter to Clients.
99.5 Instructions to Registered Holder and/or Book Entry Transfer Participant from Beneficial Owner.
99.6* Guidelines for Certificate of Taxpayer Identification Number on substitute Form W-9.
</TABLE>
- ---------
* Previously filed with the Commission.
+ See pages II-6 through II-14.
ITEM 22. UNDERTAKINGS.
(a) We hereby undertake that insofar as indemnification for liabilities
arising under the Securities Act of 1933, as amended, may be permitted to
directors, officers and controlling persons of DIMAC Corporation pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. Should a claim of
indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or controlling person of DIMAC
Corporation in the successful defense of any action, suit or proceeding) be
asserted by such director, officer or controlling person in connection with the
securities being registered, we will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by us is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(b) We hereby undertake to respond to requests for information that is
incorporated by reference into this prospectus pursuant to Item 4, 10(b), 11, or
13 of this Form, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of this Registration Statement through the date of responding to
the request.
(c) We 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.
(d) We hereby undertake to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities
II-4
<PAGE>
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in
the form of a prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(e) We hereby undertake that, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(f) We hereby undertake to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on August , 1999.
<TABLE>
<S> <C> <C>
DIMAC CORPORATION
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
/s/ JOHN F. MENEOUGH President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer
/s/ EDWARD D. LAZAROWITZ (Principal Financial
- ------------------------------ Officer and
Edward D. Lazarowitz Principal Accounting
Officer)
/s/ TIMOTHY BEFFA
- ------------------------------ Director
Timothy Beffa
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ GEORGE E. MCCOWN
- ------------------------------ Director
George E. McCown
/s/ BENJAMIN MCSWINEY
- ------------------------------ Director
Benjamin McSwiney
/s/ JOHN D. WEIL
- ------------------------------ Director
John D. Weil
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on August , 1999.
<TABLE>
<S> <C> <C>
AMERICOMM HOLDINGS, INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Controller
/s/ SCOTT P. EBERT (Principal Financial
- ------------------------------ Officer and
Scott P. Ebert Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Atlanta, State of Georgia, on August , 1999.
<TABLE>
<S> <C> <C>
AMERICOMM DIRECT MARKETING, INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Controller
/s/ SCOTT P. EBERT (Principal Financial
- ------------------------------ Officer and
Scott P. Ebert Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of St.
Louis, State of Missouri, on August , 1999.
<TABLE>
<S> <C> <C>
DIMAC MARKETING CORPORATION
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer,
Vice President and
/s/ MICHAEL J. SPEICHINGER Treasurer
- ------------------------------ (Principal Financial
Michael J. Speichinger Officer and
Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of St.
Louis, State of Missouri, on August , 1999.
<TABLE>
<S> <C> <C>
DIMAC DIRECT, INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer,
Vice President and
/s/ MICHAEL J. SPEICHINGER Treasurer
- ------------------------------ (Principal Financial
Michael J. Speichinger Officer and
Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Palm
Coast, State of Florida, on August , 1999.
<TABLE>
<S> <C> <C>
PALM COAST DATA INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
VICE-CHAIRMAN
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and Vice-Chairman
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer,
Vice President and
/s/ MICHAEL SPEICHINGER Treasurer
- ------------------------------ (Principal Financial
Michael Speichinger Officer and
Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Central Islip, State of New York, on August , 1999.
<TABLE>
<S> <C> <C>
MBS/MULTIMODE INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
VICE-CHAIRMAN
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and Vice-Chairman
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer,
Vice President and
/s/ MICHAEL J. SPEICHINGER Treasurer
- ------------------------------ (Principal Financial
Michael J. Speichinger Officer and
Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Wayne, State of Pennsylvania, on August , 1999.
<TABLE>
<S> <C> <C>
DMW WORLDWIDE, INC.
By: /s/ JOHN F. MENEOUGH
-----------------------------------------
John F. Meneough
PRESIDENT
</TABLE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes David E. King, John F. Meneough and David E. De Leeuw and each
of them, as attorney-in-fact, to sign on such person's behalf, individually and
in each capacity stated below, and to file any amendments, including post
effective amendments to the registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on August , 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ --------------------------
<S> <C>
/s/ JOHN F. MENEOUGH Director and President
- ------------------------------ (Principal Executive
John F. Meneough Officer)
Chief Financial Officer,
Vice President and
/s/ MICHAEL J. SPEICHINGER Treasurer
- ------------------------------ (Principal Financial
Michael J. Speichinger Officer and
Principal Accounting
Officer)
/s/ DAVID E. KING
- ------------------------------ Chairman of the Board and
David E. King Secretary
- ------------------------------ Director
David E. De Leeuw
</TABLE>
II-14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1* Purchase Agreement, dated as of October 16, 1998, among DIMAC Corporation, the subsidiary
guarantors named therein, Credit Suisse First Boston Corporation, First Union Capital Markets
and Warburg Dillon Read LLC. ................................................................
2.1 Stock Purchase Agreement, dated as of May 17, 1998, by and between, Heritage Media Corporation
and DIMAC Corporation (formerly DMAC Acquisition Corp.). ....................................
2.2 Agreement and Plan of Merger, dated as of May 18, 1998, by and among DIMAC Holdings, Inc.
(formerly DMAC Holdings, Inc.), DMAC Merger Corp. and AmeriComm Holdings, Inc. ..............
2.3* Certificate of Merger, dated June 26, 1998, of DMAC Merger Corp. with and into AmeriComm
Holdings, Inc. ..............................................................................
3.1* Certificate of Incorporation of DIMAC Corporation, filed with the Secretary of State of the
State of Delaware. ..........................................................................
3.2 By-Laws, as amended, of DIMAC Corporation. ....................................................
4.1* Indenture, dated as of October 15, 1998, between DIMAC Corporation, the subsidiary guarantors
named therein and Wilmington Trust Company. .................................................
4.2* Specimen Certificates of the 12 1/2% Senior Subordinated Note Due 2008 and 12 1/2% Series B
Senior Subordinated Note Due 2008 (included in Exhibit 4.1 hereto). .........................
4.3 First Supplemental Indenture, dated as of January 4, 1999, between DIMAC Corporation, DMW
Worldwide, Inc. and Wilmington Trust Company. ...............................................
4.4 Registration Rights Agreement, dated as of October 16, 1998, among DIMAC Corporation, the
subsidiary guarantors named therein and Credit Suisse First Boston Corporation, First Union
Capital Markets and Warburg Dillon Read LLC. ................................................
5.1* Opinion of White & Case LLP regarding the legality of the registered notes. ...................
8.1* Opinion of White & Case LLP regarding certain tax matters. ....................................
10.1 Employment Agreement, dated June 15, 1995, between Scott Ebert and National Fiberstok
Corporation. ................................................................................
10.2* Employment Agreement, dated May 19, 1998, between Scott Ebert and AmeriComm Direct Marketing,
Inc. ........................................................................................
10.3 Amended and Restated Credit Agreement, dated as of October 22, 1998, by and among DIMAC
Corporation, as Borrower, the Lenders listed therein, Credit Suisse First Boston Corporation,
as Administrative Agent and Arranger, Warburg Dillon Read LLC, as Syndication Agent and First
Union National Bank, as Documentation Agent. ................................................
10.4 Securities Purchase Agreement, dated as of October 22, 1998, by and among DIMAC Holdings, Inc.,
DIMAC Corporation and the purchasers listed on the signature pages thereto. .................
10.5* Subordination Agreement, dated as of October 22, 1998, among DIMAC Corporation and the
purchasers listed therein. ..................................................................
10.6* Advisory Services Agreement, dated as of June 26, 1998, by and between DIMAC Corporation and
MDC Management Company IV, LLC. .............................................................
</TABLE>
- ---------
* Previously filed with the Commission.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION PAGE
- --------- ----------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.7 Side Letter to the Advisory Services Agreement, dated March 31, 1999, between DIMAC Corporation
and MDC Management Company IV, LLC. .........................................................
10.8 DIMAC Holdings, Inc. 1998 Stock Option Plan ...................................................
10.9 Tax Sharing Agreement, dated as of October 18, 1998, between DIMAC Holdings, Inc., DIMAC
Corporation, DIMAC Marketing Corporation, AmeriComm Holdings, Inc., DIMAC DIRECT, Inc., The
McClure Group Inc., MBS/Multimode Inc., Wilcox & Associates Inc., Palm Coast Data Inc. and
AmeriComm Direct Marketing, Inc. ............................................................
10.10 First Amendment, dated as of March 26, 1999, to the Amended and Restated Credit Agreement,
dated as of October 22, 1998, by and among DIMAC Corporation, DIMAC Holdings, Inc., the
Credit Support Parties listed on the signature pages thereto, the financial institutions
party thereto, Credit Suisse First Boston, as Administrative Agent and Arranger, Warburg
Dillon Read LLC, as Syndication Agent, and First Union National Bank, as Documentation
Agent. ......................................................................................
10.11 Second Amendment, dated as of July 23, 1999, to the Amended and Restated Credit Agreement,
dated as of October 22, 1998, as amended by the First Amendment, dated as of March 26, 1999,
by and among DIMAC Corporation, DIMAC Holdings, Inc., the Credit Support Parties listed on
the signature pages thereto, the financial institutions party thereto, Credit Suisse First
Boston, as Administrative Agent and Arranger, Warburg Dillon Read LLC, as Syndication Agent,
and First Union National Bank, as Documentation Agent. ......................................
12.1 Statement regarding computation of ratios. ....................................................
21.1 Subsidiaries of DIMAC Corporation, as amended. ................................................
23.1 Consent of Arthur Andersen LLP. ...............................................................
23.2 Consent of Arthur Andersen LLP. ...............................................................
23.3 Consent of Deloitte & Touche LLP. .............................................................
23.4* Consent of White & Case LLP (included in Exhibit 5.1 hereto). .................................
23.5* Consent of White & Case LLP (included in Exhibit 8.1 hereto). .................................
24.1*+ Power of Attorney (see pages II-6 through II-14). .............................................
25.1* Statement of eligibility of trustee. ..........................................................
99.1 Form of Letter of Transmittal for registered notes. ...........................................
99.2* Form of Notice of Guaranteed Delivery for registered notes. ...................................
99.3 Letter to Brokers. ............................................................................
99.4 Letter to Clients. ............................................................................
99.5 Instructions to Registered Holder and/or Book Entry Transfer Participant from Beneficial
Owner. ......................................................................................
99.6* Guidelines for Certificate of Taxpayer Identification Number on substitute Form W-9. ..........
</TABLE>
- ---------
* Previously filed with the Commission.
+ See pages II-6 through II-14.
<PAGE>
Exhibit 2.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
by and between
HERITAGE MEDIA CORPORATION, as Seller
and
DMAC ACQUISITION CORP., as Buyer
RELATING TO ALL THE CAPITAL STOCK
OF
DIMAC MARKETING CORPORATION
----------------------------------------
Dated as of May 17, 1998
----------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions............................................................ 1
-----------
2. Sale and Purchase of Shares............................................ 6
---------------------------
3. Closing; Closing Date.................................................. 6
---------------------
4. Purchase Price and Payment for Shares.................................. 6
-------------------------------------
5. Representations and Warranties of the Seller........................... 9
--------------------------------------------
5.1 Due Incorporation and Qualification........................... 9
-----------------------------------
5.2 Capital Stock................................................. 9
-------------
5.3 Options or Other Rights....................................... 10
-----------------------
5.4 Subsidiaries.................................................. 10
------------
5.5 Certificates of Incorporation and By-Laws..................... 11
-----------------------------------------
5.6 Power and Capacity............................................ 11
------------------
5.7 Freedom to Contract........................................... 11
-------------------
5.8 Financial Statements.......................................... 12
--------------------
5.9 Absence of Undisclosed Liabilities............................ 13
----------------------------------
5.10 No Material Adverse Change.................................... 13
--------------------------
5.11 Taxes......................................................... 14
-----
5.12 Compliance with Laws.......................................... 15
--------------------
5.13 Environmental Matters......................................... 15
---------------------
5.14 Litigation.................................................... 17
----------
5.15 Agreements.................................................... 17
----------
5.16 Real Property................................................. 19
-------------
5.17 Fixed Assets.................................................. 19
------------
5.18 Proprietary Rights............................................ 19
------------------
5.19 Title To Properties........................................... 20
-------------------
5.20 Employee Benefit Plans........................................ 21
----------------------
5.21 Executive Employees........................................... 30
-------------------
5.22 Labor Matters................................................. 31
-------------
5.23 Operations of the Company..................................... 32
-------------------------
5.24 Banks, Brokers and Proxies.................................... 32
--------------------------
5.25 Brokers and Finders........................................... 32
-------------------
5.26 Affiliated Transactions....................................... 33
-----------------------
6. Representations and Warranties of the Buyer............................ 33
-------------------------------------------
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
6.1 Due Incorporation............................................. 33
-----------------
6.2 Power and Capacity............................................ 33
------------------
6.3 Freedom to Contract........................................... 34
-------------------
6.4 Litigation.................................................... 34
----------
6.5 Acquisition of Shares for Investment.......................... 35
------------------------------------
6.6 Financing..................................................... 35
---------
6.7 Brokers and Finders........................................... 35
-------------------
7. Covenants of the Parties............................................... 36
------------------------
7.1 Conduct of Business Pending Closing........................... 36
-----------------------------------
7.2 Seller's Notice of Certain Events............................. 38
---------------------------------
7.3 Buyer's Notice of Certain Events.............................. 38
--------------------------------
7.4 Company Access................................................ 39
--------------
7.5 Consent to Jurisdiction and Service of Process................ 39
----------------------------------------------
7.6 Expenses...................................................... 40
--------
7.7 Independent Investigation..................................... 40
-------------------------
7.8 Post-Closing Access........................................... 40
-------------------
7.9 Books and Records............................................. 41
-----------------
7.10 Confidentiality............................................... 42
---------------
7.11 Regulatory and Other Authorizations; Consents................. 42
---------------------------------------------
7.12 Title Insurance............................................... 43
---------------
7.13 Supplements to Schedules...................................... 43
------------------------
7.14 Non-Solicitation.............................................. 43
----------------
7.15 Capital Expenditures; Capital Leases.......................... 43
------------------------------------
8. Conditions Precedent to the Obligation of the Buyer to Close........... 43
------------------------------------------------------------
8.1 Representations and Warranties True as of the Closing Date.... 44
----------------------------------------------------------
8.2 Compliance with this Agreement................................ 44
------------------------------
8.3 Officer's Certificate......................................... 44
---------------------
8.4 Opinion of Counsel to the Company and the Seller.............. 44
------------------------------------------------
8.5 Litigation.................................................... 45
----------
8.6 Delivery of Stock Certificates................................ 45
------------------------------
8.7 HSR Act....................................................... 45
-------
8.8 Consents...................................................... 45
--------
8.9 KCET Disposition.............................................. 45
----------------
8.10 Material Adverse Change....................................... 45
-----------------------
8.11 Indebtedness.................................................. 46
------------
8.12 Intercompany Accounts......................................... 46
---------------------
9. Conditions Precedent to the Obligation of the Seller to Close.......... 46
-------------------------------------------------------------
9.1 Representations and Warranties True as of the Closing Date.... 46
----------------------------------------------------------
9.2 Compliance with this Agreement................................ 47
------------------------------
9.3 Officer's Certificate......................................... 47
---------------------
9.4 Opinion of Counsel to the Buyer............................... 47
-------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
9.5 Litigation.................................................... 47
----------
9.6 HSR Act....................................................... 47
-------
9.7 Payment of Purchase Price..................................... 47
-------------------------
9.8 Consents...................................................... 47
--------
10. Survival of Representations and Warranties; Indemnification............ 48
-----------------------------------------------------------
10.1 Survival of Representations and Warranties.................... 48
------------------------------------------
10.2 Indemnification............................................... 48
---------------
10.3 Notice to the Indemnitor...................................... 48
------------------------
10.4 Rights of Parties to Settle or Defend......................... 49
-------------------------------------
10.5 Settlement Proposals.......................................... 50
--------------------
10.6 Tax and Other Benefits........................................ 50
----------------------
11. Tax Matters............................................................ 51
-----------
11.1 Liability For Taxes........................................... 51
-------------------
11.2 Allocation.................................................... 52
----------
11.3 Filing of Tax Returns; Change of Tax Year..................... 52
-----------------------------------------
11.4 Payment....................................................... 53
-------
11.5 Refunds....................................................... 54
-------
11.6 Contests...................................................... 54
--------
11.7 Payments for Certain Audit Adjustments........................ 56
--------------------------------------
11.8 Cooperation and Exchange of Information....................... 56
---------------------------------------
11.9 Conveyance Taxes.............................................. 57
----------------
11.10 No Section 338(h)(10) Election................................ 57
------------------------------
11.11 Disputes...................................................... 57
--------
11.12 Exclusive Tax Remedy.......................................... 58
--------------------
11.13 Treatment of Indemnity Payments............................... 58
-------------------------------
12. Cooperation; Further Assurances........................................ 58
-------------------------------
13. Termination of Agreement............................................... 59
------------------------
13.1 Termination................................................... 59
-----------
13.2 No Liabilities in the Event of Termination.................... 59
------------------------------------------
14. Miscellaneous.......................................................... 59
-------------
14.1 Knowledge..................................................... 59
---------
14.2 No Rescission................................................. 60
-------------
14.3 Post-Closing Liabilities; Mitigation of Damages............... 60
-----------------------------------------------
14.4 Entire Agreement.............................................. 60
----------------
14.5 Governing Law................................................. 60
-------------
14.6 Headings and Titles........................................... 60
-------------------
14.7 Notices....................................................... 61
-------
14.8 Separability.................................................. 62
------------
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C>
14.9 Amendment; Waiver............................................. 62
-----------------
14.10 Publicity..................................................... 62
---------
14.11 Assignment and Binding Effect................................. 62
-----------------------------
14.12 No Benefit to Others.......................................... 62
--------------------
14.13 Counterparts.................................................. 62
------------
14.14 Interpretation................................................ 63
--------------
14.15 Guaranty by the Fund.......................................... 63
--------------------
</TABLE>
iv
<PAGE>
SCHEDULES:
<TABLE>
<S> <C>
5.4 Subsidiaries
5.7 Seller's Consents
5.9 Undisclosed Liabilities
5.11 Taxes
5.13 Environmental Matters
5.14 Litigation
5.15 Material Contracts
5.16 Real Property
5.17 Fixed Assets
5.18 Proprietary Rights
5.19 Title to Properties
5.20(a) Employee Benefit Plans
5.20(b) Disclosures Relating to Employee Benefit Plans
5.21 Executive Employees
5.22 Labor Matters
5.23 Operations of the Company
5.24 Banking Relations
6.3 Buyer's Consents
14.1(I) Knowledge
14.1(II) Knowledge
</TABLE>
v
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of May 17, 1998, by
and between HERITAGE MEDIA CORPORATION, a Delaware corporation (the "Seller"),
and DMAC ACQUISITION CORP., a Delaware corporation (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Seller is the beneficial and record owner of all of the issued
and outstanding shares (the "Shares") of common stock, par value $.01 per share,
of DIMAC MARKETING CORPORATION, a Delaware corporation, with its principal
executive office located at One Corporate Woods Drive, Bridgeton, Missouri 63044
(the "Company"); and
WHEREAS, the Seller wishes to sell, and the Buyer wishes to purchase, the
Shares upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto do
hereby agree as follows:
1. Definitions. For the purposes of this Agreement, the following terms
shall have the following meanings:
"Acquisition Date" shall mean August 20, 1997.
"Adjusted Working Capital" shall have the meaning set forth in Section
4(b)(i) hereof.
"Affiliate" shall mean any Person which controls, is controlled by, is
under the control of or is under direct or indirect common control with the
Person in question.
"Agreement" shall have the meaning set forth in the Preamble hereto.
<PAGE>
"Balance Sheet" shall have the meaning set forth in Section 5.8 hereof.
"Balance Sheet Date" shall have the meaning set forth in Section 5.8
hereof.
"Benefit Plan" shall have the meaning set forth in Section 5.20(a) hereof.
"Buyer" shall have the meaning set forth in the Preamble hereto.
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"CERCLA" shall have the meaning set forth in Section 5.13(e) hereof.
"Closing" shall have the meaning set forth in Article 3 hereof.
"Closing Date" shall have the meaning set forth in Article 3 hereof.
"COBRA" shall have the meaning set forth in Section 5.20(b) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" shall have the meaning set forth in the Recitals hereto.
"Company Facilities" shall have the meaning set forth in Section 5.13(a)
hereof.
"Confidentiality Agreement" shall have the meaning set forth in Section 7.9
hereof.
"Contest" shall have the meaning set forth in Section 11.6(b) hereof.
"Controlled Group" shall have the meaning set forth in Section 5.20(a)
hereof.
"December 31, 1997 Financial Statements" shall have the meaning set forth
in Section 5.8 hereof.
"Employee Benefit Plans" shall have the meaning set forth in Section
5.20(a) hereof.
"Environmental Laws" shall have the meaning set forth in Section 5.13(e)
hereof.
2
<PAGE>
"ERISA" shall have the meaning set forth in Section 5.20(a) hereof.
"Financial Statements" shall have the meaning set forth in Section 5.8
hereof.
"Fund" shall have the meaning set forth in Section 6.6 hereof.
"GAAP" shall mean U.S. generally accepted accounting principles.
"Governmental Authority" shall mean any local, state, federal or foreign
governmental authority, including all agencies, bureaus, commissions,
authorities or bodies of the federal government or any state, county, municipal
or local government.
"Hazardous Substances" shall have the meaning set forth in Section 5.13(f)
hereof.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Party" shall have the meaning set forth in Section 10.3
hereof.
"Indemnitor" shall have the meaning set forth in Section 10.3 hereof.
"Independent Accounting Firm" shall have the meaning set forth in Section
4(b)(ii) hereof.
"IRS" shall have the meaning set forth in Section 5.20(b) hereof.
"KCET" shall have the meaning set forth in Section 4(b)(iv) hereof.
"KCET Disposition" shall have the meaning set forth in Section 7.1 hereof.
"Islip Leased Property" shall mean the facility leased from The Town of
Islip Industrial Development Agency.
"Law" shall mean any statute, ordinance, code, rule, regulation, order,
writ, judgment, decree or other law enacted, adopted or promulgated by any
Governmental Authority.
"Leased Property" shall have the meaning set forth in Section 5.16 hereof.
3
<PAGE>
"Liabilities" shall have the meaning set forth in Section 5.9 hereof.
"Liens" shall have the meaning set forth in Section 5.3 hereof.
"Material Adverse Effect" shall mean a material adverse effect on the
business, assets, condition (financial or otherwise), operations or results of
operations of the Company and the Subsidiaries, taken as a whole.
"Material Contracts" shall have the meaning set forth in Section 5.15
hereof.
"McClure Earn-Out Agreement" shall have the meaning set forth in Section
4(b)(iv) hereof.
"Minimum Working Capital Amount" shall have the meaning set forth in
Section 4(b)(i) hereof.
"Multiemployer Plan" shall have the meaning set forth in Section 5.20(b)
hereof.
"PBGC" shall have the meaning set forth in Section 5.20(b) hereof.
"Owned Real Property" shall have the meaning set forth in Section 5.16
hereof.
"Permits" shall have the meaning set forth in Section 5.12 hereof.
"Permitted Liens" shall have the meaning set forth in Section 5.19 hereof.
"Person" shall mean any individual, trustee, corporation, general or
limited partnership, limited liability partnership, limited liability company,
joint venture, joint stock company, bank, firm, governmental agency, trust,
association, organization or unincorporated entity of any kind or nature
whatsoever.
"Properties" shall have the meaning set forth in Section 5.16 hereof.
"Proposed Settlement" shall have the meaning set forth in Section 10.5
hereof.
4
<PAGE>
"Proprietary Rights" shall mean any license, patent, copyright, copyright
permission, trade name, trademark or service mark, proprietary right, brand name
or design, or any registration (granted or pending) or applications therefor.
"Purchase Price" shall have the meaning set forth in Section 4(a) hereof.
"RCRA" shall have the meaning set forth in Section 5.13(e) hereof.
"Real Property Leases" shall have the meaning set forth in Section 5.16
hereof.
"Regulations" shall mean the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of any succeeding regulations).
"Securities Act" shall have the meaning set forth in Section 6.5 hereof.
"Seller" shall have the meaning set forth in the Recitals hereto.
"Shares" shall have the meaning set forth in the Recitals hereto.
"Single Employer Plan" shall have the meaning set forth in Section 5.20(b)
hereof.
"Subsidiary" shall have the meaning set forth in Section 5.4 hereof.
"Tax Claim" shall have the meaning set forth in Section 11.1(a) hereof.
"Tax Returns" shall mean any returns, declarations and reports and all
information returns and statements of any kind or nature whatsoever relating to
Taxes.
"Taxes" shall mean all foreign, federal, state, county, local and other
taxes, levies, impositions, deductions, charges and withholdings, including any
interest, penalties or additions thereto. Taxes shall include, without
limitation, income, franchise, gross receipts, sales, commercial rent and
employment taxes.
5
<PAGE>
"VEBA" shall have the meaning set forth in Section 5.20(a) hereof.
"Working Capital" shall have the meaning set forth in Section 4(b)(iv)
hereof.
"Working Capital Statement" shall have the meaning set forth in Section
4(b)(ii) hereof.
2. Sale and Purchase of Shares. Subject to the terms and conditions of this
Agreement, at the Closing provided for in Article 3 hereof, the Seller shall
sell, transfer, convey and assign to the Buyer, and the Buyer shall purchase
from the Seller, the Shares (which shall constitute all of the issued and
outstanding shares of the Company on the Closing Date).
3. Closing; Closing Date. Subject to the terms and conditions of this
Agreement, the closing of the sale and purchase of the Shares contemplated
hereby (the "Closing") shall take place at the offices of Squadron, Ellenoff,
Plesent & Sheinfeld, LLP, 551 Fifth Avenue, New York, New York 10176, at 10:00
a.m. New York City time, on the date three (3) Business Days following the later
to occur of (i) the expiration or termination of the applicable waiting periods
under the HSR Act and (ii) the satisfaction or waiver of all other conditions
set forth in Articles 8 and 9 hereof, or such later date as may be agreed to by
the Buyer and the Seller. The date upon which the Closing shall occur is herein
called the "Closing Date." At the Closing, the Seller shall deliver to the Buyer
stock certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in proper form for transfer.
4. Purchase Price and Payment for Shares.
(a) The aggregate purchase price for the Shares, to be paid at the Closing,
shall be $200,000,000 (the "Purchase Price").
(b) The Purchase Price shall be adjusted as follows:
6
<PAGE>
(i) If the amount of the adjusted Working Capital of the Company, as
determined in accordance with Section 4(b)(iv) hereof (the "Adjusted
Working Capital"), is less than $7,686,000 (the "Minimum Working Capital
Amount"), the Purchase Price shall be decreased by the amount equal to the
difference between the Adjusted Working Capital and the Minimum Working
Capital Amount.
(ii) The Adjusted Working Capital shall be determined by the Seller as
of the opening of business on the Closing Date in accordance with GAAP, in
all cases applied on a basis consistent with the December 31, 1997
Financial Statements (except as provided below). The Seller shall deliver
to the Buyer a statement of the Adjusted Working Capital (the "Working
Capital Statement") within sixty (60) days after the Closing, together with
a certificate (1) setting forth the amount of Adjusted Working Capital, (2)
stating that the calculation has been made in accordance with GAAP, in all
cases applied on a basis consistent with the December 31, 1997 Financial
Statements (except as provided below) and (3) setting forth the amount of
any required adjustment to the Purchase Price pursuant to this Section
4(b). During the period from the Closing Date until the date of delivery of
the Working Capital Statement, the Buyer shall give to the Seller and its
independent accountants such assistance and access to the assets and books
and records of the Company and the Subsidiaries as the Seller and such
personnel shall reasonably request during normal business hours in order to
enable them to prepare the Working Capital Statement. The Working Capital
Statement shall be final and binding on the parties unless, within thirty
(30) days after delivery to the Buyer, notice is given by the Buyer to the
Seller of its objection. If notice of objection is given, the parties shall
consult with each other with respect to the objection. If such
7
<PAGE>
dispute is not resolved within thirty (30) days thereafter, the parties
shall submit the dispute to Ernst & Young LLP (the "Independent Accounting
Firm") for resolution, which resolution shall be final, conclusive and
binding on the parties; provided, however, that the Independent Accounting
Firm shall be empowered only to settle numerical discrepancies and disputes
as to whether the Working Capital Statement has been prepared in accordance
with GAAP, on a basis consistent with the December 31, 1997 Financial
Statements (except as provided below), between the parties and shall have
no authority to interpret any term or provision of this Agreement or to
settle any dispute relating to the interpretation of any term or provision
of this Agreement. Notwithstanding anything in this Agreement to the
contrary, the fees and expenses of the Independent Accounting Firm in
resolving the dispute shall be borne equally by the Seller and the Buyer.
(iii) Within ten (10) days after the Working Capital Statement has
become final and binding upon the parties, the Seller shall pay to the
Buyer the amount, if any, by which the Adjusted Working Capital is less
than the Minimum Working Capital Amount, plus interest accrued thereon at a
rate equal to eight percent (8%) per annum.
(iv) For purposes of this Article 4, "Adjusted Working Capital" shall
mean the excess of consolidated current assets over consolidated current
liabilities of the Company and the Subsidiaries applied on a basis
consistent with the December 31, 1997 Financial Statements (except as
provided below), excluding (1) the income tax receivable-parent from the
Seller or News America Incorporated, which shall be recorded as a reduction
of the capital of the Company in accordance with Section 8.12, (2) all
assets and liabilities related to KCET/DIMAC Communications, L.L.C.
("KCET") consistent with the treatment disclosed in footnote number 4
8
<PAGE>
of the Company's audited financial statements as at December 31, 1997, and
(3) all current deferred tax assets and liabilities. Notwithstanding
anything herein to the contrary, current liabilities for purposes of this
Article 4 and for the calculation of working capital shall include, but not
be limited to, the accrued liabilities related to management bonuses
(including guaranteed bonuses) on a pro rata basis, and the estimated pro
rata portion through to the Closing Date for the earned but unpaid portion
of contingent consideration under the terms of the Earn-Out Agreement among
PCD Acquisition Company, DIMAC Corporation and Palm Coast Data, Ltd., dated
May 1, 1995; the Earn-Out Agreement among TMG Acquisition Company, DIMAC
Corporation and T.R. McClure & Co., dated September 30, 1995 (the "McClure
Earn-Out Agreement"); and the Earn-Out Agreement among WAA Acquisition
Company, DIMAC Corporation and Wilcox & Associates, Inc., dated March 1,
1996.
(c) The Purchase Price shall be further reduced by the amount of any and
all dividends, distributions or other payments or transfers to any Affiliate of
the Company (other than its Subsidiaries) occurring between the date of this
Agreement and the Closing Date.
(d) Any payment pursuant to this Article 4 shall be made in immediately
available funds by wire transfer to an account or accounts designated in writing
by the Seller or the Buyer, as the case may be, at least two (2) Business Days
prior to the date of such payment.
5. Representations and Warranties of the Seller. The Seller represents and
warrants to the Buyer as follows:
5.1 Due Incorporation and Qualification. Each of the Company and the
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the Laws of its
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jurisdiction of incorporation. Each of the Company and the Subsidiaries is duly
qualified or licensed to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or
location of its properties requires such qualification or licensing and in which
the failure so to qualify would have a Material Adverse Effect.
5.2 Capital Stock. The Company is authorized to issue 5,000 shares of
Common Stock, par value $.01 share, 1,000 shares of which are issued and
outstanding. All of the Shares are duly authorized and are validly issued,
fully paid and nonassessable and free of preemptive rights. The Seller is
the lawful beneficial and record owner of, and has good and marketable
title to, the Shares.
5.3 Options or Other Rights. The Shares are owned by the Seller free and
clear of all liens, claims, charges, pledges, security interests or other
encumbrances of any nature whatsoever ("Liens"), and there are no outstanding
agreements, subscriptions, warrants, calls, preemptive rights, options, trusts
(voting or otherwise) or other rights of any kind granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company, the
Seller or any Subsidiary at any time or upon the happening of any stated event
any shares of the capital stock or any other security of the Company or any
Subsidiary, nor is there any outstanding right, subscription, warrant, call,
preemptive right, option, trust (voting or otherwise) or other agreement of any
kind granting to any Person any interest in or the right to purchase or
otherwise acquire from the Company, the Seller or any Subsidiary any security of
any kind convertible into or exchangeable for capital stock of the Company or
any Subsidiary, including any proxy, agreement, trust or understanding with
respect to the voting of the capital stock of the Company or any Subsidiary.
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5.4 Subsidiaries. Schedule 5.4 annexed hereto sets forth the name and
jurisdiction of incorporation of the Company's subsidiaries (the
"Subsidiaries"). All of the issued and outstanding shares of capital stock of
the Subsidiaries are duly authorized and are validly issued, fully paid and
nonassessable and free of preemptive rights. The Company is the lawful and
beneficial and record owner of, and has good and marketable title to, all of the
outstanding capital stock of the Subsidiaries, free and clear of any and all
Liens. Except as set forth on Schedule 5.4 annexed hereto, the Company does not
have any ownership interest in any entity other than the Subsidiaries.
5.5 Certificates of Incorporation and By-Laws. The copies of the
certificates or articles of incorporation and by-laws of the Company and the
Subsidiaries, and all amendments to each, which have been delivered to the Buyer
are true, correct and complete.
5.6 Power and Capacity. The Seller has all requisite power, authority and
approval required to execute, deliver and perform this Agreement, to consummate
the transactions contemplated hereby and to perform fully its obligations
hereunder. The execution, delivery and performance of this Agreement by the
Seller have been duly authorized by all necessary corporate action of the
Seller. This Agreement and each document and instrument contemplated by this
Agreement to be executed by the Seller, when executed and delivered in
accordance with the provisions hereof (assuming due authorization, execution and
delivery by the Buyer), shall constitute the valid and binding obligations of
the Seller, enforceable against the Seller in accordance with their respective
terms subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial
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reasonableness, good faith and fair dealing (regardless of whether enforcement
is sought in a proceeding at law or in equity).
5.7 Freedom to Contract. The execution, delivery and performance of
this Agreement by the Seller do not, and the performance by it of its
obligations hereunder in accordance with its terms and conditions will not, (i)
violate or conflict with any provision of the certificate of incorporation or
by-laws of the Seller, the Company or any Subsidiary, (ii) violate any of the
terms, conditions or provisions of any Law binding upon the Seller, the Company,
the Subsidiaries or any of their respective properties, or (iii) conflict with
or result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, license, franchise, permit, guaranty, joint venture
agreement, or other written agreement, instrument or obligation, to which the
Seller, the Company or any Subsidiary is a party or by which any of them or any
of their respective properties is bound, except (x) with respect to clause (iii)
of this sentence, as set forth on Schedule 5.7 annexed hereto, and (y) such
violations, breaches, defaults or conflicts that would not, individually or in
the aggregate, have a Material Adverse Effect. No governmental authorization,
approval, order, license, permit, consent, registration, declaration or filing
with any Governmental Authority, and no consent or approval of any Person, is
required in connection with the Seller's execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby,
except (i) as set forth on Schedule 5.7 annexed hereto, (ii) the requirements
under the HSR Act or (iii) where the failure to obtain any authorization,
approval,
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order, license, permit, consent, registration, declaration or filing
would not have a material adverse effect on the ability of the parties to
consummate the transactions contemplated by this Agreement.
5.8 Financial Statements. The Seller has delivered to the Buyer copies
of (i) the audited consolidated balance sheet of the Company and the
Subsidiaries as at December 31, 1997 and the related audited consolidated
statements of income and the cash flows of the Company and the Subsidiaries for
the year then ended (the "December 31, 1997 Financial Statements") and (ii) the
unaudited consolidated balance sheet of the Company and the Subsidiaries at
March 31, 1998 and the related consolidated statements of income of the Company
and the Subsidiaries for the three-month period then ended (such audited and
unaudited statements, including the related notes and schedules thereto, as
applicable, are referred to herein as the "Financial Statements."). Each of the
Financial Statements is complete and correct in all material respects, has been
prepared in accordance with GAAP (subject to normal year-end adjustments in the
case of the unaudited statements) and presents fairly the financial position,
results of operations and cash flows (with respect to the December 31, 1997
Financial Statements) of the Company and the Subsidiaries as at the date and for
the period indicated. The unaudited balance sheet as at March 31, 1998 is herein
referred to as the "Balance Sheet," and March 31, 1998 is herein referred to as
the "Balance Sheet Date."
5.9 Absence of Undisclosed Liabilities. As at the Balance Sheet Date,
the Company did not have any material direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility,
liquidated or unliquidated, secured or unsecured, accrued, absolute, contingent
or otherwise, including, without limitation, liabilities on account of taxes
(subject to
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<PAGE>
normal year-end adjustments), other governmental charges or lawsuits brought
("Liabilities"), other than (i) Liabilities fully and adequately reflected or
reserved for on the Financial Statements (including Liabilities disclosed in the
footnotes thereto), (ii) Liabilities disclosed on Schedule 5.9 annexed hereto or
any other Schedule annexed hereto or otherwise addressed by any of the
representations, warranties or covenants made by the Seller in this Agreement,
(iii) Liabilities under this Agreement, (iv) Liabilities fully covered by
insurance, indemnification, contribution or comparable arrangements or (v)
Liabilities incurred since the Balance Sheet Date in the ordinary course of
business.
5.10 No Material Adverse Change. Between the Balance Sheet Date and the
date of this Agreement, there has been no material adverse change in the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries which would materially
impair the overall conduct of the Company's business as currently conducted, nor
has there been any damage, destruction or loss materially affecting the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries, whether or not
covered by insurance, other than as disclosed by the Seller to the Buyer;
provided, however, that no representation or warranty is made as to the effect
of seasonal fluctuations on the Company's business, general conditions in the
direct marketing industry, variations in customer order levels which have not
resulted in a change in overall order levels for such customers, or present or
future Laws, including, without limitation, Laws relating to postal rates and
procedures.
5.11 Taxes.
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(a) Except as set forth on Schedule 5.11 annexed hereto, (i) each of the
Company and the Subsidiaries has filed all Tax Returns required to be filed by
it or requests for extensions to file such Tax Returns have been filed, granted
and have not expired, except to the extent that such failures to file or to have
extensions granted that remain in effect would not, individually or in the
aggregate, have a Material Adverse Effect; (ii) all Tax Returns filed by the
Company and each Subsidiary are complete and accurate except to the extent that
such failure to be complete and accurate would not, individually or in the
aggregate, have a Material Adverse Effect; and (iii) the Company and each
Subsidiary have paid (or the Company has paid on the Subsidiaries' behalf) all
Taxes due (whether or not required to be paid with a Tax Return), except for
such Taxes that would not individually or in the aggregate have a Material
Adverse Effect, and the Balance Sheet reflects an adequate reserve, in
accordance with GAAP, for all Taxes payable by the Company and the Subsidiaries
(subject to normal year-end adjustments) for all taxable periods and portions
thereof accrued through the date of the Balance Sheet.
(b) Except as set forth on Schedule 5.11 annexed hereto, no deficiencies
for any Taxes have been proposed, asserted or assessed against the Company or
any Subsidiary that are not adequately reserved for in accordance with GAAP, in
all cases applied on a basis consistent with the Balance Sheet, except for
deficiencies that would not, individually or in the aggregate, have a Material
Adverse Effect, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending.
(c) The Company and each Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee,
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independent contractor, creditor, stockholder or other third party, except for
such Taxes that would not, individually or in the aggregate, have a Material
Adverse Effect, and have complied with all information reporting and backup
withholding requirements, except to the extent that failure to comply with such
requirements would not, individually or in the aggregate, have a Material
Adverse Effect.
5.12 Compliance with Laws. Each of the Company and the Subsidiaries is
in compliance with all Laws applicable to it or its business, except for such
non-compliances that would not, individually or in the aggregate, have a
Material Adverse Effect. All licenses, permits, order or approvals of any
Governmental Authority (collectively, the "Permits") of the Company and the
Subsidiaries are in full force and effect, except where the failure to have any
such Permits would not, individually or in the aggregate, have a Material
Adverse Effect.
5.13 Environmental Matters.
(a) Each of the Company and the Subsidiaries is and has, at all times from
and after February 21, 1996, been in compliance in all material respects with
all Environmental Laws. Except as set forth on Schedule 5.13 annexed hereto,
neither the Company, the Subsidiaries, nor the Seller has received any written
communication from any Governmental Authority that alleges that the Company or
any of the Subsidiaries is not in compliance with any Environmental Law. All
material Permits and other governmental authorizations required pursuant to the
Environmental Laws relating to any property currently owned or operated by
either the Company or the Subsidiaries (the "Company Facilities") have been
obtained and are currently in force.
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(b) Except as set forth on Schedule 5.13 annexed hereto, from and after
February 21, 1996 there have been no releases of any Hazardous Substances at,
under or from any Company Facility.
(c) There are no consent decrees, consent orders, judgments, judicial or
administrative orders, agreements with (other than Permits) or Liens by any
Governmental Authority relating to any Environmental Law imposed against the
Company or any Subsidiary as a named party.
(d) True and correct copies of all written environmental reports, audits or
assessments which have been conducted since the Acquisition Date, either by the
Company or the Subsidiaries or any Person engaged by the Company or any
Subsidiary for such purpose, at any Company Facility have been made available to
the Buyer.
(e) "Environmental Laws" shall mean all applicable Laws relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water, land surface, or subsurface strata),
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Atomic Energy Act of 1954, as amended, the Occupational
Safety and Health Act, as amended, and all analogous Laws.
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(f) "Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or mediation under Environmental Laws.
5.14 Litigation. Except as set forth on Schedule 5.14 annexed hereto, and
except for claims substantially covered by insurance, indemnification,
contribution or comparable arrangements, there is no action, suit or proceeding
by or before any referee, mediator or arbitrator, or any court or governmental
or other regulatory or administrative agency or commission, pending or, to the
knowledge of the Seller, threatened, against the Company or the Subsidiaries or
relating to their respective assets, that, individually or in the aggregate,
would have a Material Adverse Effect or which would in any way seek to prevent,
enjoin, alter or delay the transactions contemplated hereby.
5.15 Agreements. Except in each case as set forth on Schedule 5.15
annexed hereto or any other Schedule annexed hereto, and except for this
Agreement, neither the Company nor any Subsidiary is a party to any contract:
(i) for the purchase of products, materials, supplies, services or equipment
involving the payment of more than $250,000 in any twelve (12) month period;
(ii) under which it is lessor or lessee of personal property involving the
payment of more than $125,000 in any twelve (12) month period; (iii) for capital
improvements or capital expenditures with any one contractor or subcontractor
involving the payment, during the twelve (12) month period commencing on the
date hereof, of more than $250,000 in any case or $750,000 in the aggregate;
(iv) for the borrowing of money or for a line of credit; (v) creating any
security interests or liens securing
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<PAGE>
obligations in excess of $125,000 in any case or $500,000 in the aggregate; (vi)
pursuant to which its right to compete with any Person in the conduct of its
business is restrained or restricted in any material way except for exclusive
sales representation, distribution, licensing and similar agreements made in the
ordinary course of business; (vii) involving any merger or consolidation of the
Company or any Subsidiary or the acquisition or sale of all or substantially all
the assets of the Company or any Subsidiary (other than contracts relating to
the KCET Disposition); or (viii) constituting a guarantee of any debt or
obligation of another by the Company or any Subsidiary (collectively, the
"Material Contracts"). Except in each case as set forth on Schedule 5.15 annexed
hereto, neither the Company nor any Subsidiary is in breach or default of any
provision of any Material Contract, except for any possible breaches or defaults
that would not, individually or in the aggregate, have a Material Adverse
Effect. None of the Company, any Subsidiary or the Seller has received written
notice canceling or terminating any Material Contract. To the Seller's
knowledge, no other party to any Material Contract is in breach or default of
such Material Contract, except for breaches or defaults that would not,
individually or in the aggregate, have a Material Adverse Effect, and no event
has occurred which, with or without the giving of notice, lapse of time or both,
would constitute a material default by such party thereunder.
5.16 Real Property. Schedule 5.16 annexed hereto sets forth list of (i)
all real property owned by the Company and the Subsidiaries ("Owned Real
Property"), and (ii) all leases, subleases or other agreements ("Real Property
Leases") under which the Company or any Subsidiary is lessor or lessee of any
real property, including, without limitation, the Islip Leased Property ("Leased
Property," and together with the Owned Real Property, the "Properties"). Except
as set forth
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on Schedule 5.16 annexed hereto, neither the Company nor any Subsidiary is in
breach or default of any provision of any Real Property Lease, except for
breaches or defaults that would not individually or in the aggregate have a
Material Adverse Effect. Neither the Company, any Subsidiary nor the Seller has
received written notice canceling or terminating any Real Property Lease. To the
Seller's knowledge, no other party to any Real Property Lease is in breach or
default of such Real Property Lease, and no event has occurred which, with or
without the giving of notice lapse of time or both, would constitute a material
default by such party thereunder, except for breaches of defaults that would
not, individually or in the aggregate, have a Material Adverse Effect.
5.17 Fixed Assets. Schedule 5.17 annexed hereto sets forth a true and
complete listing of all equipment, machinery, motor vehicles, fixtures and other
fixed assets owned by the Company or any Subsidiary having a net book value in
excess of $500,000.
5.18 Proprietary Rights. The Company and the Subsidiaries possess all
Proprietary Rights necessary for the conduct of their businesses as presently
conducted. Except as set forth on Schedule 5.18 annexed hereto, each of the
Company and the Subsidiaries owns and possesses all right, title and interest in
and to, or possesses the valid right to use, all Proprietary Rights, except
where the failure to own or possess such right would not have a Material Adverse
Effect. Except for licenses entered into in the ordinary course of the Company's
or the Subsidiaries' business, neither the Company nor any Subsidiary has
granted to any Person the right to use any Proprietary Right which is material
to the Company's or the Subsidiaries' business. Except as set forth on Schedule
5.18 annexed hereto, no claims have been asserted by any third party based on
the use by, or challenging the ownership of, the Company or any Subsidiary of
any Proprietary Right that the
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Company or any Subsidiary licenses or uses, except for such claims that would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
set forth on Schedule 5.18 annexed hereto, all trademark registrations for
trademarks that are still in use by the Company are in full force and effect,
except where the failure to have such registrations in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect.
5.19 Title To Properties. The Company or a Subsidiary, as the case may
be, is the owner of record of the Owned Real Property, is the owner of record of
the leasehold estate to the Islip Leased Property and is the owner of, and has
good and marketable title to, all of the other assets and properties reflected
on the Financial Statements, in each case free and clear of any Lien, except for
(i) assets and properties disposed of, or subject to purchase or sales orders,
in the ordinary course of business since the Balance Sheet Date; (ii) Liens
incurred in the ordinary operation of the Company's business; (iii) Liens for
Taxes and assessments not yet payable; (iv) Liens for Taxes, assessments and
charges and other claims, the validity of which is being contested in good
faith; (v) Liens the existence of which, individually or in the aggregate, do
not have a Material Adverse Effect; (vi) Liens set forth on Schedule 5.19
annexed hereto; and (vii) Liens, inclusive of covenants, restrictions of record,
encroachments and states of facts, set forth in title insurance policies
described on Schedule 5.19 annexed hereto for the Owned Real Property and the
Islip Leased Property (Liens referred to in clauses (i) through (vii) of this
Section 5.19 are collectively referred to herein as "Permitted Liens").
5.20 Employee Benefit Plans.
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(a) List of Plans. Set forth in Schedule 5.20(a) annexed hereto is an
accurate and complete list of all (i) "employee benefit plans," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations thereunder ("ERISA"); and (ii) bonus,
stock option, stock purchase, restricted stock, incentive, fringe benefit,
"voluntary employees' beneficiary associations" ("VEBAs"), under Section
501(c)(9) of the Code, profit-sharing, pension, or retirement, deferred
compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans, programs, arrangements, commitments
and/or practices (whether or not insured); for active, retired or former
employees or directors, whether or not any such plans, programs, arrangements,
commitments, contracts, agreements and/or practices (referred to in (i) or (ii)
above) are otherwise exempt from the provisions of ERISA; that have been
established, sponsored, maintained or contributed to (or with respect to which
an obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company and/or any Subsidiary (including,
for this purpose and for the purpose of all of the representations in this
Section 5.20, any predecessors to the Company or any Subsidiary), the Seller or
any of its subsidiaries or affiliates, and all employers (whether or not
incorporated) that would be treated together with the Company, any Subsidiary
and/or the Seller as a single employer within the meaning of Section 414 of the
Code (the "Controlled Group"), to which the Company and/or any Subsidiary
contributes or with respect to which the Company and/or any Subsidiary has any
obligation or liability (including for this purpose and for purposes of the
representations in this
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Section 5.20, any indirect, potential, or contingent or secondary liability)
("Employee Benefit Plans").
(b) Except (i) as set forth in Schedule 5.20(b) annexed hereto and (ii) to
the extent that any breach of the representations set forth in this Section
5.20(b) would not have a Material Adverse Effect:
(i) Status of Plans. Each Employee Benefit Plan (including any related
trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has at all times
been maintained and operated in compliance with its terms and the
requirements of all applicable laws, including, without limitation, ERISA
and the Code. No complete or partial termination of any Employee Benefit
Plan has occurred or is expected to occur, and, to the Seller's knowledge,
no proceedings have been instituted, and no condition exists and no event
has occurred that could constitute grounds, under Title IV of ERISA, to
terminate, or appoint a trustee to administer, any Employee Benefit Plan.
Neither the Company nor any Subsidiary has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan.
Except as required to maintain the tax-qualified status of any Employee
Benefit Plan intended to qualify under Section 401(a) of the Code, no
condition or circumstance exists that would prevent or restrict the
amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that would reasonably
be expected to result in an increase in the benefits under or the expense
of maintaining any Employee Benefit Plan from the level of benefits or
expense incurred for the most recent fiscal year ended thereof. No Employee
Benefit Plan is a plan described in Section 4063(a) of ERISA.
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(ii) Liabilities.
(1) No Employee Benefit Plan subject to Section 412 or 418B of
the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or
Section 302 of ERISA, respectively, or has applied for or obtained a
waiver from the Internal Revenue Service ("IRS") of any minimum
funding requirement or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA. Except for
payments of premiums to the Pension Benefit Guaranty Corporation
("PBGC"), which have been timely paid in full, neither the Company nor
any other member of the Controlled Group has incurred any unsatisfied
liability to the PBGC in connection with any Employee Benefit Plan,
including, without limitation, any liability under Section 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of ERISA,
and neither the Company nor any other member of the Controlled Group
has ceased operations at any facility or withdrawn from any such
Employee Benefit Plan in a manner which could subject it to liability
under Section 4062, 4063 or 4064 of ERISA, or knows of any facts or
circumstances that might give rise to any liability of the Company or
any Subsidiary to the PBGC under Title IV of ERISA that could
reasonably be anticipated to result in any claims being made against
the Buyer by the PBGC.
(2) Neither the Company nor any other member of the Controlled
Group has incurred any unsatisfied withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of
Section 4201 or 4204 of ERISA to any Employee Benefit Plan which is a
"multiemployer plan" (as such term is defined in Section
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4001(a)(3) of ERISA) ("Multiemployer Plan"), and no event has occurred
and no condition or circumstance has existed, that presents a material
risk of the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any such Multiemployer
Plan which could result in any liability of the Company or any
Subsidiary to any such Multiemployer Plan.
(3) Neither the Company nor any Subsidiary maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined
in section 5000(b)(1) of the Code or Section 607(1) of ERISA) that has
not been administered and operated in all respects in compliance with
the applicable requirements of Part 6 of Subtitle B of Title I of
ERISA and Section 4980B of the Code ("COBRA"), and neither the Company
nor any Subsidiary is subject to any liability, including, without
limitation, additional contributions, fines, taxes, penalties or loss
of tax deduction as a result of such administration and operation. No
Employee Benefit Plan which is such a group health plan is a "multiple
employer welfare arrangement," within the meaning of Section 3(40) of
ERISA. Each Employee Benefit Plan that is intended to meet the
requirements of Section 125 of the Code meets such requirements, and
each program of benefits for which employee contributions are provided
pursuant to elections under any Employee Benefit Plan meets the
requirements of the Code applicable thereto. Neither the Company
nor any Subsidiary maintains any Employee Benefit Plan which is an
"employee welfare benefit plan" (as such term is defined in
Section 3(1) of ERISA) that has provided any "disqualified benefit"
(as such term
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is defined in Section 4976(b) of the Code) with respect to which an
excise tax could be imposed.
(4) Neither the Company nor any Subsidiary maintains any Employee
Benefit Plan (whether qualified or non-qualified under Section 401(a)
of the Code) providing for post-employment or retiree health, life
insurance and/or other welfare benefits and having unfunded
liabilities, and neither the Company nor any Subsidiary have any
obligation to provide any such benefits to any retired or former
employees or active employees following such employees' retirement or
termination of service, except as required by COBRA. Neither the
Company nor any Subsidiary has any unfunded liabilities pursuant to
any Employee Benefit Plan that is a "pension plan" (as defined in
Section 3(2) of ERISA) and is not intended to be qualified under
Section 401(a) of the Code.
(5) Neither the Company nor any Subsidiary has incurred any
liability for any tax or excise tax arising under Chapter 43 of the
Code, and no event has occurred and no condition or circumstance has
existed that could give rise to any such liability.
(6) No asset of the Company or any Subsidiary is subject to any
lien arising under Section 302(f) of ERISA or Section 412(n) of the
Code, and no event has occurred and no condition or circumstance has
existed that could give rise to any such lien. Neither the Company nor
any Subsidiary has been required to provide any security under Section
307 of ERISA or Section 401 (a)(29) or 412(f) of the Code, and no
event has
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occurred and no condition or circumstance has existed that could give
rise to any such requirement to provide any such security.
(7) There are no actions, suits, claims or disputes pending, or,
to the knowledge of the Seller or the Company, threatened, anticipated
or expected to be asserted against or with respect to any Employee
Benefit Plan or the assets of any such plan (other than routine claims
for benefits and appeals of denied routine claims). No civil or
criminal action brought pursuant to the provisions of Title I,
Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or
expected to be asserted against the Company or any Subsidiary or any
fiduciary of any Employee Benefit Plan, in any case with respect to
any Employee Benefit Plan. No Employee Benefit Plan or any fiduciary
thereof has been the direct or indirect subject of an audit,
investigation or examination by any governmental or quasi-governmental
agency.
(iii) Contributions. Full payment has been timely made of all amounts
which the Company or any Subsidiary is required, under applicable law or
under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any Subsidiary is a party, to have
paid as contributions or premiums thereto as of the last day of the most
recent fiscal year of such Employee Benefit Plan ended prior to the date
hereof. All such contributions and/or premiums have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed
by any governmental entity, and to the knowledge of the Seller or the
Company and the Subsidiaries no event has occurred and no condition or
circumstance has existed that could give rise to any such challenge or
disallowance. The Company
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has made adequate provision for reserves to meet contributions and premiums
and any other liabilities that have not been paid or satisfied because they
are not yet due under the terms of any Employee Benefit Plan, applicable
law or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided.
(iv) Funded Status; Withdrawal Liability.
(1) As of the date of this Agreement, the current value of the
accumulated benefit obligations (based upon actuarial assumptions
which are in the aggregate reasonable in all respects and which have
been furnished to and relied upon by the Buyer) under each Employee
Benefit Plan which is covered by Title IV of ERISA and which is a
"single employer plan" (as such term is defined in Section 4001(a)(15)
of ERISA) ("Single Employer Plan") did not exceed the current fair
value of the assets of each such Single Employer Plan allocable to
such accrued benefits, and since the date of the Working Capital
Statement, there has been (x) no change in the financial condition of
any Single Employer Plan, (y) no change in the actuarial assumptions
with respect to any Single Employer Plan and (z) no increase in
benefits under any Single Employer Plan as a result of plan
amendments, written interpretations or announcements (whether written
or not), change in applicable law or otherwise, which individually or
in the aggregate, would result in the current value of any Single
Employer Plan's accrued benefits exceeding the current value of all
such Single Employer Plan's assets. No Employee Benefit Plan holds as
an asset any interest in any annuity contract, guaranteed investment
contract or any other investment or
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insurance contract, policy or instrument issued by an insurance
company that, to the knowledge of the Seller or the Company, is the
subject of bankruptcy, conservatorship, insolvency, liquidation,
rehabilitation or similar proceedings.
(2) As of the date of this Agreement, using actuarial assumptions
and computation methods consistent with Part I of Subtitle E of Title
IV of ERISA, neither the Company nor any other members of the
Controlled Group would have any liability to any Multiemployer Plans
in the event of a complete withdrawal therefrom, as of the close of
the most recent fiscal year of each Multiemployer Plan ended prior to
the date hereof. To the knowledge of the Company or the Seller, there
has been no change in the financial condition of any Multiemployer
Plan, in any such actuarial assumption or computation method or in the
benefits under any Multiemployer Plan as a result of collective
bargaining or otherwise since the close of each such fiscal year
which, individually or in the aggregate, would increase such
liability.
(v) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has, as currently in effect,
been determined to be so qualified by the IRS. Each trust established in
connection with any Employee Benefit Plan which is intended to be exempt
from Federal income taxation under Section 501(a) of the Code has, as
currently in effect, been determined to be so exempt by the IRS. Each VEBA
has been determined by the IRS to be exempt from Federal income tax under
Section 501(c)(9) of the Code. To the knowledge of the Seller and the
Company, since the date of each most recent determination referred to in
this paragraph (b)(5), no event has occurred and no condition or
circumstance has existed that
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resulted or is likely to result in the revocation of any such determination
or that could adversely affect the qualified status of any such Employee
Benefit Plan or the exempt status of any such trust or VEBA.
(vi) Transactions. No "reportable event" (as such term is defined in
Section 4043 of ERISA) for which the 30-day notice requirement has not been
waived by the PBGC has occurred or is expected to occur with respect to any
Employee Benefit Plan which could reasonably be expected to subject the
Company or any Subsidiary to any liability. Neither the Company nor any
Subsidiary nor any of their respective directors, officers, employees or,
to the knowledge of the Seller or the Company, other persons who
participate in the operation of any Employee Benefit Plan or related trust
or funding vehicle, has engaged in any transaction with respect to any
Employee Benefit Plan or breached any applicable fiduciary responsibilities
or obligations under Title I of ERISA that would subject any of them to a
tax, penalty or liability for prohibited transactions or breach of any
obligations under ERISA or the Code or would result in any claim being made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(vii) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable,
which (either alone or upon the occurrence of any additional or subsequent
event) will or may result in the termination of any Employee Benefit Plan
or any payment (whether of severance pay or otherwise), "parachute payment"
(as such term is defined in Section 280G of the
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Code), acceleration, vesting or increase in benefits to any employee or
former employee or director of the Company or any Subsidiary. No Employee
Benefit Plan provides for the payment of severance, termination, change in
control or similar-type payments or benefits.
(c) Documents. The Seller or the Company has provided access to,
delivered or caused to be delivered to the Buyer or its counsel true and
complete copies of all material documents in connection with each Employee
Benefit Plan, including, without limitation (where applicable): (i) all
Employee Benefit Plans as in effect on the date hereof, together with all
amendments thereto, including, in the case of any Employee Benefit Plan not
set forth in writing, a written description thereof; (ii) all current
summary plan descriptions, summaries of material modifications, and
material communications; (iii) all current trust agreements, declarations
of trust and other documents establishing other funding arrangements (and
all amendments thereto and the latest financial statements thereof); (iv)
the most recent IRS determination letter obtained with respect to each
Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code or exempt under Section 501 (a) or 501(c)(9) of the Code; (v) the
annual report on IRS Form 5500 series or 990 for each of the last three
years for each Employee Benefit Plan required to file such form; (vi) the
most recently prepared actuarial valuation report for each Employee Benefit
Plan covered by Title IV of ERISA; (vii) the most recently prepared annual
financial statements; and (viii) all material contracts and agreements
relating to each Employee Benefit Plan, including, without limitation,
service provider agreements, insurance contracts, annuity contracts,
investment management agreements, subscription agreements, participation
agreements, and record keeping agreements and collective bargaining
agreements.
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5.21 Executive Employees.
(a) Schedule 5.21 annexed hereto is a correct and complete list of the
names, titles and current annual salary rates of and bonuses paid to all present
executive officers and employees of the Company and the Subsidiaries whose
annual salary (excluding bonuses) as of January 1, 1998 is in excess of
$100,000.
(b) Except as set forth on Schedule 5.21 annexed hereto, neither the
Company nor any Subsidiary has any written employment agreement or any written
severance agreement with respect to any Employee whose annual salary (excluding
bonuses) as of January 1, 1998 is in excess of $100,000.
5.22 Labor Matters.
(a) Schedule 5.22 annexed hereto is a correct and complete list of all
written collective bargaining agreements to which the Company or any Subsidiary
is a party or by which any of them is bound. The Company has delivered copies of
all such agreements to the Buyer. Neither the Company nor any Subsidiary is in
default with regard to any of such agreements, except for such defaults that
would not, individually or in the aggregate, have a Material Adverse Effect.
(b) Each of the Company and the Subsidiaries is in compliance in all
material respects with all Laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, and is not engaged in any
material unfair labor or unlawful employment practice, except for such
non-compliance that would not, individually or in the aggregate, have a Material
Adverse Effect. Except as set forth on Schedule 5.14 or Schedule 5.22 annexed
hereto, there is no unlawful employment practice charge pending against the
Company or
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any Subsidiary before the U.S. Equal Employment Opportunity Commission ("EEOC")
or EEOC recognized state "referral agency." Except as set forth on Schedule 5.14
or Schedule 5.22 annexed hereto, or as would not, individually or in the
aggregate, have a Material Adverse Effect, there is no unfair labor practice
charge or complaint against the Company or any of the Subsidiaries pending
before the National Labor Review Board ("NLRB"). There is no labor strike,
dispute, slowdown or stoppage pending, or, to the knowledge of the Seller,
threatened against the Company or any of the Subsidiaries, and no NLRB
representation petition has been filed or, to the knowledge of the Seller, is
impending respecting their respective employees. Except as set forth on Schedule
5.14 or Schedule 5.22 annexed hereto, or as would not, individually or in the
aggregate, have a Material Adverse Effect, no employee related grievances or
arbitration proceeding is pending and no written claims therefor exist.
5.23 Operations of the Company. Except as set forth on Schedule 5.23
annexed hereto, from the Balance Sheet Date through the date of this Agreement
the Company and the Subsidiaries have conducted their business in the ordinary
course consistent with past practices. From January 1, 1998 through the date of
this Agreement, the Company has not declared, paid, set aside or made any
dividend or other distribution or payment with respect to, or split, combined,
redeemed or reclassified, or purchased or otherwise acquired any shares of its
capital stock or its other securities, nor has it incurred or paid any
indebtedness other than the cash overdraft.
5.24 Banks, Brokers and Proxies. Schedule 5.24 annexed hereto sets forth
(i) the name of each bank, trust company and securities or other broker with
which the Company maintains accounts; (ii) the name of each Person authorized by
the Company to effect transactions therewith
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or to have access to any safe deposit box or vault; and (iii) all proxies,
powers of attorney or other like instruments to act on behalf of the Company in
matters concerning its business or affairs.
5.25 Brokers and Finders. The Seller represents and warrants to the Buyer
that, except for Allen & Company Incorporated, no broker, finder, agent or
similar intermediary has acted on behalf of the Company or the Seller in
connection with this Agreement or the transactions contemplated hereby, and that
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Company or the Seller, or any action taken by the Company
or the Seller, other than fees payable to Allen & Company Incorporated for which
the Seller shall be liable.
5.26 Affiliated Transactions. Except as set forth on Schedule 5.26
annexed hereto, no officer, director, stockholder or Affiliate of the Company or
any of the Subsidiaries, or any individual in such officer's, director's,
stockholder's or Affiliate's immediate family is a party to any material
agreement, contract, commitment or transaction with the Company or the
Subsidiaries or has a material interest in any material property used by the
Company or the Subsidiaries.
6. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Seller as follows:
6.1 Due Incorporation. The Buyer is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware.
6.2 Power and Capacity. The Buyer has all requisite power, authority and
approval to execute and deliver this Agreement, to consummate the transactions
contemplated hereby and to perform fully its obligations hereunder. The
execution, delivery and performance of this Agreement
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by the Buyer have been duly authorized by all necessary corporate action of the
Buyer. This Agreement and each document and instrument contemplated by this
Agreement to be executed by the Buyer, when executed and delivered in accordance
with the provisions hereof (assuming due authorization, execution and delivery
by the Seller), shall constitute the valid and binding obligations of the Buyer
enforceable against the Buyer in accordance with their respective terms subject
to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.3 Freedom to Contract. The execution, delivery and performance of this
Agreement by the Buyer do not, and the performance by it of its obligations
hereunder in accordance with its terms and conditions will not, (i) violate or
conflict with any provision of the certificate or articles of incorporation or
by-laws of the Buyer, (ii) violate any of the terms, conditions or provisions of
any Law binding upon the Buyer or any of its properties or (iii) conflict with
or result in a violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, indenture, debenture, security agreement, trust agreement,
lien, mortgage, lease, agreement, license, franchise, permit, guaranty, joint
venture agreement, or other written agreement, instrument or obligation, to
which the Buyer is a party or by which it or any of its properties are bound,
except, with respect to clause (iii) of this sentence, as set forth on Schedule
6.3 annexed hereto. No governmental authorization, approval, order, license,
permit, consent,
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registration, declaration or filing with any Governmental Authority, and no
consent or approval of any Person, is required in connection with the Buyer's
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, except (i) as set forth on Schedule 6.3
annexed hereto, (ii) the requirements under the HSR Act or (iii) where the
failure to obtain any authorization, approval, order, license, permit, consent,
registration, declaration or filing would not have a material adverse effect on
the ability of the parties to consummate the transactions contemplated hereby.
6.4 Litigation. There is no action, suit or proceeding by or before any
referee, mediator or arbitrator, or any court or governmental or other
regulatory or administrative agency or commission, pending or, to the knowledge
of the Buyer, threatened, against the Buyer or relating to its assets, which
would in any way seek to prevent, enjoin, alter or delay the transactions
contemplated hereby.
6.5 Acquisition of Shares for Investment. The Buyer is acquiring the
Shares for investment and not with a view toward, or for sale in connection
with, any distribution thereof, nor with any present intention of distributing
or selling the Shares. The Buyer agrees and understands that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), and may not be sold, transferred, offered for sale, pledged, hypothecated
or otherwise disposed of (i) without registration under the Securities Act,
except pursuant to an exemption from such registration available under the
Securities Act, and (ii) except in accordance with applicable provisions of
state securities Laws.
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6.6 Financing. The Buyer has received, and has delivered a true and
complete copy to Seller of, a Commitment Letter from Credit Suisse First Boston,
whereby Credit Suisse First Boston has committed to provide bank financing for
the transactions contemplated by this Agreement. Assuming receipt of funds in
accordance with the terms of such Commitment Letter, the Buyer will have all
funds necessary to consummate the transactions contemplated by this Agreement.
McCown De Leeuw & Co. IV, L.P. (the "Fund") has agreed to provide the Buyer with
the requisite equity financing necessary to consummate the transactions
contemplated by this Agreement.
6.7 Brokers and Finders. The Buyer represents and warrants to the Seller
that no broker, finder, agent or similar intermediary has acted on its behalf in
connection with this Agreement or the transactions contemplated hereby, and that
there are no brokerage commissions, finders' fees or similar fees or commissions
payable in connection therewith based on any agreement, arrangement or
understanding with the Buyer, or any action taken by the Buyer.
7. Covenants of the Parties. The parties hereby covenant and agree as follows:
7.1 Conduct of Business Pending Closing. From the date hereof until the
Closing Date, the Seller will cause the Company and the Subsidiaries to:
(a) maintain their existence in good standing;
(b) maintain the general character of their businesses and conduct
their businesses in the ordinary and usual manner subject to seasonal
fluctuations, general economic conditions and variations in customer order
levels;
(c) maintain proper business and accounting records consistent with
past practices;
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(d) maintain their properties in substantially the same repair and
condition, as on the date of this Agreement, subject to normal wear and
use;
(e) use commercially reasonable efforts to preserve the Company's and
the Subsidiaries' businesses intact;
(f) refrain from paying or increasing any bonuses, salaries, or other
compensation to any director, officer, employee or stockholder or entering
into any employment, severance or similar agreement with any director,
officer or employee, other than in the ordinary course of business
consistent with past practice;
(g) refrain from adopting or increasing any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan for or with any employees of the Company or the
Subsidiaries, other than in the ordinary course of business consistent with
past practice;
(h) refrain from entering into any material contract or commitment,
other than (1) contracts or commitments with respect to the disposition of
the 60% interest in KCET owned by DIMAC DIRECT, Inc. (the "KCET
Disposition") or (2) in the ordinary course of business consistent with
past practice;
(i) refrain from canceling or waiving any claim or right of
substantial value which individually or in the aggregate is material to the
Company or the Subsidiaries, other than with respect to the KCET
Disposition;
(j) refrain from making any material change in accounting methods or
practices, other than changes required by law or GAAP;
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(k) refrain from selling, leasing or otherwise disposing of any
material asset or property of the Company or any Subsidiary, other than (1)
with respect to the KCET Disposition or (2) in the ordinary course of
business consistent with past practice;
(l) refrain from making any capital expenditure or commitment therefor
in excess of $250,000;
(m) refrain from writing off as uncollectible any notes or accounts
receivable, other than in the ordinary course of business consistent with
past practice;
(n) refrain from incurring or paying any indebtedness for borrowed
money other than the cash overdraft;
(o) refrain from declaring, paying, setting aside or making any
dividend or other distribution or payment with respect to, or splitting,
combining, redeeming or reclassifying, or purchasing or otherwise acquiring
any shares of its capital stock or its other securities;
(p) refrain from making any payments before their due date in order to
accelerate a tax deduction; and
(q) refrain from agreeing in writing to do any of the foregoing.
7.2 Seller's Notice of Certain Events. The Seller shall promptly notify
the Buyer of:
(a) any breach of the terms of this Agreement or any fact, condition
or circumstance which would make any of the representations and warranties
of either the Buyer or the Seller contained herein untrue, inaccurate or
misleading, of which the Seller has knowledge;
(b) any actions, suits or proceedings commenced or, to the Seller's
knowledge, threatened against, relating to, involving or otherwise
affecting the Company which, if pending on the
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date of this Agreement, would have been required to be disclosed pursuant
to Section 5.14 hereof or which relate to the consummation of the
transactions contemplated by this Agreement; or
(c) any material adverse change in the business, assets, condition
(financial or otherwise), operations or results of operations of the
Company (other than seasonal fluctuations, general economic conditions and
variations in customer order levels which have not resulted in a change in
overall order levels for such customer).
7.3 Buyer's Notice of Certain Events. The Buyer shall promptly notify the
Seller of:
(a) any breach of the terms of this Agreement or any fact, condition
or circumstance which would make any of the representations and warranties
of either the Buyer or the Seller contained herein untrue, inaccurate or
misleading, of which the Buyer has knowledge;
(b) any actions, suits or proceedings commenced or, to the Buyer's
knowledge, threatened against, relating to, involving or otherwise
affecting the Buyer which relate to the consummation of the transactions
contemplated by this Agreement; or
(c) any event, condition or circumstance which is reasonably likely to
have, or does have, the effect of impairing the ability of the Buyer to
consummate the transactions contemplated by this Agreement.
7.4 Company Access. Prior to the Closing Date, the Buyer shall be
entitled, through its employees and representatives, to gain access to the
assets, properties, business and operations of the Company and the Subsidiaries,
and such examination of the books, records and financial condition of the
Company and the Subsidiaries as the Buyer requests upon reasonable notice to the
Seller. Any such access shall be at reasonable times and under reasonable
circumstances, and the Company, the
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Subsidiaries and the Seller shall cooperate fully therein. Any and all
information or documents obtained by the Buyer from the Company or the
Subsidiaries, concerning their respective assets, properties, businesses and
operations pursuant to this Section 7.4 shall at all times be subject to the
confidentiality provisions set forth in Section 7.10 hereof. If this Agreement
terminates for any reason, any documents obtained from the Company or the
Subsidiaries or otherwise in the Buyer's possession or under the Buyer's control
shall be promptly returned to the Seller within two (2) Business Days following
such termination.
7.5 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any state or federal court
located in New York County, State of New York, and each party agrees not to
assert, by way of motion, as a defense or otherwise, in any such action, suit or
proceeding, any claim that it is not subject personally to the jurisdiction of
such court, that its property is exempt or immune from attachment or execution,
that the action, suit or proceeding is brought in an inconvenient forum, that
the venue of the action, suit or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and hereby
waives any offsets or counterclaims in any such action, suit or proceeding. Each
party further irrevocably submits to the jurisdiction of any such court in any
such action, suit or proceeding. Any and all service of process and any other
notice in any such action, suit or proceeding shall be effective against any
party if given in accordance with Section 14.5 hereof. Nothing herein contained
shall be deemed to affect the right of any party to serve process in any manner
permitted by law or to commence legal proceedings or otherwise proceed against
any other party in any jurisdiction other than New York.
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7.6 Expenses. The parties to this Agreement shall, except as otherwise
specifically provided herein, bear their respective expenses incurred in
connection with the preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without limitation, all fees
and expenses of agents, representatives, counsel and accountants.
7.7 Independent Investigation. The Buyer acknowledges and agrees that (i)
as of the Closing Date, it shall have been furnished with or given adequate
access to such information as it has requested; (ii) as of the Closing Date, it
shall have made its own inquiry and investigation into, and, based thereon, will
have formed an independent judgment concerning, the Shares, the Company and the
Subsidiaries, and their respective businesses; and (iii) it will not assert any
claim against the Seller, the Company, the Subsidiaries or any of their
respective directors, officers, employees, agents, stockholders, Affiliates,
consultants or representatives, or hold any such Persons liable for any
inaccuracies, misstatements or omissions with respect to information (other
than, with respect to the Seller, the representations and warranties contained
in this Agreement) furnished by such Persons unless such inaccuracies or
misstatements constitute fraud.
7.8 Post-Closing Access. In order to facilitate the resolution of any
claims made by or against or incurred by the Seller prior to the Closing, after
the Closing, upon two (2) Business Days advance notice, the Buyer shall, at no
charge to the Seller, (i) afford the officers, employees and authorized agents
and representatives of the Seller reasonable access, during normal business
hours, to the offices, properties, books and records, of the Buyer, the Company
and the Subsidiaries and any of their respective successors; (ii) furnish to the
officers, employees and authorized agents and representatives of the Seller such
additional financial and other information regarding the Company
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and the Subsidiaries including any successors, the assets, properties, goodwill
and business of the Company and the Subsidiaries and any successors, and their
respective businesses as the Seller may from time to time reasonably request;
and (iii) make available to the Seller, the employees of the Buyer, the Company
and the Subsidiaries whose assistance, testimony or presence is necessary to
assist the Seller in evaluating any such claims and in defending such claims,
including the presence of such Persons as witnesses in hearings or trials for
such purposes.
7.9 Books and Records. The Buyer agrees that it shall preserve and keep
all books and records of the Company and the Subsidiaries in the Buyer's
possession for a period of at least seven (7) years from the Closing Date. After
such seven (7) year period, before the Buyer shall dispose of any of such books
and records, at least ninety (90) days prior written notice to such effect shall
be given by the Buyer to the Seller, and the Seller shall be given an
opportunity, at its cost and expense, to remove and retain all or any part of
such books and records as the Seller may select. During such seven (7) year
period, duly authorized representatives of the Seller shall, upon reasonable
notice, have access thereto during normal business hours to examine, inspect and
copy such books and records. If, in order properly to prepare documents required
to be filed with governmental authorities or its financial statements, it is
necessary that any party hereto or any successors be furnished with additional
information relating to the Company or the Subsidiaries or their respective
businesses, and such information is in the possession of any other party hereto,
such party agrees to use its best efforts to furnish such information to such
requesting party, at the cost and expense of the party being furnished such
information.
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7.10 Confidentiality. The terms of the letter agreement dated as of
January 15, 1998 (the "Confidentiality Agreement") between Allen & Company
Incorporated, as agent for The News Corporation Limited and its Affiliates, and
McCown DeLeeuw & Co. are hereby incorporated by reference and shall continue in
full force and effect and be binding on all parties to this Agreement until the
Closing, at which time such Confidentiality Agreement and the obligations of the
Buyer, and the Seller under this Section 7.10 shall terminate; provided,
however, that the Confidentiality Agreement shall terminate only in respect of
that portion of the Confidential Material (as defined in the Confidentiality
Agreement) exclusively relating to the transactions contemplated by this
Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement and this Section 7.10 shall continue in
full force and effect in respect of such Confidential Material.
7.11 Regulatory and Other Authorizations; Consents. Each party hereto
will use its commercially reasonable efforts to obtain all authorizations,
consents, orders and approvals of all federal, state, local and foreign
regulatory bodies and officials that may be or become necessary for its
execution and delivery of, and the performance of its obligations pursuant to,
this Agreement and will cooperate fully with the other parties hereto in
promptly seeking to obtain all such, authorizations, consents, orders and
approvals. If required, each party hereto agrees to make an appropriate filing
of a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby within five (5) Business Days of the date
hereof and to supply promptly any additional information and documentary
material that may be requested pursuant to the HSR Act. The parties
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hereto will not take any action that will have the effect of delaying, impairing
or impeding the receipt of any required approvals.
7.12 Title Insurance. The Buyer covenants and agrees that, if it obtains
owner's or leasehold title insurance policies as applicable for any of the Owned
Property or the Islip Leased Property, the Buyer shall do so at its sole cost
and expense.
7.13 Supplements to Schedules. The Seller and the Buyer shall have the
right from time to time prior to the Closing to supplement or amend any schedule
annexed hereto with respect to any matter hereafter arising which, if existing
or known on the date of this Agreement, would have been required to be set forth
or described in such schedule.
7.14 Non-Solicitation. For the period commencing on Closing Date and
ending on the second anniversary thereof, the Seller shall not, directly or
indirectly, on its own behalf or on behalf of any other Person, hire, solicit,
or encourage to leave the employ of the Company or any Subsidiary any Person who
is an employee of the Company or any Subsidiary during such period while such
Person is an employee of the Company.
7.15 Capital Expenditures; Capital Leases. The Seller hereby agrees that
during the period from the date of this Agreement through the Closing Date, it
shall cause the Company and the Subsidiaries to spend $200,000 on capital
expenditures and to pay $676,000 principal and interest on capital leases.
8. Conditions Precedent to the Obligation of the Buyer to Close. The
obligation of the Buyer to enter into and complete the Closing is subject, at
its option, to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by it:
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8.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of the Seller contained in this Agreement which
are qualified as to "materiality" or "Material Adverse Effect" shall be true and
correct in all respects, and the representations and warranties of the Seller
which are not so qualified shall be true in all material respects, in each case
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date; provided, however, that to the extent that any
representation or warranty is made herein as of a specified date, such
representation or warranty shall be true as of such specified date; and provided
further that to the extent that any representation or warranty has been
qualified by a reference to any schedule annexed hereto which has been
supplemented or amended by the Seller after the date hereof, such representation
or warranty shall be true and correct as described above without giving effect
to such supplemented or amended schedule.
8.2 Compliance with this Agreement. The Seller shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by the Seller on or prior to the
Closing Date.
8.3 Officer's Certificate. The Seller shall have delivered to the Buyer
a certificate, dated as of the Closing Date and signed by an officer of the
Seller, certifying that the conditions specified in Sections 8.1 and 8.2 hereof
have been fulfilled.
8.4 Opinion of Counsel to the Company and the Seller. The Buyer shall
have received the opinion of Squadron, Ellenoff, Plesent & Sheinfeld, LLP,
counsel to the Company and the Seller, dated the date of the Closing, addressed
to the Buyer, in form and substance reasonably satisfactory to the Buyer.
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8.5 Litigation. No action, suit or proceeding shall have been
instituted before or by any Governmental Authority to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transactions.
8.6 Delivery of Stock Certificates. The Seller shall have delivered to
the Buyer at the Closing stock certificates representing all of the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer.
8.7 HSR Act. The waiting period under the HSR Act shall have expired or
early termination with respect thereto shall have been granted.
8.8 Consents. The Seller shall have received each consent or approval
required to be given by any third party in connection with the consummation of
the transactions contemplated hereby, where the failure to receive such consent
or approval would have a Material Adverse Effect.
8.9 KCET Disposition. The Buyer shall have received evidence
satisfactory to it that the KCET Disposition shall have been consummated.
8.10 Material Adverse Change. Since the date of this Agreement, there
shall not have been or occurred any material adverse change in the assets,
properties, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries which would materially
impair the overall conduct of their business as currently conducted, nor shall
there have been any damage, destruction or loss materially affecting the assets,
prospectus, business or condition (financial or otherwise), operations or
results of operations of the Company and the Subsidiaries, whether or not
covered by insurance; provided, however, that the effects of seasonal
fluctuations on the Company's business, general conditions in the direct
marketing industry, variations in customer
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order levels which have not resulted in a change in overall order levels for
such customer, or present or future Laws, including, without limitation, Laws
relating to postal matters and procedures shall not be deemed to have been a
material adverse change for purposes of this Section 8.10.
8.11 Indebtedness. The Buyer shall have received evidence satisfactory
to it that the outstanding amount of all indebtedness for money borrowed of the
Company shall be zero, it being understood and agreed that indebtedness for
money borrowed shall not be deemed to include capital lease obligations or cash
over-draft.
8.12 Intercompany Accounts. The payable of the Company to the Seller
shall have been contributed to the capital of the Company, and the income tax
receivable-parent from the Seller or News America Incorporated that is recorded
on the Company's books shall be recorded as a reduction of the capital of the
Company.
9. Conditions Precedent to the Obligation of the Seller to Close. The
obligation of the Seller to enter into and complete the Closing is subject, at
its option, to the fulfillment of the following conditions, any one or more of
which may be waived:
9.1 Representations and Warranties True as of the Closing Date. The
representations and warranties of the Buyer contained in this Agreement which
are qualified as to "materiality" or "Material Adverse Effect" shall be true and
correct in all respects, and the representations and warranties of the Buyer
which are not so qualified shall be true in all material respects, in each case
on and as of the Closing Date with the same force and effect as though made on
as of the Closing Date; provided, however, that to the extent that any
representation or warranty is made herein as of a specified date, such
representation or warranty shall be true as of such specified date; and provided
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further that to the extent that any representation or warranty has been
qualified by a reference to any schedule annexed hereto which has been
supplemented or amended by the Buyer after the date hereof,
such representation or warranty shall be true and correct as described above
without giving effect to such supplemented or amended schedule.
9.2 Compliance with this Agreement. The Buyer shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
9.3 Officer's Certificate. The Buyer shall have delivered to the Seller
a certificate, dated as of the Closing Date and signed by an officer of the
Buyer, certifying that the conditions specified in Sections 9.1 and 9.2 hereof
have been fulfilled.
9.4 Opinion of Counsel to the Buyer. The Seller shall have received the
opinion of White & Case, LLP, counsel to the Buyer, dated the date of the
Closing, addressed to the Seller, in form and substance reasonably satisfactory
to the Seller.
9.5 Litigation. No action, suit or proceeding shall have been
instituted before or by any Governmental Authority to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transactions.
9.6 HSR Act. The waiting period under the HSR Act shall have expired or
early termination with respect thereto shall have been granted.
9.7 Payment of Purchase Price. The Buyer shall have paid to the Seller
the Purchase Price in immediately available funds in accordance with Section
4(a) hereof.
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9.8 Consents. The Buyer shall have received each consent or approval
required to be given by any third party in connection with the consummation of
the transactions contemplated hereby, where the failure to receive such consent
or approval would have a material adverse effect on the Buyer's ability to
consummate the transactions contemplated hereby.
10. Survival of Representations and Warranties; Indemnification.
10.1 Survival of Representations and Warranties. The representations
and warranties contained in Section 5 and 6 of this Agreement (other than the
representation contained in Section 5.2, which shall survive the Closing) shall
not survive the execution and delivery hereof and the Closing hereunder.
10.2 Indemnification. From and after the Closing Date, the Seller
hereby agrees to indemnify the Buyer and its subsidiaries (including the
Company), and their respective successors and assigns and hold them harmless at
all times against and in respect of any and all claims, damages, losses and
liabilities and costs and expenses arising out of, resulting from or relating to
(i) KCET and (ii) payments to be made to T.R. McClure & Co., Inc. pursuant to
the McClure Earn-Out Agreement, in connection with work generated prior to the
Closing Date, other than payments that have been accrued as current liabilities
on the Working Capital Statement for work performed during the period from April
1, 1998 through the Closing Date, with the amount determined in a manner
consistent with past practices.
10.3 Notice to the Indemnitor. Promptly after the assertion of any
claim by a third party or occurrence of any event which may give rise to a claim
for indemnification from an indemnitor (the "Indemnitor") under Section 10.2, an
indemnified party (the "Indemnified Party") shall notify the
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Indemnitor in writing of such claim (other than any claims with respect to
Section 10.2(ii) of which the Seller is already aware) and shall describe in
reasonable detail the facts and circumstances with respect to the subject matter
of such claim or action and the basis on which indemnification is sought
pursuant to this Agreement.
10.4 Rights of Parties to Settle or Defend. The Indemnitor shall have the
right to direct, through counsel of its own choosing, the defense or settlement
of any claim or proceeding at its own expense for which the Indemnified Party is
seeking indemnification pursuant to this Agreement. If the Indemnitor elects to
assume the defense of such claim, the Indemnified Party shall have the right to
be represented, at its own expense by its own counsel and accountants, their
participation to be subject to the reasonable direction of the Indemnitor. In
either case, the Indemnified Party shall make available to the Indemnitor and
its attorneys and accountants, at all reasonable times during normal business
hours, all books, records and other documents in its possession relating to such
claim and shall otherwise cooperate with the Indemnitor in the defense or
settlement thereof. If the Indemnitor elects to direct the defense of any such
claim or proceeding, the Indemnified Party shall not pay or permit to be paid
any part of any claim or demand arising from such asserted liability, unless the
Indemnitor consents in writing to such payment or unless the Indemnitor, subject
to the last sentence of this Section 10.4, withdraws from the defense of such
asserted liability, or unless a final judgment from which no appeal may be taken
by or on behalf of the Indemnitor is entered against the Indemnified Party for
such liability. Notwithstanding the foregoing, the Indemnitor shall not settle
any third-party claim (other than solely by the payment of money) without the
Indemnified Party's
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prior written consent, which consent shall not be unreasonably withheld. If the
Indemnitor shall fail to defend, or if, after commencing or undertaking any such
defense, the Indemnitor fails to prosecute or withdraws from such defense, the
Indemnified Party shall have the right to undertake the defense or settlement
thereof. If the Indemnified Party assumes the defense of any such claim or
proceeding pursuant to this Section 10.4 and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then the Indemnified Party shall give the Indemnitor prompt
written notice thereof.
10.5 Settlement Proposals. In the event the Indemnified Party desires to
settle any such third-party claim, the Indemnified Party shall advise the
Indemnitor in writing of the amount it proposes to pay in settlement thereof
(the "Proposed Settlement"). If such Proposed Settlement is unsatisfactory to
the Indemnitor, it shall have the right, at its expense, to contest such claim
by giving written notice of such election to the Indemnified Party within ten
(10) days after the Indemnitor's receipt of the advice of the Proposed
Settlement. If the Indemnitor does not deliver such written notice within ten
(10) days after receipt of such advice, the Indemnified Party may offer the
Proposed Settlement to the third party making such claim. If the Proposed
Settlement is not accepted by the party making such claim, any new Proposed
Settlement figure which the Indemnified Party may wish to present to the party
making such claim shall first be presented to the Indemnitor who shall have the
right, subject to the conditions hereinabove set forth in this Section 10.5, to
contest such claim.
10.6 Tax and Other Benefits. Payments by the Indemnitor pursuant to
Section 10.2 hereof shall be limited to the amount of any liability or damage
that remains after deducting therefrom (i) any current Tax benefit to the
Indemnified Party or any Affiliate thereof, and (ii) any insurance proceeds
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and any indemnity, contribution or other similar payment recoverable by the
Indemnified Party or its Affiliates from any third party with respect thereto.
If a Tax benefit is recognized by the Indemnified Party or any Affiliate in a
tax period subsequent to the period in which the indemnity payment occurs, the
Indemnified Party shall pay the Indemnitor the amount of such benefit actually
realized in the subsequent period.
11. Tax Matters.
11.1 Liability For Taxes.
(a) Except as otherwise provided in Section 11.1(c) hereof, the
Seller shall be liable for, shall pay and shall indemnify and hold the Buyer and
the Company harmless against all claims for Taxes and reasonable costs and
expenses relating thereto of the Company or the Subsidiaries (i) for any taxable
period or portion thereof ending after the Acquisition Date, but on or before
the Closing Date, due or payable with respect to the operations, assets or
business of the Seller or its Affiliates (including the Company) on or before
the Closing Date, (ii) relating to the deductibility of costs and expenses paid
by the Company in connection with the acquisition of the Company by the Seller,
and (iii) for liability of the Company and the Subsidiaries pursuant to Treasury
Regulations Section 1.1502-6 or any analogous state, local or foreign law or
regulation (excluding Taxes attributable to the activities of the Company or its
Subsidiaries) by reason of the Company or the Subsidiaries having been a member
of any combined, consolidated or unitary group as to which the Seller or News
Publishing Australia Limited or their Affiliates (other than the Company or its
Subsidiaries) was the common parent (each, a "Tax Claim").
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(b) The Buyer shall be liable for, shall pay and shall indemnify and
hold the Seller harmless against (i) any and all Taxes of the Company for any
taxable period or portion thereof after the Closing Date; and (ii) any and all
Taxes not incurred in the ordinary course of business attributable to the acts
or omissions of the Buyer, the Buyer's Affiliates or the Company occurring on
the Closing Date but after the Closing.
(c) Notwithstanding any provision to the contrary contained in this
Agreement, the Seller shall be required to indemnify and hold the Buyer and the
Company harmless under Sections 11.1(a)(i) and 11.1(a)(ii) hereof only to the
extent that the aggregate of such claims exceeds $250,000. Notwithstanding the
foregoing, in no event shall the aggregate amount required to be paid by the
Seller to the Buyer or the Company or its Subsidiaries pursuant to Sections
11.1(a)(i) and 11.1(a)(ii) hereof exceed five percent (5%) of the Purchase Price
paid hereunder.
11.2 Allocation. In the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the Closing
Date, the portion of any such Tax that is allocable to the portion of the period
ending on the Closing Date shall be determined based on the actual activities
and operations of the Company and the Subsidiaries and shall be deemed equal to
the amount which would be payable if the taxable year ended on the Closing Date;
provided, however, that real and personal property Taxes (which are not based on
income) shall be determined by reference to the relative number of days in the
taxable period.
11.3 Filing of Tax Returns; Change of Tax Year. The parties hereto
covenant and agree that (i) the Seller shall prepare and file with the
applicable Governmental Authorities all Tax Returns relating to the Company and
the Subsidiaries with respect to any taxable period that ends after the
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Acquisition Date and on or before the Closing Date on a basis consistent with
past practice with respect to items reflected on such Tax Returns; and (ii) the
Buyer shall prepare and file with the applicable Governmental Authorities all
other Tax Returns relating to the Company and the Subsidiaries. With respect to
a Tax Return prepared by the Buyer which includes a taxable period or portion
thereof before the Closing Date, the Seller shall have a reasonable opportunity
to review and approve such return (such approval not to be unreasonably withheld
or delayed) and such return shall be filed on a consistent basis with past
similar returns. An exact copy of the Tax Return for such periods shall be
provided to the Seller no later than ten (10) days after such return is filed.
Notwithstanding anything to the contrary herein, the Buyer shall not, and shall
not permit the Company or the Subsidiaries to, file any amended Tax Return of
the Company or the Subsidiaries (or otherwise change such Tax Returns) with
respect to taxable periods or portions thereof ending on or prior to the Closing
Date unless (i) the Seller consents in writing (which consent shall not be
unreasonably withheld) and (ii) the amended Tax Return does not result in an
indemnifiable Tax under Section 11.1(a) hereof.
11.4 Payment. Payment by the Seller of any amounts due under
Sections 11.1(a), 11.2 and 11.3 hereof in respect of Taxes shall be made (i) at
least three (3) days before the due date of the applicable estimated or final
Tax Return required to be filed by the Buyer, the Company or the Subsidiaries,
as the case may be, after the Closing Date on which is required to be reported
income or other amounts for a period or portion thereof ending on or before the
Closing Date for which the Seller is responsible under Section 11.1(a), 11.2 or
11.3 hereof, provided that no such payment shall be due from the Seller prior to
five (5) Business Days following receipt of written notice from the
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Buyer, or (ii) within five (5) Business Days following the date of (x) an
agreement between the Seller and the Buyer that an amount is payable pursuant to
Section 11.1(a) hereof, (y) an assessment of a Tax by a taxing authority, or (z)
a "determination" as defined in Section 1313(a) of the Code. Payment by the
Buyer of any amounts due under Section 11.1(b) hereof shall be made (i) at least
three (3) days before the due date of the applicable estimated or final Tax
Return required to be filed by the Buyer, the Company or the Subsidiaries, as
the case may be, after the Closing Date on which is required to be reported
income or other amounts for a period or portion thereof after the Closing Date
for which the Buyer is responsible under Section 11.1(b) hereof, provided that
no such payment shall be due from the Buyer prior to five (5) Business Days
following receipt of written notice from the Seller, or (ii) within five (5)
Business Days following the date of (x) an agreement between the Seller and the
Buyer that an amount is payable pursuant to Section 11.1(b) hereof, (y) an
assessment of a Tax by a taxing authority, or (z) a "determination" as defined
above.
11.5 Refunds. Any refunds received by the Buyer or the Company, the
Subsidiaries or their successors (and any equivalent benefit to any such company
through a current reduction in their liability for Taxes in a post-Closing Date
period) of Taxes relating to taxable periods or portions thereof ending on or
before the Closing Date shall be for the account of the Seller, and the Buyer
shall pay over to the Seller any such refund or the amount of any such benefit
within five (5) Business Days of the receipt thereof. The Buyer shall cooperate
with the Seller in pursuing such refunds where it will not result in an adverse
effect to the Buyer, the Company or the Subsidiaries, in the Buyer's sole
discretion.
11.6 Contests.
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(a) Notice to the Seller. After the Closing, the Buyer shall
promptly notify the Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on the Buyer,
the Company or the Subsidiaries which, if determined adversely to the taxpayer
or after the lapse of time would be grounds for indemnification under Section
11.1(a) hereof. Such notice shall contain factual information (to the extent
known to the Buyer, the Company or the Subsidiaries) describing the asserted Tax
liability in reasonable detail and shall include copies of any notice or other
document received from any taxing authority in respect of any such asserted Tax
liability. If the Buyer fails to give the Seller prompt notice of an asserted
Tax liability as required by this Section 11.6(a), then if such failure to give
prompt notice results in a detriment to the Seller, any amount which the Seller
is otherwise required to pay the Buyer pursuant to Section 11.1(a) hereof with
respect to such liability shall be reduced by the amount of such detriment.
(b) Rights of the Parties to Settle or Defend. The Seller may elect
to direct, through counsel of its own choosing and at its own expense, any
audit, claim for refund and administrative or judicial proceeding involving any
asserted liability with respect to which indemnity may be sought under Section
11.1(a) hereof (any such audit, claim for refund or proceeding relating to an
asserted Tax liability are referred to herein collectively as a "Contest"). If
the Seller elects to direct the Contest of an asserted Tax liability, it shall
within thirty (30) days of receipt of the notice of asserted Tax liability
notify the Buyer of its intent to do so, and the Buyer shall cooperate and shall
cause the Company, the Subsidiaries or their successors to cooperate in each
phase of such Contest. If the Seller elects not to direct the Contest and fails
to notify the Buyer of its election as herein provided or contests its
obligation to indemnify under Section 11.1(a) hereof, the Buyer, the Company
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or the Subsidiaries may pay, compromise or contest, at their own expense, such
asserted liability. However, in such case, neither the Buyer, the Company nor
the Subsidiaries may settle or compromise any asserted liability without
providing prompt written notice thereof to the Seller. In any event, each of the
Buyer (or the Company or the Subsidiaries) and the Seller may participate, at
its own expense, in the Contest. If the Seller chooses to direct the Contest,
the Buyer shall promptly empower and shall cause the Company and the
Subsidiaries and their successors promptly to empower (by power of attorney and
such other documentation as may be appropriate) such representatives of the
Seller as it may designate to represent the Buyer, the Company, the Subsidiaries
or their successors in the Contest insofar as the Contest involves an asserted
Tax liability for which the Seller would be liable under Section 11.1(a) hereof.
If Seller settles or otherwise compromises a Tax issue relating to the Company
or its Subsidiaries indemnified under Section 11.1(a) which results in an
adverse tax effect to the Company or its Subsidiaries in a post-closing period,
the Seller shall indemnify and hold the Company and its Subsidiaries harmless
for such adverse tax effect without regard to the limitation in Section 11.1(c)
hereof.
11.7 Payments for Certain Audit Adjustments. If an audit adjustment,
claim for refund or amended return ("Adjustment") after the date hereof shall
both increase a Tax liability which is allocated to the Seller under Section
11.1(a) hereof (or reduce losses or credits otherwise available to the Seller)
for a period ending on or before the Closing Date and decrease a Tax liability
of the Buyer, the Company or the Subsidiaries (or increase losses or credits
otherwise available to any such corporation) for a period ending after the
Closing Date, then, when and to the extent that the Buyer (or the Company or the
Subsidiaries) derives a benefit from such decrease (through a reduction of
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Taxes, refund of Taxes paid or credit against Taxes due), the Buyer shall
promptly pay to the Seller an amount equal to the amount of such refund,
reduction or credit in excess of the $250,000 deductible described in Section
11.1(c) hereof. The determination of the amount of the Tax liability (or Tax
benefit) of the Buyer, the Company or the Subsidiaries for a post-closing period
described above shall be within the Buyer's sole discretion.
11.8 Cooperation and Exchange of Information. The Seller and the Buyer
will provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities. Each party shall make its employees
available on a mutually convenient basis to provide explanations of any
documents or information provided hereunder. Each party will retain all returns,
schedules and work papers and all material records or other documents relating
to Tax matters of the Company and the Subsidiaries for their taxable periods
ending after the Closing Date and for all prior taxable periods until seven (7)
years following the due date (without extension) for such returns. After such
date, notice of intent to discard will be given and the Seller may request such
records. Any information obtained under this Section 11.9 shall be kept
confidential, except as may be otherwise necessary in connection with the filing
of returns or claims for refund or in conducting an audit or other proceeding.
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11.9 Conveyance Taxes. The Buyer and the Seller agree to assume equally
any liability for and to share equally the payment of all sales, transfer,
stamp, real property transfer or gains and similar Taxes incurred as a result of
the sale of the Shares contemplated hereby.
11.10 No Section 338(h)(10) Election. The Seller and the Buyer shall not
join in an election pursuant to Section 338(h)(10) of the Code or in any similar
election under any Law.
11.11 Disputes. In the event that a dispute arises between the Seller and
the Buyer as to the amount of Taxes or indemnification or any other matter
relating to Taxes attributable to the Company and its Subsidiaries, the parties
shall attempt in good faith to resolve such dispute, and any agreed upon amount
shall be paid to the appropriate party. If such dispute is not resolved within
thirty (30) days thereafter, the parties shall submit the dispute to an
independent accounting firm mutually chosen by the Buyer and the Seller for
resolution, which resolution shall be final, conclusive and binding on the
parties; provided, however, that the independent accounting firm shall be
empowered only to settle the numerical discrepancy between the parties and shall
have no authority to interpret any term or provision of this Agreement or to
settle any dispute relating to the interpretation of any term or provision of
this Agreement. Notwithstanding anything in this Agreement to the contrary, the
fees and expenses of the independent accounting firm in resolving the dispute
shall be borne equally by the Seller and the Buyer.
11.12 Exclusive Tax Remedy. Notwithstanding anything in this Agreement
to the contrary, absent fraud, the Buyer and the Seller hereby agree that the
sole and exclusive remedy with respect to all claims for Taxes shall be pursuant
to this Article 11, and to the extent there is any conflict with any other
provisions of the Agreement, this Article 11 shall control.
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11.13 Treatment of Indemnity Payments. To the extent permitted by
applicable law, the parties to this Agreement agree that any indemnity payments
made under Section 10 or Section 11 hereof shall be treated as adjustments to
the Purchase Price.
12. Cooperation; Further Assurances. From and after the Closing, the Seller, on
the one hand, and the Buyer, on the other hand, agree to execute and deliver
such further documents and instruments and to do such other acts and things as
the Buyer or the Seller, as the case may be, may reasonably request in order to
effectuate the transactions contemplated by this Agreement. In the event any
party shall be involved in litigation, threatened litigation or government
inquiries with respect to a matter involving the Company or the Subsidiaries,
the other party shall also make available to such first party, at reasonable
times and subject to the reasonable requirements of its own business, such of
its information relevant to the matters, provided such first party shall
reimburse the providing party for its reasonable costs for employee time
incurred in connection therewith if more than one Business Day is required.
Following the Closing, the parties will cooperate with each other in connection
with tax audits and in the defense of any legal proceedings, consistent with the
other provisions for defense of claims provided in Article 11 hereof to the
extent such cooperation does not cause unreasonable expense, unless such expense
is borne by the requesting party.
13. Termination of Agreement.
13.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned (i) by mutual consent of the Seller and the
Buyer; or (ii) by the Seller or the Buyer by either giving written notice to the
other if the Closing Date shall not have occurred on or before June 26, 1998;
provided, however, that the right to terminate this Agreement under this Section
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13.1 shall not be available to any party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or shall have resulted in,
the failure of the Closing to occur prior to such date.
13.2 No Liabilities in the Event of Termination. In the event of any
termination of this Agreement as provided in Section 13.1 hereof, this Agreement
shall forthwith become wholly void and of no further force and effect and there
shall be no liability on the part of any of the parties hereto or their
respective Affiliates, officers or directors by reason of the execution hereof
(i) except as set forth in Sections 7.3, 7.4, 7.5, 7.9 and 13.2 and Article 14
hereof, which sections and article shall survive the termination of this
Agreement, and (ii) nothing herein shall relieve any party hereto from liability
for any breach hereof.
14. Miscellaneous.
14.1 Knowledge. As used in this Agreement, the term "knowledge," with
respect to the Seller or the Company, means the actual knowledge, after due
inquiry, of any of the Company's executive officers set forth on Schedule
14.1(I) annexed hereto and, with respect to the Buyer, means the actual
knowledge of any of its executive officers set forth on Schedule 14.1(II)
annexed hereto.
14.2 No Rescission. Anything herein to the contrary notwithstanding,
absent fraud, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of any party hereto,
after the consummation of the purchase and sale of the Shares contemplated
hereby, to rescind this Agreement or any of the transactions contemplated
hereby.
14.3 Post-Closing Liabilities; Mitigation of Damages. The Seller shall
have no liability under any provision of this Agreement for any liabilities
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and damages to the extent that such liabilities and damages relate to actions
taken by the Buyer or its Affiliates, including, without limitation, the Company
and the Subsidiaries, after the Closing Date, and in no event shall the Seller
be liable for consequential damages. Each party hereto shall take and shall
cause its Affiliates to take all reasonable steps to mitigate all possible
liabilities and damages upon and after becoming aware of any event which could
reasonably be expected to give rise to such liabilities and damages.
14.4 Entire Agreement. This Agreement (together with the Schedules and
Exhibits annexed hereto) contains, and is intended as, a complete statement of
all of the terms of the arrangements between the parties with respect to the
matters provided for, and supersedes any previous agreements and understandings
between the parties with respect to those matters.
14.5 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with the Laws of the State of New York, without
regard to its principles of conflicts of law.
14.6 Headings and Titles. The section headings and article titles of this
Agreement are for reference purposes only and are to be given no effect in the
construction or interpretation of this Agreement.
14.7 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given when delivered personally, mailed
by registered mail, return receipt requested, or sent by recognized overnight
delivery service to the parties at the following addresses (or to such other
address as a party may have specified by notice given to the other party
pursuant to this provision):
(a) If to the Buyer, to:
63
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DMAC Acquisition Corp.
c/o McCown De Leeuw & Co., Inc.
101 East 52nd Street
Thirty-first Floor
New York, New York 10022
Attention: David De Leeuw
Telecopier No.: (212) 355-6283
with a copy to:
White & Case, LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank Schiff, Esq.
Telecopier No.: (212) 364-8113
(b) If to the Seller, to:
Heritage Media Corporation
c/o News America Incorporated
1211 Avenue of the Americas
New York, New York 10036
Attention: Arthur M. Siskind, Esq.
Senior Executive Vice President
and Group General Counsel
The News Corporation Limited
Telecopier No.: (212) 768-2029
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attention: Joel I. Papernik, Esq.
Telecopier No.: (212) 697-6686
14.8 Separability. If at any time any of the covenants or the provisions
contained herein shall be deemed invalid or unenforceable by the Laws of the
jurisdiction wherein it is to be enforced, such covenants or provisions shall be
considered divisible as to such portion and such covenants or provisions shall
become and be immediately amended and reformed to include only such covenants or
provisions as are enforceable by the court or other body having jurisdiction of
this Agreement; and
64
<PAGE>
the parties agree that such covenants or provisions, as so amended and reformed,
shall be valid and binding as though the invalid or unenforceable portion had
not been included herein.
14.9 Amendment; Waiver. No provision of this Agreement may be amended or
modified except by an instrument or instruments in writing signed by the parties
hereto. Any party may waive compliance by another with any of the provisions of
this Agreement. No waiver of any provision hereof shall be construed as a waiver
of any other provision. Any waiver must be in writing.
14.10 Publicity. Prior to the Closing Date, the Buyer, on the one hand,
and the Seller and the Company, on the other, shall not issue any press release
or public announcement of any kind concerning the transactions contemplated by
this Agreement without the prior written consent of the other unless such
disclosure is required to be made by law.
14.11 Assignment and Binding Effect. Neither of the parties hereto may
assign any of its rights or delegate any of its duties under this Agreement
without the prior written consent of the others. All of the terms and provisions
of this Agreement shall be binding on, and shall inure to the benefit of, the
respective successors and permitted assigns of the parties
14.12 No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their respective successors and assigns and they shall not be
construed as conferring and are not intended to confer any rights on any other
Persons.
14.13 Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, and each party thereto may become a
party hereto by executing a counterpart hereof. This Agreement and any
counterpart so executed shall be deemed to be one and the same instrument.
14.14 Interpretation. Article titles, headings to sections and any table
of contents are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation hereof.
The Schedules and Exhibits referred to herein shall be construed with and as
65
<PAGE>
an integral part of this Agreement to the same extent as if they were set forth
verbatim herein. Unless a Schedule annexed hereto is expressly intended to
include items, documents, matters or statements that are "material" or that
would have a "Material Adverse Effect," or words of similar import, the
inclusion of any item, document, matter or statement on any Schedule annexed
hereto shall not be deemed to imply that such item, document, matter or
statement is "material" or will have a "Material Adverse Effect," or words of
similar import. As used herein, except as the context may otherwise require,
"include," "includes" and "including" are deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import; "hereof," "herein," "hereunder" and comparable terms refer to the
entirety hereof and not to any particular article, section or other subdivision
hereof or attachment hereto; references to any gender include the other; the
singular includes the plural and vice versa; references to any agreement or
other document are to such agreement or document as amended and supplemented
from time to time; and references to "Article," "Section" or another subdivision
or to an "Exhibit" or "Schedule" are to an article, section or subdivision
hereof or an "Exhibit" or "Schedule" annexed hereto.
14.15 Guaranty by the Fund. The Fund hereby guarantees (i) the due and
punctual payment in full and not merely the collectibility of all sums to be
paid prior to or at the Closing by the Buyer under the terms of this Agreement
in an amount not to exceed $72,000,000 in the aggregate; and (ii) the
performance and observance of all covenants to be observed and performed prior
to or at the Closing by the Buyer pursuant to this Agreement or pursuant to any
other document or instrument delivered by the Buyer or any of the Buyer's
Affiliates in connection herewith. The liability of the Fund is primary, direct
and immediate and not conditional or contingent upon the pursuit by the Seller
of any remedies which it may have against the Buyer with respect to the
obligations arising out of this Agreement. No exercise or non-exercise by the
Seller of any right given it hereunder or any other instrument or document
delivered to the Seller pursuant hereto shall in any way affect the obligation
of the Fund. Without limiting the generality of the foregoing, the Seller shall
not be required to make
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a demand on the Buyer or any other party or otherwise pursue remedies against
the Buyer before or after enforcing their rights and remedies hereunder against
the Fund. The Fund hereby expressly waives notice of default under the terms of
this Agreement and any other document delivered in connection herewith, demand
for payment, performance of, or enforcement of any terms or provisions of this
Agreement or any other document delivered herewith, and all other demands and
notices otherwise required by law. The obligation of the Fund to make payment in
accordance with the terms of this Section 14.15 shall not be impaired, modified,
changed, released in any manner whatsoever by any impairment, modification,
change, release or limitation from liability of the Buyer or its estates in
bankruptcy or reorganization resulting from the operation of any present or
future provision of the United States bankruptcy laws or similar statute or from
the decision of any court.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HERITAGE MEDIA CORPORATION
By: /s/ John P. Nallen
---------------------------------
Name: John P. Nallen
-------------------------------
Title:
------------------------------
DMAC ACQUISITION CORP.
By: /s/ David De Leeuw
---------------------------------
Name: David De Leeuw
-------------------------------
Title: President
------------------------------
AGREED TO AND ACKNOWLEDGED
WITH RESPECT TO SECTION 14.15:
MCCOWN DE LEEUW & CO. IV, L.P.
By: /s/ David De Leeuw
----------------------------
Name: David De Leeuw
--------------------------
Title: Managing Director
-------------------------
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Exhibit 2.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DMAC HOLDINGS, INC.,
DMAC MERGER CORP.
AND
AMERICOMM HOLDINGS, INC.
Dated as of May 18, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE MERGER AND RELATED MATTERS.............................................................................2
1.01 The Merger...........................................................................................2
1.02 Conversion of Stock..................................................................................2
1.03 Dissenting Stock.....................................................................................3
1.04 Surrender of Certificates............................................................................3
1.05 No Further Rights of Transfers.......................................................................4
1.06 Warrants.............................................................................................4
1.07 Stock Option and Other Plans.........................................................................4
1.08 Certificate of Incorporation of the Surviving Corporation............................................5
1.09 By-Laws of the Surviving Corporation.................................................................5
1.10 Directors and Officers of the Surviving Corporation..................................................5
1.11 Closing..............................................................................................5
1.12 Working Capital Settlement...........................................................................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES.............................................................................6
2.01 Representations and Warranties of the Company........................................................6
(a) Due Organization, Good Standing and Corporate Power..........................................6
(b) Authorization and Validity of Agreement......................................................7
(c) Capitalization...............................................................................7
(d) Consents and Approvals; No Violations........................................................8
(e) Financial Statements; Commission Filings.....................................................9
(f) Absence of Certain Changes..................................................................10
(g) Title to Properties; Encumbrances...........................................................10
(h) Leases......................................................................................10
(i) Material Contracts..........................................................................11
(j) Compliance with Laws........................................................................11
(k) Litigation..................................................................................11
(l) Employee Benefit Plans......................................................................11
(m) Employment Relations and Agreements.........................................................12
(n) Taxes.......................................................................................13
(o) Liabilities.................................................................................13
(p) Intellectual Properties.....................................................................14
(q) Environmental Laws and Regulations..........................................................14
(r) Conduct of Business.........................................................................15
(s) Broker's or Finder's Fee....................................................................15
2.02 Representations and Warranties of Parent and Sub....................................................15
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
(a) Due Organization; Good Standing and Corporate Power.........................................15
(b) Authorization and Validity of Agreement.....................................................15
(c) Consents and Approvals; No Violations.......................................................16
(d) Litigation..................................................................................16
(e) Broker's or Finder's Fee....................................................................16
(f) Financing...................................................................................16
ARTICLE III
TRANSACTIONS PRIOR TO CLOSING DATE........................................................................17
3.01 Access to Information Concerning Properties and Records............................................17
3.02 Confidentiality....................................................................................17
3.03 Conduct of the Business of the Company Pending the Closing Date....................................17
3.04 Reasonable Best Efforts............................................................................18
3.05 Exclusive Dealing..................................................................................18
ARTICLE IV
CONDITIONS PRECEDENT TO MERGER............................................................................19
4.01 Conditions to Each Party's Obligations.............................................................19
(a) No Injunction...............................................................................19
(b) Statutes....................................................................................19
(c) HSR Act.....................................................................................19
4.02 Conditions to Obligations of the Company...........................................................19
(a) Parent Representations and Warranties.......................................................19
(b) Performance by Parent.......................................................................19
(c) Certificate.................................................................................20
4.03 Conditions to Obligations of Parent and Sub........................................................20
(a) Company Representations and Warranties......................................................20
(b) Performance by the Company..................................................................20
(c) No Material Adverse Change..................................................................20
(d) Certificate.................................................................................20
(e) Employee Notes..............................................................................20
(f) Heller Credit Agreement.....................................................................20
ARTICLE V
TERMINATION AND ABANDONMENT...............................................................................20
5.01 Termination........................................................................................21
5.02 Effect of Termination..............................................................................21
ARTICLE VI
MISCELLANEOUS.............................................................................................22
6.01 Fees and Expenses..................................................................................22
6.02 Representations and Warranties.....................................................................22
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
6.03 Transfer Taxes.....................................................................................22
6.04 Extension; Waiver..................................................................................22
6.05 Public Announcements...............................................................................22
6.06 Indemnification....................................................................................22
6.07 Notices............................................................................................23
6.08 Entire Agreement...................................................................................23
6.09 Binding Effect; Benefit; Assignment................................................................24
6.10 Amendment and Modification.........................................................................24
6.11 Further Actions....................................................................................24
6.12 Headings...........................................................................................24
6.13 Counterparts.......................................................................................24
6.14 Applicable Law.....................................................................................24
6.15 Severability.......................................................................................25
6.16 Certain Definitions................................................................................26
</TABLE>
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 18, 1998 (this
"Agreement"), by and among DMAC Holdings, Inc., a Delaware corporation
("Parent"), DIMAC Merger Corp., a Delaware corporation and an indirect
wholly-owned subsidiary of Parent ("Sub"), and AmeriComm Holdings, Inc., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the acquisition of the Company by Parent; and
WHEREAS, to complete such acquisition, the respective Boards of
Directors of Parent, Sub and the Company, have approved the merger of Sub with
and into the Company (the "Merger"), pursuant to and subject to the terms and
conditions of this Agreement; and
WHEREAS, the Directors of the Company have unanimously determined
that the Merger is fair to, and in the best interests of, the holders of the
capital stock of the Company, approved the Merger and this Agreement and the
transactions contemplated hereby and recommended the approval of the Merger and
approval and adoption of this Agreement by the stockholders of the Company; and
WHEREAS, the stockholders of the Company have by written consent
approved the Merger and this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE MERGER AND RELATED MATTERS
1.01 The Merger. (a) Subject to the terms and
conditions of this Agreement, at the time of the Closing (as defined in Section
1.11 hereof), a certificate of merger (the "Certificate of Merger") shall be
duly prepared, executed and acknowledged by Sub and the Company in accordance
with the General Corporation Law of the State of Delaware (the "DGCL") and shall
be filed on the Closing Date (as defined in Section 1.11 hereof). The Merger
shall become effective upon the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the provisions
and requirements of the DGCL. The date and time when the Merger shall become
effective is hereinafter referred to as the "Effective Time."
(b) At the Effective Time, Sub shall be merged with and into the
Company and the separate corporate existence of Sub shall cease, and the Company
shall continue as the surviving corporation under the laws of the State of
Delaware under the name of "AmeriComm Holdings, Inc." (the "Surviving
Corporation").
<PAGE>
(c) From and after the Effective Time, the Merger shall have the
effects set forth in Section 259 of the DGCL.
1.02 Conversion of Stock. At the Effective Time:
(a) Each share of (i) Class A Common Stock, par value $0.0001
per share, of the Company (the "Voting Common Stock") and (ii) Class B
Non-Voting Common Stock, par value $0.0001 per share, of the Company
(the "Non-Voting Common Stock" and, collectively with the Voting Common
Stock, the "Common Stock") then issued and outstanding (other than (x)
any shares of Common Stock which are held by any Subsidiary of the
Company or in the treasury of the Company, or which are held, directly
or indirectly, by Parent or any direct or indirect subsidiary of Parent
(including, but not limited to, Sub), all of which shall be cancelled
and none of which shall receive any payment with respect thereto and
(y) shares of Common Stock held by Dissenting Stockholders (as defined
in Section 1.03 hereof)) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and
represent the right to receive the "Merger Consideration" (as
hereinafter defined);
The "Aggregate Merger Consideration" shall be equal to (i)
$200,000,000; less (ii) the amount of Debt (as hereinafter defined) at
Closing; less (iii) the fees specified in Section 2.01(s) of this
Agreement along with the other expenses of the Company in connection
with this Agreement; plus or minus (iv) any adjustments under Section
1.12.
"Debt" shall mean the outstanding principal amount of the Company's
subsidiary's 11 5/8% Senior Notes due 2002 in the aggregate amount of
approximately $100,000,000 and the Company's 12 1/2% Notes due
April 24, 2003 in the aggregate amount of approximately $39,264,000
(collectively, the "Bonds") and accrued interest thereon, and shall
include all funded long term, short term or "line of credit"
indebtedness to banks and other third parties, including the current
portion thereof, accrued interest thereon, capital lease obligations
and, in the case of Debt (other than the Bonds), the amount of any
fees, early retirement or prepayment fees and penalties, and any other
amounts due upon the prepayment thereof.
The "Merger Consideration" shall be the Aggregate Merger
Consideration plus the aggregate exercise price for all Warrants and
Options exercisable immediately prior to the Effective Time divided by
the sum of the total number of shares of Common Stock outstanding
(other than (x) any shares of Common Stock which are held by any
Subsidiary of the Company or in the treasury of the Company, or which
are held, directly or indirectly, by Parent or any direct or indirect
subsidiary of Parent (including, but not limited to, Sub)), at the
Effective Time and the total number of shares of Common Stock for which
Warrants and Options are outstanding at the Effective Time. In
calculating the Merger Consideration, no Warrant or Option shall be
included that would have an exercise price equal to or in excess of the
amount of Merger Consideration if such Warrant or Option were included
in such calculation.
2
<PAGE>
(b) Each share of common stock, par value $0.001 per share, of
Sub then issued and outstanding shall, by virtue of the Merger and
without any action on the part of the holder thereof, become one fully
paid and nonassessable share of common stock, $0.0001 par value, of the
Surviving Corporation.
1.03 Dissenting Stock. Notwithstanding anything in this Agreement
to the contrary but only to the extent required by DGCL, shares of Common Stock
that are issued and outstanding immediately prior to the Effective Time and are
held by holders of Common Stock who comply with all the provisions of Delaware
law concerning the right of holders of Common Stock to dissent from the Merger
and require appraisal of their shares of Common Stock ("Dissenting
Stockholders") shall not be converted into the right to receive the Merger
Consideration but shall become the right to receive such consideration as may be
determined to be due such Dissenting Stockholder pursuant to the law of the
State of Delaware; provided, however, that (i) if any Dissenting Stockholder
shall subsequently deliver a written withdrawal of his or her demand for
appraisal (with the written approval of the Surviving Corporation, if such
withdrawal is not tendered within 60 days after the Effective Time), or (ii) if
any Dissenting Stockholder fails to establish and perfect his or her entitlement
to appraisal rights as provided by applicable law, or (iii) if within 120 days
of the Effective Time neither any Dissenting Stockholder nor the Surviving
Corporation has filed a petition demanding a determination of the value of all
shares of the Common Stock that are issued and outstanding at the Effective Time
and held by Dissenting Stockholders, then such Dissenting Stockholder or
Stockholders, as the case may be, shall forfeit the right to appraisal of such
shares and such shares shall thereupon be deemed to have been converted into the
right to receive, as of the Effective Time, the Merger Consideration, without
interest according to the terms of this Agreement. The Company shall give Parent
and Sub (A) prompt notice of any written demands for appraisal, withdrawals of
demands for appraisal and any other related instruments received by the Company,
and (B) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal. The Company will not voluntarily make any payment with
respect to any demands for appraisal and will not, except with the prior written
consent of Parent, settle or offer to settle any such demand.
1.04 Surrender of Certificates. (a) Concurrently with or following
the Effective Date, upon the surrender for cancellation to Parent of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Common Stock (the "Certificates") Parent shall promptly
pay by wire transfer of immediately available funds to the Person (as defined in
Section 6.16 hereof) entitled thereto the Merger Consideration times the number
of shares represented by such Certificates surrendered. Until so surrendered,
each Certificate shall be deemed, for all corporate purposes, to evidence only
the right to receive upon such surrender the Merger Consideration deliverable in
respect thereof to which such Person is entitled pursuant to this Article I.
Except as otherwise provided in Section 1.12, no interest shall be paid or
accrued in respect of such cash payments.
(b) If the Merger Consideration (or any portion thereof) is to be
delivered to a Person other than the Person in whose name the Certificates
surrendered in exchange therefor are registered, it shall be a condition to the
payment of the Merger Consideration that the Certificates so surrendered shall
be properly endorsed or accompanied by appropriate stock powers and
3
<PAGE>
otherwise in proper form for transfer, that such transfer otherwise be proper
and that the Person requesting such transfer pay to the Parent any transfer or
other taxes payable by reason of the foregoing or establish to the satisfaction
of the Parent that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed, Parent will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with this Article I,
provided that, the Person to whom the Merger Consideration is paid shall, as a
condition precedent to the payment thereof, agree to indemnify the Surviving
Corporation against any claim that may be made against the Surviving Corporation
with respect to the Certificate claimed to have been lost, stolen or destroyed.
1.05 No Further Rights of Transfers. At and after the Effective
Time, each holder of a Certificate shall cease to have any rights as a
stockholder of the Company, except for, in the case of a holder of a Certificate
(other than shares to be cancelled pursuant to Section 1.02(a) hereof and other
than shares held by Dissenting Stockholders), the right to surrender his or her
Certificate in exchange for payment of the Merger Consideration or, in the case
of a Dissenting Stockholder, to perfect his or her right to receive payment for
his or her shares pursuant to Delaware law if such holder has validly perfected
and not withdrawn his or her right to receive payment for his or her shares, and
no transfer of shares of Common Stock shall be made on the stock transfer books
of the Surviving Corporation. Certificates presented to the Surviving
Corporation after the Effective Time shall be cancelled and exchanged for cash
as provided in this Article I. At the close of business on the day of the
Effective Time the stock ledger of the Company with respect to Common Stock
shall be closed.
1.06 Warrants. Immediately prior to the Effective Time, each
outstanding Warrant to purchase Common Stock (the "Warrants"), whether or not
immediately exercisable, shall no longer be exercisable for the purchase of
shares of Common Stock but shall entitle each holder thereof, in cancellation
and settlement therefor to payments in cash (subject to any applicable
withholding taxes, if any, the "Warrant Payment"), equal to the product of (i)
the total number of shares subject to such Warrant as to which such Warrant
could have been exercisable and (y) the excess of the Merger Consideration over
the exercise price per share of Common Stock subject to such Warrant.
1.07 Stock Option and Other Plans. (a) Subject to the provisions of
Section 4.02(d) hereof prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, any Committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide for the
cancellation, effective at the Effective Time of all the outstanding stock
options to purchase Common Stock (the "Options") heretofore granted under any
stock option plan of the Company (the "Stock Plans"). Immediately prior to the
Effective Time, subject to obtaining the consent of any holder of Options, to
the extent necessary, each Option, whether or not then vested or exercisable,
shall no longer be exercisable for the purchase of shares of Common Stock, but
shall entitle each holder thereof, in cancellation and settlement
4
<PAGE>
therefor, to payments in cash (subject to any applicable withholding taxes, the
"Cash Payment"), at the Effective Time, equal to the product of (x) the total
number of shares of Common Stock subject to such Option as to which such Option
could have been exercised as of the Effective Time and (y) the excess of the
Merger Consideration over the exercise price per share of Common Stock subject
to such Option. As provided herein, the Stock Plans and any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any Subsidiary (collectively with
the Stock Plans, referred to as the "Stock Incentive Plans") shall terminate as
of the Effective Time. The Company will take all steps to ensure that neither
the Company nor any of its Subsidiaries is or will be bound by any Options,
other options, warrants, rights or agreements which would entitle any Person,
other than Parent or its affiliates, to own any capital stock of the Surviving
Corporation or any of its subsidiaries or to receive any payment in respect
thereof. The Company will use its reasonable best efforts to obtain all
necessary consents to ensure that after the Effective Time, the only rights of
the holders of Options to purchase shares of Common Stock in respect of such
Options will be to receive the Cash Payment in cancellation and settlement
thereof.
(b) All Stock Plans shall terminate as of the Effective Time and
the Company shall use its reasonable best efforts to ensure that following the
Effective Time no holder of an Option or any participant in any Stock Plan shall
have any right thereunder to acquire any capital stock of the Company, Parent or
the Surviving Corporation, except as provided in Section 1.07(a).
1.08 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation.
1.09 By-Laws of the Surviving Corporation. The By-Laws of the
Company, as in effect immediately prior to the Effective Time, shall be the
By-Laws of the Surviving Corporation.
1.10 Directors and Officers of the Surviving Corporation. At the
Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, each of such directors to
hold office, subject to the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until the next annual
stockholders' meeting of the Surviving Corporation and until their respective
successors shall be duly elected or appointed and qualified. At the Effective
Time, the officers of the Company immediately prior to the Effective Time shall,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of the Surviving Corporation, be the officers of the Surviving
Corporation until their respective successors shall be duly elected or appointed
and qualified.
1.11 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of White & Case, 1155 Avenue of the Americas, New York, New
York, as soon as practicable after the last of the conditions set forth in
Article IV hereof is fulfilled or waived
5
<PAGE>
(subject to applicable law) but in no event later than the fifth business day
thereafter, or at such other time and place and on such other date as Parent and
the Company shall mutually agree (the "Closing Date").
1.12 Working Capital Settlement.
(a) Prior to the Closing Date, the Company shall estimate its
working capital position (the "Working Capital") as of the close of business on
the Closing Date. Working Capital shall be equal to the sum of (i) cash and cash
equivalents, plus (ii) the book value of accounts receivable after the allowance
for doubtful accounts, plus (iii) the book value of inventory, including all
work-in-process and finished goods, after allowance for all obsolete or
unsaleable inventory, plus (iv) the book value of all accounts classified as
current assets other than cash, cash equivalents, accounts receivable,
inventory, income tax receivable and deferred income tax, including all utility
deposits, rental deposits and equipment deposits (even though such deposits are
characterized as long-term assets); less the sum of (a) bank overdraft, plus (b)
the book value of all accounts payable, plus (c) the book value of accrued
payroll, payroll taxes and deductions, as classified as a current liability,
plus (d) the book value of advance billings, plus (e) taxes (other than income
taxes) payable, plus (f) the book value of accrued expenses as classified as a
current liability, excluding all accruals of interest, fees and penalties on
Debt. The book value of all amounts shall be as shown on the Company's financial
statements prepared in accordance with generally accepted accounting principles,
consistently applied with the Financial Statements ("GAAP"). The Company shall
provide Parent with a copy of the calculation of the Working Capital three
business days prior to the Closing Date. Parent and the Company shall mutually
agree to the Working Capital Statement (the "Working Capital Statement") on or
before the Closing Date and the Working Capital Statement as amended on the
Closing Date (the "Final Working Capital Statement") shall become final and
binding on Parent and the Shareholders.
(b)(i) If the Working Capital as set forth in the Final Working
Capital Statement is less than $25,298,000, then the Aggregate Merger
Consideration shall be decreased by such difference. If the Working Capital as
set forth in the Final Working Capital Statement is greater than $25,298,000,
then the Aggregate Merger Consideration shall be increased by such difference.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties of the Company. The Company
hereby represents and warrants to Parent and Sub as follows:
(a) Due Organization, Good Standing and Corporate Power. Each
of the Company and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Each
of the Company
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and its Subsidiaries is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be so qualified or licensed and
in good standing would not have a material adverse effect on the
business, operations, results of operations, or financial
condition (the "Condition") of the Company and its Subsidiaries
taken as a whole. The Company has made available to Parent and Sub
complete and correct copies of the Certificate of Incorporation
and By-Laws of the Company and the comparable governing documents
of each of its Subsidiaries, in each case as amended to the date
of this Agreement.
(b) Authorization and Validity of Agreement. The Company has
full power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company, and the consummation by it of the
transactions contemplated hereby, have been duly authorized and
approved by its Board of Directors and its stockholders and no other
corporate action on the part of the Company is necessary to authorize
the execution, delivery and performance of this Agreement by the
Company and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by the Company and,
assuming the due execution of this Agreement by Parent and Sub, is a
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement
of creditors' rights generally and to general equitable principles.
(c) Capitalization. (i) The authorized capital stock of the
Company consists of 4,000,000 shares of Voting Common Stock, 300,000
shares of Non-Voting Common Stock and 250,000 shares of preferred
stock, par value $0.0001 per share, (the "Preferred Stock"). As of
December 31, 1997, (A) 2,690,464 shares of Voting Common Stock were
issued and outstanding; (B) no shares of Non-Voting Common Stock were
issued and outstanding; (C) no shares of Preferred Stock were issued
and outstanding; (D) 143,589 shares of Voting Common Stock were
reserved for issuance upon the exercise of outstanding Warrants; (E)
265,636 shares of Voting Common Stock were reserved for issuance upon
the exercise of certain Options and (F) 61,820 shares of Voting Common
Stock were held in the treasury of the Company. All issued and
outstanding shares of capital stock of the Company have been validly
issued and are fully paid and nonassessable. Except as set forth in
this Section 2.01(c) or in Section 2.01(c) of the Company's disclosure
letter (the "Company Disclosure Letter"), delivered concurrently with
the delivery of this Agreement, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding and (ii) there
are not as of the date hereof, and at the Effective Time there will not
be, any outstanding or authorized options, warrants, rights,
subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to Common Stock or any other shares
of capital stock of the Company, pursuant to which
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<PAGE>
the Company is or may become obligated to issue shares of Common
Stock, any other shares of its capital stock or any securities
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of the capital stock of the Company. The
Company has no authorized or outstanding bonds, debentures, notes
or other indebtedness the holders of which have the right to vote
(or convertible or exchangeable into or exercisable for securities
having the right to vote) with the stockholders of the Company or
any of its Subsidiaries on any matter ("Voting Debt"). After the
Effective Time, the Surviving Corporation will have no obligation
to issue, transfer or sell any shares of or common stock of the
Surviving Corporation pursuant to any Plan (as defined in
Section 2.01(l)).
(ii) Section 2.01(c)(ii) of the Company Disclosure Letter
lists all of the Company's Subsidiaries. All of the outstanding shares
of capital stock of each of the Company's Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and are
owned, of record and beneficially, by the Company, free and clear of
all liens, encumbrances, options or claims whatsoever. Except as set
forth on Section 2.01(c)(ii) of the Company Disclosure Letter, no
shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized
options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or
other commitments, contingent or otherwise, relating to the capital
stock of any Subsidiary, pursuant to which such Subsidiary is or may
become obligated to issue any shares of capital stock of such
Subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such Subsidiary.
Other than as set forth on Section 2.01(c)(ii) of the Company
Disclosure Letter, there are no restrictions of any kind which prevent
the payment of dividends by any of the Company's Subsidiaries. Except
as set forth on Section 2.01(c)(ii) of the Company Disclosure Letter,
the Company does not own, directly or indirectly, any capital stock or
other equity interest in any Person or have any direct or indirect
equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan,
capital contribution or otherwise) to or in any Person. The Company's
Subsidiaries have no Voting Debt.
(d) Consents and Approvals; No Violations. Assuming (i) the
filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), are made and the waiting period
thereunder has been terminated or has expired, (ii) the filing of the
Certificate of Merger and other appropriate merger documents, if any,
as required by DGCL, are made and (iii) approval of the Merger by
holders of capital stock of the Company representing a majority of the
votes entitled to be cast at a meeting of the stockholders of the
Company, as required by the DGCL, is received, the execution and
delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby will not: (1) violate
any provision of the Certificate of Incorporation or By-Laws of the
Company or the comparable governing documents of any of its
Subsidiaries; (2) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any governmental or regulatory
8
<PAGE>
body, agency or authority applicable to the Company or any of its
Subsidiaries or by which any of their respective properties or assets
may be bound; (3) except as set forth in Section 2.01(d) of the
Company Disclosure Letter, require any filing with, or permit, consent
or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority; or (4) except as set forth in
Section 2.01(d) of the Company Disclosure Letter, result in a
violation or breach of, conflict with, constitute (with or without due
notice or lapse of time or both) a material default (or give rise to
any right of termination, cancellation, payment or acceleration)
under, or result in the creation of any material Encumbrance (as
defined herein) upon any of the properties or assets of the Company or
any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party,
or by which it or any of their respective properties or assets are
bound or subject except for in the case of clauses (3) and (4) above
for such filing, permit, consent, approval or violation, which would
not have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole, or would not prevent or materially
delay consummation of the transactions contemplated by this Agreement.
(e) Financial Statements; Commission Filings. (i) The Company
has heretofore furnished Parent with the consolidated balance sheets of
the Company and its Subsidiaries as at December 31, 1997 and 1996 and
the related consolidated statements of operations, changes in
stockholder's equity and cash flows for the periods then ended, audited
by Arthur Andersen LLP (the "Audited Financial Statements") and the
unaudited consolidated balance sheet of the Company as at March 31,
1997, and the related unaudited consolidated statements of operations,
changes in stockholders' equity and cash flows for the three month
period then ended (the "Unaudited Financial Statements" and together
with the Audited Financial Statements, the "Financial Statements"). The
consolidated unaudited balance sheet as at March 31, 1998, is sometimes
referred to herein as the "Balance Sheet" and March 31, 1998, is
sometimes herein referred to as the "Balance Sheet Date". Such
Financial Statements including the footnotes thereto, except as
indicated therein, have been prepared in accordance with generally
accepted accounting principles and fairly present in all material
respects the financial position of the Company and its Subsidiaries and
the results of their operations and cash flows at such dates and for
such periods except that the Unaudited Financial Statements do not
contain footnotes and are subject to year-end adjustments.
(ii) The Company has filed all forms, reports and documents
with the Securities and Exchange Commission (the "Commission") required
to be filed by it pursuant to the Federal securities laws and the
Commission rules and regulations thereunder, and all forms, reports and
documents filed with the Commission by the Company (collectively, the
"Commission Filings") have complied in all material respects with the
applicable requirements of the Federal securities laws and the
Commission rules and regulations promulgated thereunder. As of their
respective dates, the Commission Filings did not contain any untrue
statement of a material fact or omit to
9
<PAGE>
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
(f) Absence of Certain Changes. Other than (i) as set forth in
Section 2.01(f) of the Company Disclosure Letter, (ii) any change
resulting from general economic, financial or market conditions, or
(iii) any change resulting from conditions or circumstances generally
affecting the business in which the Company and/or its Subsidiaries
operate, since the Balance Sheet Date, there has been no material
adverse change in the Condition of the Company and its Subsidiaries
taken as a whole.
(g) Title to Properties; Encumbrances. Except as set forth in
Section 2.01(g) of the Company Disclosure Letter, the Company and each
of its Subsidiaries has good and valid title to (i) all of its material
tangible properties and assets (real and personal), including, without
limitation, all the material properties and assets reflected in the
Balance Sheet except as indicated in the notes thereto and except for
properties and assets reflected in the Balance Sheet which have been
sold or otherwise disposed of in the ordinary course of business after
the Balance Sheet Date, and (ii) all the material tangible properties
and assets purchased by the Company and any of its Subsidiaries since
the Balance Sheet Date except for such properties and assets which have
been sold or otherwise disposed of in the ordinary course of business;
in each case subject to no encumbrance, lien, security interest, charge
or other restriction (each an "Encumbrance") of any kind or character,
except as reflected in Section 2.01(g) of the Company Disclosure Letter
and except for (1) Encumbrances reflected on the Balance Sheet, (2)
Encumbrances consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially
detract from the value of, or impair the use of, such property by the
Company or any of its Subsidiaries in the operation of its respective
business, (3) Encumbrances arising by operation of law, (4)
Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent or the validity of which
are being contested in good faith by appropriate proceedings, and (5)
Encumbrances which do not have a material adverse effect on the
Condition of the Company and its Subsidiaries, taken as a whole.
(h) Leases. Section 2.01(h) of the Company Disclosure Letter
contains a list of all material leases to which the Company or any
Subsidiary is a party requiring an annual aggregate payment of at least
$100,000. Except as otherwise set forth in Section 2.01(h) of the
Company Disclosure Letter, each lease set forth therein is in full
force and effect; all rents and additional rents due to date from the
Company or such Subsidiary on each such lease have been paid; in each
case, neither the Company nor any Subsidiary has received notice that
it is in material default thereunder; and, to the knowledge of the
Company there exists no material event, occurrence, condition or act
(including the consummation of the Merger or the other transactions
contemplated hereby) which, with the giving of notice, the lapse of
time or the happening of any further event or condition, would become a
material default by the Company or any Subsidiary under such lease.
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<PAGE>
(i) Material Contracts. Except as set forth in Section
2.01(h), 2.01(i) or 2.01(m) of the Company Disclosure Letter, neither
the Company nor any Subsidiary has or is bound by (a) any agreement,
contract or commitment relating to the employment of any Person by the
Company or any Subsidiary which cannot be terminated by the Company or
the Subsidiary upon notice of 60 days or less without penalty or
premium and involve annual compensation in excess of $100,000 annually,
(b) any agreement, contract or commitment materially limiting the
freedom of the Company or any Subsidiary to engage in any line of
business or to compete with any other Person or (c) any agreement,
contract or commitment not entered into in the ordinary course of
business which materially affects the business of the Company and the
Subsidiaries taken as a whole and is not cancelable without penalty
within 90 days.
(j) Compliance with Laws. (i) The Company and its Subsidiaries
are in compliance with all applicable laws and regulations and all
orders, judgments and decrees relating to its business and operations
except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a
whole or would prevent or materially delay consummation of the
transactions contemplated by this Agreement.
(ii) The Company and each of its Subsidiaries possess all
licenses, certificates of authority, certificates of need, permits or
other authorizations and regulatory approvals required by law (a
"License") necessary for the ownership of its properties and the
conduct of its business as presently conducted in each jurisdiction in
which the Company and such Subsidiary is required to possess a License,
except where the failure to possess such a License would not have a
material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole. All such Licenses are in full force and
effect and neither the Company nor any Subsidiary has received any
written notice of any event, inquiry, investigation or proceeding
threatening the validity of such Licenses, except where the failure of
such Licenses to be in full force and effect or such event, inquiry,
investigation or proceeding would not have a material adverse effect on
the Condition of the Company and its Subsidiaries, taken as a whole.
(k) Litigation. Except as set forth in Section 2.01(k) of the
Company Disclosure Letter, there is no action, suit, proceeding at law
or in equity, or any arbitration or any administrative or other
proceeding by or before (or to the knowledge of the Company any
investigation by) any governmental or other instrumentality or agency,
pending, or, to the knowledge of the Company, threatened, against or
affecting the Company or any of its Subsidiaries, or any of their
properties or rights which, is reasonably likely to have a material
adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole or would prevent or materially delay consummation of
the transactions contemplated by this Agreement.
(l) Employee Benefit Plans. Each "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), maintained or contributed to by the
Company or any of its Subsidiaries
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<PAGE>
(each, a "Plan" and collectively, the "Plans") is listed in Section
2.01(l) of the Company Disclosure Letter, attached hereto. Except as
set forth in Section 2.01(l) of the Company Disclosure Letter, or to
the extent that any breach of the representations set forth in this
sentence would not have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole: (a) each Plan is in
compliance with applicable law and has been administered and operated
in accordance with its terms; (b) each Plan which is intended to be
"qualified" (within the meaning of Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code")), has received a
favorable determination letter from the Internal Revenue Service and,
to the knowledge of the Company, no event has occurred and no
condition exists which could reasonably be expected to result in the
revocation of any such determination letter; (c) no Plan is a
"multiemployer plan," within the meaning of Section 4001(a)(3) of
ERISA; (d) the actuarial present value of the accumulated plan
benefits (whether or not vested) under any Employee Benefit Plan
covered by Title IV of ERISA as of the close of its most recent plan
year did not exceed the fair value of the assets allocable thereto;
(e) no Employee Benefit Plan subject to Section 412 of the Code or
Section 302 of ERISA has incurred any accumulated funding deficiency
within the meaning of Section 412 of the Code or Section 302 of ERISA,
or obtained a waiver of any minimum funding standard or an extension
of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA; (f) to the knowledge of the Company, no
"disqualified person" or "party in interest" (as defined in Section
4975(e)(2) of the Code and Section 3(14) of ERISA, respectively) has
engaged in any transaction in connection with a Plan that could
reasonably be expected to result in the imposition of a penalty
pursuant to Section 502(i) of ERISA or a tax pursuant to Section
975(a) of the Code; and (g) no liability, claim, action or
litigation, has been made, commenced or, to the knowledge of the
Company, threatened with respect to any Plan (other than routine
claims for benefits payable in the ordinary course and appeals of such
claims).
(m) Employment Relations and Agreements. Except as set forth
in Section 2.01(m) of the Company Disclosure Letter or as would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole, (i) each of the Company and its
Subsidiaries is in substantial compliance with all federal, state or
other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and
is not engaged in any unfair labor practice; (ii) no representation
question exists respecting the employees of the Company or any of its
Subsidiaries; (iii) no collective bargaining agreement is currently
being negotiated by the Company or any of its Subsidiaries and neither
the Company nor any of its Subsidiaries is a party to a collective
bargaining agreement; and (v) neither the Company nor any of its
Subsidiaries has experienced any labor difficulty during the last year.
Except as disclosed in Section 2.01(m) of the Company Disclosure
Letter, there exist no employment, consulting, severance,
indemnification agreements or deferred compensation agreements between
the Company and any director, officer or employee of the Company or any
agreement that would give any Person the right to receive any payment
from the Company as a result of the Merger.
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<PAGE>
(n) Taxes. (A) (i) Tax Returns. The Company and
each of its Subsidiaries has filed or caused to be filed or will file
or cause to be filed with the appropriate taxing authorities all
material returns, statements, forms and reports ("Returns") for Taxes
that are required to be filed by, or with respect to, the Company and
its Subsidiaries on or prior to the Effective Time. As used herein,
"Tax" or "Taxes" shall mean all taxes including, without limitation,
all U.S. federal, state, local and foreign income, franchise, profits,
capital gains, capital stock, transfer, sales, use, value added,
occupation, property, excise, severance, windfall profits, stamp,
license, payroll, social security, withholding and other taxes, all
estimated taxes, deficiency assessments, additions to tax, penalties
and interest.
(ii) Payment of Taxes. All material Tax liabilities of the
Company and its Subsidiaries or for which the Company and its
Subsidiaries may be liable for all taxable years or other taxable
periods (including portions thereof) prior to the Effective Time have
been paid or adequately disclosed as a liability on the books and
records of the Company and its Subsidiaries in accordance with GAAP.
(iii) Other Tax Matters. Section 2.01(n) of the Company
Disclosure Letter sets forth (I) each taxable year or other taxable
period of the Company and its Subsidiaries for which an audit or other
examination of Taxes by any taxing authority is currently in progress
that, if determined adversely to the Company or its Subsidiaries, would
result in a material Tax liability of the Company or its Subsidiaries
after the Closing Date, and (II) the taxable years or other taxable
periods of the Company and its Subsidiaries which, for income tax
purposes, will not be subject to the normally applicable statute of
limitations because of waivers or agreements given by the Company or
its Subsidiaries.
(iv) Acquisition Indebtedness. No indebtedness of the Company
consists of "corporate acquisition indebtedness" within the meaning of
Section 279 of the Code.
(B) Except as provided in Section 2.01(n) of the Company
Disclosure Letter, neither the Company, nor any of its Subsidiaries has
been included in any "consolidated," "unitary" or "combined" Return
provided for under the laws of any jurisdiction with respect to Taxes
for any taxable period for which the statute of limitations has not
expired.
(C) Except as disclosed in Section 2.01(n) of the Company
Disclosure Letter, there are no tax sharing or tax allocation
agreements in effect between the Company or any of its Subsidiaries and
any other party under which Parent, the Company or any Subsidiary could
be liable for any material Taxes or other claims of any party.
(o) Liabilities. Except as set forth in Section 2.01(o) of the
Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has any material claims, liabilities or indebtedness,
contingent or otherwise, required to be set forth on the Balance Sheet
in accordance with generally accepted accounting principles except as
set forth in the Balance Sheet or referred to in the footnotes thereto,
and except for liabilities incurred subsequent to the Balance Sheet
Date in the ordinary course of business.
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(p) Intellectual Properties. The Company and its Subsidiaries
own or possess adequate licenses or other valid rights to use all
material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection
with the business of the Company and its Subsidiaries as currently
conducted, and the Company is unaware of any assertion or claim
challenging the validity of any of the foregoing which, individually or
in the aggregate, would have a material adverse effect on the Condition
of the Company and its Subsidiaries taken as a whole. To the knowledge
of the Company, the conduct of the business of the Company and its
Subsidiaries as currently conducted does not conflict in any way with
any patent, patent right, license, trademark, trademark right, trade
name, trade name right, service mark or copyright of any third party
that, individually or in the aggregate, would have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a
whole.
(q) Environmental Laws and Regulations. Except as set forth on
Section 2.01(q) of the Company Disclosure Letter or except as would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole, (a) Hazardous Materials have not been
(i) generated, used, treated or stored on, or transported to or from,
any Company Property by the Company, or (ii) Released or disposed of on
any Company Property by the Company, except in the case of clause (i)
or (ii) in compliance with Environmental Law and so as not to give rise
for an Environmental Claim, (b) the Company and each of its
Subsidiaries are in compliance applicable with Environmental Laws and
the requirements of any permits issued under such Environmental Laws
and (c) there are no past, pending or threatened material Environmental
Claims against the Company or any of its Subsidiaries.
For purposes of this Agreement, the following terms shall have
the following meanings: (A) "Company Property" means any real property
and improvements owned, leased, or operated by the Company or any of
its Subsidiaries; (B)"Hazardous Materials" means (i) any petroleum or
petroleum products, radioactive materials or friable asbestos; (ii) any
chemicals, materials or substances defined as "hazardous substances,"
under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq.
("CERCLA"); (C) "Environmental Law" means any federal, state or local
statute, law, rule, regulation, ordinance or code in effect and in each
case as amended as of the date hereof and Closing Date, relating to the
environment or Hazardous Materials, including without limitation
CERCLA, the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean
Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. Section 3808 et seq.; and (D) "Environmental Claims"
means regulatory or judicial actions, suits, claims, notices of
noncompliance or violation, or proceedings arising under
Environmental Law (for purposes of this subclause (D), "Claims")
including (i) Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial actions or
14
<PAGE>
damages pursuant to applicable Environmental Law and (ii) Claims by any
third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from injury to the environment; and (E) "Release"
means disposing, discharging, injecting, spilling, leaking, leaching,
dumping, emitting, escaping, emptying, seeping, placing and the like,
into or upon any land or water or air, or otherwise entering into the
environment.
(r) Conduct of Business. Since the Balance Sheet Date, except
(a) as set forth in Section 2.01(r) of the Company Disclosure Letter or
(b) as contemplated or expressly required or permitted by this
Agreement, the Company has not taken any action which, if taken
subsequent to the execution of this Agreement and on or prior to the
Closing Date, would constitute a material breach of the Company's
agreements set forth in Section 3.03 of this Agreement.
(s) Broker's or Finder's Fee. Except for Goldman Sachs & Co.
and MDC Management Company II, L.P. (whose fees and expenses will be
paid as contemplated by Section 1.02), no agent, broker, Person or firm
acting on behalf of the Company is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the parties hereto,
or from any Person controlling, controlled by, or under common control
with any of the parties hereto, in connection with this Agreement or
any of the transactions contemplated hereby.
2.02 Representations and Warranties of Parent and Sub. Each of
Parent and Sub represents and warrants to the Company as follows:
(a) Due Organization; Good Standing and Corporate Power.
Parent is a corporation duly organized and validly existing and in good
standing under the laws of the State of Delaware. Sub is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware.
(b) Authorization and Validity of Agreement. Each of Parent
and Sub has the requisite corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Parent and Sub, and the
consummation by each of them of the transactions contemplated hereby,
have been duly authorized by the respective Boards of Directors of
Parent and Sub. No other corporate action on the part of either Parent
or Sub is necessary to authorize the execution, delivery and
performance of this Agreement by each of Parent and Sub and the
consummation of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by each of Parent and Sub and is a
valid and binding obligation of each of Parent and Sub, enforceable
against each of Parent and Sub in accordance with its terms, except
that such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and general equitable principles.
15
<PAGE>
(c) Consents and Approvals; No Violations. Assuming (i) the
filings required under the HSR Act are made and the waiting period
thereunder has been terminated or has expired and (ii) the filing of
the Certificate of Merger and other appropriate merger documents, if
any, as required by the laws of the State of Delaware, the execution
and delivery of this Agreement by Parent and Sub and the consummation
by Parent and Sub of the transactions contemplated hereby will not: (1)
violate any provision of the Certificate of Incorporation or By-Laws of
Parent or Sub; (2) violate any statute, ordinance, rule, regulation,
order or decree of any court or of any governmental or regulatory body,
agency or authority applicable to Parent or Sub or by which either of
their respective properties or assets may be bound; (3) require any
filing with, or permit, consent or approval of, or the giving of any
notice to any governmental or regulatory body, agency or authority; or
(4) result in a violation or breach of, conflict with, constitute (with
or without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Parent, Sub or
any of their respective direct or indirect subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease or other
instrument or obligation to which Parent or Sub or any of their
subsidiaries is a party, or by which they or their respective
properties or assets may be bound except for in the case of clauses (3)
and (4) above for such filing, permit, consent, approval or violation,
which would not prevent or materially delay consummation of the
transactions contemplated by this Agreement.
(d) Litigation. There is no action, suit, proceeding at law or
in equity, or any arbitration or any administrative or other proceeding
by or before (or, to the knowledge of Parent or Sub, any investigation
by) any governmental or other instrumentality or agency, pending or, to
the knowledge of Parent or Sub, threatened, against or affecting Parent
or any of its direct or indirect subsidiaries (including, but not
limited to, Sub), or any of their properties or rights, which would
prevent or materially delay consummation of the transactions
contemplated by this Agreement.
(e) Broker's or Finder's Fee. No agent, broker, Person or firm
acting on behalf of Parent or Sub is, or will be, entitled to any fee,
commission or broker's or finder's fees from any of the Stockholders in
connection with this Agreement or any of the transactions contemplated
hereby.
(f) Financing. Parent has (or will have immediately prior to
and at the Effective Time), and will make available to Sub, sufficient
funds to perform its obligations under this Agreement including,
without limitation, to make the payments specified in Article I hereof.
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ARTICLE III
TRANSACTIONS PRIOR TO CLOSING DATE
3.01 Access to Information Concerning Properties and Records.
During the period commencing on the date hereof and ending on the Closing Date,
the Company shall, and shall cause each of its Subsidiaries to, upon reasonable
notice, afford Parent and Sub, and their respective counsel, accountants,
consultants and other authorized representatives, full access during normal
business hours to the employees, properties, books and records of the Company
and its Subsidiaries in order that they may have the opportunity to make such
investigations as they shall desire of the affairs of the Company and its
Subsidiaries; provided, that such investigation shall not unreasonably disrupt
the personnel and operations of the Company and its Subsidiaries.
3.02 Confidentiality. Information obtained by Parent and Sub
pursuant to Section 3.01 hereof shall be subject to the provisions of the
Confidentiality Agreement between the Company and McCown De Leeuw & Co., Inc.
dated May 12, 1998 (the "Confidentiality Agreement").
3.03 Conduct of the Business of the Company Pending the
Closing Date. The Company agrees that, except as set forth in Section 3.03 of
the Company Disclosure Letter and except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved by Parent, during the period commencing on the date
hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations in the ordinary and usual course of
business and will use their best efforts to preserve intact their
respective business organization, keep available the services of their
officers and employees and maintain satisfactory relationships with
licensors, suppliers, distributors, clients, joint venture partners,
and others having business relationships with them; and
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or
By-Laws (or comparable governing documents); (ii) issue or sell any
shares of its capital stock (other than in connection with the exercise
of Warrants or Options outstanding on the date hereof) or any of its
other securities, or issue any securities convertible into, or options,
warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of, any
shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) sell or pledge or agree
to sell or pledge any stock owned by it in any of its Subsidiaries;
(iv) declare, pay, set aside or make any dividend or other distribution
or payment with respect to, or split, combine, redeem or reclassify, or
purchase or otherwise acquire any shares of its capital stock or its
other securities; (v) (A) enter into any contract or commitment with
respect to capital expenditures in excess of $150,000 individually or
$500,000 in the aggregate, (B) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership
17
<PAGE>
or other business or division thereof; or (C) other than in the
ordinary course of business enter into, cancel or materially amend,
modify or supplement or cancel any other material contract, (vi)
acquire a material amount of assets or securities or release or
relinquish any material contract rights; (vii) except to the extent
required under existing employee and director benefit plans, agreements
or arrangements as in effect on the date of this Agreement or
applicable law, increase the compensation or fringe benefits of any of
its directors, officers or employees, except for increases in salary or
wages of employees of the Company or its subsidiaries in the ordinary
course of business or make bonus, pension, retirement or insurance
payments or arrangements to or with any such Person, except in the
ordinary course of business; (viii) transfer, lease, license,
guarantee, sell, mortgage, pledge, dispose of, encumber or subject to
any lien, any material assets or incur or modify any indebtedness or
other liability, other than in the ordinary course of business, or
issue any debt securities or assume, guarantee or endorse or otherwise
as an accommodation become responsible for the obligations of any
person or, other than in the ordinary course of business, make any loan
or other extension of credit; (ix) make any material tax election or
settle or compromise any material tax liability; (x) make any material
change in its method of accounting other than such changes as may be
necessary or advisable to comply with applicable law or regulation or
with generally accepted accounting principals; (xi) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company
or any of its Subsidiaries not constituting an inactive Subsidiary
(other than the Merger); or (xii) agree, in writing or otherwise, to
take any of the foregoing actions.
3.04 Reasonable Best Efforts. Subject to the terms and
conditions provided herein, each of the Company, Parent and Sub shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective reasonable best efforts to take, or cause to be taken, all
appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, their respective reasonable best efforts to obtain, prior to the
Closing Date, all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its Subsidiaries as are necessary for consummation of the
transactions contemplated by this Agreement and to fulfill the conditions to the
Merger.
3.05 Exclusive Dealing. During the period from the date of
this Agreement to the earlier of the termination of this Agreement and the
Effective Time, none of the Company or any of the Company's respective
affiliates, officers or directors shall take any action to, directly or
indirectly, encourage, initiate, solicit or engage in discussions or
negotiations with, or provide any information to, any Person, other than Parent,
Sub and their representatives, concerning any purchase of any capital stock of
the Company or any merger, asset sale or similar transaction involving the
Company.
18
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT TO MERGER
4.01 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Effective Time of the following
conditions:
(a) No Injunction. No preliminary injunction, or decree, or
other order shall have been issued by any court or by any governmental
or regulatory agency, body or authority which prohibits the
consummation of the Merger and the transactions contemplated by this
Agreement which is in effect at the Effective Time; provided, however,
that, in the case of any such injunction, decree or other order, each
of the parties hereto shall have used reasonable best efforts to
prevent the entry of any such decree, injunction or other order and to
appeal as promptly as possible any such decree, injunction or other
order that may be entered.
(b) Statutes. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which
prohibits the consummation of the Merger of the transactions
contemplated hereby.
(c) HSR Act. Any waiting period applicable to the Merger under
the HSR Act shall have expired or earlier termination thereof shall
have been granted and no action shall have been instituted by either
the United States Department of Justice or the Federal Trade Commission
to prevent the consummation of the transactions contemplated by this
Agreement or to modify or amend such transactions in any material
manner or, if any such action shall have been instituted, it shall have
been withdrawn or a final judgment shall have been entered against such
Department or Commission, as the case may be.
4.02 Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger shall be subject to the fulfillment at or
prior to the Effective Time of the following additional conditions, any one or
more of which may be waived by the Company:
(a) Parent Representations and Warranties. The representations
and warranties of Parent and Sub contained in this Agreement shall be
true and correct in all material respects the Effective Time with the
same effect as though such representations and warranties had been made
on and as of such date.
(b) Performance by Parent. Parent and Sub shall have performed
and complied with all of the covenants and agreements in all material
respects and satisfied in all material respects all of the conditions
required by this Agreement to be performed or complied with or
satisfied by Parent and Sub at or prior to the Effective Time.
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<PAGE>
(c) Certificate. Parent shall have delivered to the Company a
certificate executed on its behalf by its President, any Vice President
or another authorized officer in their corporate capacity to the effect
that the conditions set forth in Subsections 4.02(a) and 4.02(b) above,
have been satisfied.
4.03 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions, any one or more of which may be waived by Parent:
(a) Company Representations and Warranties. The
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the
Effective Time with the same effect as though such representations and
warranties had been made on and as of such date.
(b) Performance by the Company. The Company shall have
performed and complied with all the covenants and agreements in all
material respects and satisfied in all material respects all the
conditions required by this Agreement to be performed or complied with
or satisfied by the Company at or prior to the Effective Time.
(c) No Material Adverse Change. There shall have not occurred
after the date hereof any material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole (other than any
material adverse effect on the Condition of the Company and its
Subsidiaries, taken as whole, due to (i) general economic, financial or
market conditions, or (ii) conditions or circumstances generally
affecting the business in which the Company and its Subsidiaries
operate).
(d) Certificate. The Company shall have delivered, or caused
to be delivered, to Parent a certificate executed on its behalf by its
duly authorized officer in their corporate capacity to the effect that
the conditions set forth in Subsections 4.03(a), 4.03(b) and 4.03(c),
above, have been satisfied.
(e) Employee Notes. The Company shall have made arrangements
reasonably acceptable to Parent with those employees of the Company who
have purchased capital stock of the Company through the issuance of
notes to the Company (the "Employee Notes") to have such Employee Notes
paid in full on or prior to the Closing Date.
(f) Heller Credit Agreement. The Company shall have delivered
to Parent the written consent of Heller Financial, Inc. ("Heller")
under the terms of the Credit Agreement dated as of June 28, 1996 by
and among National Fiberstok Corporation, Label Art, Inc., Infoseal
International Inc., Government Forms and Systems Inc., Putnam Graphic
Innovations, Inc., Short Run Labels, Inc., Boharb Communications, A/L
Systems, Inc., Heller and the financial institutions party thereto
("Heller Credit Agreement") to the transactions contemplated by this
Agreement.
ARTICLE V
20
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TERMINATION AND ABANDONMENT
5.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether before or after approval of the Merger by the Company's
stockholders:
(a) by mutual consent of the Company, on the one hand, and of
Parent and Sub, on the other hand;
(b) by the Company or Parent if the Merger shall not have been
consummated on or before June 30, 1998 (or such later date as may be
agreed to in writing by the Company and Parent), by reason of the
failure of any condition to the consummation of the Merger which must
be fulfilled to its satisfaction, provided, that, no party may
terminate this Agreement under this Section 5.01(b) if such failure has
been caused primarily by such party's material breach of this
Agreement;
(c) by the Company if (a) there are any inaccuracies,
misrepresentations or breaches of any of Parent's or Sub's
representations or warranties in this Agreement, such that the
condition set forth in Section 4.02(a) to the Company's obligation to
effect the Merger cannot be met, or (b) Parent has breached or failed
to perform in all material respects any of its material covenants or
agreements contained herein as to which notice has been given to Parent
and Parent has failed to cure or otherwise resolve the same to the
reasonable satisfaction of the Company within fifteen (15) days after
receipt of such notice;
(d) by Parent if (a) there are any inaccuracies,
misrepresentations or breaches of any of the Company's representations
or warranties in this Agreement, such that the condition set forth in
Section 4.03(a) to Parent's and Sub's obligation to effect the Merger
cannot be met, or (b) the Company has breached or failed to perform in
all material respects any of its material covenants or agreements
contained herein as to which notice has been given to the Company and
the Company has failed to cure or otherwise resolve the same to the
reasonable satisfaction of Parent within fifteen (15) days after
receipt of such notice;
(e) by the Company or Parent if a court of competent
jurisdiction or other governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or
other action shall have become final and nonappealable;
5.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 5.01 hereof by Parent or Sub, on the one
hand, or the Company, on the other hand, written notice thereof shall forthwith
be given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall become void and have
no effect, and there shall be no liability hereunder on the part of Parent, Sub
or the Company, except that Sections 3.02, 6.01 and this Section 5.02 hereof
shall survive any
21
<PAGE>
termination of this Agreement. Nothing in this Section 5.02 shall relieve any
party to this Agreement of liability for breach of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.01 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
6.02 Representations and Warranties. Each and every
representation and warranty of the Company, on the one hand, and Parent and Sub,
on the other hand, contained herein or in any certificates or other documents
delivered prior to or at the Closing shall expire with, and be terminated and
extinguished by, the Closing and thereafter none of the Company, Parent or Sub
shall be under any liability whatsoever with respect to any such representation
or warranty. This Section 6.02 shall have no effect upon any other obligation of
the parties hereto, whether to be performed before or after the Effective Time.
6.03 Transfer Taxes. All transfer, sales and use,
registration, stamp and similar Taxes imposed in connection with the sale of
Stock or any other transaction that occurs pursuant to this Agreement shall be
borne solely by the [Sub].
6.04 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken by or on behalf of the respective
Boards of Directors of the Company, Parent or Sub, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other applicable party or in any document, certificate
or writing delivered pursuant hereto by any other applicable party or (iii)
waive compliance with any of the agreements or conditions contained herein.
6.05 Public Announcements. The Company, on the one hand, and
Parent and Sub, on the other hand, agree to consult promptly with each other
prior to issuing any press release or otherwise making any public statement with
respect to the transactions contemplated hereby, and shall not issue any such
press release or make any such public statement prior to such consultation and
review by the other party of a copy of such release or statement, unless
required by applicable law.
6.06 Indemnification. From and after the Effective Time,
Parent shall cause the Company to (i) maintain in effect in the Certificate of
Incorporation of the Company the provisions with respect to indemnification set
forth in Article Seventh of the Certificate of Incorporation of the Company as
in effect at the Effective Time, which provisions shall not be amended, repealed
or otherwise modified for a period of six (6) years from the Effective Time in
any manner that would adversely affect the rights thereunder of individuals (or
their estates) who at the date of this Agreement and/or as of the Effective Time
are or were directors, officers,
22
<PAGE>
employees or agents of the Company or its Subsidiaries, unless such modification
is required by law.
6.07 Notices. All notices, requests, demands, waivers and
other communications required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given if delivered in
person or mailed, certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, as follows:
(a) if to the Company, to it at:
AmeriComm Holdings, Inc.
575 Peachtree Dunwoody Road, Suite C150
New York, New York 10036
Attention: John Weil
with a copy to:
McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
(b) if to either Parent or Sub, to it at:
DMAC Merger Corp. or
DMAC Holdings Inc.
c/o McCown De Leeuw & Co.
101 East 52nd Street
31st Floor
New York, New York 10022
Attention: David E. King
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
6.08 Entire Agreement. This Agreement and the annex,
disclosure letter and other documents referred to herein or delivered pursuant
hereto and the Confidentiality Agreement collectively contain the entire
understanding of the parties hereto with respect to the
23
<PAGE>
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
6.09 Binding Effect; Benefit; Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Nothing in this Agreement, expressed or implied, is intended to confer on any
Person other than the parties hereto or their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement except for Sections 6.06 which shall inure to, and be
enforceable by, the intended beneficiaries thereof.
6.10 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in writing by the
parties hereto in any and all respects before the Effective Time
(notwithstanding any stockholder approval), by action taken by the respective
Boards of Directors of Parent, Sub and the Company or by the respective officers
authorized by such Boards of Directors; provided, however, that after any such
stockholder approval, no amendment shall be made which by law requires further
approval by such stockholders without such further approval.
6.11 Further Actions. Each of the parties hereto agrees that,
subject to its legal obligations, it will use its reasonable best efforts to
fulfill all conditions precedent specified herein, to the extent that such
conditions are within its control, and to do all things reasonably necessary to
consummate the transactions contemplated hereby.
6.12 Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only, do
not constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
6.13 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
6.14 Applicable Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the laws of the State of New York, without regard to the conflict of laws rules
thereof. Each of the parties hereto hereby irrevocably acknowledges and consents
that any legal action or proceeding brought with respect to any of the
obligations arising under or relating to this Agreement may be brought in the
courts of the State of New York or in the United States District Court for the
Southern District of New York, as the party bringing such action or proceeding
may elect, and each of the parties hereto hereby irrevocably submits to and
accepts with regard to any such action or proceeding, for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. The foregoing shall not limit the rights of any party to serve
process in any other manner permitted by law. The foregoing consents to
jurisdiction shall not constitute general consents to service of process in the
State of New York for any purpose except as provided above and shall not be
deemed to confer rights on any Person other than the respective parties to this
Agreement.
24
<PAGE>
To the fullest extent permitted by applicable law, each of the parties hereto
hereby irrevocably waives the objection which it may now or hereafter have to
the laying of the venue of any suit, action or proceeding arising out of or
relating to this Agreement in any of the courts referred to above and hereby
further irrevocably waives any claim that any such court is not a convenient
forum for any such suit, action or proceeding.
6.15 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
6.16 Certain Definitions. (a) "Person" shall mean and include
an individual, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization, a group and a government or other department or
agency thereof.
(b) "Subsidiary", with respect to the Company, shall mean and
include (x) any partnership of which the Company or any Subsidiary is a general
partner or (y) any other entity in which the Company or any of its Subsidiaries
owns or has the power to vote 50% or more of the equity interests in such entity
having general voting power to participate in the election of the governing body
of such entity.
(c) "Knowledge" shall mean, with regard to any natural person,
the actual knowledge of such person, and with regard to any party hereto, the
actual knowledge of the executive officers of such party.
[SIGNATURE PAGE FOLLOWS]
25
<PAGE>
IN WITNESS WHEREOF, each of Parent, Sub and the Company have
caused this Agreement to be executed by their respective officers thereunto duly
authorized, all as of the date first above written.
AMERICOMM HOLDINGS, INC.
By /s/ Robert M. Miklas
-------------------------------
Name: Robert M. Miklas
Title: President and Chief
Executive Officer
DMAC MERGER CORP.
By /s/ David De Leeuw
-------------------------------
Name: David De Leeuw
Title: President
DMAC HOLDINGS, INC.
By /s/ David De Leeuw
-------------------------------
Name: David De Leeuw
Title: President
26
<PAGE>
Exhibit 3.2
BY-LAWS
OF
DMAC ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
STOCKHOLDERS.............................................................................................1
Section 1. Annual Meeting...............................................................................1
Section 2. Special Meetings.............................................................................1
Section 3. Notice of Meetings...........................................................................1
Section 4. Quorum.......................................................................................1
Section 5. Organization of Meetings.....................................................................2
Section 6. Voting.......................................................................................2
Section 7. Inspectors of Election.......................................................................2
Section 8. Action by Consent............................................................................2
ARTICLE II
DIRECTORS................................................................................................3
Section 1. Number, Quorum, Term, Vacancies, Removal.....................................................3
Section 2. Meetings, Notice.............................................................................3
Section 3. Committees...................................................................................4
Section 4. Action by Consent............................................................................4
Section 5. Compensation.................................................................................4
ARTICLE III
OFFICERS.................................................................................................4
Section 1. Titles and Election..........................................................................4
Section 2. Terms of Office..............................................................................4
Section 3. Removal......................................................................................5
Section 4. Resignations.................................................................................5
Section 5. Vacancies....................................................................................5
Section 6. Chairman of the Board........................................................................5
Section 7. President....................................................................................5
Section 8. Vice Presidents..............................................................................5
Section 9. Secretary....................................................................................5
Section 10. Treasurer....................................................................................6
Section 11. Duties of Officers may be Delegated..........................................................6
ARTICLE IV
INDEMNIFICATION..........................................................................................6
Section 1. Actions by Others............................................................................6
Section 2. Actions by or in the Right of the Corporation................................................6
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Section 3. Successful Defense...........................................................................7
Section 4. Specific Authorization.......................................................................7
Section 5. Advance of Expenses..........................................................................7
Section 6. Right of Indemnity not Exclusive.............................................................7
Section 7. Insurance....................................................................................8
Section 8. Invalidity of any Provisions of this Article.................................................8
ARTICLE V
CAPITAL STOCK............................................................................................8
Section 1. Certificates.................................................................................8
Section 2. Transfer.....................................................................................8
Section 3. Record Dates.................................................................................8
Section 4. Lost Certificates............................................................................9
ARTICLE VI
CHECKS, NOTES, ETC.......................................................................................9
Section 1. Checks, Notes, Etc...........................................................................9
ARTICLE VII
MISCELLANEOUS PROVISIONS.................................................................................9
Section 1. Offices......................................................................................9
Section 2. Fiscal Year..................................................................................9
Section 3. Corporate Seal...............................................................................9
Section 4. Books.......................................................................................10
Section 5. Voting of Stock.............................................................................10
ARTICLE VIII
AMENDMENTS..............................................................................................10
</TABLE>
(ii)
<PAGE>
BY-LAWS
OF
DMAC CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held either within or without the State
of Delaware, at such place as the Board of Directors may designate in the call
or in a waiver of notice thereof, on the first Monday in May of each year
beginning with the year 1999 (or if such day be a legal holiday, then on the
next succeeding day not a holiday) at 10 a.m., for the purpose of electing
directors and for the transaction of such other business as may properly be
brought before the meeting.
Section 2. Special Meetings. Special Meetings of the
stockholders may be called by the Board of Directors or by the
President, and shall be called by the President or by the Secretary upon the
written request of the holders of record of at least twenty-five per cent (25%)
of the shares of stock of the Corporation, issued and outstanding and entitled
to vote, at such times and at such place either within or without the State of
Delaware as may be stated in the call or in a waiver of notice thereof.
Section 3. Notice of Meetings. Notice of the time, place
and purpose of every meeting of stockholders shall be delivered personally or
mailed not less than ten days nor more than sixty days previous thereto to each
stockholder of record entitled to vote, at his post office address appearing
upon the records of the Corporation or at such other address as shall be
furnished in writing by him to the Corporation for such purpose. Such further
notice shall be given as may be required by law or by these By-Laws. Any meeting
may be held without notice if all stockholders entitled to vote are present in
person or by proxy, or if notice is waived in writing, either before or after
the meeting, by those not present.
Section 4. Quorum. The holders of record of at least a
majority of the shares of the stock of the Corporation, issued and outstanding
and entitled to vote, present in person or by proxy, shall, except as otherwise
provided by law or by these By-Laws, constitute a quorum at all meetings of the
stockholders; if there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time until
a quorum shall have been obtained.
Section 5. Organization of Meetings. Meetings of the
stockholders shall be presided over by the Chairman of the Board, if there be
one, or if he is not present by the
<PAGE>
President, or if he is not present, by a chairman to be chosen at the meeting.
The Secretary of the Corporation, or in his absence an Assistant Secretary,
shall act as Secretary of the meeting, if present.
Section 6. Voting. At each meeting of stockholders, except
as otherwise provided by statute or the Certificate of Incorporation, every
holder of record of stock entitled to vote shall be entitled to one vote in
person or by proxy for each share of such stock standing in his name on the
records of the Corporation. Elections of directors shall be determined by a
plurality of the votes cast thereat and, except as otherwise provided by
statute, the Certificate of Incorporation, or these By-Laws, all other action
shall be determined by a majority of the votes cast at such meeting. Each proxy
to vote shall be in writing and signed by the stockholder or by his duly
authorized attorney.
At all elections of directors, the voting shall be by ballot
or in such other manner as may be determined by the stockholders present in
person or by proxy entitled to vote at such election. With respect to any other
matter presented to the stockholders for their consideration at a meeting, any
stockholder entitled to vote may, on any question, demand a vote by ballot.
A complete list of the stockholders entitled to vote at each
such meeting, arranged in alphabetical order, with the address of each, and the
number of shares registered in the name of each stockholder, shall be prepared
by the Secretary and shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 7. Inspectors of Election. The Board of Directors in
advance of any meeting of stockholders may appoint one or more Inspectors of
Election to act at the meeting or any adjournment thereof. If Inspectors of
Election are not so appointed, the chairman of the meeting may, and on the
request of any stockholder entitled to vote, shall appoint one or more
Inspectors of Election. Each Inspector of Election, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election at such meeting with strict impartiality and
according to the best of his ability. If appointed, Inspectors of Election shall
take charge of the polls and, when the vote is completed, shall make a
certificate of the result of the vote taken and of such other facts as may be
required by law.
Section 8. Action by Consent. Any action required or
permitted to be taken at any meeting of stockholders may be taken without a
meeting, without prior notice and without a vote, if, prior to such action, a
written consent or consents thereto, setting forth such action, is signed by the
holders of record of shares of the stock of the Corporation, issued and
outstanding and entitled to vote thereon, having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
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ARTICLE II
DIRECTORS
Section 1. Number, Quorum, Term, Vacancies, Removal. The
Board of Directors of the Corporation shall consist of at least two but no more
than five persons. The number of directors may be changed by a resolution passed
by a majority of the whole Board or by a vote of the holders of record of at
least a majority of the shares of stock of the Corporation, issued and
outstanding and entitled to vote.
A majority of the members of the Board of Directors then
holding office (but not less than one-third of the total number of directors nor
less than two directors) shall constitute a quorum for the transaction of
business, but if at any meeting of the Board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum shall have been obtained.
Directors shall hold office until the next annual election and
until their successors shall have been elected and shall have qualified, unless
sooner displaced.
Whenever any vacancy shall have occurred in the Board of
Directors, by reason of death, resignation, or otherwise, other than removal of
a director with or without cause by a vote of the stockholders, it shall be
filled by a majority of the remaining directors, though less than a quorum
(except as otherwise provided by law), or by the stockholders, and the person so
chosen shall hold office until the next annual election and until his successor
is duly elected and has qualified.
Any one or more of the directors of the Corporation may be
removed either with or without cause at any time by a vote of the holders of
record of at least a majority of the shares of stock of the Corporation, issued
and outstanding and entitled to vote, and thereupon the term of the director or
directors who shall have been so removed shall forthwith terminate and there
shall be a vacancy or vacancies in the Board of Directors, to be filled by a
vote of the stockholders as provided in these By- Laws.
Section 2. Meetings, Notice. Meetings of the Board of
Directors shall be held at such place either within or without the State of
Delaware, as may from time to time be fixed by resolution of the Board, or as
may be specified in the call or in a waiver of notice thereof. Regular meetings
of the Board of Directors shall be held at such times as may from time to time
be fixed by resolution of the Board, and special meetings may be held at any
time upon the call of two directors, the Chairman of the Board, if one be
elected, or the President, by oral, telegraphic or written notice, duly served
on or sent or mailed to each director not less than two days before such
meeting. A meeting of the Board may be held without notice immediately after the
annual meeting of stockholders at the same place at which such meeting was held.
Notice need not be given of regular meetings of the Board. Any meeting may be
held without notice, if all directors are present, or if notice is waived in
writing, either before or after the meeting, by those not present. Any member of
the Board of Directors, or any committee thereof, may participate in a
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meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other and
participation in a meeting by such means shall constitute presence in person at
such meeting.
Section 3. Committees. The Board of Directors may, in its
discretion, by resolution passed by a majority of the whole Board, designate
from among its members one or more committees which shall consist of two or more
directors. The Board may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committees shall have and may exercise such
powers as shall be conferred or authorized by the resolution appointing them. A
majority of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board shall have power at any time to change the membership of any such
committee, to fill vacancies in it, or to dissolve it.
Section 4. Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting, if prior to such action a
written consent or consents thereto is signed by all members of the Board, or of
such committee as the case may be, and such written consent or consents is filed
with the minutes of proceedings of the Board or committee.
Section 5. Compensation. The Board of Directors may determine,
from time to time, the amount of compensation which shall be paid to its
members. The Board of Directors shall also have power, in its discretion, to
allow a fixed sum and expenses for attendance at each regular or special meeting
of the Board, or of any committee of the Board; in addition the Board of
Directors shall also have power, in its discretion, to provide for and pay to
directors rendering services to the Corporation not ordinarily rendered by
directors, as such, special compensation appropriate to the value of such
services, as determined by the Board from time to time.
ARTICLE III
OFFICERS
Section 1. Titles and Election. The officers of the
Corporation, who shall be chosen by the Board of Directors at its first meeting
after each annual meeting of stockholders, shall be a President, a Treasurer and
a Secretary. The Board of Directors from time to time may elect a Chairman of
the Board, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and such other officers and agents as it shall deem necessary, and
may define their powers and duties. Any number of offices may be held by the
same person.
Section 2. Terms of Office. The officer shall hold office
until their successors are chosen and qualify.
Section 3. Removal. Any officer may be removed, either with or
without cause, at any time, by the affirmative vote of a majority of the Board
of Directors.
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Section 4. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors or to the Secretary. Such
resignation shall take effect at the time specified therein, and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 5. Vacancies. If the office of any officer or agent
becomes vacant by reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the directors may choose a successor, who
shall hold office for the unexpired term in respect of which such vacancy
occurred.
Section 6. Chairman of the Board. The Chairman of the Board
of Directors, if one be elected, shall preside at all meetings of the Board of
Directors and of the stockholders, and he shall have and perform such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 7. President. The President shall be the Chief
Executive Officer of the Corporation and, in the absence of the Chairman, shall
preside at all meetings of the Board of Directors, and of the stockholders. He
shall exercise the powers and perform the duties usual to the chief executive
officer and, subject to the control of the Board of Directors, shall have
general management and control of the affairs and business of the Corporation;
he shall appoint and discharge employees and agents of the Corporation (other
than officers elected by the Board of Directors) and fix their compensation; and
he shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall have the power to execute bonds, mortgages and
other contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
Section 8. Vice Presidents. If chosen, the Vice Presidents,
in the order of their seniority, shall, in the absence or disability of the
President, exercise all of the powers and duties of the President. Such Vice
Presidents shall have the power to execute bonds, notes, mortgages and other
contracts, agreements and instruments of the Corporation, and shall do and
perform such other duties incident to the office of Vice President and as the
Board of Directors, or the President shall direct.
Section 9. Secretary. The Secretary shall attend all sessions
of the Board and all meetings of the stockholders and record all votes and the
minutes of proceedings in a book to be kept for that purpose. He shall give, or
cause to be given, notice of all meetings of the stockholders and of the Board
of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors. The Secretary shall affix the corporate seal to any
instrument requiring it, and when so affixed, it shall be attested by the
signature of the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer who may affix the seal to any such instrument in the event
of the absence or disability of the Secretary. The Secretary shall have and be
the custodian of the stock records and all other books, records and papers of
the Corporation (other than financial) and shall see that all books, reports,
statements, certificates and other documents and records required by law are
properly kept and filed.
Section 10. Treasurer. The Treasurer shall have the custody
of the corporate funds
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and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
Corporation, in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board, taking proper vouchers for such disbursements, and shall render to
the directors whenever they may require it, an account of all his transactions
as Treasurer and of the financial condition of the Corporation.
Section 11. Duties of Officers may be Delegated. In case of
the absence or disability of any officer of the Corporation, or for any other
reason that the Board may deem sufficient, the Board may delegate, for the time
being, the powers or duties, or any of them, of such officer to any other
officer, or to any director.
ARTICLE IV
INDEMNIFICATION
Section 1. Actions by Others. The Corporation (1) shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a director
or an officer of the Corporation and (2) except as otherwise required by Section
3 of this Article, may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee,
agent of or participant in another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise
6
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against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Delaware Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Delaware Court of Chancery or such other court shall deem proper.
Section 3. Successful Defense. To the extent that a person
who is or was a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or Section 2 of this Article, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Specific Authorization. Any indemnification under
Section 1 or Section 2 of this Article (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in said Sections 1 and 2. Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. Advance of Expenses. Expenses incurred by any
person who may have a right of indemnification under this Article in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation pursuant to this Article.
Section 6. Right of Indemnity not Exclusive. The
indemnification provided by this Article shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 7. Insurance. The Corporation may purchase and
maintain insurance on
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behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of or participant in another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and 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,
Section 145 of the General Corporation Law of the State of Delaware or
otherwise.
Section 8. Invalidity of any Provisions of this Article. The
invalidity or unenforceability of any provision of this Article shall not affect
the validity or enforceability of the remaining provisions of this Article.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates. The interest of each stockholder of
the Corporation shall be evidenced by certificates for shares of stock in such
form as the Board of Directors may from time to time prescribe. The certificates
of stock shall be signed by the President or a Vice President and by the
Secretary, or the Treasurer, or an Assistant Secretary, or an Assistant
Treasurer, and countersigned and registered in such manner, if any, as the Board
of Directors may by resolution prescribe. Where any such certificate is
countersigned by a transfer agent other than the Corporation or its employee, or
registered by a registrar other than the Corporation or its employee, the
signature of any such officer may be a facsimile signature. In case any officer
or officers who shall have signed, or whose facsimile signature or signatures
shall have been used on, any such certificate or certificates shall cease to be
such officer or officers of the Corporation, whether because of death,
resignation or otherwise, before such certificate or certificates shall have
been delivered by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and delivered as though
the person or persons who signed such certificate or certificates or whose
facsimile signature or signatures shall have been used thereon had not ceased to
be such officer or officers of the Corporation.
Section 2. Transfer. The shares of stock of the Corporation
shall be transferred only upon the books of the Corporation by the holder
thereof in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and power of
transfer endorsed thereon or attached thereto, duly executed, with such proof of
the authenticity of the signature as the Corporation or its agents may
reasonably require.
Section 3. Record Dates. The Board of Directors may fix in
advance a date, not less than ten nor more than sixty days preceding the date of
any meeting of stockholders, or the date for the payment of any dividend, or the
date for the distribution or allotment of any rights, or the date when any
change, conversion or exchange of capital stock shall go into effect, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any such
dividend, or to receive any distribution
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or allotment of such rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock, and in such case only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend, or to receive such distribution or allotment or
rights or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 4. Lost Certificates. In the event that any
certificate of stock is lost, stolen, destroyed or mutilated, the Board of
Directors may authorize the issuance of a new certificate of the same tenor and
for the same number of shares in lieu thereof. The Board may in its discretion,
before the issuance of such new certificate, require the owner of the lost,
stolen, destroyed or mutilated certificate, or the legal representative of the
owner to make an affidavit or affirmation setting forth such facts as to the
loss, destruction or mutilation as it deems necessary, and to give the
Corporation a bond in such reasonable sum as it directs to indemnify the
Corporation.
ARTICLE VI
CHECKS, NOTES, ETC.
Section 1. Checks, Notes, Etc. All checks and drafts on the
Corporation's bank accounts and all bills of exchange and promissory notes, and
all acceptances, obligations and other instruments for the payment of money, may
be signed by the President or any Vice President and may also be signed by such
other officer or officers, agent or agents, as shall be thereunto authorized
from time to time by the Board of Directors.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 1. Offices. The registered office of the Corporation
shall be located at the office of The Corporation Trust Company, in the City of
Wilmington, County of New Castle, in the State of Delaware and said Corporation
shall be the registered agent of this Corporation in charge thereof. The
Corporation may have other offices either within or without the State of
Delaware at such places as shall be determined from time to time by the Board of
Directors or the business of the Corporation may require.
Section 2. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 3. Corporate Seal. The seal of the Corporation
shall be circular in form and contain the name of the Corporation, and the year
and state of its incorporation. Such seal may be altered from time to time at
the discretion of the Board of Directors.
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Section 4. Books. There shall be kept at such office of the
Corporation as the Board of Directors shall determine, within or without the
State of Delaware, correct books and records of account of all its business and
transactions, minutes of the proceedings of its stockholders, Board of Directors
and committees, and the stock book, containing the names and addresses of the
stockholders, the number of shares held by them, respectively, and the dates
when they respectively became the owners of record thereof, and in which the
transfer of stock shall be registered, and such other books and records as the
Board of Directors may from time to time determine.
Section 5. Voting of Stock. Unless otherwise specifically
authorized by the Board of Directors, all stock owned by the Corporation, other
than stock of the Corporation, shall be voted, in person or by proxy, by the
President or any Vice President of the Corporation on behalf of the Corporation.
ARICLE VIII
AMENDMENTS
Section 1. Amendments. The vote of the holders of at least a
majority of the shares of stock of the Corporation, issued and outstanding and
entitled to vote, shall be necessary at any meeting of stockholders to amend or
repeal these By-Laws or to adopt new by-laws. These By-Laws may also be amended
or repealed, or new by-laws adopted, at any meeting of the Board of Directors by
the vote of at least a majority of the entire Board; provided that any by-law
adopted by the Board may be amended or repealed by the stockholders in the
manner set forth above.
Any proposal to amend or repeal these By-Laws or to adopt new
by-laws shall be stated in the notice of the meeting of the Board of Directors
or the stockholders, or in the waiver of notice thereof, as the case may be,
unless all of the directors or the holders of record of all of the shares of
stock of the Corporation, issued and outstanding and entitled to vote, are
present at such meeting.
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DMAC ACQUISITION CORP.
_____________________________
Unanimous Written Consent
of the
Board of Directors
_____________________________
The undersigned, being all the directors of DMAC ACQUISITION CORP., a
Delaware corporation (the "Corporation"), acting without a meeting pursuant to
Section 141(f) of the General Corporation Law of the State of Delaware, do
hereby consent to the taking of action without a meeting and adopt the following
resolutions:
AMENDMENT OF BY-LAWS
RESOLVED, that the first sentence of Article III, Section 7 of the
By-Laws of the Corporation shall be amended so that, as amended, such sentence
shall read in its entirety as follows:
"The President, in the absence of the Chairman, shall preside at all
meetings of the Board of Directors, and of the stockholders."
RESOLVED, that Article III, Section 6 shall be amended by inserting at
the end thereof the following sentence:
"The Chairman of the Board of Directors shall be the Chief Executive
Officer of the Corporation."
<PAGE>
REMOVAL OF THE CHAIRMAN OF THE BOARD OF DIRECTORS
RESOLVED, that David De Leeuw is hereby removed as Chairman of the
Board of the Board of Directors of the Corporation.
APPOINTMENT OF THE CHAIRMAN OF THE BOARD OF DIRECTORS
RESOLVED, that Martin R. Lewis is hereby appointed and elected
Chairman of the Board of the Board of Directors of the Corporation.
REMOVAL OF CURRENT OFFICERS
RESOLVED, that the following persons are hereby removed as officers of
the Corporation:
David De Leeuw President and Treasurer
David E. King Vice President and Secretary
APPOINTMENT OF OFFICERS
RESOLVED, that the following persons are hereby appointed and elected
officers of the Corporation as follows:
Robert M. Miklas President
John F. Meneough Executive Vice President
Jack Resnick Executive Vice President
Scott P. Ebert Vice President and Controller
GENERAL RESOLUTIONS
RESOLVED, that each of the officers of the Corporation be, and each of
them severally is, hereby authorized, empowered and directed, in the name and on
behalf of the Corporation, to execute, certify, file and record such additional
agreements, notices, documents, certificates and instruments and to take such
additional action as may be or become necessary,
-2-
<PAGE>
appropriate or convenient to carry out and put into effect the purposes of the
foregoing resolutions, the authority for the execution, certification, delivery
and filing of such agreements, documents, certificates and instruments and the
taking of such action to be conclusively evidenced thereby; and it is
RESOLVED, that all actions of any kind heretofore taken by the
Corporation in connection with the foregoing resolution be, and they hereby are,
ratified, confirmed and approved in all respects.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Consent
effective as of June 27, 1998.
/s/ David De Leeuw
-----------------------------------
David De Leeuw
/s/ Martin R. Lewis
-----------------------------------
Martin R. Lewis
/s/ James Wu
-----------------------------------
James Wu
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<PAGE>
DIMAC CORPORATION
____________________________________________________
Unanimous Written Consent
of the
Board of Directors
_____________________________________________________
The undersigned, being all the directors of DIMAC CORPORATION, a
Delaware corporation (the "Corporation"), do hereby consent to the taking of
action without a meeting pursuant to Section 141(f) of the Delaware General
Corporation Law. The following actions are hereby approved and the following
resolutions are hereby adopted by the Corporation.
AMENDMENT OF BY-LAWS
RESOLVED, that the first sentence of Article II, Section 1 of the
By-Laws of the Corporation shall be amended so that, as amended, such sentence
shall read in its entirety as follows:
"The Board of Directors of the Corporation shall consist of at least
two but not more than eight persons."
ELECTION OF ADDITIONAL DIRECTORS
RESOLVED, that the following persons are hereby elected and qualified
as directors of the Corporation until their respective successors are elected
and qualified or until their respective resignation or removal:
David E. King;
Timothy Beffa;
Benjamin L. McSwiney;
George E. McCown; and
<PAGE>
John D. Weil.
GENERAL RESOLUTIONS
RESOLVED, that each of the officers of the Corporation be, and each of
them severally is, hereby authorized, empowered and directed, in the name and on
behalf of the Corporation, to execute, certify, file and record such additional
agreements, notices, documents, certificates and instruments and to take such
additional action as may be or become necessary, appropriate or convenient to
carry out and put in effect the purposes of the foregoing resolutions, the
authority for the execution, certification, delivery and filing of such
agreements, documents, certificates and instruments and the taking of such
action to be conclusively evidenced thereby; and it is further
RESOLVED, that all actions of any kind heretofore taken by the
Corporation in connection with the foregoing resolutions be, and they hereby
are, ratified, confirmed and approved in all respects.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Consent
effective as of the 31st day of August, 1998.
/s/ David De Leeuw
-------------------------------
David De Leeuw
/s/ Martin R. Lewis
-------------------------------
Martin R. Lewis
/s/ James Wu
-------------------------------
James Wu
<PAGE>
Exhibit 4.3
FIRST SUPPLEMENTAL INDENTURE, dated as of January 4, 1999
(the "Supplemental Indenture") between DIMAC Corporation, a corporation
organized under the laws of the State of Delaware (the "Company"), DMW
Worldwide, a Missouri corporation ("DMW" or "Additional Guarantor") and
Wilmington Trust Company (the "Trustee"), as Trustee under the Indenture (as
defined below). Capitalized terms used and not defined herein shall have the
same meanings given in the Indenture unless otherwise indicated.
WHEREAS, the Company, the Subsidiary Guarantors listed therein
and the Trustee are parties to that certain Indenture, dated as of October 15,
1998 (the "Indenture"), pursuant to which the Company issued its 12 1/2% Senior
Subordinated Notes due 2008 (the "Notes") and the Subsidiary Guarantors
guaranteed the obligations of the Company under the Indenture and the Notes;
WHEREAS, pursuant to Section 4.10 of the Indenture, if the
Company acquires or creates an additional subsidiary which is a domestic
Restricted Subsidiary that Incurs any Senior Indebtedness, such subsidiary shall
execute and deliver a supplemental indenture pursuant to which such subsidiary
shall unconditionally guaranty the Company's obligations under the Notes;
WHEREAS, the Additional Guarantor is a domestic Restricted
Subsidiary of the Company that Incurs certain Senior Indebtedness;
WHEREAS, the Company and the Trustee desire to have the
Additional Guarantor enter into this Supplemental Indenture pursuant to which
the Additional Guarantor will guaranty the obligations of the Company under the
Indenture and the Notes and the Additional Guarantor desires to enter into the
Supplemental Indenture pursuant to which it will guaranty the obligations of the
Company under the Indenture and the Notes as of such date;
WHEREAS, Section 9.01 of the Indenture provides that the
Company and the Trustee may, without the written consent of the holders of the
outstanding Notes, amend the Indenture as provided herein;
WHEREAS, by entering into this Supplemental Indenture, the
Company and the Trustee have consented to amend the Indenture in accordance with
the terms and conditions herein; and
WHEREAS, all acts and things prescribed by the Articles of
Incorporation and the By-laws (each as now in effect) of the Additional
Guarantor necessary to make this Supplemental Indenture a valid instrument
legally binding on the Additional Guarantor for the purposes herein expressed,
in accordance with its terms, have been duly done and performed.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company, the Additional Guarantor and the Trustee hereby agree
for the benefit of each other and the equal and ratable benefit of the holders
of the Notes as follows:
<PAGE>
1. ADDITIONAL GUARANTOR AS SUBSIDIARY GUARANTOR. As of the
date hereof and pursuant to this Supplemental Indenture, the Additional
Guarantor shall become a Subsidiary Guarantor in accordance with the terms and
conditions of the Indenture and shall assume all rights and obligations of a
Subsidiary Guarantor thereunder.
2. COMPLIANCE WITH AND FULFILLMENT OF CONDITION OF SECTION
4.10. The execution and delivery of this Supplemental Indenture by the
Additional Guarantor (along with such documentation relating thereto as the
Trustee shall require, including, without limitation, an Opinion of Counsel as
to the enforceability of the Supplemental Indenture and an Officers'
Certificate) fulfills the obligations of the Company under Section 4.10 of the
Indenture.
3. CONSTRUCTION. For all purposes of this Supplemental
Indenture, except as otherwise herein expressly provided or unless the context
otherwise requires: (i) the terms and expressions used herein shall have the
same meanings as corresponding terms and expressions used in the Indenture; and
(ii) the words "herein," "hereof" and "hereby" and other words of similar import
used in this Supplemental Indenture refer to this Supplemental Indenture as a
whole and not to any particular Section hereof.
4. TRUSTEE ACCEPTANCE. The Trustee accepts the amendment of
the Indenture effected by this Supplemental Indenture, as hereby amended, but
only upon the terms and conditions set forth in the Indenture, as hereby
amended, including the terms and provisions defining and limiting the
liabilities and responsibilities of the Trustee in the performance of its duties
and obligations under the Indenture, as hereby amended. Without limiting the
generality of the foregoing, the Trustee has no responsibility for the
correctness of the recitals of fact herein contained which shall be taken as the
statements of each of the Company and the Additional Guarantor, respectively,
and makes no representations as to the validity or enforceability against any of
the Company or the Additional Guarantor.
5. INDENTURE RATIFIED. Except as expressly amended hereby, the
Indenture is in all respects ratified and confirmed and all the terms,
conditions and provisions thereof shall remain in full force and effect.
6. HOLDERS BOUND. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of the Notes heretofore
or hereafter authenticated and delivered shall be bound hereby.
7. SUCCESSORS AND ASSIGNS. This Supplemental Indenture shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
8. COUNTERPARTS. This Supplemental Indenture may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original, and all of such counterparts shall together constitute one and
the same instrument.
9. GOVERNING LAW. This Supplemental Indenture shall be
governed by and construed in accordance with the internal laws of the State of
New York without giving effect to principles of conflicts of laws.
-2-
<PAGE>
IN WITNESS WHEREOF, the Company, the Additional Guarantor and
the Trustee have caused this Supplemental Indenture to be duly executed as of
the date first above written.
COMPANY:
DIMAC CORPORATION
By:/s/ Martin R. Lewis
---------------------------------------------
Name: Martin R. Lewis
Title: Chairman and Chief Executive Officer
ADDITIONAL GUARANTOR:
DMW WORLDWIDE, INC.
By:/s/ Carol J. Myers
---------------------------------------------
Name: Carol J. Myers
Title: Secretary
TRUSTEE:
WILMINGTON TRUST COMPANY
By:/s/ Roseline K. Maney
---------------------------------------------
Name: Roseline K. Maney
Title: Senior Financial Services Officer
-3-
<PAGE>
Exhibit 4.4
EXECUTION COPY
DIMAC CORPORATION
$100,000,000 12-1/2% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
-----------------------------
October 16, 1998
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS, A DIVISION OF WHEAT FIRST SECURITIES, INC.
WARBURG DILLON READ, LLC
Eleven Madison Avenue
New York, New York 10010-3629
Dear Sirs:
DIMAC Corporation, a Delaware corporation (the "Company"), proposes to
issue and sell to Credit Suisse First Boston Corporation, First Union Capital
Markets and Warburg Dillon Read LLC (collectively, the "Initial Purchasers"),
upon the terms set forth in a purchase agreement of even date herewith (the
"Purchase Agreement"), $100,000,000 aggregate principal amount of the Company's
12-1/2% Senior Subordinated Notes Due 2008 (the "Initial Securities"). The
Initial Securities will be unconditionally guaranteed on a senior subordinated
basis (the "Subsidiary Guaranties") by each domestic subsidiary of the Company
signatory hereto (the "Subsidiary Guarantors"). The Initial Securities will be
issued pursuant to an Indenture, dated as of October 15, 1998 (the "Indenture"),
among the Company, the Subsidiary Guarantors and Wilmington Trust Company, (the
"Trustee"). As an inducement to the Initial Purchasers to enter into the
Purchase Agreement, the Company agrees with the Initial Purchasers, for the
benefit of the holders of the Initial Securities (including, without limitation,
the Initial Purchasers) (the "Holders") as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall, at its own cost, prepare
and, not later than 60 days after (or if the 60th day is not a business day, the
first business day thereafter) the date of original issue of the Initial
Securities (the "Issue Date"), file with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act of 1933, (the
"Securities Act"), with respect to a proposed offer (the "Registered Exchange
Offer") to the Holders who are not prohibited by any law or policy of the
Commission from participating in such a Registered Exchange Offer, to issue and
deliver to such Holders, in exchange for their respective Initial Securities, a
like aggregate principal amount (or principal amount at maturity) of debt
securities of the Company (collectively, the "Exchange Securities") issued under
the Indenture and identical in all material respects to the Initial Securities
(except for the transfer restrictions relating to such Initial Securities and
the provisions
<PAGE>
relating to the matters described in Section 6 hereof), as the case may be, that
would be registered under the Securities Act. The Company shall use its
reasonable best efforts to cause such Exchange Offer Registration Statement to
become effective under the Securities Act within 150 days (or if the 150th day
is not a business day, the first business day thereafter) after the Issue Date
of the Initial Securities and shall keep such Exchange Offer Registration
Statement effective for not less than 30 days (or longer, if required by
applicable law) after the date notice of the Registered Exchange Offer is mailed
to the Holders (such period being called the "Exchange Offer Registration
Period").
If the Company effects the Registered Exchange Offer, the Company will be
entitled to close such Registered Exchange Offer 30 days after the commencement
thereof provided that the Company has accepted all the Initial Securities
theretofore validly tendered and not validly withdrawn in accordance with the
terms of the Registered Exchange Offer.
Following the declaration of the effectiveness of the Exchange Offer
Registration Statement, the Company shall promptly commence the Registered
Exchange Offer, it being the objective of such Registered Exchange Offer to
enable each Holder of the Initial Securities electing to exchange such Initial
Securities for Exchange Securities (assuming that such Holder is not an
affiliate of the Company within the meaning of the Securities Act, or an
Exchanging Dealer (as defined below) not complying with the requirements of
clause (i) of the next paragraph acquires the Exchange Securities in the
ordinary course of such Holder's business and has no arrangements with any
person to participate in the distribution of the Exchange Securities and is not
prohibited by any law or policy of the Commission from participating in the
Registered Exchange Offer) to trade such Exchange Securities from and after
their receipt without any limitations or restrictions under the Securities Act
and without material restrictions under the securities laws of the several
states of the United States.
The Company acknowledges that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, in the absence of an
applicable exemption therefrom, (i) each Holder which is a broker-dealer
electing to exchange Initial Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "Exchanging Dealer"), is required to deliver a prospectus
containing the information set forth in (a) Annex A hereto on the cover, (b)
Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section, and (c) Annex C hereto in the "Plan of
Distribution" section of such prospectus in connection with a sale of any such
Exchange Securities received by such Exchanging Dealer pursuant to a Registered
Exchange Offer and (ii) an Initial Purchaser that elects to sell Exchange
Securities acquired in exchange for Initial Securities constituting any portion
of an unsold allotment, is required to deliver a prospectus containing the
information required by Items 507 or 508 of Regulation S-K under the Securities
Act, as applicable, in connection with such sale.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein, in order to permit such prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period
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<PAGE>
of time as such persons must comply with such requirements in order to resell
the Exchange Securities; PROVIDED, HOWEVER, that (i) in the case where such
prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of
180 days and the date on which all Exchanging Dealers and the Initial Purchasers
have sold all Exchange Securities held by them (unless such period is extended
pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus
and any amendment or supplement thereto available to any broker-dealer for use
in connection with any resale of any Exchange Securities for a period of not
less than 90 days after the consummation of the Registered Exchange Offer.
If, upon consummation of the Registered Exchange Offer, any Initial
Purchaser holds Initial Securities acquired by it as part of its initial
distribution, the Company, simultaneously with the delivery of the Exchange
Securities pursuant to the relevant Registered Exchange Offer, shall issue and
deliver to such Initial Purchaser upon its written request, in exchange (each, a
"Private Exchange" and, collectively, the "Private Exchanges") for the
respective Initial Securities held by such Initial Purchaser, a like principal
amount (or principal amount at maturity) of debt securities of the Company
issued under the Indenture and identical in all material respects (including the
existence of restrictions on transfer under the Securities Act and the
securities laws of the several states of the United States, but excluding
provisions relating to the matters described in Section 6 hereof) to the Initial
Securities (the "Private Exchange Securities"). The Initial Securities, the
Exchange Securities and the Private Exchange Securities are herein collectively
called the "Securities".
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice thereof is
mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York,
which may be the Trustee or an affiliate of the Trustee;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York time, on the last business day on which
the Registered Exchange Offer shall remain open; and
(e) otherwise comply with all applicable laws.
As soon as practicable after the close of a Registered Exchange Offer or
Private Exchange, as the case may be, the Company shall:
(x) accept for exchange all the Initial Securities validly tendered
and not withdrawn pursuant to the Registered Exchange Offer or the Private
Exchange, as the case may be;
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<PAGE>
(y) deliver to the Trustee for cancelation all the Initial Securities
so accepted for exchange; and
(z) cause the Trustee to authenticate and deliver promptly to each
Holder of the Initial Securities, Exchange Securities or Private Exchange
Securities, as the case may be, equal in principal amount to the Initial
Securities of such Holder so accepted for exchange.
The Indenture will provide that the Exchange Securities subject to the
Indenture will not be subject to the transfer restrictions set forth in the
Indenture and that all the Securities subject to the Indenture will vote and
consent together on all matters as one class and that none of the Securities
will have the right to vote or consent as a class separate from one another on
any matter.
Interest on each Exchange Security or Private Exchange Security issued
pursuant to a Registered Exchange Offer or Private Exchange will accrue from the
last interest payment date on which interest was paid on the Initial Securities
surrendered in exchange therefor or, if no interest has been paid on the Initial
Securities, from the Issue Date.
Each Holder participating in a Registered Exchange Offer shall be required
to represent to the Company that at the time of the consummation of such
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Initial Securities or the Exchange Securities within the
meaning of the Securities Act, (iii) such Holder is not an "affiliate," as
defined in Rule 405 of the Securities Act, of such Issuer or if it is an
affiliate, such Holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if such Holder
is not a broker-dealer, that it is not engaged in, and does not intend to engage
in, the distribution of the Exchange Securities and (v) if such Holder is a
broker-dealer, that it will receive Exchange Securities for its own account in
exchange for Initial Securities that were acquired as a result of market-making
activities or other trading activities and that it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Securities.
Notwithstanding any other provisions hereof, the Company will ensure that
(i) any Exchange Offer Registration Statement and any amendment thereto and any
prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not, as of the consummation of the Registered Exchange
Offer, include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
2. SHELF REGISTRATION. If, (i) because of any change in law or in
applicable interpretations thereof by the staff of the Commission,
4
<PAGE>
the Company is not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not
consummated within 180 days of the Issue Date, (iii) any Initial Purchaser so
requests with respect to the Initial Securities (or the Private Exchange
Securities) not eligible to be exchanged for Exchange Securities in a Registered
Exchange Offer and held by it following consummation of the Registered Exchange
Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to
participate in the its Registered Exchange Offer or, in the case of any Holder
(other than an Exchanging Dealer) that participates in the Registered Exchange
Offer, such Holder does not receive freely tradeable Exchange Securities on the
date of the exchange, the Company shall take the following actions:
(a) The Company shall, at its cost, use its reasonable best efforts
to, as promptly as practicable (but in no event more than 45 days after so
required or requested pursuant to this Section 2) file with the Commission
and thereafter shall use its reasonable best efforts to cause to be
declared effective a registration statement or statements (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, a "Registration Statement") on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined in Section 6 hereof) by the Holders thereof from
time to time in accordance with the methods of distribution set forth in
the Shelf Registration Statement and Rule 415 under the Securities Act
(hereinafter, the "Shelf Registration"); PROVIDED, HOWEVER, that no Holder
(other than an Initial Purchaser) shall be entitled to have the Initial
Securities or Private Exchange Securities held by it covered by such Shelf
Registration Statement unless such Holder agrees in writing to be bound by
all the provisions of this Agreement applicable to such Holder.
(b) The Company shall use its reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus included therein to be lawfully delivered by the Holders of the
relevant Securities, for a period of two years (or for such longer period
if extended pursuant to Section 3(j) below) from the Issue Date or such
shorter period that will terminate when all the Securities covered by the
Shelf Registration Statement (i) have been sold pursuant thereto or (ii)
are no longer restricted securities (as defined in Rule 144 under the
Securities Act, or any successor rule thereof (the "Shelf Registration
Period")). The Company shall be deemed not to have used its reasonable
best efforts to keep the Shelf Registration Statement effective during the
requisite period if they voluntarily take any action that would result in
Holders of Securities covered thereby not being able to offer and sell such
Securities during that period, unless such action is required by applicable
law; provided however, that the foregoing shall not apply to actions taken
by the Company in good faith and for valid business reasons (not including
avoidance of its obligations hereunder), including, without limitation, the
acquisition or divestiture of assets so long as the Company within 120 days
thereafter complies with the requirements of Section 3(j) hereof.
(c) Notwithstanding any other provisions of this Agreement to the
contrary, the Company shall cause the Shelf Registration Statement and the
related prospectus and any amendment or supplement thereto, as of the
effective date of the Shelf
5
<PAGE>
Registration Statement, amendment or supplement, (i) to comply in all
material respects with the applicable requirements of the Securities Act
and the rules and regulations of the Commission and (ii) not to contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3. REGISTRATION PROCEDURES. In connection with any Shelf Registration
contemplated by Section 2 hereof and, to the extent applicable, any Registered
Exchange Offer contemplated by Section 1 hereof, the following provisions shall
apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and, in the event that an Initial Purchaser
(with respect to any portion of an unsold allotment from the original
offering) is participating in the Registered Exchange Offer or the Shelf
Registration Statement, the Company shall use its reasonable best efforts
to reflect in each such document, when so filed with the Commission, such
comments as such Initial Purchaser reasonably may propose; (ii) include the
information set forth in Annex A hereto on the cover, in Annex B hereto in
the "Exchange Offer Procedures" section and the "Purpose of the Exchange
Offer" section and in Annex C hereto in the "Plan of Distribution" section
of the prospectus forming a part of the Exchange Offer Registration
Statement and include the information set forth in Annex D hereto in the
Letter of Transmittal delivered pursuant to such Registered Exchange Offer;
(iii) if requested by an Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer
Registration Statement; (iv) include within the prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the
staff of the Commission with respect to the potential "underwriter" status
of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of Exchange Securities received by such broker-dealer in a Registered
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the Commission or
such positions or policies, in the reasonable judgment of the Initial
Purchasers based upon advice of counsel (which may be in-house counsel),
represent the prevailing views of the staff of the Commission; and (v) in
the case of a Shelf Registration Statement, include the names of the
Holders who propose to sell Securities pursuant to the Shelf Registration
Statement as selling security holders.
(b) The Company shall give notice to the Initial Purchasers, the
Holders of the Securities and any Participating Broker-Dealer from whom the
Company has received prior written notice that it will be a Participating
Broker-Dealer in a Registered Exchange Offer and, if requested by such
person, confirm such advice in writing, (which notice pursuant to clauses
(ii)-(v) hereof shall be accompanied by an instruction to suspend
6
<PAGE>
the use of the prospectus until the requisite changes have been made):
(i) when the Registration Statement or any amendment thereto has
been filed with the Commission and when the Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of
the Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to
make changes in the Registration Statement or the prospectus in order
that the Registration Statement or the prospectus does not contain an
untrue statement of a material fact nor omit to state a material fact
required to be stated therein or necessary to make the statements
therein (in the case of the prospectus, in light of the circumstances
under which they were made) not misleading.
(c) The Company shall make every reasonable effort to obtain the
withdrawal at the earliest possible time, of any order suspending the
effectiveness of the Registration Statement.
(d) The Company shall furnish to each Holder of Securities included
within the coverage of the Shelf Registration, without charge, at least one
copy of the Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder
so requests in writing, all exhibits thereto (including those, if any,
incorporated by reference).
(e) The Company shall deliver to each Exchanging Dealer and each
Initial Purchaser, and to any other Holder who so requests, without charge,
at least one conformed copy of the Exchange Offer Registration Statement
and any post-effective amendment thereto, including financial statements
and schedules, and, if any Initial Purchaser, Exchanging Dealer or any such
Holder so requests in writing, all exhibits thereto (including those, if
any, incorporated by reference).
(f) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Securities included within the coverage of the Shelf
Registration, without charge, as many copies of the prospectus (including
each preliminary prospectus) included in the Shelf Registration Statement
and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this
Agreement, to
7
<PAGE>
the use of the prospectus or any amendment or supplement thereto by each of
the selling Holders of the Securities in connection with the offering and
sale of the Securities covered by the prospectus, or any amendment or
supplement thereto, included in the Shelf Registration Statement.
(g) The Company shall deliver to each Initial Purchaser, any
Exchanging Dealer, any Participating Broker-Dealer and such other persons
required to deliver a prospectus following the Registered Exchange Offers,
without charge, as many copies of the final prospectus included in the
Exchange Offer Registration Statement and any amendment or supplement
thereto as such persons may reasonably request. The Company consents,
subject to the provisions of this Agreement, to the use of the prospectus
or any amendment or supplement thereto by any Initial Purchaser, any
Exchanging Dealer, if necessary, any Participating Broker-Dealer and such
other persons required to deliver a prospectus following the Registered
Exchange Offers in connection with the offering and sale of the Exchange
Securities covered by the prospectus, or any amendment or supplement
thereto, included in such Exchange Offer Registration Statement.
(h) Prior to any public offering of the Securities pursuant to any
Registration Statement the Company shall use its reasonable efforts to
register or qualify or cooperate with the Holders of the Securities
included therein and their respective counsel in connection with the
registration or qualification of the Securities for offer and sale under
the securities or "blue sky" laws of such states of the United States as
any Holder of the Securities reasonably requests in writing and do any and
all other acts or things necessary or advisable to enable the offer and
sale in such jurisdictions of the Securities covered by such Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
(i) qualify generally to do business in any jurisdiction where it is not
then so qualified or (ii) take any action which would subject it to general
service of process or to taxation in any jurisdiction where it is not then
so subject.
(i) The Company shall cooperate with the Holders of the Securities to
facilitate the timely preparation and delivery of certificates representing
the Securities to be sold pursuant to any Registration Statement free of
any restrictive legends and in such denominations and registered in such
names as the Holders may request in writing a reasonable period of time
prior to sales of the Securities pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by paragraphs
(ii) through (v) of Section 3(b) above during the period for which the
Company is required to maintain an effective Registration Statement, the
Company shall promptly prepare and file a post-effective amendment to the
Registration Statement or a supplement to the related prospectus and any
other required document so that, as thereafter delivered to Holders of the
Securities or purchasers of Securities, the prospectus will not contain an
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
If the Company notifies the Initial Purchasers, the Holders of the
Securities and any known Participating Broker-Dealer in accordance with
paragraphs
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<PAGE>
(ii) through (v) of Section 3(b) above to suspend the use of the prospectus
until the requisite changes to the prospectus have been made, then the
Initial Purchasers, the Holders of the Securities and any such
Participating Broker-Dealers shall suspend use of such prospectus, and the
period of effectiveness of the Shelf Registration Statement provided for in
Section 2(b) above or the Exchange Offer Registration Statement provided
for in Section 1 above shall be extended by the number of days from and
including the date of the giving of such notice to and including the date
when the Initial Purchasers, the Holders of the Securities and any known
Participating Broker-Dealer shall have received such amended or
supplemented prospectus pursuant to this Section 3(j).
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide CUSIP numbers for the Initial
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, and provide the Trustee with printed certificates for the
Initial Securities, the Exchange Securities or the Private Exchange
Securities, as the case may be, in forms eligible for deposit with The
Depository Trust Company.
(l) The Company will use its reasonable best efforts to comply with
all rules and regulations of the Commission to the extent and so long as
they are applicable to the Registered Exchange Offers or the Shelf
Registration and the Company will make generally available to the Company's
securityholders (or otherwise provide in accordance with Section 11(a) of
the Securities Act) an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act, no later than 45 days after the end of
a 12-month period (or 90 days, if such period is a fiscal year) beginning
with the first month of the Company's first fiscal quarter commencing after
the effective date of the Registration Statement, which statement shall
cover such 12-month period.
(m) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") as
required by applicable law, in a timely manner and containing such changes,
if any, as shall be necessary for such qualification. In the event that
such qualification would require the appointment of a new trustee under the
Indenture, the Company shall appoint a new trustee thereunder pursuant to
the applicable provisions of such Indenture.
(n) The Company may require each Holder of Securities to be sold
pursuant to the Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of the Securities as
the Company may from time to time reasonably require for inclusion in the
Shelf Registration Statement, and the Company may exclude from such
registration the Securities of any Holder that unreasonably fails to
furnish such information within a reasonable time after receiving such
request.
(o) The Company shall enter into such customary agreements
(including, if requested, an underwriting agreement in customary form) and
take all such other action, if any, as any Holder of the Securities shall
reasonably request in order to facilitate the disposition of the Securities
pursuant to any Shelf Registration.
(p) In the case of any Shelf Registration, the Company
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<PAGE>
shall (i) make reasonably available for inspection by the Holders of the
Securities, any underwriter participating in any disposition pursuant to
the Shelf Registration Statement and any attorney, accountant or other
agent retained by the Holders of the Securities or any such underwriter all
relevant financial and other records, pertinent corporate documents and
properties of the Company and (ii) use its reasonable best efforts to cause
the Company's officers, directors, employees, accountants and auditors to
supply all relevant information reasonably requested by the Holders of the
Securities or any such underwriter, attorney, accountant or agent in
connection with the Shelf Registration Statement, in each case, as shall be
reasonably necessary to enable such persons, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
PROVIDED, HOWEVER, that the foregoing inspection and information gathering
shall be coordinated on behalf of the Initial Purchasers by you and on
behalf of the other parties, by one counsel designated by and on behalf of
such other parties as described in Section 4 hereof.
(q) In the case of any Shelf Registration, the Company, if requested
by any Holder of Securities covered thereby, shall use its reasonable best
efforts to cause (i) its counsel to deliver an opinion and updates thereof
relating to the Securities in customary form addressed to such Holders and
the managing underwriters, if any, thereof and dated, in the case of the
initial opinion, the effective date of such Shelf Registration Statement
(it being agreed that the matters to be covered by such opinion shall
include, without limitation, the due incorporation and good standing of the
Company and its subsidiaries; the qualification of the Company and its
subsidiaries to transact business as a foreign corporation; the due
authorization, execution and delivery of the relevant agreement of the type
referred to in Section 3(o) hereof; the due authorization, execution, and
issuance, and the validity and enforceability, of the applicable
Securities; the absence of material legal or governmental proceedings
involving the Company and its subsidiaries; the absence of governmental
approvals required to be obtained in connection with the Shelf Registration
Statement, the offering and sale of the applicable Securities, or any
agreement of the type referred to in Section 3(o) hereof; the compliance in
all material respects as to form of such Shelf Registration Statement and
any documents incorporated by reference therein and of the Indenture with
the requirements of the Securities Act and the Trust Indenture Act,
respectively; and, as of the date of the opinion and as of the effective
date of the Shelf Registration Statement or most recent post-effective
amendment thereto, as the case may be, the absence from such Shelf
Registration Statement and the prospectus included therein, as then amended
or supplemented, and from any documents incorporated by reference therein,
of an untrue statement of a material fact or the omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of any such documents, in
the light of the circumstances existing at the time that such documents
were filed with the Commission under the Exchange Act)); (ii) its officers
to execute and deliver all customary documents and certificates and updates
thereof reasonably requested by any underwriters of the applicable
Securities and (iii) its independent public accountants to provide to the
selling Holders of the applicable Securities and any
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underwriter therefor a comfort letter in customary form and covering
matters of the type customarily covered in comfort letters in connection
with primary underwritten offerings, subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of
Auditing Standards No. 72.
(r) In the case of a Shelf Registration Statement, if requested by
any Initial Purchaser or any known Participating Broker-Dealer, the Company
shall cause (i) their counsel to deliver to such Initial Purchaser or such
Participating Broker-Dealer a signed opinion in the form set forth in
Section 6(e) of the Purchase Agreement with such changes as are customary
in connection with the preparation of a Registration Statement and
(ii) their independent public accountants to deliver to such Initial
Purchaser or such Participating Broker-Dealer a comfort letter, in
customary form, meeting the requirements as to the substance thereof as set
forth in Sections 6(a), 6(b), 6(c) and 6(h) of the Purchase Agreement, with
appropriate date changes.
(s) If a Registered Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Initial Securities by Holders to the
Company (or to such other Person as directed by the Company) in exchange
for the Exchange Securities or the Private Exchange Securities, as the case
may be, the Company shall mark, or cause to be marked, on the Initial
Securities so exchanged that such Initial Securities are being canceled in
exchange for the Exchange Securities or the Private Exchange Securities, as
the case may be; in no event shall the Initial Securities be marked as paid
or otherwise satisfied.
(t) The Company will use its reasonable best efforts to (a) if the
Initial Securities have been rated prior to the initial sale of such
Initial Securities, confirm such ratings will apply to the Securities
covered by a Registration Statement, or (b) if the Initial Securities were
not previously rated, cause the Securities covered by a Registration
Statement to be rated with the appropriate rating agencies, if so requested
by Holders of a majority in aggregate principal amount (or principal amount
at maturity) of Securities covered by such Registration Statement, or by
the managing underwriters, if any.
(u) In the event that any broker-dealer registered under the Exchange
Act shall underwrite any Securities or participate as a member of an
underwriting syndicate or selling group or "assist in the distribution"
(within the meaning of the Conduct Rules (the "Rules") of the National
Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a
Holder of such Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, the Company shall
use its reasonable best efforts to assist such broker-dealer in complying
with the requirements of such Rules, including, without limitation, by
(i) if such Rules, including Rule 2720, shall so require, engaging a
"qualified independent underwriter" (as defined in Rule 2720) to
participate in the preparation of the Registration Statement relating to
such Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Registration Statement is an underwritten offering or is made through a
placement or sales agent, to recommend the yield of such Securities,
(ii) indemnifying any such qualified independent
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<PAGE>
underwriter to the extent of the indemnification of underwriters provided
in Section 5 hereof and (iii) providing such information to such
broker-dealer as may be required in order for such broker-dealer to comply
with the requirements of the Rules.
(v) The Company shall use its reasonable best efforts to take all
other steps necessary to effect the registration of the Securities covered
by a Registration Statement contemplated hereby.
4. REGISTRATION EXPENSES. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 3 hereof (including the reasonable fees and expenses, if any, of
Cravath, Swaine & Moore, counsel for the Initial Purchasers, incurred in
connection with the Registered Exchange Offer), whether or not a Registered
Exchange Offer or a Shelf Registration is filed or becomes effective, and, in
the event of a Shelf Registration, shall bear or reimburse the Holders of the
Securities covered thereby for the reasonable fees and disbursements of one firm
of counsel designated by the Holders of a majority in principal amount of the
Securities covered thereby to act as counsel for the Holders of the Securities
in connection therewith.
5. INDEMNIFICATION. (a) The Company agrees to indemnify and hold
harmless each Holder of the Securities, any Participating Broker-Dealer and each
person, if any, who controls such Holder or such Participating Broker-Dealer
within the meaning of the Securities Act or the Exchange Act (each Holder, any
Participating Broker-Dealer and such controlling persons are referred to
collectively as the "Indemnified Parties") from and against any losses, claims,
damages or liabilities, joint or several, or any actions in respect thereof
(including, but not limited to, any losses, claims, damages, liabilities or
actions relating to purchases and sales of the Securities) to which such
Indemnified Party may become subject under the Securities Act, the Exchange Act
or otherwise, insofar as such losses, claims, damages, liabilities or actions
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration, or arise out of, or are based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
promptly upon demand, as incurred, the Indemnified Parties for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action in respect thereof;
PROVIDED, HOWEVER, that (i) the Company shall not be liable in any such case to
the extent that such loss, claim, damage, liability or action arises out of or
is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in a Registration Statement or prospectus or in any
amendment or supplement thereto or in any preliminary prospectus relating to a
Shelf Registration in reliance upon and in conformity with written information
pertaining to such Holder and furnished to the Company by or on behalf of such
Holder specifically for inclusion therein and (ii) with respect to any untrue
statement or omission or alleged untrue statement or omission made in any
preliminary prospectus relating to a Shelf Registration Statement, the indemnity
agreement contained in this subsection (a) shall not inure to the benefit of any
Holder or Participating Broker-Dealer from whom the person asserting any such
losses, claims, damages or liabilities purchased the Securities concerned, to
the extent that a prospectus
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<PAGE>
relating to such Securities was required to be delivered by such Holder or
Participating Broker-Dealer under the Securities Act in connection with such
purchase and any such loss, claim, damage or liability of such Holder or
Participating Broker-Dealer results from the fact that there was not sent or
given to such person, at or prior to the written confirmation of the sale of
such Securities to such person, a copy of the final prospectus if the Company
has previously furnished copies thereof to such Holder or Participating
Broker-Dealer; PROVIDED FURTHER, HOWEVER, that this indemnity agreement will be
in addition to any liability which the Company may otherwise have to such
Indemnified Party. The Company shall also indemnify underwriters, their
officers and directors and each person who controls such underwriters within the
meaning of the Securities Act or the Exchange Act to the same extent as provided
above with respect to the indemnification of the Holders of the Securities if
requested by such Holders.
(b) Each Holder of the Securities, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act or the Exchange Act from
and against any losses, claims, damages or liabilities, joint or several, or any
actions in respect thereof, to which the Company or any such controlling person
may become subject under the Securities Act, the Exchange Act or otherwise,
insofar as such losses, claims, damages, liabilities or actions arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement or prospectus or in any amendment or
supplement thereto or in any preliminary prospectus relating to a Shelf
Registration, or arise out of or are based upon the omission or alleged omission
to state therein a material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
omission or alleged untrue statement or omission was made in reliance upon and
in conformity with written information pertaining to such Holder and furnished
to the Company by or on behalf of such Holder specifically for inclusion
therein; and, subject to the limitation set forth immediately preceding this
clause, shall reimburse, promptly upon demand, as incurred, the Company for any
legal or other expenses reasonably incurred by the Company or any such
controlling person in connection with investigating or defending any loss,
claim, damage, liability or action in respect thereof. This indemnity agreement
will be in addition to any liability which such Holder may otherwise have to the
Company or any of their controlling persons.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action or proceeding (including a governmental
investigation), such indemnified party will, if a claim in respect thereof is to
be made against the indemnifying party under this Section 5, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not, in any event, except to the extent it
has been materially prejudiced by such failure, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above. In case any such action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the
13
<PAGE>
indemnifying party), and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. No indemnifying party shall, without the prior
written consent of the indemnified party, (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a party
and indemnity could have been sought hereunder by such indemnified party unless
such settlement includes an unconditional release of such indemnified party from
all liability on any claims that are the subject matter of such action.
(d) If the indemnification provided for in this Section 5 is unavailable
or insufficient to hold harmless an indemnified party under subsections (a) or
(b) above, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to in subsection (a) or (b)
above (i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the exchange of the Initial Securities,
pursuant to the relevant Registered Exchange Offer, or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party or
parties on the one hand and the indemnified party on the other in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities (or actions in respect thereof) as well as any other relevant
equitable considerations. The relative fault of the parties shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
such Holder or such other indemnified party, as the case may be, on the other,
and the parties' intent and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
by an indemnified party as a result of the losses, claims, damages, liabilities
or action referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any action or
claim which is the subject of this subsection (d). Notwithstanding any other
provision of this Section 5(d), the Holders of the Securities shall not be
required to contribute any amount in excess of the amount by which the net
proceeds received by such Holders from the sale of the Securities pursuant to a
Registration Statement exceeds the amount of damages which such Holders have
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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this paragraph (d), each person,
if any, who controls such indemnified party within the meaning of the Securities
Act or the Exchange Act shall have the same rights to contribution as such
indemnified party and each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act shall have the same rights to
contribution as the Company.
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<PAGE>
(e) The agreements contained in this Section 5 shall survive the sale of
the Securities pursuant to a Registration Statement and shall remain in full
force and effect, regardless of any termination or cancelation of this Agreement
or any investigation made by or on behalf of any indemnified party.
6. ADDITIONAL INTEREST UNDER CERTAIN CIRCUMSTANCES. (a) Additional
interest (the "Additional Interest") with respect to the Initial Securities (or
the Private Exchange Securities) issued by the Company shall be assessed as
follows if any of the following events occur (each such event in clauses (i)
through (iii) below a "Registration Default"):
(i) If by December 21, 1998, neither the Exchange Offer Registration
Statement nor a Shelf Registration Statement relating to such Notes has
been filed with the Commission;
(ii) If by April 20, 1999, neither the Registered Exchange Offer
relating to such Notes is consummated nor, if required in lieu thereof, a
Shelf Registration Statement relating to such Notes is declared effective
by the Commission; or
(iii) If after either the Exchange Offer Registration Statement or
the Shelf Registration Statement Initial Securities are declared effective
(A) such Registration Statement thereafter ceases to be effective or
(B) such Registration Statement or the related prospectus ceases to be
usable in connection with resales of Transfer Restricted Securities during
the periods specified herein because either (1) any event occurs as a
result of which the related prospectus forming part of such Registration
Statement would include any 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, or
(2) it shall be necessary to amend such Registration Statement or
supplement the related prospectus, to comply with the Securities Act or the
Exchange Act or the respective rules thereunder.
Additional Interest shall accrue on the Initial Securities and any Private
Exchange Securities exchanged therefor over and above the interest set forth in
the title of the Securities from and including the date on which any such
Registration Default shall occur to but excluding the date on which all such
Registration Defaults relating to the relevant Securities have been cured, at a
rate of 0.50% per annum (the "Additional Interest Rate") for the first 90-day
period immediately following the occurrence of such Registration Default. The
Additional Interest Rate shall increase by an additional 0.50% per annum with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum Additional Interest Rate of 2.0% per annum.
(b) A Registration Default referred to in Section 6(a)(iii) hereof shall
be deemed not to have occurred and be continuing in relation to a Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to such Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use
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<PAGE>
the related prospectus or (y) other material events, with respect to the Company
that would need to be described in such Shelf Registration Statement or the
related prospectus and (ii) in the case of clause (y), the Company is proceeding
promptly and in good faith to amend or supplement such Shelf Registration
Statement and related prospectus to describe such events; PROVIDED, HOWEVER,
that in any case if such Registration Default occurs for a continuous period in
excess of 30 days, Additional Interest shall be payable in accordance with the
above paragraph from the day such Registration Default occurs until such
Registration Default is cured.
(c) Any amounts of Additional Interest due pursuant to clause (i), (ii) or
(iii) of Section 6(a) above will be payable in cash on the regular interest
payment dates with respect to the Initial Securities and Private Exchange
Securities, as the case may be. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Initial Securities and Private Exchange Securities, as
the case may be, multiplied by a fraction, the numerator of which is the number
of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
(d) "Transfer Restricted Securities" means each Security until (i) the
date on which such Security has been exchanged by a person other than a
broker-dealer for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered
Exchange Offer of such security for an Exchange Security, the date on which such
Exchange Security is sold to a purchaser who receives from such broker-dealer on
or prior to the date of such sale a copy of the prospectus contained in the
Exchange Offer Registration Statement, (iii) the date on which such Security has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iv) the date on which such
Security is distributed to the public pursuant to Rule 144 under the Securities
Act or is saleable pursuant to Rule 144(k) under the Securities Act.
Notwithstanding anything to the contrary in this Section 6, the Company shall
not be required to pay liquidated damages to a Holder of Transfer Restricted
Securities if such Holder failed to comply with its obligations to make the
representations set forth in Section 1 or failed to provide the information
required to be provided by it, if any.
7. RULES 144 AND 144A. The Company shall use its reasonable best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any Holder of Transfer
Restricted Securities, make publicly available other information so long as
necessary to permit sales of their securities pursuant to Rules 144 and 144A.
The Company covenants that it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Transfer Restricted Securities identified to the
Company by the Initial Purchasers upon request. Upon the request of any Holder
of Transfer Restricted Securities, the Company shall deliver to such Holder a
written statement
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<PAGE>
as to whether it has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering ("Managing Underwriters") will be selected by
the Holders of a majority in aggregate principal amount (or principal amount at
maturity) of such Transfer Restricted Securities to be included in such
offering, subject to the consent of the Company (which shall not be unreasonably
withheld or delayed), and such Holders shall be responsible for all underwriting
commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder unless
such person (i) agrees to sell such person's Transfer Restricted Securities on
the basis reasonably provided in any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements.
9. MISCELLANEOUS.
(a) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, except by the Company and the written
consent of the Holders of a majority in principal amount (or principal amount at
maturity) of the Securities affected by such amendment, modification,
supplement, waiver or consent, taken as a single class.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, first-class mail,
facsimile transmission, or air courier which guarantees overnight delivery:
(1) if to a Holder of the Securities, at the most current address
given by such Holder to the Company.
(2) if to the Initial Purchasers;
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010-3629
Fax No.: (212) 325-8278
Attention: Transactions Advisory Group
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Telephone: (212) 474-1000
Telecopy: (212) 474-3700
Attention: Kris F. Heinzelman, Esq.
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(3) if to the Company, at its address as follows:
DIMAC Corporation
5775 Peachtree
Dunwoody Road
Suite C-150
Atlanta, GA 30342
Telephone: (404) 256-1123
Fax: (404) 705-9929
Attention: Scott Ebert
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036-2787
Telephone: (212) 819-8200
Fax: (212) 354-8113
Attention: Frank L. Schiff, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; three
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged by recipient's facsimile machine operator, if sent
by facsimile transmission; and on the day delivered, if sent by overnight air
courier guaranteeing next day delivery.
(c) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, entered into, nor shall they, on or after the date hereof, enter into,
any agreement with respect to their securities that is inconsistent with the
rights granted to the Holders herein or otherwise conflicts with the provisions
hereof.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and their successors and assigns.
(e) 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.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
(h) SEVERABILITY. If 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.
(i) SECURITIES HELD BY THE COMPANY. Whenever the consent or approval of
Holders of a specified percentage of principal amount (or principal amount at
maturity) of Securities is required hereunder, Securities held by the Company or
its affiliates (other than subsequent
18
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Holders of Securities if such subsequent Holders are deemed to be affiliates
solely by reason of their holdings of such Securities) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the several Initial Purchasers and the Company in accordance with its terms.
Very truly yours,
DIMAC CORPORATION,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
SUBSIDIARY GUARANTORS:
DIMAC MARKETING CORPORATION,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
DIMAC DIRECT, INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
PALM COAST DATA INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
THE McCLURE GROUP INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
WILCOX & ASSOCIATES INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
20
<PAGE>
MBS/MULTIMODE INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
AMERICOMM HOLDINGS, INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
AMERICOMM DIRECT MARKETING, INC.,
by /s/ James Wu
------------------------------------
Name: James Wu
Title: Assistant Secretary
The foregoing Registration
Rights Agreement is hereby confirmed
and accepted as of the date first
above written.
Credit Suisse First Boston Corporation
First Union Capital Markets
Warburg Dillon Read Llc
By: Credit Suisse First Boston
Corporation
by /s/ Richard Gallant
------------------------------------
Name: Richard Gallant
Title: Managing Director
21
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to a Registered Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Initial Securities where such Initial Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the
Expiration Date (as defined herein), it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
22
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Initial Securities, where such Initial Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
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<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Registered Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received in
exchange for Initial Securities where such Initial Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until ,
199 , all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.(1) In addition, the legend required by
Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange
Offer prospectus.
- ---------------------
(1) In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
24
<PAGE>
1
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Securities or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Securities. Any broker-dealer that resells Exchange Securities that were
received by it for its own account pursuant to an Exchange Offer and any broker
or dealer that participates in a distribution of such Exchange Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Exchange Securities and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that,
by acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of one counsel for the Holders of the
Securities) other than commissions or concessions of any brokers or dealers and
will indemnify the Holders of the Securities (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
25
<PAGE>
ANNEX D
CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Initial Securities that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
26
<PAGE>
Exhibit 10.1
[LETTERHEAD OF FIBERSTOCK]
June 15, 1995
Mr. Scott P. Ebert
1105 Autumn Chase Court
Marietta, GA 30064
Dear Scott;
Confirming our various discussions, effective immediately you will assume the
position of Vice President/Controller of National Fiberstok Corporation (the
"Company"). In addition, you will maintain the title of Assistant Secretary of
DEC International, Inc.
RESPONSIBILITIES
In your capacity as Vice President / Controller, you will report directly to
Robert Webster, Executive Vice President and Chief Financial Officer and will
continue to maintain your primary office at the corporate headquarters in
Atlanta. Your specific responsibilities will include, among others:
- oversight of all internal and external financial reporting,
- development of financial management reporting,
- development of the cash management system and all cash reporting,
- maintenance of lender relationships,
- supervision of the outside audit of the Company's financial
statements,
- renewal and maintenance of property and casualty insurance programs,
- review and evaluation of the costs and effectiveness of the Company's
employee benefit programs,
- supervision of the Company's income tax reporting and compliance,
- supervision of the Company's payroll processing consolidation, and
- other activities as assigned.
<PAGE>
Mr. Scott P. Ebert
Page 2
CASH COMPENSATION
Your base compensation, expressed on an annual basis, will continue to be
$83,417. Your performance against a mutually agreed upon plan will form the
basis for any increase in base compensation. Any such increase will be subject
to approval by the Compensation Committee of the Joint Board of Directors.
You will be eligible to earn incentive cash compensation consistent with past
practice. Specifically, your incentive cash compensation will be based on your
performance versus an agreed upon plan in addition to the overall profitability
of the Company.
INSURANCE AND RETIREMENT BENEFITS
You will continue to be eligible to elect coverage under the insurance plans
which are available to other executive employees of the Company as follows:
- medical care and hospitalization,
- dental care,
- long-term disability,
- short-term disability, and
- life insurance.
Naturally, you will also continue to be eligible to participate in the National
Fiberstok Corporation 401k Savings Plan.
SEVERANCE
Should the Company choose to terminate your employment for any reason other than
an illegal act, you will be entitled to continuation of your then current base
compensation for a period of six (6) months from the date of termination.
This severance would also be applicable should you or the Company terminate your
employment as a result of a transfer in ownership of the Company or DEC
International, Inc.
<PAGE>
Mr. Scott P. Ebert
Page 3
Scott, you have contributed significantly to the success of the Company to date.
I am looking forward to continued fine performance in your new role. If you are
in agreement with the provisions of this letter, please indicate by
countersigning and returning it to me. A copy of the fully executed letter will
be provided for your files.
Sincerely,
NATIONAL FIBERSTOK CORPORATION
/s/ Robert M. Miklas
- -----------------------------------
Robert M. Miklas
President & CEO
cc: Robert B. Webster
Accepted by:
/s/ Scott P. Ebert 06/15/95
- -----------------------------------
Scott P. Ebert Date
<PAGE>
Exhibit 10.3
EXECUTION
AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF OCTOBER 22, 1998
AMONG
DIMAC CORPORATION,
AS BORROWER,
DIMAC HOLDINGS, INC.,
AS A GUARANTOR,
THE LENDERS LISTED HEREIN,
AS LENDERS,
CREDIT SUISSE FIRST BOSTON,
AS ADMINISTRATIVE AGENT
AND ARRANGER,
WARBURG DILLON READ LLC,
AS SYNDICATION AGENT,
AND
FIRST UNION NATIONAL BANK,
AS DOCUMENTATION AGENT
<PAGE>
DIMAC CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1.
DEFINITIONS................................................. 2
1.1 Certain Defined Terms................................................................ 2
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement...................................................................... 39
1.3 Other Definitional Provisions........................................................ 39
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS.................................. 39
2.1 Commitments; Loans................................................................... 39
2.2 Interest on the Loans................................................................ 48
2.3 Fees................................................................................. 52
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments........................................................ 53
2.5 Use of Proceeds...................................................................... 63
2.6 Special Provisions Governing Eurodollar Rate Loans................................... 64
2.7 Increased Costs; Taxes; Capital Adequacy............................................. 66
2.8 Obligation of Lenders and Issuing Lenders to Mitigate................................ 70
SECTION 3.
LETTERS OF CREDIT.............................................. 71
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.............................................................................. 71
3.2 Letter of Credit Fees................................................................ 74
3.3 Drawings and Payments and Reimbursement of Amounts Drawn or Paid
Under Letters of Credit.............................................................. 75
3.4 Obligations Absolute................................................................. 77
3.5 Indemnification; Nature of Issuing Lender's Duties................................... 78
3.6 Increased Costs and Taxes Relating to Letters of Credit.............................. 80
SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT.................................. 81
4.1 Conditions to Effectiveness of Amendment and Restatement............................. 81
4.2 Conditions to All Loans.............................................................. 87
4.3 Conditions to Letters of Credit...................................................... 88
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 5.
REPRESENTATIONS AND WARRANTIES........................................ 89
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries......................................................................... 89
5.2 Authorization of Borrowing, etc...................................................... 90
5.3 Financial Condition; Projections..................................................... 91
5.4 No Material Adverse Change; No Restricted Junior Payments............................ 92
5.5 Title to Properties; Liens; Real Property............................................ 93
5.6 Litigation; Adverse Facts............................................................ 93
5.7 Payment of Taxes..................................................................... 94
5.8 Performance of Agreements; Materially Adverse Agreements............................. 94
5.9 Governmental Regulation.............................................................. 94
5.10 Securities Activities................................................................ 94
5.11 Employee Benefit Plans............................................................... 94
5.12 Certain Fees......................................................................... 95
5.13 Environmental Protection............................................................. 95
5.14 Employee Matters..................................................................... 97
5.15 Solvency............................................................................. 97
5.16 Related Agreements................................................................... 97
5.17 Disclosure........................................................................... 97
5.18 Subordination of Subordinated Indebtedness........................................... 98
5.19 Year 2000 Problems................................................................... 98
SECTION 6.
AFFIRMATIVE COVENANTS............................................ 99
6.1 Financial Statements and Other Reports............................................... 99
6.2 Corporate Existence..................................................................104
6.3 Payment of Taxes and Claims; Tax Consolidation.......................................104
6.4 Maintenance of Properties; Insurance.................................................104
6.5 Inspection; Lender Meeting...........................................................105
6.6 Compliance with Laws, etc............................................................105
6.7 Environmental Disclosure and Inspection..............................................105
6.8 Company's Remedial Action Regarding Hazardous Materials..............................107
6.9 Execution of Subsidiary Guaranty and Collateral Documents by Subsidiar-
ies and Future Subsidiaries..........................................................107
6.10 Interest Rate Protection.............................................................108
6.11 Further Assurances...................................................................108
6.12 Conforming Leasehold Interests; Matters Relating to Additional Real
Property Collateral..................................................................109
6.13 Year 2000 Problems...................................................................111
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 7.
NEGATIVE COVENANTS..............................................112
7.1 Indebtedness.........................................................................112
7.2 Liens and Related Matters............................................................113
7.3 Investments; Joint Ventures..........................................................115
7.4 Contingent Obligations...............................................................116
7.5 Restricted Junior Payments...........................................................117
7.6 Financial Covenants..................................................................117
7.7 Restriction on Fundamental Changes; Asset Sales......................................121
7.8 Sales and Lease-Backs................................................................122
7.9 Sale or Discount of Receivables......................................................123
7.10 Transactions with Shareholders and Affiliates........................................123
7.11 Disposal of Subsidiary Stock.........................................................123
7.12 Conduct of Business of Company.......................................................123
7.13 Amendments or Waivers of Related Agreements..........................................124
7.14 Fiscal Year..........................................................................124
7.15 Conduct of Business of Holdings......................................................124
SECTION 8.
EVENTS OF DEFAULT..............................................125
8.1 Failure to Make Payments When Due....................................................125
8.2 Default in Other Agreements..........................................................125
8.3 Breach of Certain Covenants..........................................................125
8.4 Breach of Warranty...................................................................126
8.5 Other Defaults Under Loan Documents..................................................126
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.................................126
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc...................................126
8.8 Judgments and Attachments............................................................127
8.9 Dissolution..........................................................................127
8.10 Employee Benefit Plans...............................................................127
8.11 Change in Control....................................................................127
8.12 Invalidity of Guaranties.............................................................128
8.13 Failure of Security..................................................................128
SECTION 9.
AGENTS....................................................129
9.1 Appointment..........................................................................129
9.2 Powers; General Immunity.............................................................131
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.....................................................................132
9.4 Right to Indemnity...................................................................132
9.5 Successor Administrative Agent and Swing Line Lender.................................133
9.6 Collateral Documents.................................................................133
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 10.
MISCELLANEOUS................................................134
10.1 Assignments and Participations in Loans, Letters of Credit...........................134
10.2 Expenses.............................................................................137
10.3 Indemnity............................................................................137
10.4 Set-Off; Security Interest in Deposit Accounts.......................................138
10.5 Ratable Sharing......................................................................139
10.6 Amendments and Waivers...............................................................139
10.7 Independence of Covenants............................................................141
10.8 Notices..............................................................................141
10.9 Survival of Representations, Warranties and Agreements...............................142
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative................................142
10.11 Marshalling; Payments Set Aside......................................................142
10.12 Severability.........................................................................142
10.13 Obligations Several; Independent Nature of Lenders' Rights...........................143
10.14 Maximum Amount.......................................................................143
10.15 Headings.............................................................................144
10.16 Applicable Law.......................................................................144
10.17 Successors and Assigns...............................................................144
10.18 Consent to Jurisdiction and Service of Process.......................................144
10.19 Waiver of Jury Trial.................................................................145
10.20 Confidentiality......................................................................146
10.21 Counterparts; Effectiveness..........................................................146
Signature pages.....................................................................................S-1
</TABLE>
(iv)
<PAGE>
EXHIBITS
<TABLE>
<S> <C>
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TERM A NOTE
V FORM OF TERM B NOTE
VI FORM OF TERM C NOTE
VII FORM OF REVOLVING NOTE
VIII FORM OF SWING LINE NOTE
IX FORM OF SUBSIDIARY GUARANTY
X FORM OF HOLDINGS GUARANTY
XI FORM OF PLEDGE AGREEMENT
XII FORM OF SECURITY AGREEMENT
XIII FORM OF COMPLIANCE CERTIFICATE
XIV [Intentionally Deleted]
XV [Intentionally Deleted]
XVI FORM OF ASSIGNMENT AGREEMENT
XVII FORM OF COLLATERAL ACCOUNT AGREEMENT
XVIII FORM OF CERTIFICATE OF NON-BANK STATUS
XIX FORM OF PERMITTED SELLER PAPER
XX FORM OF MORTGAGE
XXI FORM OF ACKNOWLEDGEMENT AND CONSENT
</TABLE>
(v)
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
1.1(i) ADDBACKS TO EBITDA
1.1(ii) CERTAIN EARN OUT AGREEMENTS
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
3.1 EXISTING LETTERS OF CREDIT
4.1H CLOSING DATE MORTGAGED PROPERTIES AND CERTAIN LEASEHOLD
INTERESTS
4.1S CORPORATE STRUCTURE; CAPITAL STRUCTURE; OWNERSHIP
5.1 SUBSIDIARIES OF COMPANY
5.5 CERTAIN REAL PROPERTY MATTERS
5.11 CERTAIN EMPLOYEE BENEFIT PLANS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2A CERTAIN EXISTING LIENS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
7.6C EARN OUT AMOUNTS
7.6E STIPULATED CONSOLIDATED ADJUSTED EBITDA
7.7 PERMITTED SALES OF ASSETS
7.8 CERTAIN EXCLUDED SALE LEASE-BACKS
</TABLE>
(vi)
<PAGE>
EXECUTION
DIMAC CORPORATION
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT is dated as of October 22,
1998 and entered into by and among DIMAC CORPORATION, a Delaware corporation
(formerly known as DMAC Acquisition Corp.; the "Company"), DIMAC HOLDINGS, INC.,
a Delaware corporation (formerly known as DMAC Holdings, Inc.; "Holdings"), THE
FINANCIAL INSTITUTIONS LISTED ON THE SIGNATURE PAGES HEREOF (each individually
referred to herein as a "Lender" and collectively as "Lenders"), CREDIT SUISSE
FIRST BOSTON ("CSFB"), as administrative agent for Lenders (in such capacity,
"Administrative Agent"), and as arranger (in such capacity, "Arranger"), WARBURG
DILLON READ LLC ("WDR"), as syndication agent (in such capacity, "Syndication
Agent"), and FIRST UNION NATIONAL BANK ("First Union"), as documentation agent
(in such capacity, "Documentation Agent").
R E C I T A L S
WHEREAS, Holdings, Company, and certain of the Lenders are parties to
that certain Credit Agreement dated as of June 26, 1998, as amended on July 29,
1998 (as so amended and as it may be heretofore have been further amended,
supplemented or otherwise modified, the "Existing Credit Agreement"), pursuant
to which those Lenders agreed to extend certain facilities to Company the
proceeds of which, together with the proceeds of the Equity Contribution
(capitalized terms used in these Recitals without definition shall have the
respective meanings assigned in subsection 1.1 hereof), were used to finance the
purchase price for the DIMAC Shares payable in connection with the DIMAC
Acquisition, to finance the AmeriComm Merger Consideration, to refinance certain
Indebtedness of DIMAC and its Subsidiaries, to pay related transaction fees and
expenses and to provide financing for working capital and other general
corporate purposes (including acquisitions) of Company and its Subsidiaries;
WHEREAS, Company and Holdings desire that the Lenders amend and restate
the Existing Credit Agreement in its entirety: (i) to set forth in greater
detail certain amendments that were made to the Existing Credit Agreement by the
First Amendment, pursuant to which the loans and commitments under the Existing
Credit Agreement were reallocated among the existing Term A Loan facility, the
existing Term B Loan facility and a newly created Term C Loan facility; (ii) to
increase the Term B Loan facility by an aggregate principal amount of
$10,000,000 and the Term C Loan facility by an aggregate principal amount of
$10,000,000, the proceeds of such additional Term B Loans and such additional
Term C Loans to be used to repay certain Indebtedness incurred in connection
with the AmeriComm Acquisition and to pay
1
<PAGE>
transaction fees and expenses related to such refinancing; and (iii) to make
certain other changes as more fully set forth herein, which amendment and
restatement shall become effective upon satisfaction of the conditions precedent
set forth herein;
WHEREAS, it is the intent of the parties hereto that this Agreement not
constitute a novation of the obligations and liabilities of the parties under
the Existing Credit Agreement or be deemed to be evidence or constitute
repayment of all or any portion of such obligations and liabilities and that
this Agreement amend and restate in its entirety the Existing Credit Agreement
and re-evidence the Obligations of Company outstanding thereunder; and
WHEREAS, it is the intent of Loan Parties to confirm that all
Obligations of Loan Parties under the other Loan Documents shall continue in
full force and effect and that, from and after the Effective Date, all
references to the "Credit Agreement" contained therein shall be deemed to refer
to this Agreement:
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Company, Holdings, Lenders and Agents
agree that on the Effective Date the Existing Credit Agreement shall be amended
and restated in its entirety as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:
"Acknowledgement and Consent" means that certain
Acknowledgement and Consent executed by Company, Holdings and the
Subsidiary Guarantors dated as of the Effective Date and substantially
in the form of Exhibit XXI annexed hereto, as such Acknowledgement and
Consent may be amended, restated, supplemented or otherwise modified
from time to time.
"Administrative Agent" has the meaning assigned to that term
in the introduction to this Agreement and also means and includes any
successor Administrative Agent appointed pursuant to subsection 9.5A.
"Affected Class" has the meaning assigned to that term in
subsection 10.6.
"Affected Lender" has the meaning assigned to that term in
subsection 2.6C.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as
applied to any
2
<PAGE>
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by
contract or otherwise.
"Agents" means Administrative Agent, Syndication Agent,
Arranger and Documentation Agent.
"Agreement" means this Amended and Restated Credit Agreement
dated as of October 22, 1998, as it may be amended, restated,
supplemented or otherwise modified from time to time.
"AmeriComm" means AmeriComm Direct Marketing, Inc. a Delaware
corporation (formerly known as National Fiberstok Corporation).
"AmeriComm Acquisition" means the transactions contemplated by
the AmeriComm Acquisition Agreement.
"AmeriComm Acquisition Agreement" means that certain Agreement
and Plan of Merger dated as of May 18, 1998, by and among Company,
Merger Corp. and AmeriComm Holdings, as in effect on the Closing Date
and as such agreement may thereafter be amended, restated, supplemented
or otherwise modified from time to time to the extent permitted under
subsection 7.13A.
"AmeriComm Holdings" means AmeriComm Holdings, Inc., a
Delaware corporation (formerly known as DEC International, Inc.).
"AmeriComm Merger" means the merger of Merger Corp. with and
into AmeriComm Holdings in accordance with the terms of the AmeriComm
Acquisition Agreement and the Certificate of Merger, with AmeriComm
Holdings being the surviving corporation in such merger.
"AmeriComm Merger Consideration" means the aggregate of all
amounts necessary to finance the AmeriComm Merger.
"Anniversary" means each of the dates that is an anniversary
of the Closing Date.
"Applicable Base Rate Margin" means, (i) from the Closing Date
until the later of (x) the delivery of financial statements for the
period ending September 30, 1998 as required pursuant to subsection
6.1(ii) and (y) the date which is six months after the Effective Date,
1.75% per annum for Term A Loans and Revolving Loans, 2.25% per annum
for Term B Loans and 2.50% per annum for Term C Loans, and (ii)
thereafter, a percentage per annum determined by reference to the
Leverage Ratio as set forth below:
3
<PAGE>
<TABLE>
<CAPTION>
Applicable Applicable Applicable
Base Rate Base Rate Base Rate
Leverage Ratio Margin for Margin Margin
Term A for for
Loans and Term B Term C
Revolving Loans Loans
Loans
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5.0:1.0 or greater 1.75% 2.25% 2.50%
- -----------------------------------------------------------------------------------------------
4.5:1.0 or greater, 1.50% 2.25% 2.50%
but less than 5.0:1.0
- -----------------------------------------------------------------------------------------------
4.0:1.0 or greater,
but less than 4.5:1.0 1.25% 2.00% 2.25%
- -----------------------------------------------------------------------------------------------
less than 4.0:1.0 1.00% 2.00% 2.25%
</TABLE>
The Applicable Base Rate Margin shall be determined by reference to the
Leverage Ratio in effect from time to time; provided, however, that (x)
no change in the Applicable Base Rate Margin shall be effective until
the date on which Administrative Agent receives financial statements
pursuant to subsection 6.1(ii) and an Officer's Certificate calculating
the Leverage Ratio (or the date of conclusion of the period referred to
in clause (i) of this definition, if later), and (y) the Applicable
Base Rate Margin shall be 1.75% in the case of Term A Loans and
Revolving Loans, 2.25% in the case of Term B Loans and 2.50% in the
case of Term C Loans for so long (but only for so long) as Company has
not submitted to Administrative Agent the information described in
clause (x) of this proviso as and when required under subsection
6.1(ii).
"Applicable Commitment Fee Percentage" means, (i) from the
Closing Date until the later of (x) the delivery of financial
statements for the period ending September 30, 1998 as required
pursuant to subsection 6.1(ii) and (y) the date which is six months
after the Effective Date, 0.50% per annum, and (ii) thereafter, a
percentage per annum determined by reference to the Leverage Ratio as
set forth below:
<TABLE>
<CAPTION>
Applicable Commitment
Leverage Ratio Fee Percentage
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
<S> <C>
4.0:1.0 or greater 0.50%
- -------------------------------------------------------------------------
less than 4.0:1.0 0.375%
</TABLE>
The Applicable Commitment Fee Percentage shall be determined by
reference to the Leverage Ratio in effect from time to time; provided,
however, that (x) no change in the Applicable Commitment Fee Percentage
shall be effective until the date on which
4
<PAGE>
Administrative Agent receives financial statements pursuant to
subsection 6.1(ii) and an Officer's Certificate calculating the
Leverage Ratio (or the date of conclusion of the period referred to in
clause (i) of this definition, if later), and (y) the Applicable
Commitment Fee Percentage shall be 0.50% for so long (but only for so
long) as Company has not submitted to Administrative Agent the
information described in clause (x) of this proviso as and when
required under subsection 6.1(ii).
"Applicable Eurodollar Rate Margin" means, (i) from the
Closing Date until the later of (x) the delivery of financial
statements for the period ending September 30, 1998 as required
pursuant to subsection 6.1(ii) and (y) the date which is six months
after the Effective Date, 2.75% per annum for Term A Loans and
Revolving Loans, 3.25% per annum for Term B Loans and 3.50% per annum
for Term C Loans, and (ii) thereafter, a percentage per annum
determined by reference to the Leverage Ratio as set forth below:
<TABLE>
<CAPTION>
Applicable Applicable Applicable
Eurodollar Eurodollar Eurodollar
Leverage Ratio Rate Rate Rate
Margin for Margin Margin
Term A for for
Loans and Term B Term C
Revolving Loans Loans
Loans
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5.0:1.0 or greater 2.75% 3.25% 3.50%
- ---------------------------------------------------------------------------------------------
4.5:1.0 or greater, 2.50% 3.25% 3.50%
but less than
5.0:1.0
- ---------------------------------------------------------------------------------------------
4.0:1.0 or greater,
but less than 2.25% 3.00% 3.25%
4.5:1.0
- ---------------------------------------------------------------------------------------------
less than 4.0:1.0 2.00% 3.00% 3.25%
</TABLE>
The Applicable Eurodollar Rate Margin shall be determined by reference
to the ratio in effect on the first day of the Interest Period for the
applicable Eurodollar Rate Loan; provided, however, that (x) no change
in the Applicable Eurodollar Rate Margin shall be effective until the
date on which Administrative Agent receives financial statements
pursuant to subsection 6.1(ii) and an Officer's Certificate calculating
the Leverage Ratio (or the date of conclusion of the period referred to
in clause (i) of this definition, if later), and (y) the Applicable
Eurodollar Rate Margin shall be 2.75% in the case of Term A Loans and
Revolving Loans, 3.25% in the case of Term B Loans and 3.50% in the
case of Term C Loans for so long (but only for so long) as Company has
not submitted to Administrative Agent the information described in
clause (x) of this proviso as and when
5
<PAGE>
required under subsection 6.1(ii).
"Applicable Laws" means, collectively, all statutes, laws,
rules, regulations, ordinances, decisions, writs, judgments, decrees,
and injunctions of any federal, state or local governmental authority,
agency or court affecting any Loan Party or the Collateral or any part
thereof, whether now or hereafter enacted and in force, and all
Governmental Authorizations relating thereto, and all covenants,
conditions, and restrictions contained in any instruments, either of
record or known to any Loan Party, at any time in force affecting any
Real Property Asset or any part thereof, including any such covenants,
conditions and restrictions which may (i) require improvements, repairs
or alterations in or to such Real Property Asset or any part thereof or
(ii) in any way limit the use and enjoyment thereof; for the purpose of
usury, Applicable Laws means the law of the State of New York
applicable to maximum rates of interest.
"Arranger" has the meaning assigned to that term in the
Recitals to this Agreement.
"Asset Sale" means the sale by Company or any of its
Subsidiaries to any Person (other than Company or any of its wholly
owned Subsidiaries) of (i) any of the stock of any of Company's
Subsidiaries, (ii) all or substantially all of the assets of any
division or line of business of Company or any of its Subsidiaries, or
(iii) any other assets other than (w) sales of assets in the ordinary
course of business, (x) sales of obsolete equipment, (y) sales of
assets that are replaced in the ordinary course of business with other
similar assets used in the business of Company and its Subsidiaries and
(z) any such other assets to the extent that the aggregate value of
such assets sold (determined in good faith by the board of directors of
Company) is equal to $500,000 or less in any one Fiscal Year.
"Assigned Rights and Obligations" has the meaning assigned to
that term in subsection 2.1F.
"Assignment Agreement" means an assignment agreement in
substantially the form of Exhibit XVI annexed hereto or in such other
form as may be approved by Administrative Agent.
"Assignment of Rents and Leases" means each Assignment of
Rents and Leases executed and delivered by any Loan Party in favor of
Administrative Agent for the benefit of Administrative Agent and the
Lenders in such form as shall be approved by Administrative Agent in
its reasonable discretion, in each case with such changes thereto as
may be reasonably recommended by Administrative Agent's local counsel
based on local laws or customary practice, as any such Assignment of
Rents and Leases may heretofore have been or hereafter may be amended,
restated, supplemented, consolidated, extended or otherwise modified
from time to time in accordance with the terms thereof and hereof.
"Bankruptcy Code" means Title 11 of the United States Code
entitled
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"Bankruptcy", as now and hereafter in effect, or any successor statute.
"Base Rate" means, at any time, the higher of (x) the Prime
Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds
Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates
determined by reference to the Base Rate as provided in subsection
2.2A.
"Business Day" means a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to close; provided that, with respect to matters
relating to Eurodollar Rate Loans, the term "Business Day" shall mean a
day other than a Saturday, Sunday or other day on which commercial
banks in New York City or London, England, are authorized or required
by law to close.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee
that, in conformity with GAAP, is accounted for as a capital lease on
the balance sheet of that Person.
"Cash" means money, currency or a credit balance in a Deposit
Account.
"Cash Equivalents" means (i) marketable securities issued or
directly and unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith and credit
of the United States, in each case maturing within one year from the
date of acquisition thereof; (ii) marketable direct obligations issued
by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof
maturing within one year from the date of acquisition thereof and, at
the time of acquisition, having the highest rating obtainable from
either Standard & Poor's, a division of the McGraw-Hill Companies, Inc.
("S&P"), or Moody's Investors Service, Inc. ("Moody's"); (iii)
commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of
deposit or bankers' acceptances maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having a rating
of at least A-1 from S&P or at least P-1 from Moody's, issued by any
Lender or any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia
having unimpaired capital and surplus of not less than $250,000,000
(each Lender and each such commercial bank being herein called a "Cash
Equivalent Bank"); and (v) Eurodollar time deposits having a maturity
of less than one year purchased directly from any Cash Equivalent Bank
(provided such deposit is with such Cash Equivalent Bank or any other
Cash Equivalent Bank).
"Cash Proceeds" means, with respect to any Asset Sale, Cash
payments (including any Cash received by way of deferred payment
pursuant to, or monetization of, a note receivable or otherwise, but
only as and when so received) received from such Asset Sale.
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"Certificate of Merger" means the Certificate of Merger dated
as of June 26, 1998 by and between Merger Corp. and AmeriComm Holdings,
in the form delivered to Agents and Lenders prior to or concurrently
with their execution of the Existing Credit Agreement and as such
Certificate of Merger may heretofore have been or hereafter may be
amended from time to time thereafter to the extent permitted under
subsection 7.13A.
"Certificate of Non-Bank Status" means a certificate
substantially in the form of Exhibit XVIII annexed hereto delivered by
a Lender to Administrative Agent pursuant to subsection 2.7B(iii).
"Class" means each of the following four classes of Lenders:
(i) Lenders having Term A Loan Exposure, (ii) Lenders having Term B
Loan Exposure, (iii) Lenders having Term C Loan Exposure and (iv)
Lenders having Revolving Loan Exposure.
"Closing Date" means June 26, 1998.
"Closing Date Mortgaged Property" means each Real Property
Asset listed in Part A of Schedule 4.1H annexed hereto
"Closing Date Mortgages" means the Mortgages delivered
pursuant to subsection 4.1H of the Existing Credit Agreement.
"Collateral" means all of the properties and assets (including
capital stock) in which Liens are purported to be granted by the
Collateral Documents.
"Collateral Account" has the meaning assigned to that term in
the Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account
Agreement executed and delivered by Company and Administrative Agent on
the Closing Date, substantially in the form of Exhibit XVII annexed
hereto, pursuant to which Company may pledge cash to Administrative
Agent to secure the obligations of Company to reimburse Issuing Lenders
for payments made under one or more Letters of Credit as provided in
subsection 3.3C and in Section 8, as such Collateral Account Agreement
may heretofore have been or hereafter may be amended, restated,
supplemented or otherwise modified from time to time.
"Collateral Documents" means the Pledge Agreement, the
Security Agreement, the Collateral Account Agreement, the Mortgages,
the Assignments of Rents and Leases, and any other documents,
instruments or agreements delivered by any Loan Party pursuant to this
Agreement or any of the other Loan Documents in order to grant or
perfect liens on any assets of such Loan Party as security for the
Obligations.
"Commercial Letter of Credit" means any letter of credit or
similar instrument issued for the purpose of providing the primary
payment mechanism in connection with
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<PAGE>
the purchase of any materials, goods or services by Company or any of
its Subsidiaries in the ordinary course of business of Company or such
Subsidiary.
"Commitments" means (i) with respect to the period prior to
the Effective Date, the commitments of Lenders to make Loans as set
forth in subsection 2.1A of the Existing Credit Agreement and (ii)
thereafter, the commitments of Lenders to make Loans as set forth in
subsection 2.1A of this Agreement.
"Company" has the meaning assigned to that term in the
introduction to this Agreement.
"Compliance Certificate" means a certificate substantially in
the form of Exhibit XIII annexed hereto delivered to Administrative
Agent by Company pursuant to subsection 6.1(iv).
"Conforming Leasehold Interest" means any Recorded Leasehold
Interest as to which the lessor has agreed in writing for the benefit
of Administrative Agent (which writing has been delivered to
Administrative Agent), whether under the terms of the applicable lease,
under the terms of a Landlord Consent and Estoppel, or otherwise, to
the matters requested by Administrative Agent, which interest, if a
subleasehold or sub-subleasehold interest, is not subject to any
contrary restrictions contained in a superior lease or sublease.
"Condemnation Proceeds" has the meaning assigned to that term
in subsection
2.4B(iii)(d).
"Consent Solicitation" means the solicitation by AmeriComm,
from the holders of outstanding Existing Senior Notes, of consents to
certain amendments to the Existing Senior Note Indenture, the terms and
conditions of which consents and amendments shall be as described in
the Debt Tender Offer Materials and shall otherwise be in form and
substance satisfactory to Administrative Agent and Requisite Lenders.
"Consolidated Adjusted EBITDA" means, for any period, the sum
(without duplication) of the amounts for such period (as determined for
Company and its Subsidiaries on a consolidated basis and in accordance
with subsection 7.6E(ii), if applicable) of (i) Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes
based on income, (iv) total depreciation expense, (v) total
amortization expense, (vi) other non-cash items reducing Consolidated
Net Income, (vii) all one-time cash compensation payments made in
connection with the Acquisition, and (viii) those items described on
Schedule 1.1(i) annexed hereto, less (a) other non-cash items
increasing Consolidated Net Income, (b) to the extent not otherwise
deducted in determining Consolidated Net Income, any payments made
under Permitted Earn Out Agreements entered into on or after the
Closing Date and Management Fees, and (c) any payments (net of
indemnification) by Company and its Subsidiaries of any demands,
obligations, interest, penalties, suits, judgments, orders,
liabilities, debts, claims, actions, causes of action, costs and
expenses (including legal, consultants' and witness' fees) in
9
<PAGE>
connection with the postal inspection service investigation disclosed
on Schedule 5.14 of the DIMAC Acquisition Agreement. With respect to
the determination of Consolidated Adjusted EBITDA for any period prior
to the completion of four Fiscal Quarters following the Closing Date,
Consolidated Adjusted EBITDA shall be calculated for certain Fiscal
Quarters in the manner set forth in subsection 7.6E(i).
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of
Capital Leases which is capitalized on the consolidated balance sheet
of Company and its Subsidiaries) by Company and its Subsidiaries during
that period that, in conformity with GAAP, are included in "purchases
of property, plant or equipment" (excluding acquisitions permitted
under subsection 7.7(vii)) or comparable items reflected in the
consolidated statement of cash flows of Company and its Subsidiaries.
"Consolidated Current Assets" means, as at any date of
determination, the total assets of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current assets
in conformity with GAAP, excluding Cash, Cash Equivalents and deferred
income taxes to the extent otherwise included in current assets.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on
a consolidated basis which may properly be classified as current
liabilities in conformity with GAAP, other than (i) any liabilities
that are the current portion of Indebtedness classified as long term
liabilities in conformity with GAAP and (ii) deferred income taxes to
the extent otherwise included in current liabilities.
"Consolidated Excess Cash Flow" means, for any period, an
amount (if positive) equal to (i) the sum, without duplication, of the
amounts for such period of (a) Consolidated Adjusted EBITDA and (b) the
Consolidated Working Capital Adjustment minus (ii) the sum, without
duplication, of the amounts for such period of (a) voluntary and
scheduled cash repayments of Consolidated Total Debt (excluding
repayments of Revolving Loans except to the extent the Revolving Loan
Commitments are permanently reduced in connection with such
repayments), (b) Consolidated Capital Expenditures (net of any proceeds
of any related financings with respect to such expenditures), (c)
Consolidated Interest Expense, (d) to the extent not included in
Consolidated Capital Expenditures, the cash portion of the aggregate
purchase price of acquisitions permitted under subsection 7.7(vii)
during such period (net of any proceeds of any related financings with
respect to such acquisitions), (e) any Cash payments made during such
period with respect to items set forth on Schedule 1.1(i) annexed
hereto, and (f) the provision for taxes based on income of Company and
its Subsidiaries and paid in cash with respect to such period.
"Consolidated Fixed Charges" means, for any period, an amount
equal to the sum, without duplication, of the amounts for such period
as determined for Company and its Subsidiaries on a consolidated basis
of (i) scheduled repayments of principal of all
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<PAGE>
Indebtedness (as reduced by prepayments thereon previously made), (ii)
Consolidated Interest Expense, (iii) Consolidated Capital Expenditures
(other than Designated Capital Expenditures), and (iv) the portion of
taxes based on income actually paid in Cash. With respect to the
calculation of Consolidated Fixed Charges for any period prior to the
completion of four Fiscal Quarters following the Closing Date,
Consolidated Fixed Charges shall only include those amounts otherwise
included pursuant to the foregoing sentence from the Closing Date
through the date of determination, except that Consolidated Interest
Expense shall be calculated for such period in the manner described in
the definition of Consolidated Interest Expense.
"Consolidated Interest Expense" means, for any period (as
determined for Company and its Subsidiaries on a consolidated basis and
in accordance with subsection 7.6E(ii), if applicable), total interest
expense (including that portion attributable to Capital Leases in
accordance with GAAP) payable in cash, including, without limitation,
all commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing and net costs
under Interest Rate Agreements, but excluding, however, (i) any amounts
referred to in subsection 2.3 of the Existing Credit Agreement payable
to Agents or Lenders on or before the Closing Date and (ii) any
amortized Transaction Costs. With respect to the determination of
Consolidated Interest Expense for any period prior to the completion of
four Fiscal Quarters following the Closing Date, Consolidated Interest
Expense shall be calculated on an annualized basis for the period from
the Closing Date through the date of determination in the manner set
forth in the proviso to subsection 7.6A.
"Consolidated Net Income" means, for any period, the net
income (or loss) of Company and its Subsidiaries on a consolidated
basis for such period taken as a single accounting period determined in
conformity with GAAP; provided that there shall be excluded therefrom
(i) the income (or loss) of any Person (other than a Subsidiary of
Company) in which any other Person (other than Company or any of its
Subsidiaries) has a joint interest, except to the extent of the amount
of dividends or other distributions actually paid to Company or any of
its Subsidiaries by such Person during such period, (ii) the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary
of Company or is merged into or consolidated with Company or any of its
Subsidiaries or that Person's assets are acquired by Company or any of
its Subsidiaries, (iii) the income of any Subsidiary of Company to the
extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, (iv) any after-tax gains or
losses attributable to Asset Sales, and (v) (to the extent not included
in clauses (i) through (iv) above) any net extraordinary gains or net
non-cash extraordinary losses.
"Consolidated Total Debt" means, as at any date of
determination, the aggregate stated balance sheet amount of all
outstanding Indebtedness (excluding Permitted Earn Out Agreements
entered into on or after the Closing Date) of Company and its
Subsidiaries on a consolidated basis as determined in conformity with
GAAP.
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<PAGE>
"Consolidated Working Capital" means, as at any date of
determination, the excess of Consolidated Current Assets over
Consolidated Current Liabilities.
"Consolidated Working Capital Adjustment" means, for any
period on a consolidated basis, the amount (which may be a negative
number) by which Consolidated Working Capital as of the beginning of
such period exceeds (or is less than) Consolidated Working Capital as
of the end of such period.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person
(i) with respect to any Indebtedness, lease, dividend or other
obligation of another if the primary purpose or intent thereof by the
Person incurring the Contingent Obligation is to provide assurance to
the obligee of such obligation of another that such obligation of
another will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect
thereof, (ii) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable
for reimbursement of drawings, or (iii) under Interest Rate Agreements.
Contingent Obligations shall include, without limitation, (a) the
direct or indirect guaranty, endorsement (otherwise than for collection
or deposit in the ordinary course of business), co-making, discounting
with recourse or sale with recourse by such Person of the obligation of
another, (b) the obligation to make take-or-pay or similar payments if
required regardless of non-performance by any other party or parties to
an agreement, and (c) any liability of such Person for the obligation
of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of
such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise) or (Y) to maintain the
solvency or any balance sheet item, level of income or financial
condition of another if, in the case of any agreement described under
subclauses (X) or (Y) of this sentence, the primary purpose or intent
thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Continuing Director" shall mean, as of any date of
determination, any member of the Board of Directors of Company who (i)
was a member of such Board of Directors on the Closing Date or (ii) was
nominated for election or elected to such Board of Directors with the
affirmative vote (directly or indirectly) of the MDC Entities.
"Contractual Obligation" means, as applied to any Person, any
provision of any Security issued by that Person or of any material
indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any
of its properties is bound or to which it or any of its properties is
subject.
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<PAGE>
"Corporate Loan Party" means any Loan Party which is a
corporation.
"CSFB" means Credit Suisse First Boston.
"Cutoff Date" has the meaning assigned to that term in
subsection 2.4C(iii).
"Debt Tender Offer" means the offer by Company or any of its
Subsidiaries to repurchase up to and including 100% of the outstanding
Existing Senior Notes after the Closing Date pursuant to the Debt
Tender Offer Materials.
"Debt Tender Offer Materials" means an offer to purchase and
other consent solicitation materials relating to the Debt Tender Offer
and any accompanying consent and letter of transmittal.
"Defaulting Lender" means any Lender with respect to which a
Lender Default is in effect.
"Deposit Account" means a demand, time, savings, passbook or
like account with a bank, savings and loan association, credit union or
like organization, other than an account evidenced by a negotiable
certificate of deposit.
"Designated Capital Expenditures" means Consolidated Capital
Expenditures in an aggregate amount not in excess of $7,500,000 made
during the period from the Closing Date to December 31, 1999, to the
extent such Consolidated Capital Expenditures represent expenditures of
Company and its Subsidiaries deferred from periods prior to the Closing
Date.
"DIMAC" means DIMAC Marketing Corporation, a Delaware
corporation.
"DIMAC Acquisition" means the transactions contemplated by the
DIMAC Acquisition Agreement.
"DIMAC Acquisition Agreement" means that certain Stock
Purchase Agreement dated as of May 17, 1998, by and between Company and
Heritage, as in effect on the Closing Date and as such agreement may
thereafter have been or may be amended, restated, supplemented or
otherwise modified from time to time to the extent permitted under
subsection 7.13A.
"DIMAC Shares" means the outstanding capital stock of DIMAC as
of the Closing Date.
"Documentation Agent" has the meaning assigned to that term in
the Introduction to this Agreement.
"Dollars" and the sign "$" mean the lawful money of the United
States of America.
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"Effective Date" means the date on or before October , 1998 on
which the conditions precedent set forth in subsection 4.1 are met and
this Agreement becomes effective.
"Eligible Assignee" means (A) (i) a commercial bank organized
under the laws of the United States or any state thereof; (ii) a
commercial bank organized under the laws of any other country or a
political subdivision thereof; provided that (x) such bank is acting
through a branch or agency located in the United States or (y) such
bank is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country; and (iii) any other entity which is an
"accredited investor" (as defined in Regulation D under the Securities
Act) which extends credit or buys loans as one of its businesses
including, but not limited to, insurance companies, mutual funds and
lease financing companies, in each case (under clauses (i) through
(iii) above) that is reasonably acceptable to Administrative Agent; and
(B) any Lender and any Affiliate of any Lender and, with respect to any
Lender that is an investment fund that invests in commercial loans, any
other investment fund that invests in commercial loans and that is
managed by the same investment advisor as such Lender, or by an
Affiliate of such investment advisor; provided that no Affiliate of
Company shall be an Eligible Assignee.
"Employee Benefit Plan" means any "employee benefit plan" as
defined in Section 3(3) of ERISA which is subject to ERISA and which is
maintained or contributed to by Company or any of its ERISA Affiliates.
"Environmental Claim" means any written accusation,
allegation, notice of violation, claim, demand, abatement order or
other order or direction (conditional or otherwise) by any governmental
authority or any Person for any damage, including, without limitation,
personal injury (including sickness, disease or death), tangible or
intangible property damage, contribution, indemnity, indirect or
consequential damages, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for
fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company,
any of its Subsidiaries, any of their respective Affiliates that are
directly or indirectly controlled by Company, or any Facility.
"Environmental Laws" means all laws, statutes, ordinances,
orders, rules, regulations, plans, policies or decrees relating to (i)
environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the Release or
threatened Release of Hazardous Materials, (ii) the generation, use,
storage, transportation or disposal of Hazardous Materials, or (iii)
occupational safety and health, public health and safety, industrial
hygiene or protection of wetlands, applicable to and binding upon
Company or any of its Subsidiaries or any of their respective
properties, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
Section 9601 et seq.), the Hazardous Materials Transportation Act
(49
14
<PAGE>
U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act
(42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. Section 136 et seq.), the Occupational
Safety and Health Act (29 U.S.C. Section 651 et seq.) and the
Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section
11001 et seq.), each as amended or supplemented, and any
analogous future or present local, state and federal statutes and
regulations promulgated pursuant thereto, each as in effect as of the
date of determination.
"Equity Contribution" means the equity contribution on the
Closing Date by Holdings of $100,000,000 in cash to Company.
"Equity Proceeds" means the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated
therewith) from the issuance of any equity Securities of Holdings or
Company after the Effective Date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any successor statute.
"ERISA Affiliate" means, as applied to any Person, (i) any
corporation which is a member of a controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of
which that Person is a member; (ii) any trade or business (whether or
not incorporated) which is a member of a group of trades or businesses
under common control within the meaning of Section 414(c) of the
Internal Revenue Code of which that Person is a member; and (iii)
solely for purposes of obligations under Section 412 of the Internal
Revenue Code or under the applicable sections set forth in Section
414(t)(2) of the Internal Revenue Code, any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the
Internal Revenue Code of which that Person, any corporation described
in clause (i) above or any trade or business described in clause (ii)
above is a member.
"ERISA Event" means (i) a "reportable event" within the
meaning of Section 4043(c) of ERISA and the regulations issued
thereunder with respect to any Pension Plan (excluding those for which
the provision for 30-day notice to the PBGC has been waived by
regulation or with respect to which no penalty will be assessed by the
PBGC for failure to satisfy such notice requirements); (ii) the failure
to meet the minimum funding standard of Section 412 of the Internal
Revenue Code with respect to any Pension Plan (whether or not waived in
accordance with Section 412(d) of the Internal Revenue Code) or the
failure to make by its due date a required installment under Section
412(m) of the Internal Revenue Code with respect to any Pension Plan or
the failure to make any required contribution to a Multiemployer Plan;
(iii) the provision by the administrator of any Pension Plan pursuant
to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the withdrawal by Company or any of its ERISA Affiliates from any
Pension Plan with two or more contributing sponsors or the termination
of any such Pension Plan
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<PAGE>
resulting, in either case, in liability pursuant to Section 4063 or
4064 of ERISA, respectively; (v) the institution by the PBGC of
proceedings to terminate any Pension Plan pursuant to Section 4042 of
ERISA; (vi) the imposition of liability on Company or any of its ERISA
Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of
the application of Section 4212(c) of ERISA; (vii) the withdrawal by
Company or any of its ERISA Affiliates in a complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from
any Multiemployer Plan resulting in withdrawal liability pursuant to
Section 4201 of ERISA, or the receipt by Company or any of its ERISA
Affiliates of written notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA,
or that it intends to terminate or has terminated under Section 4042 of
ERISA or under Section 4041A of ERISA if such termination would result
in liability to Company or any of its ERISA Affiliates; (viii) the
imposition on Company or any of its ERISA Affiliates of fines,
penalties or taxes under Chapter 43 of the Internal Revenue Code or
under Section 409 or 502(c), (i) or (l) or 4071 of ERISA in respect of
any Employee Benefit Plan; (ix) the disqualification by the Internal
Revenue Service of any Pension Plan (or any other Employee Benefit Plan
intended to be qualified under Section 401(a) of the Internal Revenue
Code) under Section 401(a) of the Internal Revenue Code, or the
determination by the Internal Revenue Service that any trust forming
part of any Pension Plan fails to qualify for exemption from taxation
under Section 501(a) of the Internal Revenue Code; or (x) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or pursuant to ERISA with respect to any Pension
Plan.
"Eurocurrency Reserve Requirements" means, for each Interest
Period for each Eurodollar Rate Loan, the highest reserve percentage
applicable to any Lender during such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System or any successor for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement), with respect to liabilities or
assets consisting of or including Eurocurrency liabilities having a
term equal to such Interest Period.
"Eurodollar Base Rate" means the rate per annum determined by
Administrative Agent at approximately 11:00 A.M. (London time) on the
date which is two Business Days prior to the beginning of the relevant
Interest Period (as specified in the applicable Notice of Borrowing) by
reference to the British Bankers' Association Interest Settlement Rates
for deposits in Dollars (as set forth by any service selected by
Administrative Agent which has been nominated by the British Bankers'
Association as an authorized information vendor for the purpose of
displaying such rates) for a period equal to such Interest Period;
provided that, to the extent that an interest rate is not ascertainable
pursuant to the foregoing provisions of this definition, the
"Eurodollar Base Rate" shall be the interest rate per annum determined
by Administrative Agent to be the average of the rates per annum at
which deposits in Dollars are offered for such relevant Interest Period
to major banks in the London interbank market in London, England by the
Reference Lenders at approximately 11:00 A.M. (London time) on the date
which is two Business Days prior to the beginning of such Interest
Period. If any of the Reference Lenders shall be unable or shall
otherwise fail to supply such rates to Administrative
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Agent upon its request, the rate of interest shall be determined on the
basis of the quotations of the remaining Reference Lender.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Reserve Adjusted Eurodollar Rate as
provided in subsection 2.2A.
"Event of Default" means each of the events set forth in
Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Existing AmeriComm Credit Agreement" means that certain
Credit Agreement dated as of June 28, 1996 by and among AmeriComm, the
guarantors named therein, the lenders party thereto, and Heller
Financial, Inc., as agent, as amended to the Closing Date and as such
agreement may have been or may be further amended, supplemented or
otherwise modified from time to time.
"Existing Credit Agreement" has the meaning assigned to that
term in the Recitals to this Agreement.
"Existing Lenders" means the "Lenders" party to the Existing
Credit Agreement on the Effective Date immediately before the
effectiveness hereof.
"Existing Letters of Credit" has the meaning assigned to that
term in subsection 3.1.
"Existing Loan" or "Existing Loans" means, as the context
requires, one or more of the Existing Term A Loans, Existing Term B
Loans, Existing Term C Loans, or Existing Revolving Loans or any
combination thereof.
"Existing Revolving Loan" or "Existing Revolving Loans" means
Revolving Loans (as defined in the Existing Credit Agreement)
outstanding on the Effective Date.
"Existing Senior Notes" means AmeriComm's $100,000,000 in
original aggregate principal amount of 11-5/8% Senior Notes due 2002,
Series B issued pursuant to the Existing Senior Note Indenture.
"Existing Senior Note Indenture" means that certain Indenture
dated as of June 15, 1996 pursuant to which the Existing Senior Notes
were issued by AmeriComm, as such Indenture may heretofore have been or
hereafter may be amended, supplemented or otherwise modified from time
to time to the extent permitted under subsection 7.13A.
"Existing TCW Notes" means the $35,000,000 in original
aggregate principal amount of AmeriComm Holdings' 12-1/2% Senior Notes
due April 24, 2003.
"Existing Term A Loan" or "Existing Term A Loans" means the
Term A
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Loans (as defined in the Existing Credit Agreement) outstanding on the
Effective Date.
"Existing Term B Loan" or "Existing Term B Loans" means the
Term B Loans (as defined in the Existing Credit Agreement) outstanding
on the Effective Date.
"Existing Term C Loan" or "Existing Term C Loans" means the
Term C Loans (as defined in the Existing Credit Agreement) outstanding
on the Effective Date.
"Existing Term Loans" means the Existing Term A Loans, the
Existing Term B Loans and the Existing Term C Loans.
"Facilities" means any and all real property (including,
without limitation, all buildings, fixtures or other improvements
located thereon) now, hereafter or heretofore owned, leased, operated
or used by Company or any of its Subsidiaries (but only as to portions
of buildings actually leased or used) or any of their respective
predecessors or any of their respective Affiliates that are directly or
indirectly controlled by Company.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds
brokers of recognized standing selected by Administrative Agent.
"First Amendment" means that certain First Amendment to Credit
Agreement dated as of July 28, 1998, by and among Company, Holdings,
Administrative Agent, Arranger, Syndication Agent and Lenders.
"First Priority" means, with respect to any Lien purported to
be created in any Collateral pursuant to any Collateral Document, that
such Lien is the most senior Lien (other than Permitted Encumbrances
and other Liens permitted pursuant to subsection 7.2A to the extent not
perfected by filing of any UCC financing statements) to which such
Collateral is subject.
"First Union" means First Union National Bank.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Holdings and its
Subsidiaries ending on December 31 of each calendar year.
"Flood Hazard Property" means a Mortgaged Property located in
an area designated by the Federal Emergency Management Agency as having
special flood or
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mud slide hazards.
"Funding and Payment Office" means the office of
Administrative Agent located at 11 Madison Avenue, New York, New York
10010 (or such office of Administrative Agent or any successor
Administrative Agent specified by Administrative Agent or such
successor Administrative Agent in a written notice to Loan Parties and
Lenders).
"Funding Date" means the date of the funding of a Loan.
"GAAP" means, subject to the limitations on the application
thereof set forth in subsection 1.2, generally accepted accounting
principles set forth in opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting
profession, in each case as the same are applicable to the
circumstances as of the date of determination and specifically, terms
used herein applicable to Company and its Subsidiaries defined by
reference to GAAP shall give effect to the subtraction of minority
interests.
"Governmental Authorization" means any permit, license,
authorization, plan, directive, consent order or consent decree of or
from any federal, state or local governmental authority, agency or
court.
"Guaranty" means, individually, the Subsidiary Guaranty, the
Holdings Guaranty or any other guaranty of the Obligations, and
"Guaranties" means, collectively, the Subsidiary Guaranty, the Holdings
Guaranty and each other guaranty of the Obligations.
"Guarantor" means, individually, the Subsidiary Guarantors,
Holdings or any other guarantor of the Obligations, and "Guarantors"
means, collectively, the Subsidiary Guarantors, Holdings and each other
guarantor of the Obligations.
"Hazardous Materials" means (i) any chemical, material or
substance defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "restricted hazardous waste", "infectious waste",
"toxic substances" or any other formulations intended to define, list
or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of
similar import under any applicable Environmental Laws; (ii) any oil,
petroleum, petroleum fraction or petroleum derived substance; (iii) any
drilling fluids, produced waters and other wastes associated with the
exploration, development or production of crude oil, natural gas or
geothermal resources; (iv) any flammable substances or explosives; (v)
any radioactive materials; (vi) asbestos in any form; (vii) urea
formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty
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parts per million; (ix) pesticides; and (x) any other chemical,
material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority.
"Heritage" means Heritage Media Corporation, a Delaware
corporation.
"Holdings" has the meaning assigned to that term in the
introduction to this Agreement.
"Holdings Guaranty" means the Holdings Guaranty, substantially
in the form of Exhibit X annexed hereto, executed and delivered by
Holdings on the Closing Date, as such Holdings Guaranty may heretofore
have been or hereafter may be amended, restated, supplemented or
otherwise modified from time to time.
"Holdings Note Exchange Offer" means the offer by Holdings to
the holders of outstanding existing Holdings Notes or outstanding
existing Holdings PIK Notes, to exchange such existing Holdings Notes
or existing Holdings PIK Notes for "Series B Notes" in accordance with
(and as such term is defined in) the terms of the Holdings Note
Indenture.
"Holdings Note Indenture" means that certain Indenture dated
as of October 22, 1998 by and among Holdings and Wilmington Trust
Company, as trustee.
"Holdings Note Purchase Agreement" means that certain Purchase
Agreement dated as of October 22, 1998 pursuant to which the Holdings
Notes were issued by Holdings, as such agreement has been amended since
the Effective Date and as such Indenture may have been further amended,
supplemented or otherwise modified from time to time to the extent
permitted under subsection 7.13A.
"Holdings Notes" means (i) $30,000,000 in original aggregate
principal amount of Holdings' 15 1/2% Senior Notes due 2009, issued
pursuant to the Holdings Note Indenture and (ii) any notes issued
pursuant to the Holdings Note Exchange Offer in accordance with the
Holdings Note Indenture to replace any notes issued pursuant to clause
(i).
"Holdings PIK Notes" means (i) any promissory notes issued by
Holdings in favor of the holders of the Holdings Notes, pursuant to the
Holdings Notes to evidence the payment of interest thereunder; (ii) any
additional promissory notes issued by Holdings to the holders of any
notes issued pursuant to clause (i) to evidence the payment of interest
thereunder; and (iii) any notes issued pursuant to the Holdings Note
Exchange Offer in accordance with the Holdings Note Indenture to
replace any notes issued pursuant to clauses (i) or (ii).
"Improvements" means all buildings, structures, fixtures,
tenant improvements, and other improvements of any kind and description
now or hereafter located in or on or attached to any land that is a
Real Property Asset, including all building materials,
water sanitary and storm sewers, drainage, electricity, steam, gas,
telephone and other utility ,
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facilities, parking areas, roads, driveways, walks and other site
improvements; and all additions and betterments there to and all
renewals, substitutions and replacements thereof.
"Indebtedness" means, as applied to any Person, (i) all
indebtedness for borrowed money, (ii) that portion of obligations with
respect to Capital Leases that is properly classified as a liability on
a balance sheet in conformity with GAAP, (iii) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money (other than accounts payable incurred in
the ordinary course of business and accrued expenses incurred in the
ordinary course of business), (iv) any obligation owed for all or any
part of the deferred purchase price of property or services (excluding
any such obligations incurred under ERISA and other trade payables
incurred in the ordinary course of business), including amounts payable
under Permitted Earn Out Agreements, and (v) all indebtedness secured
by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been
assumed by that Person or is nonrecourse to the credit of that Person.
Obligations under Interest Rate Agreements and Currency Agreements
constitute Contingent Obligations and not Indebtedness.
"Indemnitee" has the meaning assigned to that term in
subsection 10.3.
"Insurance Proceeds" has the meaning assigned to that term in
subsec- tion 2.4B(iii)(d).
"Interest Coverage Ratio" has the meaning assigned to that
term in subsec- tion 7.6.
"Interest Payment Date" means (i) with respect to any Base
Rate Loan, the last Business Day in each of March, June, September and
December of each year, commencing on September 30, 1998, and (ii) with
respect to any Eurodollar Rate Loan, the last day of each Interest
Period applicable to such Loan; provided that in the case of each
Interest Period of longer than three months, "Interest Payment Date"
shall also include the date that is three months after the commencement
of such Interest Period.
"Interest Period" has the meaning assigned to that term in
subsection 2.2B.
"Interest Rate Agreement" means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement or arrangement designed to hedge Company or
any of its Subsidiaries against fluctuations in interest rates.
"Interest Rate Determination Date" means each date for
calculating the Reserve Adjusted Eurodollar Rate, for purposes of
determining the interest rate in respect of an Interest Period. The
Interest Rate Determination Date for purposes of calculating the
Reserve Adjusted Eurodollar Rate shall be the second Business Day prior
to the first day of the related Interest Period.
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"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended to the date hereof and from time to time hereafter.
"Investment" means (i) any direct or indirect purchase or
other acquisition by Company or any of its Subsidiaries of, or of a
beneficial interest in, stock or other Securities of any other Person
(other than a Person that, prior to such purchase or acquisition, was a
wholly-owned Subsidiary of Company), or (ii) any direct or indirect
loan, advance (other than advances to employees for moving,
entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital
contribution by Company or any of its Subsidiaries to any other Person
other than a wholly-owned Subsidiary of Company, including all
indebtedness and accounts receivable acquired from that other Person
that are not current assets or did not arise from sales to that other
Person in the ordinary course of business; provided, however, that the
term "Investment" shall not include (a) current trade and customer
accounts receivable for goods furnished or services rendered in the
ordinary course of business and payable in accordance with customary
trade terms, (b) advances and prepayments to suppliers for goods and
services in the ordinary course of business, (c) stock or other
securities acquired in connection with the satisfaction or enforcement
of Indebtedness or claims due or owing to Company or any of its
Subsidiaries or as security for any such Indebtedness or claims, (d)
Cash held in Deposit Accounts with banks, trust companies and Lenders
and (e) shares in a mutual fund that invests solely in Cash
Equivalents. The amount of any Investment shall be the original cost of
such Investment plus the cost of all additions thereto, without any
adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Issuing Lender" means, with respect to any Letter of Credit,
the Lender which agrees or is otherwise obligated to issue such Letter
of Credit, determined as provided in subsection 3.1B(ii).
"Joint Venture" means a joint venture, partnership or other
similar arrangement, whether in corporate, partnership or other legal
form; provided that in no event shall any corporate Subsidiary of any
Person be considered to be a Joint Venture to which such Person is a
party.
"Landlord Consent and Estoppel" means, with respect to any
Leasehold Property, a letter, certificate or other instrument in
writing from the lessor under the related lease, in form and substance
acceptable to Administrative Agent in its reasonable discretion.
"Leasehold Property" means any leasehold interest of any Loan
Party as lessee under any lease of real property, other than any such
leasehold interest designated from time to time by Administrative Agent
in its sole discretion as not being required to be included in the
Collateral.
"Lender" and "Lenders" means the persons identified as
"Lenders" and
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listed on the signature pages of this Agreement, together with their
successors and permitted assigns pursuant to subsection 10.1, and the
term "Lenders" shall include Swing Line Lender unless the context
otherwise requires; provided that the term "Lenders", when used in the
context of a particular Commitment, shall mean Lenders having that
Commitment. To the extent the context so requires, the terms "Lender"
and "Lenders" shall include "Lenders" under and as defined in, the
Existing Credit Agreement.
"Lender Default" means (i) the refusal (which has not been
retracted) of a Lender to make available its portion of any Loans
(including any Revolving Loans made to pay Refunded Swing Line Loans or
to reimburse drawings under Letters of Credit) in accordance with
subsection 2.1A or its portion of any unreimbursed drawing or payment
under a Letter of Credit in accordance with subsection 3.3C or (ii) a
Lender having notified Company and/or Administrative Agent in writing
that it does not intend to comply with its obligations under subsection
2.1 or subsections 3.1C, 3.3B or 3.3C, as a result of any takeover of
such Lender by any regulatory authority or agency.
"Lending Office" means, as to any Lender, the office or
offices of such Lender specified as the "Lending Office" on Schedule
2.1, or such other office or offices as such Lender may from time to
time notify Company and Administrative Agent.
"Letter of Credit" or "Letters of Credit" means Commercial
Letters of Credit and Standby Letters of Credit issued or to be issued
by Issuing Lenders for the account of Company pursuant to subsection
3.1.
"Letter of Credit Usage" means, as at any date of
determination, the sum of (i) the maximum aggregate amount which is or
at any time thereafter may become available for drawing under all
Letters of Credit then outstanding plus (ii) the aggregate amount of
all drawings under Letters of Credit honored by Issuing Lenders and not
theretofore reimbursed by Company (including any such reimbursement out
of the proceeds of Revolving Loans pursuant to subsection 3.3B).
"Leverage Ratio" has the meaning assigned to that term in
subsection 7.6.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, fixed or floating charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any
lease in the nature thereof, and any agreement to give any security
interest) and any option, trust or other preferential arrangement
having the practical effect of any of the foregoing.
"Loan" or "Loans" means, as the context requires, one or more
of the Term Loans, Revolving Loans, and Swing Line Loans or any
combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters
of Credit (and any applications for, or reimbursement agreements or
other documents or certificates executed by Company in favor of an
Issuing Lender relating to, the Letters of
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Credit), the Guaranties, the Collateral Documents and the
Acknowledgement and Consent.
"Loan Parties" means Company, Holdings and each Subsidiary
Guarantor.
"Management Fees" means the fees payable by Holdings or any of
its Subsidiaries pursuant to the Management Services Agreement.
"Management Services Agreement" means that certain Advisory
Services Agreement, dated as of the Closing Date between an Affiliate
of the MDC Entities and Holdings and/or any of its Subsidiaries as in
effect on the Closing Date and as it may heretofore have been or
hereafter may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the provisions of subsection
7.13A.
"Margin Stock" has the meaning assigned to that term in
Regulation U of the Board of Governors of the Federal Reserve System as
in effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect
upon the business, operations, properties, assets, condition (financial
or otherwise) or prospects of Holdings and its Subsidiaries, taken as a
whole, (ii) the material impairment of the ability of any Loan Party to
perform the Obligations and (iii) a material adverse effect upon the
legality, validity, binding effect or enforceability against a Loan
Party of a Loan Document to which it is a party; provided that
consummation of the DIMAC Acquisition in accordance with the terms of
the DIMAC Acquisition Agreement and consummation of the AmeriComm
Acquisition in accordance with the terms of the AmeriComm Acquisition
Agreement shall not be deemed to have a Material Adverse Effect for
purposes of subsection 5.4.
"MDC Entities" means McCown De Leeuw & Co. IV, L.P., a
California limited partnership, McCown De Leeuw & Co. IV Associates,
L.P., a California limited partnership, and Delta Fund LLC, a
California limited liability company.
"Merger Corp." means DMAC Merger Corp., a Delaware
corporation.
"Mortgage" means (i) a security instrument (whether designated
as a deed of trust or a mortgage or by any similar title) executed and
delivered by any Loan Party, substantially in the form of Exhibit XX
annexed hereto or in such other form as may be approved by
Administrative Agent in its sole discretion, in each case with such
changes thereto as may be recommended by Administrative Agent's local
counsel based on local laws or customary local mortgage or deed of
trust practices, or (ii) at Administrative Agent's option, in the case
of an Additional Mortgaged Property (as defined in subsection 6.12), an
amendment to an existing Mortgage, in form satisfactory to
Administrative Agent, adding such Additional Mortgaged Property to the
Real Property Assets encumbered by such existing Mortgage, in either
case as such security instrument or amendment may heretofore have been
or hereafter may be amended, supplemented or otherwise modified from
time to time. "Mortgages" means all such instruments,
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including the Closing Date Mortgages and any Additional Mortgages (as
defined in subsection 6.12), collectively.
"Mortgaged Property" means a Closing Date Mortgaged Property
or an Additional Mortgaged Property (as defined in subsection 6.12).
"Multiemployer Plan" means a "multiemployer plan", as defined
in Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA,
to which Company or any of its ERISA Affiliates is contributing or to
which Company or any of its ERISA Affiliates has an obligation to
contribute.
"Net Cash Proceeds" means, with respect to any Asset Sale,
Cash Proceeds of such Asset Sale net of bona fide direct costs of sale
including, without limitation, (i) income taxes reasonably estimated to
be actually payable as a result of such Asset Sale within two years of
the date of receipt of such Cash Proceeds, (ii) transfer, sales, use
and other taxes payable in connection with such Asset Sale, (iii)
payment of the outstanding principal amount of, premium or penalty, if
any, and interest on any Indebtedness (other than the Loans) that is
secured by a Lien on the stock or assets in question and that is
required to be repaid under the terms thereof as a result of such Asset
Sale, and (iv) financial advisor's commissions and reasonable fees and
expenses of counsel and other advisors in connection with such Asset
Sale.
"New Lender" means any Lender which is a party to this
Agreement on the Effective Date which is not an Existing Lender.
"Non-Defaulting Lender" means and includes each Lender other
than a Defaulting Lender.
"Notes" means one or more of the Term Notes, Revolving Notes
or Swing Line Note or any combination thereof.
"Notice of Borrowing" means a notice in the form of Exhibit I
annexed hereto delivered by Company to Administrative Agent pursuant to
subsection 2.1B with respect to a proposed borrowing.
"Notice of Conversion/Continuation" means a notice
substantially in the form of Exhibit II annexed hereto delivered by
Company to Administrative Agent pursuant to subsection 2.2D with
respect to a proposed conversion or continuation of the applicable
basis for determining the interest rate with respect to the Loans
specified therein.
"Notice of Issuance of Letter of Credit" means a notice in the
form of Exhibit III annexed hereto delivered by Company to
Administrative Agent pursuant to subsection 3.1B(i) with respect to the
proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each
Loan Party from time to time owed to Agents, Lenders or any of them
under the Loan Documents,
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whether for principal, interest, reimbursement of amounts drawn under
Letters of Credit or payments for early termination of Interest Rate
Agreements, fees, expenses, indemnification or otherwise.
"Officer's Certificate" means, with respect to any Person, a
certificate executed on behalf of such Person (x) if such Person is a
partnership, by its chairman of the Board (if an officer) or chief
executive officer or by the chief financial officer of its general
partner and (y) if such Person is a corporation, on behalf of such
corporation by its chairman of the board (if an officer) or chief
executive officer or its chief financial officer or vice president;
provided that every Officer's Certificate with respect to the
compliance with a condition precedent to the making of any Loans
hereunder shall include (i) a statement that the officer or officers
making or giving such Officer's Certificate have read such condition
and any definitions or other provisions contained in this Agreement
relating thereto, (ii) a statement that, in the opinion of the signer
or signers, they have made or have caused to be made such examination
or investigation as is necessary to enable them to express an informed
opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signer or
signers, such condition has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
that is not a Capital Lease other than any such lease under which that
Person is the lessor.
"Other Investors" means such Persons other than the MDC
Entities as shall hold equity interests in Holdings on or prior to the
Closing Date.
"Partnership Loan Party" means any Loan Party which is a
limited partnership.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA (or any successor
thereto).
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Title IV of ERISA.
"Permitted Earn Out Agreements" means (i) the agreements
containing the earn out arrangements described on Schedule 1.1 annexed
hereto and (ii) any agreement by Company to pay the seller or sellers
of any Person or assets acquired in accordance with the provisions of
subsection 7.7(vii) at any time following the consummation of such
acquisition by reference to the financial performance of the Person or
assets so acquired.
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"Permitted Encumbrances" means the following types of Liens:
(i) Liens for taxes, assessments or governmental
charges or claims the payment of which is not, at the time,
required by subsection 6.3;
(ii) statutory Liens of landlords, statutory Liens of
carriers, warehousemen, mechanics and materialmen and other
Liens imposed by law (other than any such Lien imposed
pursuant to Section 401(a)(29) or 412(n) of the Internal
Revenue Code or by ERISA) incurred in the ordinary course of
business for sums not yet delinquent or being contested in
good faith, if such reserve or other appropriate provision, if
any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or
to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts,
trade contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the
payment of borrowed money);
(iv) any attachment or judgment Lien not constituting
an Event of Default under subsection 8.8;
(v) leases or subleases granted to others not
interfering in any material respect with the ordinary conduct
of the business of Company or any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, minor
defects, encroachments or irregularities in title and other
similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of
Company or any of its Subsidiaries and encumbrances set forth
on the title reports delivered to Administrative Agent (i) on
or before the Closing Date pursuant to subsection 4.1H(v) of
the Existing Credit Agreement and (ii) on or before the
Effective Date pursuant to subsection 4.1P of this Agreement;
(vii) any (a) interest or title of a lessor or
sublessor under any Capital Lease permitted by subsection
7.1(iv) or any operating lease not prohibited by this
Agreement, (b) restriction or encumbrance that the interest or
title of such lessor or sublessor may be subject to, or (c)
subordination of the interest of the lessee or sublessee under
such lease to any restriction or encumbrance referred to in
the preceding clause (b);
(viii) Liens arising from filing UCC financing
statements relating solely to leases permitted by this
Agreement;
(ix) Liens in favor of customs and revenue
authorities arising as a
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matter of law to secure payment of customs duties in
connection with the importation of goods;
(x) deposits in the ordinary course of business to
secure liabilities to insurance carriers, lessors, utilities
and other service providers; and
(xi) bankers liens and rights of setoff with respect
to customary depository arrangements entered into in the
ordinary course of business.
"Permitted Seller Paper" means any Indebtedness of Company or
Holdings incurred in connection with any acquisition consummated in
accordance with the provisions of subsection 7.7(vii) and payable to
the seller in connection therewith, evidenced by a promissory note
substantially in the form of Exhibit XIX hereto.
"Person" means and includes natural persons, corporations,
limited partnerships, limited liability companies, general
partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts
or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Phase II Term B Loans" means a portion of the Term B Loans,
in an aggregate principal amount not exceeding $10,000,000, that may be
borrowed by Company on the Effective Date.
"Phase II Term C Loans" means a portion of the Term C Loans,
in an aggregate principal amount not exceeding $35,000,000, that may be
borrowed by Company on the Effective Date.
"Phase II Term Loans" means the Phase II Term B Loans and the
Phase II Term C Loans, collectively.
"Pledge Agreement" means that certain Pledge Agreement entered
into by and among Holdings, Company, Subsidiary Guarantors and
Administrative Agent on and as of the Closing Date, or pursuant to
subsection 6.9, substantially in the form of Exhibit XI annexed hereto
as such Pledge Agreement may heretofore have been or hereafter may be
amended, restated, supplemented or otherwise modified from time to
time.
"Potential Event of Default" means a condition or event that,
after notice or after any applicable grace period has lapsed, or both,
would constitute an Event of Default.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by CSFB as its prime commercial lending
rate in effect at its principal office in New York City. The Prime Rate
is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. CSFB or any other Lender
may make commercial loans or other loans at rates of interest at, above
or below the Prime
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Rate.
"Pro Forma Basis" means, with respect to compliance with any
test or covenant hereunder, compliance with such covenant or test after
giving effect to any proposed acquisition or other action which
requires compliance on a pro forma basis (including pro forma
adjustments arising out of events which are directly attributable to a
specific transaction, are factually supportable and are expected to
have a continuing impact, in each case determined on a basis consistent
with Article 11 of Regulation S-X of the Securities Act and as
interpreted by the staff of the Securities and Exchange Commission
prior to December 1996 which would include cost savings resulting from
head count reductions, closure of facilities and similar restructuring
charges, which pro forma adjustments shall be certified by the chief
financial officer of Company), using, for purposes of determining such
compliance, the historical financial statements of all entities or
assets so acquired or to be acquired and the consolidated financial
statements of Company and its Subsidiaries which shall be reformulated
as if such acquisition or other action, and any acquisitions which have
been consummated during the period, and any Indebtedness or other
liabilities incurred in connection with any such acquisition had been
consummated at the beginning of such period and assuming that such
Indebtedness bears interest during any portion of the applicable
measurement period prior to the relevant acquisition at the weighted
average of the interest rates applicable to outstanding Loans during
such period, and otherwise in conformity with certain procedures to be
agreed upon between Administrative Agent and Company.
"Pro Rata Share" means (i) with respect to all payments,
computations and other matters relating to the Term A Loan Commitment
or the Term A Loan of any Lender, the percentage obtained by dividing
(x) the Term A Loan Exposure of that Lender by (y) the aggregate Term A
Loan Exposure of all Lenders; (ii) with respect to all payments,
computations and other matters relating to the Term B Loan Commitment
or the Term B Loan of any Lender, the percentage obtained by dividing
(x) the Term B Loan Exposure of that Lender by (y) the aggregate Term B
Loan Exposure of all Lenders; (iii) with respect to all payments,
computations and other matters relating to the Term C Loan Commitment
or the Term C Loan of any Lender, the percentage obtained by dividing
(x) the Term C Loan Exposure of that Lender by (y) the aggregate Term C
Loan Exposure of all Lenders; (iv) with respect to all payments,
computations and other matters relating to the Revolving Loan
Commitment or the Revolving Loans of any Lender or any Letters of
Credit issued by any Lender or any participations purchased by any
Lender therein or in any Swing Line Loans, the percentage obtained by
dividing (x) the Revolving Loan Exposure of that Lender by (y) the
aggregate Revolving Loan Exposure of all Lenders; and (v) for all other
purposes with respect to each Lender, the percentage obtained by
dividing (x) the sum of the Term Loan Exposure of that Lender
and the Revolving Loan Exposure of that Lender by (y) the sum of the
aggregate Term Loan Exposure of all Lenders and the aggregate Revolving
Loan Exposure of all Lenders; in any such case as the applicable
percentage may be adjusted by assignments permitted pursuant to
subsection 10.1. The Pro Rata Share of each Lender as of the Effective
Date for purposes of each of clauses (i), (ii), (iii) and (iv) of the
preceding sentence and Section 2.1F hereof is set forth opposite the
name of that Lender in
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Schedule 2.1 annexed hereto.
"Projections" has the meaning assigned to that term in
subsection 5.3B.
"Purchasing Lender" has the meaning assigned to that term in
subsection 2.1F.
"Real Property Asset" means, at any time of determination, any
interest then owned by any Loan Party in any real property.
"Recorded Leasehold Interest" means a Leasehold Property with
respect to which a Record Document (as hereinafter defined) has been
recorded in all places necessary or desirable, in Administrative
Agent's reasonable judgment, to give constructive notice of such
Leasehold Property to third-party purchasers and encumbrancers of the
affected real property. For purposes of this definition, the term
"Record Document" means, with respect to any Leasehold Property, (a)
the lease evidencing such Leasehold Property or a memorandum thereof,
executed and acknowledged by the owner of the affected real property,
as lessor, or (b) if such Leasehold Property was acquired or subleased
from the holder of a Recorded Leasehold Interest, the applicable
assignment or sublease document, executed and acknowledged by such
holder, in each case in form sufficient to give such constructive
notice upon recordation and otherwise in form reasonably satisfactory
to Administrative Agent.
"Reference Lenders" means (i) CSFB, (ii) UBS or (iii) First
Union, or, in lieu thereof, another Lender from time to time determined
by Administrative Agent with the consent of Company.
"Refunded Swing Line Loans" has the meaning assigned to that
term in subsection 2.1A(iv).
"Register" has the meaning assigned to that term in subsection
2.1D.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means, collectively, the DIMAC
Acquisition Agreement, the AmeriComm Acquisition Agreement, the
Stockholders Agreement, the Certificate of Merger, the Debt Tender
Offer Materials, the Management Services Agreement, the Senior
Subordinated Note Indenture, the Senior Subordinated Notes, the
Holdings Note Purchase Agreement, the Holdings Note Indenture, the
Holdings Notes, the Holdings PIK Notes and any document pursuant to
which Subordinated Indebtedness is issued or otherwise incurred after
the date of this Agreement and any other documents relating to any of
the foregoing.
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"Release" means any release, spill, emission, leaking,
pumping, pouring, injection, escaping, deposit, disposal, discharge,
dispersal, dumping, leaching or migration of Hazardous Materials into
the indoor or outdoor environment (including, without limitation, the
abandonment or disposal of any barrels, containers or other closed
receptacles containing any Hazardous Materials), or into or out of any
Facility, including the movement of any Hazardous Material through the
air, soil, surface water, groundwater or property.
"Required Prepayment Date" has the meaning assigned to that
term in subsection 2.4C(iii).
"Requisite Class Lenders" means, at any time of determination
(i) for the Class of Lenders having Term A Loan Exposure,
Non-Defaulting Lenders having or holding more than 50% of the sum of
the aggregate Term A Loan Exposure of all Non-Defaulting Lenders, (ii)
for the Class of Lenders having Term B Loan Exposure, Non-Defaulting
Lenders having or holding more than 50% of the aggregate Term B Loan
Exposure of all Non-Defaulting Lenders, (iii) for the Class of Lenders
having Term C Loan Exposure, Non-Defaulting Lenders having or holding
more than 50% of the aggregate Term C Loan Exposure of all
Non-Defaulting Lenders, and (iv) for the Class of Lenders having
Revolving Loan Exposure, Non-Defaulting Lenders having or holding more
than 50% of the aggregate Revolving Loan Exposure of all Non-Defaulting
Lenders.
"Requisite Lenders" means Non-Defaulting Lenders having or
holding more than 50% of the sum of the aggregate Term Loan Exposure of
all Non-Defaulting Lenders and the aggregate Revolving Loan Exposure of
all Non-Defaulting Lenders.
"Reserve Adjusted Eurodollar Rate" means, with respect to each
day during each Interest Period pertaining to a Eurodollar Rate Loan, a
rate per annum determined for such day in accordance with the following
formula:
Eurodollar Base Rate
--------------------------------
1.00 - Eurocurrency Reserve Requirements
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of stock of Company now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock to the holders of that
class, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock of Company now or hereafter
outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to
acquire shares of any class of stock of Company now or hereafter
outstanding, and (iv) any payment or prepayment of principal of,
premium, if any, or interest on, or redemption, purchase, retirement,
defeasance (including in-substance or legal defeasance), sinking fund
or similar payment with respect to, any Subordinated Indebtedness.
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"Revolving Loan Commitment" means the commitment of a Lender
to make or maintain Revolving Loans to Company pursuant to subsection
2.1A(iii) and "Revolving Loan Commitments" means such commitments of
all Lenders in the aggregate.
"Revolving Loan Commitment Termination Date" means June 30,
2004.
"Revolving Loan Exposure" means, with respect to any Lender as
of any date of determination (i) prior to the termination of the
Revolving Loan Commitments, that Lender's Revolving Loan Commitment and
(ii) after the termination of the Revolving Loan Commitments, the sum
of (a) the aggregate outstanding principal amount of the Revolving
Loans of that Lender plus (b) in the event that Lender is an Issuing
Lender, the aggregate Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender (net of any participations purchased by
other Lenders in such Letters of Credit) plus (c) the aggregate amount
of all participations purchased by that Lender in any outstanding
Letters of Credit or any unreimbursed drawings under any Letters of
Credit plus (d) the aggregate amount of all participations purchased by
that Lender in any outstanding Swing Line Loans plus (e) in the case of
Swing Line Lender, the sum of the aggregate outstanding principal
amount of all Swing Line Loans (in each case net of any participations
therein purchased by other Lenders).
"Revolving Loans" means the Loans made or maintained by
Lenders to Company pursuant to subsection 2.1A(iii).
"Revolving Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E on the Effective Date, amending and
restating the Revolving Notes issued under the Existing Credit
Agreement, and (ii) any promissory notes issued by Company pursuant to
the last sentence of subsection 10.1B(i) in connection with assignments
of the Revolving Loan Commitment and Revolving Loans of any Lender, in
each case substantially in the form of Exhibit VII annexed hereto, as
they may be amended, restated, supplemented or otherwise modified from
time to time.
"Securities" means any stock, shares, partnership interests,
voting trust certificates, certificates of interest or participation in
any profit-sharing agreement or arrangement, options, warrants, bonds,
debentures, notes, or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of
interest, shares or participations in temporary or interim certificates
for the purchase or acquisition of, or any right to subscribe to,
purchase or acquire, any of the foregoing.
"Security Agreement" means the Security Agreement entered into
by and among Company, the Subsidiary Guarantors and Administrative
Agent on and as of the Closing Date, or pursuant to subsection 6.9,
substantially in the form of Exhibit XII annexed hereto, as such
Security Agreement may heretofore have been or hereafter may be
amended, restated, supplemented or otherwise modified from time to
time.
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"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any successor statute.
"Selling Lender" has the meaning assigned to that term in
subsection 2.1F.
"Senior Subordinated Notes" means Company's $100,000,000 in
original aggregate principal amount of 12 1/2% Senior Subordinated
Notes due 2008, issued pursuant to the Senior Subordinated Note
Indenture.
"Senior Subordinated Note Indenture" means that certain
Indenture dated as of October 22, 1998 pursuant to which the Senior
Subordinated Notes were issued by Company, as such Indenture has been
amended since the Effective Date and as such Indenture may have been
further amended, supplemented or otherwise modified from time to time
to the extent permitted under subsection 7.13A or 7.13B.
"Solvent" means, with respect to any Person, that as of the
date of determination both (i) (a) the then fair saleable value of the
property of such Person is (y) greater than the total amount of
liabilities (including contingent liabilities but excluding amounts
payable under intercompany promissory notes) of such Person and (z) not
less than the amount that will be required to pay the probable
liabilities on such Person's then existing debts as they become
absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (b) such
Person's capital is not unreasonably small in relation to its business
or any contemplated or undertaken transaction; and (c) such Person does
not intend to incur, or believe (nor should it reasonably believe) that
it will incur, debts beyond its ability to pay such debts as they
become due; and (ii) such Person is "solvent" within the meaning given
that term and similar terms under applicable laws relating to
fraudulent transfers and conveyances. For purposes of this definition,
the amount of any contingent liability at any time shall be computed as
the amount that, in light of all of the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability.
"Standby Letter of Credit" means any standby letter of credit
or similar instrument issued for the purpose of supporting (i) workers'
compensation liabilities of Company or any of its Subsidiaries, (ii)
the obligations of third party insurers of Company or any of its
Subsidiaries arising by virtue of the laws of any jurisdiction
requiring third party insurers, (iii) performance, payment, deposit or
surety obligations of Company or any of its Subsidiaries, in any case
if required by law or governmental rule or regulation or in accordance
with custom and practice in the industry, and (iv) such other
obligations of Company and its Subsidiaries as may be reasonably
acceptable to Administrative Agent; provided that Standby Letters of
Credit may not be issued for the purpose of supporting (a) trade
payables or (b) Indebtedness constituting "antecedent debt" (as that
term is used in Section 547 of the Bankruptcy Code).
"Stockholders Agreement" means that certain Stockholders
Agreement to be entered into by and among certain shareholders of
Holdings, which Stockholders
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Agreement shall be in form and substance reasonably satisfactory to
Agents, as such Stockholders Agreement may heretofore have been or
hereafter may be amended, restated, supplemented or otherwise modified
from time to time in accordance with the provisions of subsection
7.13A.
"Subordinated Indebtedness" means (i) Permitted Seller Paper,
(ii) Senior Subordinated Notes and (iii) other Indebtedness of Holdings
or any of its Subsidiaries subordinated in right of payment to the
Obligations pursuant to documentation containing maturities,
amortization schedules, covenants, defaults, remedies, subordination
provisions and other material terms in form and substance satisfactory
to Administrative Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any
corporation, partnership, association, joint venture or other business
entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Person or
Persons (whether directors, managers, trustees or other Persons
performing similar functions) having the power to direct or cause the
direction of the management and policies thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
"Subsidiary Guarantor" means any Subsidiary of Company that is
a party to the Subsidiary Guaranty on the Closing Date or at any time
after the Closing Date pursuant to subsection 6.9 or subsection 6.9 of
the Existing Credit Agreement.
"Subsidiary Guaranty" means the Subsidiary Guaranty,
substantially in the form of Exhibit IX annexed hereto, executed and
delivered by the existing Subsidiary Guarantors on and as of the
Closing Date or by any additional Subsidiary Guarantor from time to
time thereafter pursuant to subsection 6.9 or Subsection 6.9 of the
Existing Credit Agreement, as such Subsidiary Guaranty may heretofore
have been or hereafter may be amended, restated, supplemented or
otherwise modified from time to time.
"Swing Line Lender" means CSFB, or any Person serving as a
successor Administrative Agent hereunder, in its capacity as Swing Line
Lender hereunder.
"Swing Line Loan Commitment" means the commitment of Swing
Line Lender to make Swing Line Loans to Company pursuant to subsection
2.1A(iv).
"Swing Line Loans" means (i) for the period prior to the
Effective Date the Loans made by Swing Line Lender pursuant to
subsection 2.1A(iv) of the Existing Credit Agreement and (ii) for all
periods on and after the Effective Date, any Loans referred to in
clause (i) which remain outstanding and the Loans made by Swing Line
lender pursuant to subsection 2.1A(iv) of this Agreement.
"Swing Line Note" means (i) the promissory note of Company
issued pursuant to subsection 2.1E on the Effective Date, amending and
restating the Swing Line Note
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issued under the Existing Credit Agreement and (ii) any promissory note
issued by Company to any successor Swing Line Lender pursuant to the
last sentence of subsection 9.5B, in each case substantially in the
form of Exhibit VIII annexed hereto, as it may be amended, restated,
supplemented or otherwise modified from time to time.
"Syndication Agent" has the meaning assigned to that term in
the Introduction to this Agreement.
"Tax" or "Taxes" means any present or future tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature and
whatever called, by whomsoever, on whomsoever and wherever imposed,
levied, collected, withheld or assessed; provided that "Tax on the
overall net income" of a Person shall be construed as a reference to a
tax imposed by the jurisdiction in which that Person's principal office
(and/or, in the case of a Lender, its relevant Lending Office) is
located or in which that Person is deemed to be doing business on all
or part of the net income, profits or gains of that Person (whether
worldwide, or only insofar as such income, profits or gains are
considered to arise in or to relate to a particular jurisdiction, or
otherwise).
"Term A Loan Commitment" means the commitment of a Lender to
maintain a Term A Loan to Company pursuant to subsection 2.1A(i)(a) of
this Agreement, and "Term A Loan Commitments" means such commitments of
all Lenders in the aggregate.
"Term A Loan Exposure" means, with respect to any Lender, as
of any date of determination, the outstanding principal amount of the
Term A Loan of that Lender.
"Term A Loans" means the Existing Term A Loans maintained
pursuant to subsection 2.1A(i)(a) of this Agreement.
"Term A Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E on the Effective Date, amending and
restating the Term A Notes issued under the Existing Credit Agreement
and (ii) any promissory notes issued by Company pursuant to the last
sentence of subsection 10.1B(i) of this Agreement in connection with
assignments of the Term A Loans of any Lender, in each case
substantially in the form of Exhibit IV annexed hereto, as they may be
amended, restated, supplemented or otherwise modified from time to
time.
"Term B Loan Commitment" means the commitment of a Lender to
maintain a Term B Loan to Company pursuant to subsection 2.1A(i)(b) of
this Agreement and the commitment of a Lender to make a Phase II Term B
Loan to Company pursuant to subsection 2.1A(ii)(a) of this Agreement,
and "Term B Loan Commitments" means such commitments of all Lenders in
the aggregate.
"Term B Loan Exposure" means, with respect to any Lender as of
any date of determination the outstanding principal amount of the Term
B Loan of that Lender, after giving effect to the Phase II Term B Loan
of such Lender.
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"Term B Loans" means (i) the Existing Term B Loans maintained
pursuant to subsection 2.1A(i)(b) of this Agreement and (ii) the Phase
II Term B Loans made by Lenders to Company pursuant to subsection
2.1A(ii)(a) of this Agreement.
"Term B Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E on the Effective Date, amending and
restating the Term B Notes issued under the Existing Credit Agreement
and (ii) any promissory note issued by Company pursuant to the last
sentence of subsection 10.1B(i) of this Agreement in connection with
assignments of the Term B Loans of any Lender, in each case
substantially in the form of Exhibit V annexed hereto, as they may be
amended, restated, supplemented or otherwise modified from time to
time.
"Term C Loan Commitment" means the commitment of a Lender (i)
to maintain a Term C Loan to Company pursuant to subsection 2.1A(i)(c)
of this Agreement and (ii) to make a Phase II Term C Loan to Company
pursuant to subsection 2.1A(ii)(b) of this Agreement, and "Term C Loan
Commitments" means such commitments of all Lenders in the aggregate.
"Term C Loan Exposure" means, with respect to any Lender as of
any date of determination, the outstanding principal amount of the Term
C Loan of that Lender, after giving effect to the Phase II Term C Loan
of such Lender.
"Term C Loans" means (i) the Existing Term C Loans maintained
pursuant to subsection 2.1A(i)(c) of this Agreement, and (ii) the Phase
II Term C Loans made by Lenders to Company pursuant to 2.1A(ii)(b) of
this Agreement.
"Term C Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1E on the Effective Date, amending and
restating the Term C Notes issued under the Existing Credit Agreement
and (ii) any promissory note issued by Company pursuant to the last
sentence of subsection 10.1B(i) of this Agreement in connection with
assignments of the Term C Loans of any Lender, in each case
substantially in the form of Exhibit VI annexed hereto, as they may be
amended, restated, supplemented or otherwise modified from time to
time.
"Term Loan Commitment" means the Term A Loan Commitment, the
Term B Loan Commitment or the Term C Loan Commitment of a Lender, and
"Term Loan Commitments" means such commitments of all Lenders in the
aggregate.
"Term Loan Exposure" means, with respect to any Lender as of
any date of determination, the aggregate Term A Loan Exposure, Term B
Loan Exposure and Term C Loan Exposure of that Lender.
"Term Loans" means the Term A Loans, the Term B Loans and the
Term C Loans.
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"Term Notes" means the Term A Notes, the Term B Notes and the
Term C Notes.
"Title Company" means, collectively, one or more title
insurance companies reasonably satisfactory to Administrative Agent.
"Total Utilization of Revolving Loan Commitments" means, as at
any date of determination, the sum of (i) the aggregate principal
amount of all outstanding Revolving Loans (other than Revolving Loans
made for the purpose of repaying any Refunded Swing Line Loans or
reimbursing the applicable Issuing Lender for any amount drawn under
any Letter of Credit but not yet so applied) plus (ii) the aggregate
principal amount of all outstanding Swing Line Loans plus (iii) the
Letter of Credit Usage.
"Transaction Costs" means the fees, costs and expenses (other
than amounts payable to Administrative Agent and Lenders) payable by
Holdings and its Subsidiaries on or before the Closing Date in
connection with the transactions contemplated hereby and by the DIMAC
Acquisition Agreement and the AmeriComm Acquisition Agreement.
"UBS" means UBS AG, Stamford Branch.
"Unfunded Current Liability" means, with respect to any
Pension Plan, the amount, if any, by which the actuarial present value
of the accumulated plan benefits under such Pension Plan as of the
close of its most recent plan year exceeds the fair market value of the
assets allocable thereto, each determined in accordance with Statement
of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by such Pension Plan's actuary in the most recent
annual valuation of such Pension Plan.
"Waivable Mandatory Prepayment" has the meaning assigned to
that term in subsection 2.4C(iii).
"WDR" means Warburg Dillon Read LLC.
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"Year 2000 Problems" means limitations in the capacity or
readiness to handle date information for the Year 1999 or years
beginning January 1, 2000 of any of the hardware, firmware or software
systems ("Systems") associated with information processing and
delivery, operations or services (e.g., security and alarms, elevators,
communications, and HVAC) operated by, provided to or otherwise
reasonably necessary to the business or operations of Holdings and its
Subsidiaries.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations
Under Agreement.
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii),
(iii) and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP
(except, with respect to interim financial statements, normal year-end audit
adjustments and the absence of explanatory footnotes) as in effect at the time
of such preparation (and delivered together with the reconciliation statements
provided for in subsection 6.1(v)). Calculations in connection with the
definitions, covenants and other provisions of this Agreement shall utilize
accounting principles and policies in conformity with those used to prepare the
financial statements of the Subsidiaries of Holdings referred to in subsection
5.3A.
1.3 Other Definitional Provisions.
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. The words "includes," "including" and similar forms used in any Loan
Document shall be construed as if followed by the words "without limitation."
SECTION 2.
AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Loans.
A. Commitments. Subject to the terms and conditions of this Agreement
and in reliance upon the representations and warranties of Loan Parties set
forth herein and in the other Loan Documents, each Lender hereby severally
agrees to make (or maintain, as the case may be) the Loans described in
subsections 2.1A(i), 2.1A(ii) and 2.1A(iii) and Swing Line Lender hereby agrees
to make the Swing Line Loans as described in subsection 2.1A(iv).
Company acknowledges and agrees that there are Existing Revolving
Loans, Existing Term A Loans, Existing Term B Loans and Existing Term C Loans in
the respective principal amounts set forth on Schedule 2.1. Company hereby
represents, warrants, agrees, covenants and (1) reaffirms that it has no (and it
permanently and irrevocably waives and releases Agents and
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Lenders from any, to the extent arising on or prior to the Effective Date)
defense, set off, claim or counterclaim against any Agent or Lender in regard to
its Obligations in respect of such Existing Loans and (2) reaffirms its
obligations to pay such Existing Loans, and any amounts owed (whether or not
presently due and payable, and including all interest accrued to the Effective
Date) in accordance with the terms and condition of this Agreement and the other
Loan Documents.
(i) Term Loans. Each Lender severally agrees:
(a) to maintain and continue as Term A Loans
hereunder its Pro Rata Share of the principal amount of the
Existing Term A Loans, after giving effect to subsection 2.1F.
The aggregate amount of the Existing Term A Loans is
$55,000,000 and the amount of each Lender's Term A Loan on the
Effective Date is set forth opposite its name on Schedule 2.1
annexed hereto. Amounts repaid or prepaid in respect of Term A
Loans may not be reborrowed.
(b) to maintain and continue as Term B Loans
hereunder its Pro Rata Share of the principal amount of the
Existing Term B Loans, after giving effect to subsection 2.1F.
The aggregate amount of the Existing Term B Loans is
$70,000,000 and the amount of each Lender's Existing Term B
Loan that shall be maintained and continued as a Term B Loan
is set forth opposite its name on Schedule 2.1 annexed hereto.
Amounts repaid or prepaid in respect of Term B Loans may not
be reborrowed.
(c) to maintain and continue as Term C Loans
hereunder its Pro Rata Share of the principal amount of the
Existing Term C Loans, after giving effect to subsection 2.1F.
The aggregate amount of the Existing Term C Loans is
$25,000,000 and the amount of each Lender's Existing Term C
Loan that shall be maintained and continued as a Term C Loan
is set forth opposite its name on Schedule 2.1 annexed hereto.
Amounts repaid or prepaid in respect of Term C Loans may not
be reborrowed.
(ii) Phase II Term Loans.
(a) Each Lender severally agrees to lend to Company
on the Effective Date an aggregate amount not exceeding its
Pro Rata Share of the aggregate amount of the unfunded Term B
Loan Commitments, in each case to be used for the purposes
identified in subsection 2.5B. The amount of each Lender's
unfunded Term B Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the
unfunded Term B Loan Commitments is $10,000,000. Each Lender's
unfunded Term B Loan Commitment in respect of the Phase II
Term B Loans shall expire immediately and without further
action on the Effective Date in the event the Phase II Term
B Loans are not made on that date. Amounts borrowed under this
subsection 2.1A(ii)(a) and subsequently repaid or prepaid may
not be reborrowed.
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(b) Each Lender severally agrees to lend to Company
on the Effective Date an aggregate amount not exceeding its
Pro Rata Share of the aggregate amount of the unfunded Term C
Loan Commitments, in each case to be used for the purposes
identified in subsection 2.5B. The amount of each Lender's
unfunded Term C Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the
unfunded Term C Loan Commitments is $35,000,000. Each Lender's
unfunded Term C Loan Commitment in respect of the Phase II
Term C Loans shall expire immediately and without further
action on the Effective Date in the event the Phase II Term C
Loans are not made on that date. Amounts borrowed under this
subsection 2.1A(ii)(b) and subsequently repaid or prepaid may
not be reborrowed.
(iii) Revolving Loans. Each Lender severally agrees, subject
to the limitations set forth below with respect to the maximum amount
of Revolving Loans permitted to be outstanding from time to time, to
(a) maintain and continue as Revolving Loans hereunder its Pro Rata
Share of the principal amount of Existing Revolving Loans, after giving
effect to subsection 2.1F and (b) to lend to Company from time to time
during the period from the Effective Date to but excluding the
Revolving Loan Commitment Termination Date an aggregate amount
(including the amount of Revolving Loans, if any, maintained by the
applicable Lender pursuant to clause (a)) not exceeding its Pro Rata
Share of the aggregate amount of the Revolving Loan Commitments, to be
used for the purposes identified in subsection 2.5B. The amount of each
Lender's Revolving Loan Commitment on the Effective Date is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate
amount of the Revolving Loan Commitments is $75,000,000; provided that
the Revolving Loan Commitments of Lenders shall be adjusted to give
effect to any assignments of the Revolving Loan Commitments pursuant to
subsection 10.1B; provided further that the amount of the Revolving
Loan Commitments shall be reduced from time to time by the amount of
any reductions thereto made pursuant to subsections 2.4A(iv) and 2.4B.
Each Lender's Revolving Loan Commitment shall expire on the Revolving
Loan Commitment Termination Date and all Revolving Loans and all other
amounts owed hereunder with respect to the Revolving Loans and the
Revolving Loan Commitments shall be paid in full no later than that
date. Amounts borrowed under this subsection 2.1A(iii) may be repaid
and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Notwithstanding anything contained herein to the contrary, in
no event shall the Total Utilization of Revolving Loan Commitments at
any time exceed the Revolving Loan Commitments then in effect.
(iv) Swing Line Loans. Swing Line Lender hereby agrees,
subject to the limitations set forth below with respect to the maximum
aggregate amount of all Swing Line Loans outstanding from time to time,
to (a) maintain and continue as Swing Line Loans hereunder its "Swing
Line Loans" (as defined in the Existing Credit Agreement) which are
outstanding on the Effective Date and (b) make a portion of the
Revolving Loan Commitments available to Company from time to time
during the period from the Effective Date to but excluding the
Revolving Loan Commitment Termination Date by
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making Base Rate Loans as Swing Line Loans to Company in an aggregate
amount not to exceed the amount of the Swing Line Loan Commitment, to
be used for the purposes identified in subsection 2.5B, notwithstanding
the fact that such Swing Line Loans, when aggregated with the sum of
Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's
Pro Rata Share of the Letter of Credit Usage then in effect, may exceed
Swing Line Lender's Revolving Loan Commitment. The amount of the Swing
Line Loan Commitment on the Effective Date is $5,000,000; provided that
the amounts of the Swing Line Loan Commitment are subject to reduction
as provided in clause (b) of the next paragraph. The Swing Line Loan
Commitment shall expire on the Revolving Loan Commitment Termination
Date and all Swing Line Loans and all other amounts owed hereunder with
respect to the Swing Line Loans shall be paid in full no later than
that date. Amounts borrowed under this subsection 2.1A(iv) may be
repaid and reborrowed to but excluding the Revolving Loan Commitment
Termination Date.
Notwithstanding anything contained herein to the contrary, the
Swing Line Loans and the Swing Line Loan Commitment shall be subject to
the following limitations:
(a) in no event shall the Total Utilization of
Revolving Loan Commitments at any time exceed the Revolving
Loan Commitments then in effect;
(b) any reduction of the Revolving Loan Commitments
made pursuant to subsection 2.4B which reduces the aggregate
Revolving Loan Commitments to an amount less than the then
current sum of the Swing Line Loan Commitment shall result in
an automatic corresponding pro rata reduction of the Swing
Line Loan Commitment such that the sum thereof equals the
amount of the Revolving Loan Commitments, as so reduced,
without any further action on the part of Company,
Administrative Agent or Swing Line Lender; and
(c) Swing Line Lender shall have no obligation to
make any Swing Line Loans during any period when a Lender
Default exists, unless each Swing Line Lender has entered into
arrangements satisfactory to it and Company to eliminate Swing
Line Lender's risk with respect to the Defaulting Lender,
including by cash collateralizing such Defaulting Lender's Pro
Rata Share of the Revolving Loans that may be required to be
made to refund the applicable Swing Line Loan as contemplated
by the immediately following paragraph.
With respect to any Swing Line Loans which have not been
voluntarily prepaid by Company pursuant to subsection 2.4B(i), Swing
Line Lender may, at any time in its sole and absolute discretion,
deliver to Administrative Agent (with a copy to Company), no later than
12:00 Noon (New York time) at least one Business Day in advance of the
proposed Funding Date, a notice (which shall be deemed to be a Notice
of Borrowing given by Company) requesting Lenders to make Revolving
Loans that are Base Rate Loans to Company on such Funding Date in an
amount equal to the amount of such Swing Line Loans (the "Refunded
Swing Line Loans") outstanding on the date such notice is given which
Swing Line Lender requests Lenders to prepay. Anything
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contained in this Agreement to the contrary notwithstanding, (i) the
proceeds of such Revolving Loans made by Lenders other than Swing Line
Lender shall be immediately delivered by Administrative Agent to Swing
Line Lender (and not to Company) and applied to repay a corresponding
portion of the Refunded Swing Line Loans and (ii) on the day such
Revolving Loans are made, Swing Line Lender's Pro Rata Share of the
Refunded Swing Line Loans shall be deemed to be paid with the proceeds
of a Revolving Loan made by Swing Line Lender to Company, and such
portion of the Swing Line Loans deemed to be so paid shall no longer be
outstanding as Swing Line Loans and shall no longer be due under the
Swing Line Note of Swing Line Lender but shall instead constitute part
of Swing Line Lender's outstanding Revolving Loans to Company and shall
be due under the Revolving Note issued by Company to Swing Line Lender.
Company hereby authorizes Administrative Agent and Swing Line Lender to
charge Company's accounts with Administrative Agent and Swing Line
Lender (up to the amount available in each such account) in order to
immediately pay Swing Line Lender the amount of the Refunded Swing Line
Loans to the extent the proceeds of such Revolving Loans made by
Lenders, including the Revolving Loan deemed to be made by Swing Line
Lender, are not sufficient to repay in full the Refunded Swing Line
Loans. If any portion of any such amount paid (or deemed to be paid) to
Swing Line Lender should be recovered by or on behalf of Company from
Swing Line Lender in bankruptcy, by assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be
ratably shared among all Lenders in the manner contemplated by
subsection 10.5.
If for any reason Revolving Loans are not made pursuant to
this subsection 2.1A(iv) in an amount sufficient to repay any amounts
owed to Swing Line Lender in respect of any outstanding Swing Line
Loans on or before the third Business Day after demand for payment
thereof by Swing Line Lender, each Lender shall be deemed to, and
hereby agrees to, have purchased a participation in such outstanding
Swing Line Loans, and in an amount equal to its Pro Rata Share of the
applicable unpaid amount together with accrued interest thereon. Upon
one Business Day's notice from Swing Line Lender, each Lender shall
deliver to Swing Line Lender an amount equal to its respective
participation in the applicable unpaid amount in same day funds at the
office of Swing Line Lender located at the Funding and Payment Office.
In order to evidence such participation each Lender agrees to enter
into a participation agreement at the request of Swing Line Lender in
form and substance satisfactory to Swing Line Lender. In the event any
Lender fails to make available to Swing Line Lender the amount of such
Lender's participation as provided in this paragraph, Swing Line Lender
shall be entitled to recover such amount on demand from such Lender
together with interest thereon at the rate customarily used by Swing
Line Lender for the correction of errors among banks for three Business
Days and thereafter at the Base Rate, as applicable.
Notwithstanding anything contained herein to the contrary, (i)
each Lender's obligation to make Revolving Loans for the purpose of
repaying any Refunded Swing Line Loans pursuant to the second preceding
paragraph and each Lender's obligation to purchase a participation in
any unpaid Swing Line Loans pursuant to the immediately preceding
paragraph shall be absolute and unconditional and shall not be affected
by any
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circumstance, including without limitation (a) any set-off,
counterclaim, recoupment, defense or other right which such Lender may
have against Swing Line Lender, Company or any other Person for any
reason whatsoever; (b) the occurrence or continuation of an Event of
Default or a Potential Event of Default; (c) any adverse change in the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of Company or any of its Subsidiaries; (d) any
breach of this Agreement or any other Loan Document by any party
thereto; or (e) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; provided that such
obligations of each Lender are subject to the condition that Swing Line
Lender believed in good faith that all conditions under Section 4 to
the making of the applicable Refunded Swing Line Loans or other unpaid
Swing Line Loans, were satisfied at the time such Refunded Swing Line
Loans or unpaid Swing Line Loans were made, or the satisfaction of any
such condition not satisfied had been waived by Requisite Lenders prior
to or at the time such Refunded Swing Line Loans or other unpaid Swing
Line Loans were made; and (ii) Swing Line Lender shall not be obligated
to make any Swing Line Loans if it has elected not to do so after the
occurrence and during the continuation of a Potential Event of Default
or Event of Default.
B. Borrowing Mechanics. Term Loans or Revolving Loans (including any
such Loans made as Eurodollar Rate Loans with a particular Interest Period) made
on any Funding Date (other than Revolving Loans made pursuant to a request by
Swing Line Lender pursuant to subsection 2.1A(iv) for the purpose of repaying
any Refunded Swing Line Loans and Revolving Loans made pursuant to subsection
3.3B for the purpose of reimbursing any Issuing Lender for the amount of a
drawing or payment under a Letter of Credit issued by it) shall be in an
aggregate minimum amount of $500,000 and integral multiples of $100,000 in
excess of that amount; provided that any Eurodollar Rate Loan shall be in a
minimum amount of $2,000,000 and integral multiples of $500,000 in excess of
that amount. Swing Line Loans made on any Funding Date shall be in an aggregate
minimum amount of $100,000 and integral multiples of $50,000 in excess of that
amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans
it shall deliver to Administrative Agent a Notice of Borrowing no later than
12:00 Noon (New York time), at least three Business Days in advance of the
proposed Funding Date in the case of a Eurodollar Rate Loan, or at least one
Business Day in advance of the proposed Funding Date in the case of a Base Rate
Loan. Whenever Company desires that Swing Line Lender make a Swing Line Loan, it
shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00
Noon (New York time) on the proposed Funding Date. The Notice of Borrowing shall
specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the
amount and type of Loans requested, (iii) in the case of Swing Line Loans and
Loans made on the Closing Date, that such Loans shall be Base Rate Loans, (iv)
in the case of any Loans other than Swing Line Loans, whether such Loans shall
be Base Rate Loans or Eurodollar Rate Loans, and (v) in the case of any Loans
requested to be made as Eurodollar Rate Loans, the initial Interest Period
requested therefor. Term Loans and Revolving Loans may be continued as or
converted into Base Rate Loans and Eurodollar Rate Loans in the manner provided
in subsection 2.2D. In lieu of delivering the above-described Notice of
Borrowing, Company may give Administrative Agent telephonic notice by the
required time of any proposed borrowing under this subsection 2.1B; provided
that such notice shall be promptly confirmed in writing by delivery of a Notice
of Borrowing to Administrative Agent on or before the applicable
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Funding Date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Company or
for otherwise acting in good faith under this subsection 2.1B, and upon funding
of Loans by Lenders in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected Loans hereunder.
Company shall notify Administrative Agent prior to the funding of any
Loans in the event that any of the matters to which Company is required to
certify in the applicable Notice of Borrowing are no longer true and correct as
of the applicable Funding Date, and the acceptance by Company of the proceeds of
any Loans shall constitute a re-certification by Company, as of the applicable
Funding Date, as to the matters to which Company is required to certify in the
applicable Notice of Borrowing.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Borrowing for a Eurodollar Rate Loan (or telephonic notice in lieu
thereof) shall be irrevocable on and after the related Interest Rate
Determination Date, and Company shall be bound to make a borrowing in accordance
therewith.
C. Disbursement of Funds. All Term Loans and all Revolving Loans under
this Agreement shall be made by Lenders simultaneously and proportionately to
their respective Pro Rata Shares, it being understood that no Lender shall be
responsible for any default by any other Lender in that other Lender's
obligation to make a Loan requested hereunder nor shall the Commitment of any
Lender to make the particular type of Loan requested be increased or decreased
as a result of a default by any other Lender in that other Lender's obligation
to make a Loan requested hereunder. Promptly after receipt by Administrative
Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice
in lieu thereof), Administrative Agent shall notify each Lender or Swing Line
Lender, as the case may be, of the proposed borrowing and of the amount of such
Lender's Pro Rata Share of the applicable Loans.
Each Lender shall make the amount of its Loan available to
Administrative Agent not later than 12:00 Noon (New York time) on the applicable
Funding Date, and Swing Line Lender shall make the amount of its Swing Line Loan
available to Administrative Agent not later than 2:00 P.M. (New York time) on
the applicable Funding Date, in each case in same day funds, at the Funding and
Payment Office. Except as provided in subsection 2.1A(iv) or subsection 3.3B
with respect to Revolving Loans used to repay Refunded Swing Line Loans or to
reimburse any Issuing Lender for the amount of an honored drawing or payment
under a Letter of Credit issued by it, upon satisfaction or waiver of the
conditions precedent specified in subsections 4.1 (in the case of Loans made on
the Effective Date) and 4.2 (in the case of all Loans), Administrative Agent
shall make the proceeds of such Loans available to Company on the applicable
Funding Date by causing an amount of same day funds equal to the proceeds of all
such Loans received by Administrative Agent from Lenders or Swing Line Lender,
as the case may be, to be credited to the account of Company at the Funding and
Payment Office.
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Unless Administrative Agent shall have been notified by any Lender
prior to the Funding Date for any Loans that such Lender does not intend to make
available to Administrative Agent the amount of such Lender's Loan requested on
such Funding Date, Administrative Agent may assume that such Lender has made
such amount available to Administrative Agent on such Funding Date and
Administrative Agent may, in its sole discretion, but shall not be obligated to,
make available to Company a corresponding amount on such Funding Date. If such
corresponding amount is not in fact made available to Administrative Agent by
such Lender, Administrative Agent shall be entitled to recover such
corresponding amount on demand from such Lender together with interest thereon,
for each day from such Funding Date until the date such amount is paid to
Administrative Agent, at the customary rate set by Administrative Agent for the
correction of errors among banks for three Business Days and thereafter at the
Base Rate. If such Lender does not pay such corresponding amount forthwith upon
Administrative Agent's demand therefor, Administrative Agent shall promptly
notify Company and Company shall immediately pay such corresponding amount to
Administrative Agent, together with interest thereon for each day from such
Funding Date until the date such amount is paid to Administrative Agent at the
rate applicable to such Loan. Nothing in this subsection 2.1C shall be deemed to
relieve any Lender from its obligation to fulfill its Commitments hereunder or
to prejudice any rights that Company may have against any Lender as a result of
any default by such Lender hereunder.
D. The Register.
(i) Administrative Agent shall maintain, at its address
referred to in subsection 10.8, a register for the recordation of the
names and addresses of Lenders and the Commitments and Loans of each
Lender from time to time (the "Register"). The Register shall be
available for inspection by Company or any Lender at any reasonable
time and from time to time upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the
Commitments and the outstanding Loans from time to time of each Lender
and each repayment or prepayment in respect of the principal amount of
the outstanding Loans of each Lender. Any such recordation shall be
conclusive and binding on Company and each Lender, absent manifest
error; provided that failure to make any such recordation, or any error
in such recordation, shall not affect Company's Obligations in respect
of the applicable Loans.
(iii) Each Lender shall record on its internal records
(including, without limitation, the Notes held by such Lender) the
amount of each Loan made by it and each payment in respect thereof. Any
such recordation shall be conclusive and binding on Company, absent
manifest error; provided that failure to make any such recordation, or
any error in such recordation, shall not affect Company's Obligations
in respect of the applicable Loans; and provided, further that in the
event of any inconsistency between the Register and any Lender's
records, the recordations in the Register shall govern.
(iv) Company, Administrative Agent and Lenders shall deem and
treat the Persons listed as Lenders in the Register as the holders and
owners of the corresponding
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Commitments and Loans listed therein for all purposes hereof, and no
assignment or transfer of any Commitment or Loan shall be effective, in
each case unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by
Administrative Agent and recorded in the Register as provided in
subsection 10.1B(ii). Prior to such recordation, all amounts owed with
respect to the applicable Commitment or Loan shall be owed to the
Lender listed in the Register as the owner thereof, and any request,
authority or consent of any Person who, at the time of making such
request or giving such authority or consent, is listed in the Register
as a Lender shall be conclusive and binding on any subsequent holder,
assignee or transferee of the corresponding Commitments or Loans.
(v) Company hereby designates CSFB and any financial
institution serving as a successor Administrative Agent to serve as
Company's agent solely for purposes of maintaining the Register as
provided in this subsection 2.1D, and Company hereby agrees that, to
the extent CSFB serves in such capacity, CSFB and its officers,
directors, employees, agents and affiliates shall constitute
Indemnitees for all purposes under subsection 10.3.
E. Notes. Company shall execute and deliver on the Effective Date (i)
to each Lender (or to Administrative Agent for that Lender) (a) a Term A Note
substantially in the form of Exhibit IV annexed hereto, to evidence that
Lender's Term A Loan, in the principal amount of that Lender's Term A Loan and
with other appropriate insertions, (b) a Term B Note substantially in the form
of Exhibit V annexed hereto, to evidence that Lender's Term Loan, in the
principal amount of that Lender's Term B Loan and with other appropriate
insertions, (c) a Term C Note substantially in the form of Exhibit VI annexed
hereto, to evidence that Lender's Term C Loan, in the principal amount of that
Lender's Term C Loan and with other appropriate insertions, and (d) a Revolving
Note substantially in the form of Exhibit VII annexed hereto to evidence that
Lender's Revolving Loans, in the principal amount of that Lender's Revolving
Loan Commitment and with other appropriate insertions, and (ii) to Swing Line
Lender, a Swing Line Note substantially in the form of Exhibit VIII annexed
hereto to evidence Swing Line Lender's Swing Line Loans, in the principal amount
of the Swing Line Loan Commitment and with other appropriate insertions, in each
case with appropriate insertions to effect such Lender's outstanding Term Loans
and Revolving Loans after giving effect to the continuation of the Term Loans
and Revolving Loans pursuant to this Agreement. As promptly after the Effective
Date as practicable, each Existing Lender shall surrender to Company any Term A
Notes, Term B Notes, Term C Notes, Revolving Notes and/or Swing Line Note issued
to such Existing Lender pursuant to the Existing Credit Agreement. The Notes and
the Obligations evidenced thereby shall be governed by, subject to and benefit
from all of the terms and conditions of this Agreement and the other Loan
Documents and shall be guarantied and/or secured by the Collateral as provided
in the Loan Documents.
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F. Reallocation of Pro Rata Shares. On the Effective Date, each New
Lender and each Existing Lender that will have a greater Pro Rata Share of the
Existing Loans upon the Effective Date, after giving effect to this Agreement,
than its Pro Rata Share (under and as defined in the Existing Credit Agreement)
of the Existing Loans immediately prior to the Effective Date (each a
"Purchasing Lender"), without executing an Assignment Agreement, shall be deemed
to have automatically purchased assignments pro rata from each Lender that will
have a smaller Pro Rata Share of the Existing Loans upon the Effective Date than
its Pro Rata Share (under and as defined in the Existing Credit Agreement) of
the Existing Loans immediately prior to the Effective Date (each a "Selling
Lender") in all such Selling Lender's rights and obligations under this
Agreement and the other Loan Documents, including with respect to the Revolving
Loan Commitments, the commitments of Lenders to purchase participations in the
Letters of Credit and Existing Revolving Loans, and with respect to the Term
Loan Commitments, the unfunded Term Loan Commitments and the Existing Term
Loans, (collectively, except as set forth below, the "Assigned Rights and
Obligations"), so that after giving effect to such assignments, each Lender
shall have its respective Pro Rata Share as set forth in Schedule 2.1 of the
Assigned Rights and Obligations. Each such purchase hereunder shall be at par
for a purchase price equal to the principal amount of such Existing Loan and
without recourse, representation or warranty, except that, each Selling Lender
shall be deemed to represent and warrant to each Purchasing Lender that the
Assigned Rights and Obligations of such Selling Lender are legally and
beneficially owned by such Lender and are not subject to any Liens created by
that Selling Lender.
Administrative Agent shall calculate the net amount to be paid or
received by each Lender in connection with the assignments effected hereunder on
the Effective Date. Each Purchasing Lender required to make a payment shall make
the net amount of its required payment available to Administrative Agent, in
same day funds, at the Funding and Payment Office not later than 12:00 Noon (New
York time) on the Effective Date. Administrative Agent shall distribute on the
Effective Date the proceeds of such amounts to the Selling Lenders entitled to
receive payments, pro rata in proportion to the amount each such Selling Lender
is entitled to receive at the primary address set forth below such Selling
Lender's name on the signature pages hereof or at such other address as such
Selling Lender may request in writing to Administrative Agent.
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2.2 Interest on the Loans.
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made to maturity (whether by acceleration
or otherwise) at a rate determined by reference to the Base Rate or the Reserve
Adjusted Eurodollar Rate, as the case may be. Subject to the provisions of
subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal
amount thereof from the date made to maturity (whether by acceleration or
otherwise) at a rate determined by reference to the Base Rate. The applicable
basis for determining the rate of interest with respect to any Loan shall be
selected by Company initially at the time a Notice of Borrowing is given with
respect to such Loan pursuant to subsection 2.1B. The basis for determining the
interest rate with respect to any Term Loan or any Revolving Loan may be changed
from time to time pursuant to subsection 2.2D. If on any day any Term Loan or
Revolving Loan is outstanding with respect to which notice has not been
delivered to Administrative Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate.
(i) Subject to the provisions of subsections 2.2E and 2.7, the
Term Loans and the Revolving Loans shall bear interest through maturity
as follows:
(a) if a Base Rate Loan, then at the sum of the Base
Rate plus the Applicable Base Rate Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the
Reserve Adjusted Eurodollar Rate plus the Applicable
Eurodollar Rate Margin.
(ii) Subject to the provisions of subsections 2.2E and 2.7,
the Swing Line Loans shall bear interest to maturity at the sum of the
Base Rate plus the Applicable Base Rate Margin less the Applicable
Commitment Fee Percentage.
B. Interest Periods. In connection with each Eurodollar Rate Loan,
Company may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, on behalf of Company select an
interest period (each an "Interest Period") to be applicable to such Loan, which
Interest Period shall be, at Company's option, either a one, two, three or six
month period; provided that:
(i) the initial Interest Period for any Eurodollar Rate Loan
shall commence on the Funding Date in respect of such Loan, in the case
of a Loan initially made as a Eurodollar Rate Loan, or on the date
specified in the applicable Notice of Conversion/Continuation, in the
case of a Loan converted to a Eurodollar Rate Loan;
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(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a
Notice of Conversion/Continuation, each successive Interest Period
shall commence on the day on which the next preceding Interest Period
expires;
(iii) if an Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that, if any Interest Period
would otherwise expire on a day that is not a Business Day but is a day
of the month after which no further Business Day occurs in such month,
such Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (v) of this subsection 2.2B, end on
the last Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Term
A Loans shall extend beyond the sixth Anniversary, no Interest Period
with respect to any portion of the Term B Loans shall extend beyond the
eighth Anniversary, no Interest Period with respect to any portion of
the Term C Loans shall extend beyond December 31, 2006 and no Interest
Period with respect to any portion of the Revolving Loans shall extend
beyond the Revolving Loan Commitment Termination Date.
(vi) no Interest Period with respect to any portion of the
Term Loans shall extend beyond a date on which Company is required to
make a scheduled payment of principal of the Term A Loans, the Term B
Loans or the Term C Loans, as the case may be, unless the aggregate
principal amount of Term A Loans, Term B Loans or Term C Loans, as the
case may be, that are Base Rate Loans plus the aggregate principal
amount of Term A Loans, Term B Loans or Term C Loans, as the case may
be, that are Eurodollar Rate Loans with Interest Periods expiring on or
before such date equals or exceeds the principal amount required to be
paid on the Term A Loans, Term B Loans or Term C Loans, as the case may
be, on such date;
(vii) there shall be no more than ten Interest Periods
outstanding at any time; and
(viii) in the event Company fails to specify an Interest
Period for any Eurodollar Rate Loan in the applicable Notice of
Borrowing or Notice of Conversion/Continuation, Company shall be deemed
to have selected an Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event that any Swing Line Loans, any Revolving
Loans or any Term Loans that are Base Rate Loans are prepaid pursuant to
subsection 2.4B(i), interest accrued on such Loans through the date of such
prepayment shall be
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payable on the next succeeding Interest Payment Date applicable to Base Rate
Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, Company shall have the option (i) to convert at any time all or any part of
its outstanding Term Loans or Revolving Loans equal to $1,000,000 and integral
multiples of $100,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis (provided that any Loan being
converted to a Eurodollar Rate Loan shall be in a minimum amount of $2,000,000
and integral multiples of $500,000 in excess of such amount) or (ii) upon the
expiration of any Interest Period applicable to a Eurodollar Rate Loan, to
continue all or any portion of such Loan equal to $2,000,000 and integral
multiples of $500,000 in excess of that amount as a Eurodollar Rate Loan;
provided, however, that a Eurodollar Rate Loan may only be converted into a Base
Rate Loan on the expiration date of an Interest Period applicable thereto.
Company shall deliver a Notice of Conversion/Continuation to
Administrative Agent no later than 12:00 Noon (New York time) at least one
Business Day in advance of the proposed conversion date (in the case of a
conversion to a Base Rate Loan), and at least three Business Days in advance of
the proposed conversion/continuation date (in the case of a conversion to, or a
continuation of, a Eurodollar Rate Loan). A Notice of Conversion/Continuation
shall specify (i) the proposed conversion/continuation date (which shall be a
Business Day), (ii) the amount and type of the Loan to be converted/continued,
(iii) the nature of the proposed conversion/continuation, (iv) in the case of a
conversion to, or a continuation of, a Eurodollar Rate Loan, the requested
Interest Period, and (v) in the case of a conversion to, or a continuation of, a
Eurodollar Rate Loan, that no Potential Event of Default or Event of Default
has occurred and is continuing. In lieu of delivering the above-described Notice
of Conversion/Continuation, Company may give Administrative Agent telephonic
notice by the required time of any proposed conversion/continuation under this
subsection 2.2D; provided that such notice shall be promptly confirmed in
writing by delivery of a Notice of Conversion/Continuation to Administrative
Agent on or before the proposed conversion/continuation date.
Neither Administrative Agent nor any Lender shall incur any liability
to Company in acting upon any telephonic notice referred to above that
Administrative Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to act on behalf of Company or for
otherwise acting in good faith under this subsection 2.2D, and upon conversion
or continuation of the applicable basis for determining the interest rate with
respect to any Loans in accordance with this Agreement pursuant to any such
telephonic notice Company shall have effected a conversion or continuation, as
the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and Company shall be
bound to effect a conversion or continuation in accordance therewith.
E. Post-Default Interest. Upon the occurrence and during the
continuation of any
50
<PAGE>
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code, or other applicable bankruptcy or insolvency laws)
payable upon demand at a rate that is 2% per annum in excess of the interest
rate otherwise payable under this Agreement with respect to the applicable Loans
(or, in the case of any such fees and other amounts, at a rate which is 2% per
annum in excess of the interest rate otherwise payable under this Agreement for
Revolving Loans bearing interest at a rate determined by reference to the Base
Rate); provided that, in the case of Eurodollar Rate Loans, upon the expiration
of the Interest Period in effect at the time any such increase in interest rate
is effective such Eurodollar Rate Loans shall thereupon become Base Rate Loans
and shall thereafter bear interest payable upon demand at a rate equal to 2% per
annum in excess of the interest rates otherwise payable under this Agreement for
Base Rate Loans that are Term A Loans, Term B Loans, Term C Loans or Revolving
Loans, as applicable. Payment or acceptance of the increased rates of interest
provided for in this subsection 2.2E is not a permitted alternative to timely
payment and shall not constitute a waiver of any Event of Default or otherwise
prejudice or limit any rights or remedies of Administrative Agent or any Lender.
F. Computation of Interest. Interest on Loans shall be computed on the
basis of a 360-day year and for the actual number of days elapsed in the period
during which it accrues. In computing interest on any Loan, the date of the
making of such Loan or the first day of an Interest Period applicable to such
Loan or, with respect to a Base Rate Loan being converted from a Eurodollar Rate
Loan, the date of conversion of such Eurodollar Rate Loan to such Base Rate
Loan, as the case may be, shall be included, and the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan, as the
case may be, shall be excluded; provided that if a Loan is repaid on the same
day on which it is made, one day's interest shall be paid on that Loan.
2.3 Fees.
A. Commitment Fees. Company agrees to pay to Administrative Agent, for
distribution to each Lender in proportion to that Lender's Pro Rata Share of the
applicable Commitments, commitment fees for the period from and including the
Closing Date to and excluding the Revolving Loan Commitment Termination Date
equal to the average of the daily excess of the Revolving Loan Commitments over
the sum of the aggregate principal amount of Revolving Loans outstanding (but
not any Swing Line Loans outstanding) plus the Letter of Credit Usage multiplied
by the Applicable Commitment Fee Percentage. All such commitment fees shall be
calculated on the basis of a 360-day year and the actual number of days elapsed
and shall be payable quarterly in arrears on the last Business Day in each of
March, June, September and December of each year, commencing in September 1998,
and on the Revolving Loan Commitment Termination Date.
B. Annual Administrative Fee. Company agrees to pay to Administrative
Agent an annual administrative fee in such amounts as may be agreed between them
from time to time.
51
<PAGE>
C. Other Agent Fees. Company agrees to pay such other fees as may be
agreed upon from time to time.
2.4 Repayments, Prepayments and Reductions in Commitments; General
Provisions Regarding Payments.
A. Scheduled Payments of Term Loans and Scheduled Reductions of
Revolving Credit Commitments.
(i) Scheduled Payments of Term A Loans. Company shall make
principal payments on the Term A Loans in installments on the dates set
forth below, each such installment to be in an amount equal to the
corresponding percentages set forth below of the principal amount of
the Term A Loans as of the Effective Date:
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF
TERM A LOANS
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
March 31, 2000 4.00%
June 30, 2000 4.00%
September 30, 2000 4.00%
December 31, 2000 4.00%
- ---------------------------------------------------------------------------------------------
March 31, 2001 4.00%
June 30, 2001 4.00%
September 30, 2001 4.25%
December 31, 2001 4.25%
- ---------------------------------------------------------------------------------------------
March 31, 2002 6.125%
June 30, 2002 6.125%
September 30, 2002 6.125%
December 31, 2002 6.125%
- ---------------------------------------------------------------------------------------------
March 31, 2003 6.75%
June 30, 2003 6.75%
September 30, 2003 6.75%
December 31, 2003 6.75%
- ---------------------------------------------------------------------------------------------
March 31, 2004 8.00%
June 30, 2004 8.00%
</TABLE>
; provided that the scheduled installments of principal of the Term A
Loans set forth above shall be reduced in connection with any voluntary
or mandatory prepayments of the Term A Loans in accordance with
subsection 2.4C; and provided, further that the Term A Loans and all
other amounts owed hereunder with respect to the Term A Loans shall be
paid in full no later than the sixth Anniversary of the Closing Date
and the final installment payable by Company in respect of the Term A
Loans on such date shall be in
52
<PAGE>
an amount, if such amount is different from that specified above,
sufficient to repay all amounts owing by Company under this Agreement
with respect to the Term A Loans.
(ii) Scheduled Payments of Term B Loans. Company shall make
principal payments on the Term B Loans in installments on the dates set
forth below, each such installment to be in an amount equal to the
corresponding percentages set forth below of the principal amount of
the Term B Loans, including any Term B Loans which are Phase II Term B
Loans:
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF
TERM B LOANS
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
March 31, 2000 0.25%
June 30, 2000 0.25%
September 30, 2000 0.25%
December 31, 2000 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2004 0.25%
June 30, 2004 0.25%
September 30, 2004 7.50%
December 31, 2004 7.50%
- ---------------------------------------------------------------------------------------------
March 31, 2005 7.50%
June 30, 2005 7.50%
September 30, 2005 16.0%
December 31, 2005 16.0%
- ---------------------------------------------------------------------------------------------
March 31, 2006 16.0%
June 30, 2006 17.5%
</TABLE>
; provided that the scheduled installments of principal of the Term B
Loans set forth above shall be reduced in connection with any voluntary
or mandatory prepayments of the Term B Loans in accordance with
subsection 2.4C; and provided, further that the Term B Loans and all
other amounts owed hereunder with respect to the Term B Loans
53
<PAGE>
shall be paid in full no later than the eighth Anniversary of the
Closing Date and the final installment payable by Company in respect of
the Term B Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts
owing by Company under this Agreement with respect to the Term B Loans.
(iii) Scheduled Payments of Term C Loans. Company shall make
principal payments on the Term C Loans in installments on the dates set
forth below, each such installment to be in an amount equal to the
corresponding percentages set forth below of the original principal
amount of the Term C Loans, including any Term C Loans which are Phase
II Term C Loans:
54
<PAGE>
<TABLE>
<CAPTION>
SCHEDULED REPAYMENT
DATE OF
TERM C LOANS
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
March 31, 2000 0.25%
June 30, 2000 0.25%
September 30, 2000 0.25%
December 31, 2000 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2004 0.25%
June 30, 2004 0.25%
September 30, 2004 0.25%
December 31, 2004 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2005 0.25%
June 30, 2005 0.25%
September 30, 2005 0.25%
December 31, 2005 0.25%
- ---------------------------------------------------------------------------------------------
March 31, 2006 0.25%
June 30, 2006 0.25%
September 30, 2006 46.75%
December 31, 2006 46.75%
</TABLE>
; provided that the scheduled installments of principal of the Term C
Loans set forth above shall be reduced in connection with any voluntary
or mandatory prepayments of the Term C Loans in accordance with
subsection 2.4C; and provided, further that the Term C Loans and all
other amounts owed hereunder with respect to the Term C Loans shall be
paid in full no later than December 31, 2006 and the final installment
payable by Company in respect of the Term C Loans on such date shall be
in an amount, if such amount is different from that specified above,
sufficient to repay all amounts owing by Company under this Agreement
with respect to the Term C Loans.
(iv) Scheduled Reductions of Revolving Loan Commitments.
Except as set forth in the following proviso, the Revolving Loan
Commitments shall be permanently
55
<PAGE>
reduced on the dates and in the amounts set forth below:
<TABLE>
<CAPTION>
SCHEDULED REDUCTION
DATE OF REVOLVING LOAN
COMMITMENTS
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
June 30, 2003 $15,000,000
</TABLE>
; provided that the scheduled reductions of the Revolving Loan
Commitments set forth above shall be reduced in connection with any
voluntary or mandatory reductions of the Revolving Loan Commitments in
accordance with subsection 2.4C.
B. Prepayments and Reductions in Commitments.
(i) Voluntary Prepayments. Company may, upon written or
telephonic notice to Administrative Agent on or prior to 12:00 Noon
(New York time) on the date of prepayment, which notice, if telephonic,
shall be promptly confirmed in writing, at any time and from time to
time prepay, without premium or penalty, any Swing Line Loan on any
Business Day in whole or in part in an aggregate minimum amount of
$100,000 and integral multiples of $50,000 in excess of that amount. In
addition, so long as no Swing Line Loans are then outstanding, Company
may, upon not less than one Business Day's prior written or telephonic
notice, in the case of Base Rate Loans, and three Business Days' prior
written or telephonic notice, in the case of Eurodollar Rate Loans, in
each case confirmed in writing to Administrative Agent (which notice
Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time prepay,
without premium or penalty, the Loans other than Swing Line Loans on
any Business Day in whole or in part in an aggregate minimum amount of
$1,000,000 and integral multiples of $250,000 in excess of that amount;
provided, however, that in the event Company shall prepay a Eurodollar
Rate Loan other than on the expiration of the Interest Period
applicable thereto, Company shall, at the time of such prepayment, also
pay any amounts payable under subsection 2.6D hereof. Notice of
prepayment having been given as aforesaid, the Loans shall become due
and payable on the prepayment date specified in such notice and in the
aggregate principal amount specified therein. Any voluntary prepayments
pursuant to this subsection 2.4B(i) shall be applied as specified in
subsection 2.4C.
(ii) Voluntary Reductions of Revolving Loan Commitments .
Company may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to Administrative Agent (which
notice Administrative Agent will promptly transmit by telefacsimile or
telephone to each Lender), at any time and from time to time terminate
in whole or permanently reduce in part, without premium or penalty, the
Revolving Loan Commitments in an amount up to the amount by which the
Revolving Loan Commitments exceed the Total Utilization of Revolving
Loan Commitments at the time of such proposed termination or reduction;
provided that any such partial reduction of the Revolving Loan
Commitments shall be in an aggregate minimum amount of $1,000,000 and
integral multiples of $250,000 in excess of that amount. Company's
56
<PAGE>
notice to Administrative Agent shall designate the date (which shall be
a Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of the Revolving
Loan Commitments shall be effective on the date specified in such
notice and shall reduce the Revolving Loan Commitment of each Lender
proportionately to its Pro Rata Share. Any such voluntary reduction of
the Revolving Loan Commitments shall be applied as specified in
subsection 2.4C.
(iii) Mandatory Prepayments and Mandatory Reductions of
Commitments.
The Loans shall be prepaid and the Revolving Loan Commitments
shall be reduced in the manner provided in subsection 2.4C upon the
occurrence of the following circumstances:
(a) Prepayments and Reductions from Asset Sales. No
later than the first Business Day following the date of
receipt by Company or any of its Subsidiaries of Cash Proceeds
of any Asset Sale (other than an Asset Sale permitted under
subsection 7.7(v)), Company shall prepay the Loans (and/or the
Revolving Loan Commitments shall be reduced) in an amount
equal to the Net Cash Proceeds received. Concurrently with any
prepayment of the Loans and/or reduction of the Revolving Loan
Commitments pursuant to this subsection 2.4B(iii)(a), Company
shall deliver to Administrative Agent an Officer's Certificate
demonstrating the derivation of the Net Cash Proceeds of the
correlative Asset Sale from the gross sales price thereof;
provided that Company shall not be required to make any
prepayment with proceeds to the extent that all or any portion
of such proceeds are reinvested (or scheduled for
reinvestment) in assets used in the business of Company and/or
subsidiaries within 360 days from the date of receipt of such
proceeds; provided further, that the aggregate amount of
proceeds permitted to be excluded pursuant to the immediately
preceding proviso shall not exceed $25,000,000 (measured on a
cumulative basis from the Closing Date). In the event that
Company shall, at any time after receipt of Cash Proceeds of
any Asset Sale requiring a prepayment or a reduction of the
Revolving Loan Commitments pursuant to this subsection
2.4B(iii)(a), determine that the prepayments and/or reductions
of the Revolving Loan Commitments previously made in respect
of such Asset Sale were in an aggregate amount less than that
required by the terms of this subsection 2.4B(iii)(a), Company
shall promptly cause to be made an additional prepayment of
the Loans (and/or reduction in the Revolving Loan Commitments)
in an amount equal to the amount of any such deficit, and
Company shall concurrently therewith deliver to Administrative
Agent an Officer's Certificate demonstrating the derivation of
the additional Net Cash Proceeds resulting in such deficit.
(b) Prepayments and Reductions Due to Issuance of
Debt. On or prior to the first Business Day after receipt by
Company or any of its Subsidiaries of any proceeds of any
Indebtedness (other than the Loans and any other Indebtedness
permitted by this Agreement), Company shall prepay the Loans
(and/or the Revolving Loan Commitments shall be reduced) in an
amount equal to the amount
57
<PAGE>
of such proceeds; provided that payment or acceptance of the
amounts provided for in this subsection 2.4B(iii)(b) shall not
constitute a waiver of any Event of Default resulting from the
incurrence of such Indebtedness or otherwise prejudice any
rights or remedies of Administrative Agent or any Lender.
(c) Prepayments and Reductions Due to Issuance of
Equity Securities. On or prior to the first Business Day after
receipt by Company or any of its Subsidiaries of any Equity
Proceeds, Company shall prepay the Loans (and/or the Revolving
Loan Commitments shall be reduced) in an amount equal to such
Equity Proceeds; provided that such Equity Proceeds shall not
be applied to prepay Loans pursuant to this subsection if (1)
such Equity Proceeds were not derived from a public offering
of Securities and (2) such Equity Proceeds are used within 30
days of receipt thereof by Company or one of its Subsidiaries
for an acquisition permitted under subsection 7.7(vii).
(d) Prepayments and Reductions Due to Insurance and
Condemnation Proceeds. No later than the second Business Day
following the date of receipt by Company or any of its
Subsidiaries of any cash payments under any of the casualty
insurance policies covering damage to or loss of property
maintained pursuant to subsection 6.4 resulting from damage to
or loss of all or any portion of the Collateral or any other
tangible asset (net of actual and documented reasonable costs
incurred by Company or any of its Subsidiaries in connection
with adjustment and settlement thereof, "Insurance Proceeds")
or any proceeds resulting from the taking of assets by the
power of eminent domain, condemnation or otherwise (net of
actual and documented reasonable costs incurred by Company or
any of its Subsidiaries in connection with adjustment and
settlement thereof, "Condemnation Proceeds") (other than any
portion of any such proceeds that is reinvested (or scheduled
for reinvestment) in assets of the general type used in the
business of Company and its Subsidiaries within 270 days from
the date of receipt of such proceeds; provided that no Event
of Default has occurred and is continuing), Company shall
prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) in the amount of such proceeds not so reinvested
(or scheduled for such reinvestment). Company shall, no later
than 270 days after receipt of any such Insurance Proceeds or
Condemnation Proceeds that have not theretofore been applied
to the Obligations, make an additional prepayment of the Loans
(and/or the Revolving Loan Commitments shall be reduced) in
the full amount of all such proceeds that have not then been
reinvested in similar assets.
(e) Prepayments Due to Reductions or Restrictions of
Revolving Loan Commitments. Company shall prepay the Swing
Line Loans and/or the Revolving Loans from time to time to the
extent necessary so that (y) the Total Utilization of
Revolving Loan Commitments shall not at any time exceed the
Revolving Loan Commitments then in effect, and (z) the
aggregate principal amount of all outstanding Swing Line Loans
shall not at any time exceed the Swing Line Loan Commitment
then in effect. All Swing Line Loans shall be prepaid in full
prior to the prepayment of any Revolving Loans pursuant to
this
58
<PAGE>
subsection 2.4B(iii)(e).
(f) Prepayments and Reductions from Consolidated
Excess Cash Flow. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year (commencing
with the Fiscal Year ending December 31, 1999), Company shall,
no later than 100 days after the end of such Fiscal Year,
prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) in an aggregate amount equal to 50% of such
Consolidated Excess Cash Flow if the Leverage Ratio for such
Fiscal Year exceeds 4.0:1.0; provided that no prepayments
shall be required pursuant to this subsection 2.4B(iii)(f)
(and the Revolving Loan Commitments shall not be reduced) if
the Leverage Ratio for such Fiscal Year is less than or equal
to 4.0:1.0.
C. Application of Prepayments and Unscheduled Reductions of
Commitments.
(i) Application of Prepayments by Type of Loans. Any voluntary
prepayments pursuant to subsection 2.4B(i) shall be applied: first to
repay outstanding Swing Line Loans to the full extent thereof, second
to repay outstanding Term Loans and/or Revolving Loans. Any amount
required to be applied as a mandatory prepayment or Commitment
reduction pursuant to subdivisions (a), (b), (c), (d) or (f) of
subsection 2.4B(iii) shall be applied first to ratably prepay the Term
A Loans, the Term B Loans and the Term C Loans to the full extent
thereof, second to prepay Swing Line Loans to the full extent thereof
and to permanently reduce the Revolving Loan Commitment by the amount
of such prepayment, third, to prepay Revolving Loans to the full extent
thereof and to further permanently reduce the Revolving Loan
Commitments by the amount of such prepayment, fourth, to prepay
outstanding reimbursement obligations with respect to Letters of
Credit, fifth, to cash collateralize Letters of Credit as provided in
the Collateral Account Agreement and sixth, to the extent of any
remaining amount, to further reduce the Revolving Loan Commitments.
(ii) Application of Prepayments of Term Loans by Order of
Maturity. The amount of any such voluntary prepayments applied to the
Term Loans shall be applied ratably among Term A Loans, Term B Loans
and Term C Loans to ratably reduce each scheduled installment of
principal that is unpaid or the amount of principal payable at
maturity, as the case may be, of Term A Loans, Term B Loans and Term C
Loans. Except as provided in subsection 2.4C(iii) with respect to
prepayments of Term B Loans or Term C Loans that have been waived, any
mandatory prepayments of Term Loans shall be applied ratably among Term
A Loans, the Term B Loans and the Term C Loans to ratably reduce each
scheduled installment of principal set forth in subsection 2.4A(i),
2.4A(ii) or 2.4A(iii) that is unpaid or the amount of principal payable
at maturity, as the case may be.
(iii) Waiver of Certain Mandatory Prepayments. Anything
contained herein to the contrary notwithstanding, so long as any Term A
Loans are outstanding, in the event Company is required to make any
mandatory prepayment (a "Waivable Mandatory Prepayment") of the Term B
Loans and/or Term C Loans pursuant to subsection
59
<PAGE>
2.4B(iii), (X) Company shall use reasonable best efforts, not less than
three Business Days prior to the date (the "Required Prepayment Date")
on which Company is required to make such Waivable Mandatory
Prepayment, to notify Administrative Agent of the amount of such
prepayment, and Administrative Agent will promptly thereafter notify
each Lender holding an outstanding Term B Loan or Term C Loan of the
amount of such Lender's Pro Rata Share of such Waivable Mandatory
Prepayment and such Lender's option to refuse such amount, (Y) each
such Lender may exercise such option by giving written notice to
Company and Administrative Agent of its election to do so no later than
the close of business of the date it receives such notice from
Administrative Agent (the "Cutoff Date") (it being understood that any
Lender which does not notify Company and Administrative Agent of its
election to exercise such option on or before the Cutoff Date shall be
deemed to have elected, as of the Cutoff Date, not to exercise such
option), and (Z) on the Required Prepayment Date, Company shall pay to
Administrative Agent the amount of the Waivable Mandatory Prepayment,
which amount shall be applied (1) in an amount equal to that portion of
the Waivable Mandatory Prepayment payable to those Lenders that have
elected not to exercise such option, to prepay the Term B Loans and/or
Term C Loans of such Lenders (which prepayment shall be applied to the
scheduled installments of principal of the Term B Loans and Term C
Loans in accordance with subsection 2.4C(ii)) and (2) in an amount
equal to that portion of the Waivable Mandatory Prepayment otherwise
payable to those Lenders that have elected to exercise such option, to
prepay the Term A Loans and reduce the unpaid scheduled installments of
principal of the Term A Loans set forth in subsection 2.1A(i) on a pro
rata basis.
(iv) Application of Prepayments of Loans to Base Rate Loans
and Eurodollar Rate Loans. Considering Loans constituting Term Loans
and Revolving Loans being prepaid separately, any prepayment thereof
shall be applied first to Base Rate Loans to the full extent thereof
before application to Eurodollar Rate Loans, in each case in a
manner which minimizes the amount of any payments required to be made
by Company pursuant to subsection 2.6D.
60
<PAGE>
(v) Application of Unscheduled Reductions of Revolving Loan
Commitments. Any voluntary or mandatory reduction of the Revolving Loan
Commitments pursuant to subsection 2.4B(ii) or 2.4B(iii) shall be
applied to reduce the scheduled reductions of the Revolving Loan
Commitments set forth in subsection 2.4A(iv) in reverse chronological
order.
D. Application of Proceeds of Collateral and Payments Under Guaranties.
(i) Application of Proceeds of Collateral. Except as provided
in subsection 2.4B(iii)(a) with respect to prepayments from Net Cash
Proceeds, all proceeds received by Administrative Agent in respect of
any sale of, collection from, or other realization upon all or any part
of the Collateral under any Collateral Document may, in the discretion
of Administrative Agent, be held by Administrative Agent as Collateral
for, and/or (then or at any time thereafter) applied in full or in part
by Administrative Agent against, the applicable Secured Obligations (as
defined in such Collateral Document) in the following order of
priority:
(a) To the payment of all costs and expenses of such
sale, collection or other realization, including without
limitation reasonable compensation to Administrative Agent and
its agents and counsel, and all other reasonable expenses,
liabilities and advances made or incurred by Administrative
Agent in connection therewith, and all amounts for which
Administrative Agent is entitled to indemnification under such
Collateral Document and all advances made by Administrative
Agent thereunder for the account of the applicable Loan Party,
and to the payment of all reasonable costs and expenses paid
or incurred by Administrative Agent in connection with the
exercise of any right or remedy under such Collateral
Document, all in accordance with the terms of this Agreement
and such Collateral Document;
(b) thereafter, to the extent of any excess such
proceeds, to the payment of all other such Secured Obligations
for the ratable benefit of the holders thereof; and
(c) thereafter, to the extent of any excess such
proceeds, to the payment to or upon the order of such Loan
Party or to whosoever may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.
(ii) Application of Payments Under Guaranties. All payments
received by Administrative Agent under any Guaranty shall be applied
promptly from time to time by Administrative Agent in the following
order of priority:
(a) To the payment of the reasonable costs and
expenses of any collection or other realization under such
Guaranty, including without limitation reasonable compensation
to Administrative Agent and its agents and counsel, and all
expenses, liabilities and advances made or incurred by
Administrative Agent in
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connection therewith, all in accordance with the terms of this
Agreement and such Guaranty;
(b) thereafter, to the extent of any excess such
payments, to the payment of all other Guarantied Obligations
(as defined in such Guaranty) for the ratable benefit of the
holders thereof; and
(c) thereafter, to the extent of any excess such
payments, to the payment to the applicable Guarantor or to
whosoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct.
E. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by Company of
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in same day funds and without defense, setoff or
counterclaim, free of any restriction or condition, and delivered to
Administrative Agent not later than 12:00 Noon (New York time) on the
date due at the Funding and Payment Office for the account of Lenders;
funds received by Administrative Agent after that time on such due date
shall be deemed to have been paid by Company on the next succeeding
Business Day. Company hereby authorizes Administrative Agent to charge
its accounts with Administrative Agent in order to cause timely payment
to be made to Administrative Agent of all principal, interest, fees and
expenses due hereunder (subject to sufficient funds being available in
its accounts for that purpose).
(ii) Application of Payments to Principal and Interest. Except
as provided in subsection 2.2C, all payments in respect of the
principal amount of any Loan shall include payment of accrued interest
on the principal amount being repaid or prepaid, and all such payments
(and in any event any payments made in respect of any Loan on a date
when interest is due and payable with respect to such Loan) shall be
applied to the payment of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and
interest payments shall be apportioned among all outstanding Loans to
which such payments relate, in each case proportionately to Lenders'
respective Pro Rata Shares. Administrative Agent shall promptly
distribute to each Lender, at its applicable Lending Office specified
on Schedule 2.1 or at such other address as such Lender may request,
its Pro Rata Share of all such payments received by Administrative
Agent and the commitment fees of such Lender when received by
Administrative Agent pursuant to subsection 2.3. Notwithstanding the
foregoing provisions of this subsection 2.4E(iii) if, pursuant to the
provisions of subsection 2.6C, any Notice of Conversion/Continuation is
withdrawn as to any Affected Lender or if any Affected Lender makes
Base Rate Loans in lieu of its Pro Rata Share of any Eurodollar Rate
Loans, Administrative Agent shall give effect thereto in apportioning
payments received thereafter.
(iv) Payments on Business Days. Except if expressly provided
otherwise,
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whenever any payment to be made hereunder shall be stated to be due on
a day that is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be
included in the computation of the payment of interest hereunder or of
the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before
disposing of any Note held by it, or any part thereof (other than by
granting participations therein), that Lender will make a notation
thereon of all Loans evidenced by that Note and all principal payments
previously made thereon and of the date to which interest thereon has
been paid; provided that the failure to make (or any error in the
making of) a notation of any Loan made under such Note shall not limit
or otherwise affect the obligations of Company hereunder or under such
Note with respect to any Loan or any payments of principal or interest
on such Note.
2.5 Use of Proceeds.
A. Term Loans and Initial Revolving Loans. The proceeds of the Existing
Term Loans and the Existing Revolving Loans that were made on the Closing Date
were applied in accordance with the provisions of the Existing Credit Agreement.
B. Phase II Term Loans and Revolving Loans Made On the Effective Date.
The proceeds of $45,000,000 in aggregate principal amount of Phase II Term Loans
and an aggregate principal amount of Revolving Loans not to exceed an amount
acceptable to Agents made to Company on the Effective Date, together with the
net proceeds from the issuance of equity by Holdings on the Effective Date, the
Senior Subordinated Notes and the Holdings Notes shall be applied (i) to finance
the redemption, repurchase or other repayment of outstanding Indebtedness with
respect to the Existing Senior Notes, the Existing TCW Notes and the Existing
AmeriComm Credit Agreement, and (ii) to pay fees, costs and expenses payable by
Holdings and its Subsidiaries on or before the Effective Date in connection with
such refinancing.
C. Revolving Loans; Swing Line Loans. The proceeds of any Revolving
Loans (other than the Revolving Loans referenced in subsection 2.5A and 2.5B)
and any Swing Line Loans shall be applied by Company for working capital and
general corporate purposes (including acquisitions permitted by subsections
7.7(vii)) of Company and its Subsidiaries.
D. Compliance With Laws. Company undertakes that no portion of the
proceeds of any Loans or other extensions of credit under this Agreement shall
be used by any Loan Party in any manner which would be illegal under, or which
would cause the invalidity or unenforceability (in each case in whole or in
part) of any Loan Document under, any applicable law.
E. Margin Regulations. Without limiting the generality of subsection
2.5D, no portion of the proceeds of any borrowing under this Agreement shall be
used by Company or any of its Subsidiaries in any manner that might cause the
borrowing or the application of such proceeds to violate Regulation U,
Regulation T or Regulation X of the Board of Governors of the Federal Reserve
System or any other regulation of such Board or to violate the Exchange
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Act, in each case as in effect on the date or dates of such borrowing and such
use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 11:00 A.M. (New York time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to Company and
each Lender.
B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have reasonably determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any Eurodollar Rate Loans, that by
reason of circumstances arising after the date of this Agreement affecting the
London interbank market, adequate and fair means do not exist for ascertaining
the interest rate applicable to such Loans on the basis provided for in the
definition of Reserve Adjusted Eurodollar Rate Administrative Agent shall on
such date give notice (by telecopy or by telephone confirmed in writing) to
Company and each Lender of such determination, whereupon (i) no Loans may be
made as, or converted to, Eurodollar Rate Loans, until such time as
Administrative Agent notifies Company and Lenders that the circumstances giving
rise to such notice no longer exist (such notification not to be unreasonably
withheld or delayed) and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Company with respect to the Loans in respect of
which such determination was made shall be deemed to be rescinded by Company.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the
event that on any date any Lender shall have reasonably determined (which
determination shall be final and conclusive and binding upon all parties hereto
but shall be made only after consultation with Company and Administrative Agent)
that the making, maintaining or continuation of its Eurodollar Rate Loans (i)
has become unlawful as a result of compliance by such Lender in good faith with
any law, treaty, governmental rule, regulation, guideline or order (or would
conflict with any such treaty, governmental rule, regulation, guideline or order
not having the force of law even though the failure to comply therewith would
not be unlawful) or (ii) has become impracticable, or would cause such Lender
material hardship, as a result of contingencies occurring after the date of this
Agreement which materially and adversely affect the London interbank market,
then, and in any such event, such Lender shall be an "Affected Lender" and it
shall on that day give notice (by telecopy or by telephone confirmed in writing)
to Company and Administrative Agent of such determination (which notice
Administrative Agent shall promptly transmit to each other Lender). Thereafter
(a) the obligation of the Affected Lender to make Loans as, or to convert Loans
to, Eurodollar Rate Loans, shall be suspended until such notice shall be
withdrawn by the Affected Lender, (b) to the extent such determination by the
Affected Lender relates to a Eurodollar Rate Loan then being requested by
Company pursuant to
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a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected
Lender shall make such Loan as (or convert such Loan to, as the case may be) a
Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding
Eurodollar Rate Loans, as the case may be (the "Affected Loans"), shall be
terminated at the earlier to occur of the expiration of the Interest Period then
in effect with respect to the Affected Loans or when required by law, and (d)
the Affected Loans shall automatically convert into Base Rate Loans on the date
of such termination. Notwithstanding the foregoing, to the extent a
determination by an Affected Lender as described above relates to a Eurodollar
Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a
Notice of Conversion/Continuation, Company shall have the option, subject to the
provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of
Conversion/Continuation as to all Lenders by giving notice (by telecopy or by
telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other Lender). Except as provided in the immediately preceding
sentence, nothing in this subsection 2.6C shall affect the obligation of any
Lender other than an Affected Lender to make or maintain Loans as, or to convert
Loans to, Eurodollar Rate Loans in accordance with the terms of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods.
Company shall compensate each Lender, upon written request by that Lender (which
request shall set forth the basis for requesting such amounts), for all
reasonable losses, expenses and liabilities (including, without limitation, any
interest paid by that Lender to lenders of funds borrowed by it to make or carry
its Eurodollar Rate Loans and any loss, expense or liability sustained by that
Lender in connection with the liquidation or re-employment of such funds) which
that Lender may sustain: (i) if for any reason (other than a default by that
Lender) a borrowing of any Eurodollar Rate Loan does not occur on a date
specified therefor in a Notice of Borrowing or a telephonic request for
borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment (including any prepayment pursuant to subsection 2.4B) or
conversion of any of its Eurodollar Rate Loans occurs on a date that is not the
last day of an Interest Period applicable to that Loan, (iii) if any prepayment
of any of its Eurodollar Rate Loans is not made on any date specified in a
notice of prepayment given by Company, or (iv) as a consequence of any other
default by Company in the repayment of its Eurodollar Rate Loans when required
by the terms of this Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Reserve Adjusted Eurodollar Rate in an amount equal to the amount of such
Eurodollar Rate Loan and having a maturity comparable to the relevant Interest
Period
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and, through the transfer of such Eurodollar deposit from an offshore office of
that Lender to a domestic office of that Lender in the United States of America;
provided, however, that each Lender may fund each of its Eurodollar Rate Loans
in any manner it sees fit and the foregoing assumptions shall be utilized only
for the purposes of calculating amounts payable under this subsection 2.6 and
under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Company may not elect to have a Loan be made or maintained as, or converted
to, a Eurodollar Rate Loan after the expiration of any Interest Period then in
effect for that Loan and (ii) subject to the provisions of subsection 2.6D, any
Notice of Borrowing or Notice of Conversion/Continuation given by Company with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by Company.
2.7 Increased Costs; Taxes; Capital Adequacy.
A. Compensation for Increased Costs and Taxes. Subject to the
provisions of subsection 2.7B, in the event that any Lender shall determine
(which determination shall, absent manifest error, be final and conclusive and
binding upon all parties hereto) that any law, treaty or governmental rule,
regulation or order, or any change therein or in the interpretation,
administration or application thereof (including the introduction of any new
law, treaty or governmental rule, regulation or order), or any determination of
a court or governmental authority, in each case that becomes effective after the
Closing Date, or compliance by such Lender with any guideline, request or
directive issued or made after the date hereof by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) results in a change in the basis of taxation of such
Lender (or its applicable lending office) (other than a change with
respect to any Tax on the overall net income of such Lender) with
respect to this Agreement or any of its obligations hereunder or any
payments to such Lender (or its applicable lending office) of
principal, interest, fees or any other amount payable hereunder;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement against assets held by, or deposits or
other liabilities in or for the account of, or advances or loans by, or
other credit extended by, or any other acquisition of funds by, any
office of such Lender (other than any such reserve or other
requirements with respect to Eurodollar Rate Loans that are reflected
in the definition of Reserve Adjusted Eurodollar Rate; or
(iii) imposes any other condition (other than with respect to
a Tax matter) on or affecting such Lender (or its applicable lending
office) or its obligations hereunder, or the London interbank market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make,
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making or maintaining Eurodollar Rate Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto; then, in any such case, Lender shall promptly notify Company
and Administrative Agent thereof and Company shall promptly pay to such Lender,
upon receipt of the statement referred to in the next sentence, such additional
amount or amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Lender shall reasonably determine) as
may be necessary to compensate such Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Such Lender shall deliver
to Company (with a copy to Administrative Agent) a written statement, setting
forth in reasonable detail the basis for calculating the additional amounts owed
to such Lender under this subsection 2.7A, which statement shall be conclusive
and binding upon all parties hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Company
under this Agreement and the other Loan Documents shall (except to the
extent required by law) be paid free and clear of, and without any
deduction or withholding on account of, any Tax (other than a Tax on
the overall net income of any Lender) imposed, levied, collected,
withheld or assessed by or within the United States of America or any
political subdivision in or of the United States of America or any
other jurisdiction from which a payment is made by or on behalf of
Company.
(ii) Withholding of Taxes. If Company or any other Person is
required by law to make any deduction or withholding on account of any
such Tax from any sum paid or payable by Company to Administrative
Agent or any Lender under any of the Loan Documents:
(a) Company shall notify Administrative Agent of any
such requirement or any change in any such requirement as soon
as Company becomes aware of it;
(b) Company shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if
the liability to pay is imposed on Company) for its own
account or (if that liability is imposed on Administrative
Agent or such Lender, as the case may be) on behalf of and in
the name of Administrative Agent or such Lender;
(c) the sum payable by Company in respect of which
the relevant deduction, withholding or payment is required
shall be increased to the extent necessary to ensure that,
after the making of that deduction, withholding or payment,
Administrative Agent or such Lender, as the case may be,
receives on the due date a net sum equal to what it would have
received had no such deduction, withholding or payment been
required or made; and
(d) within 30 days after paying any sum from which it
is required by law to make any deduction or withholding, and
within 30 days after the due date
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of payment of any Tax which it is required by clause (b) above
to pay, Company shall deliver to Administrative Agent evidence
satisfactory to the other affected parties of such deduction,
withholding or payment and of the remittance thereof to the
relevant taxing or other authority;
provided that no such additional amount shall be required to be paid to any
Lender under clause (c) above except to the extent that any change after the
Closing Date (in the case of each Existing Lender), after the Effective Date (in
the case of each New Lender) or after the date of the Assignment Agreement
pursuant to which such Lender became a Lender (in the case of each other Lender)
in any such requirement for a deduction, withholding or payment as is mentioned
therein shall result in an increase in the rate of such deduction, withholding
or payment from that in effect at the date of this Agreement or at the date of
such Assignment Agreement, as the case may be, in respect of payments to such
Lender.
(iii) Evidence of Exemption from U.S. Withholding Tax.
(a) Each Lender that is organized under the laws of
any jurisdiction other than the United States or any state or
other political subdivision thereof (for purposes of this
subsection 2.7B(iii), a "Non-US Lender") shall deliver to each
of Administrative Agent and Company, on or prior to the
Closing Date (in the case of each Existing Lender), on or
prior to the Effective Date (in the case of each New Lender)
or on or prior to the date of the Assignment Agreement
pursuant to which it becomes a Lender (in the case of each
other Lender), and at such other times as may be necessary in
the determination of Company or Administrative Agent (each in
the reasonable exercise of its discretion), (1) two original
copies of Internal Revenue Service Form 1001 or 4224 (or any
successor forms), accurately completed and duly executed by
such Lender, together with any other certificate or statement
of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender
of principal, interest, fees or other amounts payable under
any of the Loan Documents or (2) if such Lender is not a
"bank" or other Person described in Section 881(c)(3) of the
Internal Revenue Code and cannot deliver either Internal
Revenue Service Form 1001 or 4224 pursuant to clause (1)
above, a Certificate re Non-Bank Status together with an
original copy of Internal Revenue Service Form W-8 (or any
successor form), properly completed and duly executed by such
Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Lender is
not subject to deduction or withholding of United States
federal income tax with respect to any payments to such Lender
of interest payable under any of the Loan Documents.
(b) Each Lender required to deliver any forms,
certificates or other evidence with respect to United States
federal income tax withholding matters pursuant to subsection
2.7B(iii)(a) hereby agrees, from time to time after the
initial delivery by such Lender of such forms, certificates or
other evidence,
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whenever a lapse in time or change in circumstances renders
such forms, certificates or other evidence obsolete or
inaccurate in any material respect, such Lender shall (1)
deliver to each of Administrative Agent and Company two new
original copies of Internal Revenue Service Form 1001 or 4224,
or a Certificate re Non-Bank Status and an original copy of
Internal Revenue Service Form W-8, as the case may be,
accurately completed and duly executed by such Lender,
together with any other certificate or statement of exemption
required in order to confirm or establish that such Lender is
not subject to deduction or withholding of United States
federal income tax with respect to payments to such Lender
under the Loan Documents or (2) immediately notify
Administrative Agent and Company of its inability to deliver
any such forms, certificates or other evidence.
(c) Company shall not be required to pay any
additional amount to any Non-US Lender under clause (c) of
subsection 2.7B(ii) in respect of deductions or withholdings
of United States federal income taxes if such Lender shall
have failed to satisfy the requirements of subsection
2.7B(iii)(a) or 2.7B(iii)(b); provided that if such Lender
shall have satisfied such requirements on the Closing Date (in
the case of each Existing Lender), on the Effective Date (in
the case of each New Lender), or on the date of the Assignment
Agreement pursuant to which it became a Lender (in the case of
each other Lender), nothing in this subsection 2.7B(iii)(c)
shall relieve Company of its obligation to pay any additional
amounts pursuant to clause (c) of subsection 2.7B(ii) in the
event that, as a result of any change after the Closing Date
in any applicable law, treaty or governmental rule, regulation
or order, or any change in the interpretation, administration
or application thereof, such Lender is no longer properly
entitled to deliver forms, certificates or other evidence at a
subsequent date establishing the fact that such Lender is not
subject to withholding as described in subsection 2.7B(iii)(a)
or 2.7B(iii)(b).
C. Capital Adequacy Adjustment. If any Lender shall have determined
that the adoption, effectiveness, phase-in or applicability after the
Closing Date of any law, rule or regulation (or any provision thereof)
regarding capital adequacy, or any change therein or in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its applicable
lending office) with any guideline, request or directive regarding
capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of,
or with reference to, such Lender's Loans or Commitments or Letters of
Credit or participations therein or other obligations hereunder with
respect to the Loans or the Letters of Credit to a level below that
which such Lender reasonably determines such Lender or such controlling
corporation could have achieved but for such adoption, effectiveness,
phase-in, applicability, change or compliance (taking into
consideration the policies of such Lender or such controlling
corporation with regard to capital adequacy), then from time to time,
within fifteen Business Days after receipt by Company from such Lender
of the statement referred to in the next sentence, Company
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shall pay to such Lender such additional amount or amounts as will
compensate such Lender or such controlling corporation on an after-tax
basis for such reduction. Such Lender shall deliver to Company (with a
copy to Administrative Agent) a written statement, setting forth in
reasonable detail the basis of the calculation of such additional
amounts, which statement shall be conclusive and binding upon all
parties hereto absent manifest error.
D. Substitute Lenders. In the event Company is required under
the provisions of this subsection 2.7 to make payments in a material
amount to any Lender or in the event any Lender fails to lend to
Company in accordance with this Agreement, Company may, so long as no
Event of Default or Potential Event of Default shall have occurred and
be continuing, elect to terminate such Lender as a party to this
Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and
other amounts (including without limitation amounts, if any, owed under
this subsection 2.7) due to be paid to such Lender with respect to all
periods through such date of termination, (ii) another financial
institution satisfactory to Company and Administrative Agent (or, in
the event Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent) shall agree, as of such date, to become
a Lender for all purposes under this Agreement (whether by assignment
or amendment) and to assume all obligations of the Lender to be
terminated as of such date, and (iii) all documents and supporting
materials necessary, in the judgment of Administrative Agent (or, in
the event Administrative Agent is also the Lender to be terminated, the
successor Administrative Agent) to evidence the substitution of such
Lender shall have been received and approved by Administrative Agent as
of such date.
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2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless Company agrees to
pay all incremental expenses incurred by such Lender or Issuing Lender as a
result of utilizing such other lending or letter of credit office. A certificate
as to the amount of any such expenses payable by Company pursuant to this
subsection 2.8 (setting forth in reasonable detail the basis for requesting such
amount) submitted by such Lender or Issuing Lender to Company (with a copy to
Administrative Agent) shall be conclusive absent manifest error.
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SECTION 3.
LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
Therein.
A. Letters of Credit. Company acknowledges and confirms that Schedule
3.1 annexed hereto sets forth each letter of credit issued under the Existing
Credit Agreement (collectively, the "Existing Letters of Credit") and
outstanding as of the Effective Date. Company hereby represents, warrants,
agrees, covenants and (a) reaffirms that it has no (and it permanently and
irrevocably waives and releases Agents and Lenders from any, to the extent
arising on or prior to the Effective Date) defense, set off, claim or
counterclaim against any Agent or Lender in regard to its Obligations in respect
of such Existing Letters of Credit and (b) reaffirms its obligation to reimburse
the applicable Issuing Lenders for honored drawings under such Existing Letters
of Credit in accordance with the terms and conditions of this Agreement and the
other Loan Documents applicable to Letters of Credit issued hereunder. Based on
the foregoing, each Lender agrees that (1) each Existing Letter of Credit which
is a Standby Letter of Credit shall, as of the Effective Date, be deemed for all
purposes of this Agreement to be a Standby Letter of Credit issued hereunder,
and (2) each Existing Letter of Credit which is a Commercial Letter of Credit
shall, as of the Effective Date, be deemed for all purposes of this Agreement to
be a Commercial Letter of Credit issued hereunder. In addition to the foregoing
and in addition to Company requesting that Lenders make Revolving Loans pursuant
to subsection 2.1A(iii), and that Swing Line Lender make Swing Line Loans
pursuant to subsection 2.1A(iv), Company may request, in accordance with the
provisions of this subsection 3.1, from time to time during the period from the
Effective Date to but excluding the date which is five days before the Revolving
Loan Commitment Termination Date, that one or more Lenders issue Letters of
Credit for its account for the purposes specified in the definitions of
Commercial Letters of Credit and Standby Letters of Credit. Subject to the terms
and conditions of this Agreement and in reliance upon the representations and
warranties of Loan Parties herein set forth, any one or more Lenders may, but
(except as provided in subsection 3.1B(ii)) shall not be obligated to, issue
such Letters of Credit in accordance with the provisions of this subsection 3.1;
provided that Company shall not request that any Lender issue (and no Lender
shall issue):
(i) any Letter of Credit if, after giving effect to such
issuance, the Total Utilization of Revolving Loan Commitments would
exceed the Revolving Loan Commitments then in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, the Letter of Credit Usage would exceed $5,000,000;
(iii) any Standby Letter of Credit having an expiration date
later than the earlier of (a) the Revolving Loan Commitment Termination
Date and (b) the date which is one year from the date of issuance of
such Standby Letter of Credit; provided that the immediately preceding
clause (b) shall not prevent any Issuing Lender from agreeing that a
Standby Letter of Credit will automatically be extended for one or more
successive periods not to exceed one year each unless such Issuing
Lender elects not to extend for
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any such additional period; provided further that, unless Requisite
Lenders otherwise consent, such Issuing Lender shall give notice that
it will not extend such Standby Letter of Credit if it has knowledge
that an Event of Default has occurred and is continuing on the last day
on which such Issuing Lender may give notice to the beneficiary that it
will not extend such Standby Letter of Credit;
(iv) any Commercial Letter of Credit (a) having an expiration
date later than the earlier of (X) 30 days prior to the Revolving Loan
Commitment Termination Date and (Y) the date which is 180 days from the
date of issuance of such Commercial Letter of Credit or (b) that is
otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion;
(v) any Letter of Credit denominated in a currency other than
Dollars; or
(vi) any Letter of Credit during any period when a Lender
Default exists, unless each Issuing Lender has entered into
arrangements satisfactory to it and Company to eliminate such Issuing
Lender's risk with respect to the Defaulting Lender, including by cash
collateralizing such Defaulting Lender's Pro Rata Share of the Letter
of Credit Usage (after giving effect to the issuance of the proposed
Letter of Credit).
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever Company desires the issuance
of a Letter of Credit, it shall deliver to Administrative Agent, at the
Funding and Payment Office, a Notice of Issuance of Letter of Credit no
later than 12:00 Noon (New York time) at least five Business Days, or
such shorter period as may be agreed to by the Issuing Lender in any
particular instance, in advance of the proposed date of issuance. The
Notice of Issuance of Letter of Credit shall specify (a) the proposed
date of issuance (which shall be a Business Day), (b) the face amount
of or maximum aggregate liability under, as applicable, the Letter of
Credit, (c) the expiration date of the Letter of Credit, (d) the name
and address of the beneficiary, and (e) the verbatim text of the
proposed Letter of Credit or the proposed terms and conditions thereof,
including a precise description of any documents and the verbatim text
of any certificates to be presented by the beneficiary which, if
presented by the beneficiary prior to the expiration date of the Letter
of Credit, would require the Issuing Lender to make payment thereunder;
provided that the Issuing Lender, in its reasonable discretion, may
require changes in the text of the proposed Letter of Credit or any
such documents or certificates; provided further that no Letter of
Credit shall require payment against a conforming draft or other
request for payment to be made thereunder on the same business day
(under the laws of the jurisdiction in which the office of the Issuing
Lender to which such draft or other request for payment is required to
be presented is located) that such draft or other request for payment
is presented if such presentation is made after 10:00 A.M. (in the time
zone of such office of the Issuing Lender) on such business day.
Company shall notify the applicable Issuing Lender (and
Administrative Agent, if Administrative Agent is not such Issuing
Lender) prior to the issuance of any Letter of
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Credit in the event that any of the matters to which Company is
required to certify in the applicable Notice of Issuance of Letter of
Credit is no longer true and correct as of the proposed date of
issuance of such Letter of Credit, and upon the issuance of any Letter
of Credit, Company shall be deemed to have re-certified, as of the date
of such issuance, as to the matters to which Company is required to
certify in the applicable Notice of Issuance of Letter of Credit.
(ii) Determination of Issuing Lender. Upon receipt by
Administrative Agent of a Notice of Issuance of Letter of Credit
pursuant to subsection 3.1B(i) requesting the issuance of a Letter of
Credit, in the event Administrative Agent elects to issue such Letter
of Credit, Administrative Agent shall promptly so notify Company, and
Administrative Agent shall be the Issuing Lender with respect thereto.
In the event that Administrative Agent, in its sole discretion, elects
not to issue such Letter of Credit, Administrative Agent shall promptly
so notify the Company, whereupon Company may request any other Lender
to issue such Letter of Credit by delivering to such Lender a copy of
the applicable Notice of Issuance of Letter of Credit. Any Lender so
requested to issue such Letter of Credit shall promptly notify Company
and Administrative Agent whether or not, in its sole discretion, it has
elected to issue such Letter of Credit, and any such Lender which so
elects to issue such Letter of Credit shall be the Issuing Lender with
respect thereto. In the event that all other Lenders shall have
declined to issue such Letter of Credit, notwithstanding the prior
election of Administrative Agent not to issue such Letter of Credit,
Administrative Agent shall be obligated to issue such Letter of Credit
and shall be the Issuing Lender with respect thereto, notwithstanding
the fact that the sum of the Letter of Credit Usage with respect to
such Letter of Credit and with respect to all other Letters of Credit
issued by Administrative Agent, when aggregated with Administrative
Agent's outstanding Revolving Loans and Swing Line Loans, may exceed
Administrative Agent's Revolving Loan Commitment then in effect.
(iii) Issuance of Letter of Credit. Upon satisfaction or
waiver (in accordance with subsection 10.6) of the conditions set forth
in subsection 4.3, the Issuing Lender shall issue the requested Letter
of Credit in accordance with the Issuing Lender's standard operating
procedures (any such issuance by Administrative Agent being effected
through the Funding and Payment Office), and upon its issuance of such
Letter of Credit the Issuing Lender shall promptly notify
Administrative Agent and each Lender of such issuance, which notice
shall be accompanied by a copy of such Letter of Credit.
(iv) Reports to Lenders. Within 30 days after the end of each
calendar quarter ending after the Closing Date, so long as any Letter
of Credit shall have been outstanding during such calendar quarter,
each Issuing Lender shall deliver to Administrative Agent and
Administrative Agent shall deliver to each Lender a report setting
forth for such calendar quarter the daily maximum amount available to
be drawn under the Letters of Credit that were outstanding during such
calendar quarter.
C. Lenders' Purchase of Participations in Letters of Credit.
Immediately upon the issuance of each Letter of Credit, each Lender shall be
deemed to, and hereby agrees to, have irrevocably purchased from the Issuing
Lender a participation in such Letter of Credit and
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any drawings honored or payments made thereunder in an amount equal to such
Lender's Pro Rata Share (with respect to the Revolving Loan Commitments) of the
maximum amount which is or at any time may become available to be drawn or
required to be paid thereunder.
3.2 Letter of Credit Fees.
Company agrees to pay the following amounts to each Issuing Lender with
respect to Letters of Credit issued by it for the account of Company:
(i) with respect to each Letter of Credit, (a) a fronting fee
equal to 1/4 of 1.0% per annum of the daily maximum amount available to
be drawn under such Letter of Credit and (b) a Letter of Credit fee
equal to the product of (x) the then Applicable Eurodollar Rate Margin
with respect to Revolving Loans and (y) the daily maximum amount
available to be drawn under such Letter of Credit, in each case payable
in arrears on and to the last Business Day in each of March, June,
September and December of each year, commencing September 1998, and
computed on the basis of a 360-day year for the actual number of days
elapsed; and
(ii) with respect to the issuance, amendment or transfer of
each Letter of Credit and each drawing made thereunder (without
duplication of the fees payable under clause (i) above), documentary
and processing charges in accordance with such Issuing Lender's
standard schedule for such charges in effect at the time of such
issuance, amendment, transfer or drawing, as the case may be.
Promptly upon receipt by such Issuing Lender of any amount described in clause
(i)(b) of this subsection 3.2, such Issuing Lender shall distribute to each
other Lender having Revolving Loan Exposure its Pro Rata Share of such amount.
3.3 Drawings and Payments and Reimbursement of Amounts Drawn or Paid Under
Letters of Credit.
A. Responsibility of Issuing Lender With Respect to Requests For
Drawings and Payments. In determining whether to honor any drawing or request
for payment under any Letter of Credit by the beneficiary thereof, the Issuing
Lender shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit.
B. Reimbursement by Company of Amounts Drawn or Paid Under Letters of
Credit. In the event an Issuing Lender has determined to honor a drawing or
request for payment under a Letter of Credit issued by it, such Issuing Lender
shall immediately notify Company and Administrative Agent, and Company shall
reimburse such Issuing Lender on or before the Business Day immediately
following the date on which such drawing is honored or such payment is made (the
applicable "Reimbursement Date") in an amount in same day funds equal to the
amount of such honored drawing; provided that, anything contained in this
Agreement to the contrary notwithstanding, (i) unless Company shall have
notified Administrative
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Agent and such Issuing Lender prior to 12:00 Noon (New York time) on the date of
such honored drawing or request for payment that Company intends to reimburse
such Issuing Lender for the amount of such honored drawing or payment with funds
other than the proceeds of Revolving Loans, Company shall be deemed to have
given a timely Notice of Borrowing to Administrative Agent requesting Lenders to
make Revolving Loans which are Base Rate Loans on the applicable Reimbursement
Date in an amount equal to the amount of such honored drawing or payment and
(ii) subject to satisfaction or waiver of the conditions specified in subsection
4.2B, Lenders shall, on the applicable Reimbursement Date, make Revolving Loans
in the amount of such honored drawing or payment, the proceeds of which shall be
applied directly by Administrative Agent to reimburse such Issuing Lender for
the amount of such honored drawing or payment; provided further that if for any
reason proceeds of Revolving Loans are not received by such Issuing Lender on
the applicable Reimbursement Date in an amount equal to the amount of such
honored drawing or payment, Company shall reimburse such Issuing Lender, on
demand, in an amount in same day funds equal to the excess of the amount of such
honored drawing or payment over the aggregate amount of such Revolving Loans, if
any, which are so received. Nothing in this subsection 3.3B shall be deemed to
relieve any Lender from its obligation to make Revolving Loans on the terms and
conditions set forth in this Agreement, and Company shall retain any and all
rights it may have against any Lender resulting from the failure of such Lender
to make such Revolving Loans under this subsection 3.3B.
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C. Payment by Lenders of Unreimbursed Drawings or Payments Under
Letters of Credit.
(i) Payment by Lenders. In the event that Company shall fail
for any reason to reimburse any Issuing Lender as provided in
subsection 3.3B in an amount equal to the amount of any honored drawing
or payment made by such Issuing Lender under a Letter of Credit issued
by it, such Issuing Lender shall promptly notify each other Lender of
the unreimbursed amount of such honored drawing or payment and of such
other Lender's respective participation therein based on such Lender's
Pro Rata Share of the Revolving Loan Commitments. Each Lender shall
make available to such Issuing Lender an amount equal to its respective
participation, in same day funds, at the office of such Issuing Lender
specified in such notice, not later than 2:00 P.M. (New York time) on
the first business day (under the laws of the jurisdiction in which
such office of such Issuing Lender is located) after the date notified
by such Issuing Lender. In the event that any Lender fails to make
available to such Issuing Lender on such business day the amount of
such Lender's participation in such Letter of Credit as provided in
this subsection 3.3C, such Issuing Lender shall be entitled to recover
such amount on demand from such Lender together with interest thereon
at the rate customarily used by such Issuing Lender for the correction
of errors among banks for three Business Days and thereafter at the
Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice
the right of any Lender to recover from any Issuing Lender any amounts
made available by such Lender to such Issuing Lender pursuant to this
subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with
respect to a Letter of Credit by such Issuing Lender in respect of
which payment was made by such Lender constituted gross negligence or
willful misconduct on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
Company. In the event any Issuing Lender shall have been reimbursed by
other Lenders pursuant to subsection 3.3C(i) for all or any portion of
any honored drawing or payment made by such Issuing Lender under a
Letter of Credit issued by it, such Issuing Lender shall distribute to
each other Lender which has paid all amounts payable by it under
subsection 3.3C(i) with respect to such honored drawing or payment such
other Lender's Pro Rata Share of all payments subsequently received by
such Issuing Lender from Company in reimbursement of such honored
drawing or payment when such payments are received. Any such
distribution shall be made to a Lender at its primary address set forth
below its name on the appropriate signature page hereof or at such
other address as such Lender may request.
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D. Interest on Amounts Drawn or Paid Under Letters of Credit.
(i) Payment of Interest by Company. Company agrees to pay to
each Issuing Lender, with respect to drawings or payments made under
any Letters of Credit issued by it, interest on the amount paid by such
Issuing Lender in respect of each such drawing or payment from the date
such drawing is honored or payment is made to but excluding the date
such amount is reimbursed by Company (including any such reimbursement
out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at
a rate equal to (a) for the period from the date such drawing is
honored or payment is made to but excluding the applicable
Reimbursement Date, the Base Rate plus the Applicable Base Rate Margin
with respect to Revolving Loans, and (b) thereafter, a rate which is 2%
per annum in excess of the rate of interest described in the foregoing
clause (a). Interest payable pursuant to this subsection 3.3D(i) shall
be computed on the basis of a 360-day year for the actual number of
days elapsed in the period during which it accrues and shall be payable
on demand or, if no demand is made, on the date on which the related
drawing or payment under a Letter of Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i), (a) such Issuing Lender shall
distribute to each other Lender, out of the interest received by such
Issuing Lender in respect of the period from the date of the applicable
honored drawing or payment under a Letter of Credit issued by such
Issuing Lender to but excluding the date on which such Issuing Lender
is reimbursed for the amount of such drawing or payment (including any
such reimbursement out of the proceeds of Revolving Loans pursuant to
subsection 3.3B), the amount that such other Lender would have been
entitled to receive in respect of the Letter of Credit fee that would
have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been honored or payment
had been made under such Letter of Credit, and (b) in the event such
Issuing Lender shall have been reimbursed by other Lenders pursuant to
subsection 3.3C(i) for all or any portion of such drawing or payment,
such Issuing Lender shall distribute to each other Lender which has
paid all amounts payable by it under subsection 3.3C(i) with respect to
such drawing or payment such other Lender's Pro Rata Share of any
interest received by such Issuing Lender in respect of that portion of
such drawing or payment so reimbursed by other Lenders for the period
from the date on which such Issuing Lender was so reimbursed by other
Lenders to and including the date on which such portion of such drawing
or payment is reimbursed by Company. Any such distribution shall be
made to a Lender at its Lending Office set forth on Schedule 2.1 or at
such other address as such Lender may request.
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3.4 Obligations Absolute.
The obligation of Company to reimburse each Issuing Lender for drawings
honored or payments made under the Letters of Credit issued by it and to repay
any Revolving Loans made by Lenders pursuant to subsection 3.3B and the
obligations of Lenders under subsection 3.3C(i) shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances including, without limitation, the following
circumstances:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) the existence of any claim, set-off, defense or other
right which Company or any Lender may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any Persons
for whom any such transferee may be acting), any Issuing Lender or
other Lender or any other Person or, in the case of a Lender, against
Company whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any
underlying transaction between Company or one of its Subsidiaries and
the beneficiary for which any Letter of Credit was procured);
(iii) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter
of Credit against presentation of a demand, draft or certificate or
other document which appears to substantially comply with the terms of
such Letter of Credit;
(v) any adverse change in the business, operations,
properties, assets, condition (financial or otherwise) or prospects of
Company or any of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document
by any party thereto;
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event
of Default shall have occurred and be continuing;
provided, in each case, that payment by the applicable Issuing Lender under the
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
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3.5 Indemnification; Nature of Issuing Lender's Duties.
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, Company hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which such Issuing Lender may incur or be subject to as a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing
Lender, other than as a result of (a) the gross negligence or willful misconduct
of such Issuing Lender as determined by a final judgment of a court of competent
jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor
by such Issuing Lender of a proper demand for payment made under any Letter of
Credit issued by it or (ii) the failure of such Issuing Lender to honor a
drawing or other request for payment under any such Letter of Credit as a result
of any act or omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such acts or
omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between Company and any
Issuing Lender, Company assumes all risks of the acts and omissions of, or
misuse of the Letters of Credit issued by such Issuing Lender by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Lender shall not be responsible for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing or
payment under such Letter of Credit; or (viii) any consequences arising from
causes beyond the control of such Issuing Lender, including without limitation
any Governmental Acts, and none of the above shall affect or impair, or prevent
the vesting of, any of such Issuing Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to Company.
Notwithstanding anything to the contrary contained in this subsection
3.5, Company shall
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retain any and all rights it may have against any Issuing Lender for any
liability arising solely out of the gross negligence or willful misconduct of
such Issuing Lender, as determined by a final judgment of a court of competent
jurisdiction.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
In the event that any Issuing Lender or Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the Closing
Date, or compliance by any Issuing Lender or Lender with any guideline, request
or directive issued or made after the Closing Date by any central bank or other
governmental or quasi-governmental authority (whether or not having the force of
law):
(i) results in any change in the basis of taxation of such
Issuing Lender or Lender (or its applicable lending or letter of credit
office) (other than a change with respect to any Tax on the overall net
income of such Issuing Lender or Lender) with respect to the issuing or
maintaining of any Letters of Credit or the purchasing or maintaining
of any participations therein or any other obligations under this
Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve
(including without limitation any marginal, emergency, supplemental,
special or other reserve), special deposit, compulsory loan, FDIC
insurance or similar requirement in respect of any Letters of Credit
issued by any Issuing Lender or participations therein purchased by any
Lender; or
(iii) imposes any other condition on or affecting such Issuing
Lender or Lender (or its applicable lending or letter of credit office)
regarding this Section 3 or any Letter of Credit or any participation
therein;
and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto; then, in any case, Company shall promptly pay to such Issuing Lender or
Lender, upon receipt of the statement referred to in the next sentence, such
additional amount or amounts (reasonably determined by such Issuing Lender or
Lender) as may be necessary to compensate such Issuing Lender or Lender for any
such increased cost or reduction in amounts received or receivable hereunder.
Such Issuing Lender or Lender shall deliver to Company a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Issuing Lender or Lender under this subsection 3.6, which
statement shall be conclusive and binding upon all parties hereto absent
manifest error.
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SECTION 4.
CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make (or maintain, as the case may be)
Loans and the issuance of Letters of Credit hereunder are, in addition to the
conditions precedent specified in subsection 4.3, subject to prior or concurrent
satisfaction of the following conditions.
4.1 Conditions to Effectiveness of Amendment and Restatement.
The effectiveness of this Agreement and the obligations of Lenders to
make the Phase II Term Loans is subject to prior or concurrent satisfaction of
the following conditions:
A. Holdings and Company Documents. On or before the Effective Date,
each of Holdings and Company shall deliver or cause to be delivered to
Lenders (or to Administrative Agent for Lenders with sufficient
originally executed copies, where appropriate, for each Lender and its
counsel):
(i) Certified copies of its Certificate of
Incorporation, together with a good standing certificate from
the Secretary of State of the State of Delaware, each dated a
recent date prior to the Closing Date;
(ii) resolutions of its Board of Directors approving
and authorizing the execution, delivery and performance of
this Agreement and the Acknowledgement and Consent, certified
as of the Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without
modification or amendment;
(iii) Signature and incumbency certificates of its
officers executing this Agreement and the other Loan Documents
to which it is a party as of the Closing Date;
(iv) executed originals of this Agreement, the
Acknowledgement and Consent and (to the extent not previously
executed and delivered to Lenders) the other Loan Documents to
which it is a party; and
(v) such other documents as Administrative Agent may
reasonably request.
B. Subsidiary Documents.
(i) On or before the Effective Date, Company shall deliver or
cause to be delivered to Lenders (or to Administrative Agent for
Lenders with sufficient originally executed copies, where appropriate,
for each Lender and its counsel) the following for each of its
Subsidiaries (other than AmeriComm Holdings and each of its
Subsidiaries),
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each unless otherwise noted, dated a recent date prior to their
delivery to Lenders:
(a) a certificate of its corporate secretary or an
assistant secretary to the effect that there have been no (x)
amendments to its Certificate of Incorporation or Bylaws after
the Closing Date and (y) changes after the Closing Date in the
incumbency of its officers;
(b) resolutions of its Board of Directors approving
and authorizing the execution, delivery and performance of the
Acknowledgement and Consent, certified as of the Effective
Date by its corporate secretary or an assistant secretary as
being in full force and effect without modification or
amendment;
(c) a good standing certificate from the Secretary of
State of the State of its jurisdiction of incorporation, dated
a recent date prior to the Effective Date;
(d) executed originals of the Acknowledgement and
Consent and (to the extent not previously executed and
delivered to Lenders) the other Loan Documents to which it is
a party; and
(e) such other documents as Administrative Agent may
reasonably request.
(ii) On or before the Effective Date, Company shall deliver or
cause to be delivered to Lenders (or to Administrative Agent for
Lenders with sufficient originally executed copies, where appropriate,
for each Lender and its counsel) the following for AmeriComm Holdings
and each of its Subsidiaries, each, unless otherwise noted, dated the
Closing Date:
(a) Certified copies of the Certificate or Articles
of Incorporation of such Subsidiary, together with a good
standing certificate from the Secretary of State of its
jurisdiction of incorporation and each other state in which it
is qualified as a foreign corporation to do business, each
dated a recent date prior to the Effective Date;
(b) Copies of the Bylaws of such Subsidiary,
certified as of the Effective Date by its corporate secretary
or an assistant secretary as being in full force and effect
without modification or amendment;
(c) Resolutions of the Board of Directors of such
Subsidiary approving and authorizing the execution, delivery
and performance of the Subsidiary Guaranty, the Pledge
Agreement, the Security Agreement and the other Loan Documents
to which such Subsidiary is party, certified as of the
Effective Date by its corporate secretary or an assistant
secretary as being in full force and effect without
modification or amendment;
(d) Signature and incumbency certificates of its
officers executing the
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Subsidiary Guaranty, the Pledge Agreement, the Security
Agreement and the other Loan Documents to which such
Subsidiary is party;
(e) Executed originals of the Subsidiary Guaranty,
the Pledge Agreement, the Security Agreement and the other
Loan Documents to which such Subsidiary is a party; and
(f) Such other documents as Administrative Agent may
reasonably request.
C. Opinions of Counsel to Loan Parties. Lenders and their respective
counsel shall have received originally executed copies of one or more
favorable written opinions of White & Case LLP, counsel to Loan
Parties, dated as of the Effective Date, as to the enforceability of
this Agreement, the Notes and the Acknowledgement and Consent and such
other matter as Administrative Agent and its counsel shall reasonably
request, in form and substance satisfactory to Administrative Agent,
and Company hereby requests such counsel for Loan Parties to deliver
such opinions.
D. Representations and Warranties; Performance of Agreements. Company
shall have delivered to Administrative Agent an Officer's Certificate,
in form and substance satisfactory to Administrative Agent, to the
effect that the representations and warranties in Section 5 hereof are
true and correct in all material respects on and as of the Effective
Date to the same extent as though made on and as of that date and that
Company shall have performed in all material respects all agreements
and satisfied all conditions which this Agreement provides shall be
performed or satisfied by Company on or before the Effective Date,
except as otherwise disclosed to and agreed to in writing by
Administrative Agent.
E. Closing Date Mortgage Amendments. To the extent requested by
Administrative Agent, the delivery to Administrative Agent of fully
executed and acknowledged counterparts to amendments to the Closing
Date Mortgages in form and substance satisfactory to Administrative
Agent (such amendments, collectively, the "Mortgage Amendments") for
each Closing Date Mortgaged Property and the delivery of evidence
satisfactory to Administrative Agent that counterparts of the Mortgage
Amendments have been or will be recorded in all places necessary or
desirable to maintain valid and enforceable first priority Liens on the
fee simple or leasehold interests of Company, as applicable, in the
Closing Date Mortgaged Properties as of the Effective Date in favor of
Administrative Agent, as mortgagee.
F. Date-Down Policies. To the extent requested by Administrative Agent,
the delivery to Administrative Agent of signed endorsements to the
title policies or marked title commitments ("Date-Down Policies")
insuring on the Effective Date fee simple or leasehold title to each of
the Closing Date Mortgaged Properties vested in Company and insuring
the first priority of the Liens created under the Closing Date
Mortgages as amended by the Mortgage Amendments.
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G. Property Certificates or Affidavits. To the extent requested by
Administrative Agent, the delivery to Administrative Agent of such
certificates and affidavits as the Title Company may reasonably
required in connection with the issuance of the Date-Down Policies.
H. Date Down Opinions. The delivery to Administrative Agent of
date-downs of opinions ("Date-Down Opinions") of local counsel in such
states as Administrative Agent may request as to the enforceability of
the Mortgage Amendments to be recorded in such states and such other
matters as Administrative Agent shall reasonably request, which
Date-Down Opinions shall be dated the Effective Date, addressed to
Administrative Agent and the Lenders and otherwise in form and
substance reasonably satisfactory to Administrative Agent.
I. Repayment of Certain Existing Debt. Administrative Agent shall have
received an Officers' Certificate of Company stating that, after giving
effect to the funding of the Phase II Term Loans, all Indebtedness of
Company and its Subsidiaries (including, without limitation all
outstanding Indebtedness of DIMAC and AmeriComm Holdings and their
respective Subsidiaries (other than any Obligations), including
Indebtedness under the Existing Senior Notes, the Existing TCW Notes
and the Existing AmeriComm Credit Agreement and with respect to Capital
Leases) other than Indebtedness permitted to remain outstanding after
the Effective Date pursuant to subsection 7.1 shall have been paid in
full, redeemed or defeased, any commitments to lend thereunder shall
have been terminated, all security interests created to secure the
obligations arising in connection therewith shall have been terminated
or effectively assigned to Administrative Agent for the benefit of
Lenders, all letters of credit of AmeriComm Holdings and its
Subsidiaries (other than Letters of Credit) shall have expired or been
cancelled, and Company shall have delivered to Administrative Agent
UCC-3 termination statements or assignments (or comparable forms) and
any and all other instruments of release, satisfaction, assignment
and/or reconveyance (or evidence of the filing thereof) as may be
necessary or advisable to terminate or assign to Lenders all such
security interests and all other security interests in the Collateral.
J. Consents and Amendment Relating to Senior Note Indenture. All
consents and amendments with respect to the Existing Senior Note
Indenture as may be required to permit the consummation of the
refinancings and other transactions contemplated by the Loan Documents
and the Related Agreements to occur on the Effective Date shall have
been obtained pursuant to the Consent Solicitation.
K. Related Agreements. Administrative Agent shall have received (i) a
fully executed or conformed copy of each Related Agreement entered into
after the Closing Date and all principal documents executed after the
Closing Date in connection therewith, and each such Related Agreement
shall be in full force and effect and no provision thereof shall have
been modified or waived in any respect except as permitted under
subsection 7.13, and (ii) an Officer's Certificate from Company to the
effect set forth in clause (i), and each such Related Agreement shall
be reasonably satisfactory in form and substance to Administrative
Agent.
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L. Perfection of Security Interests. Company shall have taken or caused
to be taken such actions in such a manner so that Administrative Agent
has a valid and perfected First Priority security interest in the
entire personal property and mixed Collateral of AmeriComm Holdings and
its Subsidiaries. Such actions shall include, without limitation: (i)
the delivery pursuant to the applicable Collateral Documents of (a)
such certificates (which certificates shall be registered in the name
of Administrative Agent or properly endorsed in blank for transfer or
accompanied by irrevocable undated stock powers duly endorsed in blank,
all in form and substance satisfactory to Administrative Agent)
representing all of the shares of capital stock required to be pledged
pursuant to the Collateral Documents by AmeriComm Holdings and its
Subsidiaries and (b) all promissory notes or other instruments (duly
endorsed, where appropriate, in a manner satisfactory to Administrative
Agent) evidencing any Collateral of AmeriComm Holdings and its
Subsidiaries; (ii) the delivery to Agents of (a) the results of a
recent search, by a Person satisfactory to Agents, of all effective UCC
financing statements and fixture filings and all judgment and tax lien
filings which may have been made with respect to any personal or mixed
property of AmeriComm Holdings and its Subsidiaries, together with
copies of all such filings disclosed by such search; (iii) the delivery
to Administrative Agent of Uniform Commercial Code financing statements
executed by AmeriComm Holdings and its Subsidiaries as to all such
Collateral granted by such Loan Parties for all jurisdictions as may be
necessary or desirable to perfect Administrative Agent's security
interest in such Collateral of AmeriComm Holdings and its Subsidiaries;
and (iv) the delivery to Administrative Agent of evidence reasonably
satisfactory to Administrative Agent that all other filings (including,
without limitation, Uniform Commercial Code termination statements and
filings with the United States Patent and Trademark Office of trademark
assignments and patent assignments for all trademarks and patents,
respectively, used by AmeriComm Holdings and its Subsidiaries
registered in the United States), recordings and other actions
Administrative Agent deems necessary or advisable to establish,
preserve and perfect the First Priority Liens granted to Administrative
Agent in personal and mixed property shall have been made.
M. Transaction Costs. Company shall have delivered to Administrative
Agent and Lenders a schedule, in a form satisfactory to Administrative
Agent, setting forth Company's reasonable best estimate of the fees,
costs and expenses payable by Holdings and its Subsidiaries on or
before the Effective Date in connection with the Debt Tender Offer, the
Consent Solicitation and the refinancings contemplated to occur on the
Effective Date.
N. Environmental Reports. Administrative Agent shall have received such
information, in form, scope and substance reasonably satisfactory to
Administrative Agent, as Administrative Agent may reasonably request
with respect to any environmental liabilities of AmeriComm Holdings or
any of its Subsidiaries.
O. Solvency Appraisal. Company shall have delivered to Administrative
Agent and Lenders, if otherwise required to be delivered in connection
with any refinancings to occur on the Effective Date, an opinion from
an independent valuation consultant, dated
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on or about the Effective Date, addressed to Agents and Lenders and in
form, scope and substance satisfactory to Agents, with appropriate
attachments, demonstrating that after giving effect to the consummation
of the refinancings contemplated to occur on the Effective Date,
Company and its Subsidiaries are Solvent.
P. Real Property. Administrative Agent shall have received from each
applicable Subsidiary of AmeriComm Holdings with respect to any
interest in real property (whether fee or leased) held by such
Subsidiary a Mortgage, Mortgage Policy and any other documents which
would be required to be delivered by such Subsidiary with respect to
such interest in real property pursuant to subsection 6.12 if such
interest had been acquired after the Closing Date by Company or any of
its Subsidiaries other than AmeriComm Holdings or any of its
Subsidiaries.
Q. Proceeds of Debt and Equity Capitalization of Company.
(i) Equity Capitalization. On or before the Effective Date,
Holdings shall have (a) issued and sold for Cash not less than
$30,000,000 in aggregate principal amount of Holdings Notes and shall
have contributed to Company, as common equity, all of the net Cash
proceeds from such issuance to Company and in addition (b) made a Cash,
common equity, contribution to Company of not less than $10,000,000.
(ii) Senior Subordinated Notes. On or before the Effective
Date, Company shall have issued and sold for Cash not less than
$100,000,000 in aggregate principal amount of Senior Subordinated
Notes.
(iii) Use of Proceeds. Company shall have provided evidence
reasonably satisfactory to Administrative Agent that the proceeds of
the debt and equity capitalization of Company described in the
immediately preceding clauses (i) and (ii) have been irrevocably
committed, to (a) finance the redemption, repurchase or other repayment
of outstanding Indebtedness with respect to the Existing Senior Notes,
the Existing TCW Notes and the Existing Americomm Credit Agreement, and
to pay fees, costs and expenses payable by Holdings and its
Subsidiaries on or before the Effective Date in connection with such
refinancing, in accordance with subsection 2.5B.
R. Repayment of Loans under Existing Credit Agreement; Fees; Letters of
Credit.
(i) On or before the Effective Date, Company shall have paid
to Administrative Agent, for distribution (as appropriate) to
Administrative Agent and Lenders, all accrued interest, fees and other
obligations due under the Existing Credit Agreement (including, without
limitation, any compensation payable under subsection 2.6D of the
Existing Credit Agreement).
(ii) No Letters of Credit shall be outstanding under the
Existing Credit Agreement as of the Effective Date.
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S. Opinions of Counsel Delivered Under Related Agreements. To the
extent requested by Administrative Agent, Administrative Agent and its
counsel shall have received copies of each of the opinions of counsel
delivered to the parties under any Related Agreements entered into
after the Closing Date, including, without limitation, the Senior
Subordinated Note Indenture and the Holdings Note Purchase Agreement,
together with a letter from each such counsel authorizing Agents and
Lenders to rely upon such opinion to the same extent as though it were
addressed to Agents and Lenders.
T. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated by this
Agreement and the Existing Credit Agreement and all documents
incidental thereto not previously found acceptable by Agent, acting on
behalf of Lenders, and its counsel shall be satisfactory in form and
substance to Agent and such counsel, and Agent and such counsel shall
have received all such counterpart originals or certified copies of
such documents as Agent may reasonably request.
4.2 Conditions to All Loans.
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent shall have received before that
Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, in each case signed by the
chief executive officer or the chief financial officer of Company or by
any executive officer of Company designated by any of the
above-described officers on behalf of Company in a writing delivered to
Administrative Agent.
B. As of that Funding Date:
(i) The representations and warranties contained
herein and in the other Loan Documents shall be true and
correct in all material respects on and as of that Funding
Date to the same extent as though made on and as of that date,
except to the extent such representations and warranties
specifically relate to an earlier date, in which case such
representations and warranties shall have been true and
correct in all material respects on and as of such earlier
date;
(ii) No event shall have occurred and be continuing
or would result from the consummation of the borrowing
contemplated by such Notice of Borrowing that would constitute
an Event of Default or a Potential Event of Default;
(iii) Each Loan Party shall have performed in all
material respects all agreements and satisfied all conditions
which this Agreement and the other Loan Documents provide
shall be performed or satisfied by it on or before that
Funding Date;
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(iv) No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin
or restrain any Lender from making the Loans to be made by it,
on that Funding Date;
(v) The making of the Loans requested on such Funding
Date shall not violate any law including, without limitation,
Regulation T, Regulation U or Regulation X of the Board of
Governors of the Federal Reserve System; and
(vi) There shall not be pending or, to the knowledge
of Company, threatened, any action, suit, proceeding,
governmental investigation or arbitration against or affecting
Holdings or any of its Subsidiaries or any property of
Holdings or any of its Subsidiaries that has not been
disclosed by Company in writing and that is required to be so
disclosed pursuant to subsection 5.6 or 6.1(x) prior to the
making of the last preceding Loans, and there shall have
occurred no development not so disclosed in any such action,
suit, proceeding, governmental investigation or arbitration so
disclosed that, in either event, in the opinion of
Administrative Agent or of Requisite Lenders, would be
expected to have a Material Adverse Effect; and no injunction
or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to
be issued shall be pending or noticed with respect to any
action, suit or proceeding seeking to enjoin or otherwise
prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by
this Agreement or the making of Loans hereunder.
4.3 Conditions to Letters of Credit.
The issuance of any Letter of Credit hereunder (whether or not the
applicable Issuing Lender is obligated to issue such Letter of Credit) is
subject to the following conditions precedent:
A. On or before the date of issuance of such Letter of Credit,
Administrative Agent shall have received, in accordance with the provisions of
subsection 3.1B(i), an originally executed Notice of Issuance of Letter of
Credit, signed by the chief executive officer or the chief financial officer or
by any executive officer of Company designated by any of the above-described
officers on behalf of Company and Company in a writing delivered to
Administrative Agent, together with all other information specified in
subsection 3.1B(i) and such other documents or information as the applicable
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
B. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
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SECTION 5.
REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make (or
maintain, as the case may be) the Loans, to induce Issuing Lender to issue (or
maintain, as the case may be) Letters of Credit and to induce other Lenders to
purchase participations therein, each of Holdings and Company represents and
warrants to each Lender, on the date of this Agreement, on the Effective Date,
on each Funding Date, and on the date of issuance of each Letter of Credit, that
the following statements are true and correct.
5.1 Organization, Powers, Qualification, Good Standing, Business and
Subsidiaries.
A. Organization and Powers. Holdings, Company and each Subsidiary of
Holdings which is a corporation are duly organized, validly existing and in good
standing under the laws of their respective states of organization. Each
Subsidiary of Holdings which is a limited partnership is a duly organized and
validly existing limited partnership under the laws of its jurisdiction of
formation and is in good standing in such jurisdiction. Each of Holdings,
Company and their respective Subsidiaries has all requisite corporate or
partnership (as applicable) power and authority to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted, and each Loan Party has all requisite corporate or partnership (as
applicable) power and authority to enter into the Loan Documents, to carry out
the transactions contemplated thereby and, in the case of Company, to issue and
pay the Notes.
B. Qualification and Good Standing. Holdings, Company and each
Subsidiary of Holdings which is a corporation are qualified to do business and
in good standing, and each Subsidiary of Holdings which is a limited partnership
is authorized as a foreign limited partnership to do business, in every
jurisdiction where their respective assets are located and wherever necessary to
carry out their respective businesses and operations, except in jurisdictions
where the failure to be so qualified or in good standing has not had and will
not have a Material Adverse Effect.
C. Conduct of Business. Holdings and its Subsidiaries are engaged only
in the businesses permitted to be engaged in pursuant to subsection 7.12.
D. Company and Subsidiaries. All of the Subsidiaries of Holdings as of
the Effective Date are identified in Schedule 5.1 annexed hereto, as it may be
supplemented from time to time in accordance with the provisions of subsection
6.9 The capital stock or other equity interests of each of the Subsidiaries
identified in Schedule 5.1 annexed hereto is duly authorized, validly issued,
fully paid and nonassessable and none of such capital stock or other equity
interests constitutes Margin Stock. The limited and general partnership
interests of each of the Subsidiaries of Holdings identified in Schedule 5.1
annexed hereto which are limited partnerships are duly and validly issued.
Holdings and each of the Subsidiaries of Holdings identified in Schedule 5.1
annexed hereto is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization set forth therein, has full
corporate or
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partnership (as applicable) power and authority to own its assets and properties
and to operate its business as presently owned and conducted and as proposed to
be conducted, and is qualified to do business and in good standing in every
jurisdiction where its assets are located and wherever necessary to carry out
its business and operations, in each case except where failure to be so
qualified or in good standing or a lack of such corporate power and authority
has not had and will not have a Material Adverse Effect. Schedule 5.1 annexed
hereto correctly sets forth the ownership interest of Company in each of its
Subsidiaries identified therein.
5.2 Authorization of Borrowing, etc.
A. Authorization of Borrowing. The execution, delivery and performance
of the Loan Documents and the issuance, delivery and payment of the Notes have
been duly authorized by all necessary corporate and/or partnership (as
applicable) action on the part of each of the Loan Parties party thereto.
B. No Conflict. After giving effect to the consummation of the
transactions contemplated hereby to occur on the Effective Date, the execution,
delivery and performance by each of the applicable Loan Parties of the Loan
Documents, the issuance, delivery and payment of the Notes and the consummation
of the transactions contemplated by the Loan Documents do not and will not (i)
violate any provision of any law or any governmental rule or regulation
applicable to Holdings or any of its Subsidiaries, the Certificate or Articles
of Incorporation or Bylaws (or other analogous organizational document) of
Holdings or any of its Subsidiaries or any order, judgment or decree of any
court or other agency of government binding on Holdings or any of its
Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any Contractual Obligation of
Holdings or any of its Subsidiaries, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of Holdings or any
of its Subsidiaries (other than any Liens created under any of the Loan
Documents in favor of Administrative Agent), or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
Contractual Obligation of Holdings or any of its Subsidiaries, except for such
approvals or consents which will be obtained on or before the Effective Date and
disclosed in writing to Lenders.
C. Governmental Consents. The execution, delivery and performance by
the Loan Parties of the Loan Documents, the issuance, delivery and payment of
the Notes and the consummation of the transactions contemplated by the Loan
Documents do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body except to the extent obtained on or
before the Closing Date.
D. Binding Obligation. Each of the Loan Documents has been duly
executed and delivered by each of the Loan Parties party thereto and is the
legally valid and binding obligation of each such Loan Party, enforceable
against such Loan Party in accordance with its respective terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
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E. Collateral Documents. The security interests created in favor of
Administrative Agent under the Collateral Documents will at all times from and
after the Closing Date constitute, as security for the obligations purported to
be secured thereby, a legal, valid and enforceable security interest in and
perfected First Priority Lien on all of the Collateral referred to therein in
favor of Administrative Agent for the benefit of the Lenders. Each Loan Party
has good title to its respective Collateral. No consents, filings or recordings
are required in order to perfect (or maintain the perfection or priority of) the
security interests purported to be created by any of the Collateral Documents,
other than such as have been obtained and which remain in full force and effect
and other than the filing of Uniform Commercial Code Financing Statements
delivered to Administrative Agent for filing but not yet filed, and the periodic
filing of Uniform Commercial Code continuation statements in respect of Uniform
Commercial Code financing statements filed by or on behalf of Administrative
Agent.
F. Absence of Third-Party Filings. Except such as may have been filed
in favor of Administrative Agent as contemplated by subsection 5.2E and except
as set forth on Schedule 7.2A annexed hereto, (i) no effective UCC financing
statement, fixture filing or other instrument similar in effect covering all or
any part of the Collateral is on file in any filing or recording office and (ii)
no effective filing covering all or any part of the IP Collateral is on file in
the PTO.
G. Margin Regulations. The pledge of the Pledged Collateral pursuant to
the Collateral Documents does not violate Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System.
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5.3 Financial Condition; Projections.
A. Financial Statements. Company has heretofore delivered to Lenders,
at Lenders' request, the following financial statements and information: (i) the
audited consolidated balance sheets of DIMAC and its Subsidiaries as at December
31, 1995 and 1997 for the fiscal years then ended and as at December 31, 1996
for the eleven months then ended, and the related audited consolidated
statements of income and cash flows of DIMAC and its Subsidiaries for the
periods then ended, together with the report on such consolidated financial
statements of the applicable certified public accountants setting forth in each
case in comparative form the corresponding figures for the corresponding period
from the previous fiscal year, (ii) the unaudited consolidated balance sheet of
DIMAC and its Subsidiaries as at March 29, 1998 and the related unaudited
consolidated statement of income of DIMAC and its Subsidiaries for the three
months then ended, together with the corresponding figures for the corresponding
period of the previous fiscal year, (iii) the audited consolidated balance
sheets of AmeriComm Holdings and its Subsidiaries as at December 31, 1995, 1996
and 1997, and the related audited consolidated statements of income,
stockholders' equity and cash flows of AmeriComm Holdings and its Subsidiaries
for the periods then ended, together with the report on such consolidated
financial statements of the applicable certified public accountants setting
forth in each case in comparative form the corresponding figures for the
previous fiscal year, and (iv) the unaudited consolidated balance sheet of
AmeriComm Holdings and its Subsidiaries as at March 31, 1998 and the related
unaudited consolidated statements of income, stockholders' equity and cash flows
of AmeriComm Holdings and its Subsidiaries for the three months then ended,
together with the corresponding figures for the corresponding period of the
previous fiscal year. All such statements were prepared in conformity with GAAP
and fairly present, in all material respects, the financial position (on a
consolidated basis) of the entities described in such financial statements as at
the respective dates thereof and the results of operations and cash flows (on a
consolidated basis) of the entities described therein for each of the periods
then ended, subject, in the case of any such unaudited financial statements, to
changes resulting from audit and normal year-end adjustments and the absence of
footnote disclosure required in accordance with GAAP. Neither Company nor any of
its Subsidiaries has (and did not immediately following the funding of the
initial Loans under the Existing Credit Agreement, have) any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the most recent
financial statements delivered pursuant to subsection 6.1, the notes thereto and
which in any such case is material in relation to the business, operations,
properties, assets, condition (financial or otherwise) or prospects of Holdings
and its Subsidiaries taken as a whole.
B. Projections. On and as of the Effective Date, the projections of
Company and its Subsidiaries for the period from January 1, 1998 through
December 31, 2006 previously delivered to Lenders (the "Projections") are based
on good faith estimates and assumptions made by the management of Company, it
being recognized, however, that projections as to future events are not to be
viewed as facts and that the actual results during the period or periods covered
by the Projections may differ from the projected results and that the
differences may be material. Notwithstanding the foregoing, as of the Effective
Date, management of Company believed that the Projections were reasonable and
attainable.
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5.4 No Material Adverse Change; No Restricted Junior Payments.
Since the Closing Date, no event or change has occurred that has caused
or evidences, either in any case or in the aggregate, a Material Adverse Effect.
Since the Closing Date, neither Company nor any of its Subsidiaries has directly
or indirectly declared, ordered, paid or made, or set apart any sum or property
for, any Restricted Junior Payment or agreed to do so except as permitted by
subsection 7.5.
5.5 Title to Properties; Liens; Real Property.
A. Title to Properties; Liens. After giving effect to the transactions
contemplated by the Existing Credit Agreement to occur on the Closing Date and
the transactions contemplated to occur on the Effective Date, Holdings and its
Subsidiaries have good and marketable fee simple to or a valid leasehold
interest in all of their respective properties and assets reflected in the
financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, except for assets
disposed of since the date of such financial statements in the ordinary course
of business or as otherwise permitted under subsection 7.7 and except for such
defects that neither individually nor in the aggregate could reasonably be
expected to have a Material Adverse Effect. Except as permitted by this
Agreement, all such properties and assets are free and clear of Liens.
B. Real Property. As of the Effective Date, Schedule 5.5 annexed hereto
contains a true, accurate and complete list of (i) all fee interests of any Loan
Party in real property and (ii) all leases, subleases or assignments of leases
(together with all amendments, modifications, supplements, renewals or
extensions of any thereof) affecting each Real Property Asset of any Loan Party,
regardless of whether such Loan Party is the landlord or tenant (whether
directly or as an assignee or successor in interest) under such lease, sublease
or assignment. Except as specified in Schedule 5.5 annexed hereto, each
agreement listed in clause (ii) of the immediately preceding sentence is in full
force and effect and Company does not have knowledge of any material default
that has occurred and is continuing thereunder, and each such agreement
constitutes the legally valid and binding obligation of each applicable Loan
Party, enforceable against such Loan Party in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles.
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5.6 Litigation; Adverse Facts.
There is no action, suit, proceeding, arbitration or governmental
investigation (whether or not purportedly on behalf of Holdings or any of its
Subsidiaries) at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of Company,
threatened against or affecting Holdings or any of its Subsidiaries or any
property of Holdings or any of its Subsidiaries that, either individually or in
the aggregate together with all other such actions, proceedings and
investigations, has had, or could reasonably be expected to result in, a
Material Adverse Effect. Neither Holdings nor any of its Subsidiaries is (i) in
violation of any applicable law that has had, or could reasonably be expected to
result in, a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgment, writ, injunction, decree, rule or regulation of
any court or any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, that
has had, or could reasonably be expected to result in, a Material Adverse
Effect.
5.7 Payment of Taxes.
Except to the extent permitted by subsection 6.3, all material tax
returns and reports of Holdings and its Subsidiaries required to be filed by any
of them have been timely filed, and all material taxes, assessments, fees and
other governmental charges upon Holdings and its Subsidiaries and upon their
respective properties, assets, income, businesses and franchises which are due
and payable have been paid when due and payable. Neither Holdings nor Company
knows of any proposed tax assessment against Holdings or any of its Subsidiaries
other than those which are being actively contested by Holdings or such
Subsidiary in good faith and by appropriate proceedings and for which reserves
or other appropriate provisions, if any, as may be required in conformity with
GAAP shall have been made or provided therefor.
5.8 Performance of Agreements; Materially Adverse Agreements.
A. Neither Holdings nor any of its Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any of its Contractual Obligations, and no condition
exists that, with the giving of notice or the lapse of time or both, would
constitute such a default, except where the consequences, direct or indirect, of
such default or defaults, if any, would not have a Material Adverse Effect.
B. Neither Holdings nor any of its Subsidiaries is a party to or is
otherwise subject to any agreement or instrument or any charter or other
internal restriction which has had, or could reasonably be expected (based upon
assumptions that are reasonable at the time made) to result in, individually or
in the aggregate, a Material Adverse Effect.
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5.9 Governmental Regulation.
Neither Holdings nor any of its Subsidiaries is subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act or the Investment Company Act of 1940 or under any other
federal or state statute or regulation which may limit its ability to incur
Indebtedness or which may otherwise render all or any portion of the Obligations
unenforceable.
5.10 Securities Activities.
Neither Holdings nor any of its Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
A. Holdings and each of its ERISA Affiliates are in compliance with all
applicable provisions and requirements of ERISA with respect to each Employee
Benefit Plan, and have performed all their obligations under each Employee
Benefit Plan, except to the extent that any non-compliance with ERISA or any
such failure to perform would not result in material liability of Holdings or
any of its ERISA Affiliates.
B. No ERISA Event has occurred which has resulted or is reasonably
likely to result in any material liability of Company or any of its ERISA
Affiliates to the PBGC or to any other Person.
C. Except to the extent required under Section 4980B of the Internal
Revenue Code and/or Section 601 of ERISA, neither Holdings nor any of its
Subsidiaries maintains or contributes to any employee welfare benefit plan (as
defined in Section 3(1) of ERISA) that provides health or welfare benefits
(through the purchase of insurance or otherwise) for any retired or former
employees of Holdings or any of its Subsidiaries other than as set forth on
Schedule 5.11 annexed hereto.
D. No Pension Plan has an Unfunded Current Liability in an amount that
would have a Material Adverse Effect.
E. As of the most recent valuation date for each Multiemployer Plan for
which the actuarial report is available, the potential liability of Company, its
Subsidiaries and their respective ERISA Affiliates for a complete withdrawal
from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when
aggregated with such potential liability for a complete withdrawal from all
Multiemployer Plans, based on information available pursuant to Section 4221(e)
of ERISA, could not reasonably be expected to have a Material Adverse Effect.
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5.12 Certain Fees.
No broker's or finder's fee or commission will be payable with respect
to this Agreement or any of the loan transactions contemplated hereby, and
Company hereby indemnifies Lenders against, and agrees that it will hold Lenders
harmless from, any claim, demand or liability for any such broker's or finder's
fees alleged to have been incurred in connection herewith or therewith and any
expenses (including reasonable fees, expenses and disbursements of counsel)
arising in connection with any such claim, demand or liability.
5.13 Environmental Protection.
Except where no Material Adverse Effect could reasonably be expected to
result therefrom:
(i) the operations of Holdings and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in
the Facilities) comply in all material respects with all Environmental
Laws;
(ii) Holdings and each of its Subsidiaries have obtained all
material Governmental Authorizations under Environmental Laws necessary
to their respective operations, and all such Governmental
Authorizations are in good standing, and Holdings and each of its
Subsidiaries are in compliance with all material terms and conditions
of such Governmental Authorizations;
(iii) neither Holdings nor any of its Subsidiaries has
received (a) any notice or claim to the effect that it is or may be
liable to any Person as a result of or in connection with any Hazardous
Materials or (b) any letter or request for information under Section
104 of the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. -section- 9604) or comparable state laws,
and, to the best knowledge of Comp+any, none of the operations of
Holdings or any of its Subsidiaries is the subject of any federal or
state investigation relating to or in connection with any Hazardous
Materials at any Facility or at any other location;
(iv) none of the operations of Holdings or any of its
Subsidiaries is subject to any judicial or administrative proceeding
alleging the violation of or liability under any Environmental Laws;
(v) to the knowledge of Holdings or Company, neither Holdings
nor any of its Subsidiaries nor any of their respective Facilities or
operations is subject to any outstanding written order or agreement
with any governmental authority or private party relating to (a) any
Environmental Laws or (b) any Environmental Claims;
(vi) neither Holdings nor any of its Subsidiaries has any
material contingent liability in connection with any Release of any
Hazardous Materials by Holdings or any of its Subsidiaries;
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(vii) neither Holdings nor any of its Subsidiaries nor, to the
knowledge of Holdings or Company, any predecessor of Holdings or any of
its Subsidiaries has filed any notice or report under any Environmental
Law indicating past or present treatment or Release of Hazardous
Materials at any Facility, and none of Holdings' or any of its
Subsidiaries' operations involves the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state equivalent;
(viii) to the knowledge of Company, no Hazardous Materials
exist on or under any Facility in a manner that has a reasonable
possibility of giving rise to an Environmental Claim;
(ix) neither Holdings nor any of its Subsidiaries nor, to the
best knowledge of Company, any of their respective predecessors has
disposed of any Hazardous Materials in a manner that has a reasonable
possibility of giving rise to an Environmental Claim;
(x) to the knowledge of Company, no underground storage tanks
or surface impoundments are on or at any Facility; and
(xi) to the knowledge of Company, no Lien in favor of any
Person relating to or in connection with any Environmental Claim has
been filed or has been attached to any Facility.
5.14 Employee Matters.
There is no strike or work stoppage in existence or threatened
involving Holdings or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 Solvency.
Each Loan Party is, and Company and its Subsidiaries, taken as a whole,
are, and, upon the incurrence of any Obligations by any Loan Party on any date
on which this representation is made, will be, Solvent.
5.16 Related Agreements.
A. Delivery of Related Agreements. Company has delivered to Agents
complete and correct copies of each Related Agreement and of all exhibits and
schedules thereto.
B. Seller's Warranties. Except to the extent otherwise set forth herein
or in the schedules hereto, to Holdings' and Company's knowledge (i) each of the
representations and warranties given by DIMAC or Heritage to Company in the
DIMAC Acquisition Agreement and (ii) each of the representations and warranties
given by AmeriComm or AmeriComm Holdings to Company in the AmeriComm Acquisition
Agreement was true and correct in all material respects as of the Closing Date
(or as of any earlier date to which such representation and
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warranty specifically relates), in each case subject to the qualifications set
forth in the schedules to the DIMAC Acquisition Agreement and the AmeriComm
Acquisition Agreement, as applicable.
C. Warranties of Company. Subject to the qualifications and the
schedules set forth therein, each of the representations and warranties given by
Company to DIMAC or Heritage in the DIMAC Acquisition Agreement and each of the
representations and warranties given by Company to AmeriComm Holdings in the
AmeriComm Acquisition Agreement was true and correct in all material respects as
of the Closing Date.
D. Survival. Notwithstanding anything in either the DIMAC Acquisition
Agreement or the AmeriComm Acquisition Agreement to the contrary, the
representations and warranties of Company set forth in subsections 5.16B and
5.16C shall, solely for purposes of this Agreement, survive the Closing Date for
the benefit of Agents and Lenders.
5.17 Disclosure.
The representations and warranties of Holdings and its Subsidiaries
contained in the Loan Documents and in any other document, certificate or
written statement furnished to Lenders by or on behalf of Holdings or any of its
Subsidiaries for use in connection with the transactions contemplated by this
Agreement, when taken together, do not contain any untrue statement of a
material fact or omit to state a material fact (known to Holdings or the
applicable Subsidiary, in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. Any
projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Company to be
reasonable at the time made, it being recognized by Lenders that such
projections as to future events are not to be viewed as facts and that actual
results during the period or periods covered by any such projections may differ
from the projected results. There is no fact known (or which should upon the
reasonable exercise of diligence be known) to Company (other than matters of a
general economic nature) that has had, or could reasonably be expected to result
in, a Material Adverse Effect and that has not been disclosed herein or in such
other documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
5.18 Subordination of Subordinated Indebtedness.
The subordination provisions of any Subordinated Indebtedness are
enforceable against the holders thereof, and the Loans and other monetary
Obligations hereunder are and will be within the definition of "Senior
Indebtedness" or "Senior Debt", as the case may be, included in such provisions.
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5.19 Year 2000 Problems.
Company and its Subsidiaries have (i) engaged in a process of
assessment of the existence of the Year 2000 Problems reasonably appropriate to
the scope and complexity of their respective Systems; (ii) adopted and are
successfully implementing a plan of correction ("Plan of Correction") which,
Company reasonably believes will result in a substantial elimination of Year
2000 Problems before any processing failure of a System or of Systems due to
Year 2000 Problems which might have a material effect on the business,
operations or financial performance of Company and, in the case of all Systems
critical to the business or operations of Company and its Subsidiaries,
elimination in all material respects of Year 2000 Problems prior to any
processing failure of a System or Systems due to Year 2000 Problems which might
have a material effect on the business, operations or financial performance of
Company; (iii) adopted and are successfully implementing validation procedures
calculated to test on an ongoing basis the sufficiency of the Plan of
Correction, its implementation, and the correction of Year 2000 Problems in
substantially all Systems and all Systems critical to the business or operations
of Company and its Subsidiaries; (iv) adopted and are successfully implementing
policies and procedures requiring regular reports to, and monitoring by, senior
management of Company concerning the foregoing matters; and (v) provided
Administrative Agent true and correct copies of the written Plan of Correction,
and related implementation budgets, reviewed and approved by Company's Board of
Directors.
SECTION 6.
AFFIRMATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 6.
6.1 Financial Statements and Other Reports.
Company will maintain, and cause each of its Subsidiaries to maintain,
a system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Company will deliver to Administrative Agent (with sufficient copies
for delivery to each Lender):
(i) Monthly Financials: as soon as available and in any event
within 30 days after each calendar month-end commencing with September
30, 1998, or in the case of the third month of any fiscal quarter,
within 45 days after the end of such month, (a) the consolidated and
consolidating balance sheets of Company and its Subsidiaries as at the
end of each fiscal month ending after the Closing Date and the related
consolidated and consolidating statements of income, and consolidated
statement of cash flows of Company and its Subsidiaries for such month
and for the period from the beginning of the then
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current Fiscal Year to the end of such month, setting forth, in the
case of statements of income only, in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan
and financial forecast for the current Fiscal Year delivered pursuant
to subsection 6.1(xiii), all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments; and (b) a
narrative report describing the operations of Company and its
Subsidiaries taken as a whole in the form prepared for presentation to
senior management for such month and for the period from the beginning
of the then current Fiscal Year to the end of such month;
(ii) Quarterly Financials: as soon as available and in any
event within 45 days after the end of the Fiscal Quarter ending
September 30, 1998 and of each Fiscal Quarter thereafter, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Quarter and the related
consolidated and consolidating statements of income and consolidated
statement of cash flows of Company and its Subsidiaries for such Fiscal
Quarter and for the period from the beginning of the then current
Fiscal Year to the end of such Fiscal Quarter, setting forth, in the
case of statements of income only, in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan
and financial forecast for the current Fiscal Year delivered pursuant
to subsection 6.1(xiii), all in reasonable detail and certified by the
chief financial officer of Company that they fairly present, in all
material respects, the financial condition of Company and its
Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments, and (b)
to the extent otherwise prepared for presentation to senior management,
a narrative report describing the operations of Company and its
Subsidiaries taken as a whole in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter;
(iii) Year-End Financials: as soon as available and in any
event within 90 days after the end of each Fiscal Year, (a) the
consolidated and consolidating balance sheets of Company and its
Subsidiaries as at the end of such Fiscal Year and the related
consolidated and consolidating statements of income and consolidated
statement of cash flows of Company and its Subsidiaries for such Fiscal
Year, setting forth, in the case of statements of income only, in
comparative form the corresponding figures for the previous fiscal year
and the corresponding figures from the consolidated plan and financial
forecast delivered pursuant to subsection 6.1(xiii) for the Fiscal Year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of Company that they fairly
present, in all material respects, the financial condition of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, (b) a
narrative report describing the operations of Company and its
Subsidiaries taken as a whole in the form prepared for
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presentation to senior management for such Fiscal Year, and (c) in the
case of such consolidated financial statements, a report thereon of
independent certified public accountants of recognized national
standing selected by Company and reasonably satisfactory to
Administrative Agent, which report shall be unqualified as to going
concern and scope of audit, and shall state that such consolidated
financial statements fairly present, in all material respects, the
consolidated financial position of Company and its Subsidiaries as at
the dates indicated and the results of their operations and their cash
flows for the periods indicated in conformity with GAAP applied on a
basis consistent with prior years (except as otherwise disclosed in
such financial statements) and that the audit by such accountants in
connection with such consolidated financial statements has been made in
accordance with generally accepted auditing standards;
(iv) Officer's and Compliance Certificates: together with each
delivery of financial statements of Company and its Subsidiaries
pursuant to subdivisions (ii) and (iii) above, (a) an Officer's
Certificate of Company stating that the signer has reviewed the terms
of this Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions and
condition of Company and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not
disclosed the existence during or at the end of such accounting period,
and that the signers do not have knowledge of the existence as at the
date of such Officer's Certificate, of any condition or event that
constitutes an Event of Default or Potential Event of Default, or, if
any such condition or event existed or exists, specifying the nature
and period of existence thereof and what action Company has taken, is
taking and proposes to take with respect thereto; and (b) a Compliance
Certificate demonstrating in reasonable detail compliance during and at
the end of the applicable accounting periods with the restrictions
contained in Section 7;
(v) Reconciliation Statements: if, as a result of any change
in accounting principles and policies from those used in the
preparation of the audited financial statements referred to in
subsection 5.3, the consolidated financial statements of Company and
its Subsidiaries delivered pursuant to subdivisions (i), (ii), (iii) or
(xiii) of this subsection 6.1 will differ in any material respect from
the consolidated financial statements that would have been delivered
pursuant to such subdivisions had no such change in accounting
principles and policies been made, then (a) together with the first
delivery of financial statements pursuant to subdivision (i), (ii),
(iii) or (xiii) of this subsection 6.1 following such change,
consolidated financial statements of Company and its Subsidiaries for
(y) the current Fiscal Year to the effective date of such change and
(z) the two full fiscal years immediately preceding the Fiscal Year in
which such change is made, in each case prepared on a pro forma basis
as if such change had been in effect during such periods, and (b)
together with each delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, a written statement of the chief accounting officer or
chief financial officer of Company setting forth the differences which
would have resulted if such financial statements had been prepared
without giving effect to such change, if reasonably requested by
Administrative Agent;
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(vi) Accountants' Certification: together with each delivery
of consolidated financial statements of Company and its Subsidiaries
pursuant to subdivision (iii) above, a written statement by the
independent certified public accountants giving the report thereon (a)
stating that their audit has included a reading of the terms of this
Agreement and the other Loan Documents as they relate to the covenants
set forth in subsection 7.6 and accounting matters, and (b) stating
whether, in connection with their audit examination, any condition or
event, insofar as such condition or event relates to the covenants set
forth in subsection 7.6 or accounting matters, that constitutes an
Event of Default or Potential Event of Default has come to their
attention and, if such a condition or event has come to their
attention, specifying the nature and period of existence thereof;
provided that such accountants shall not be liable by reason of any
failure to obtain knowledge of any such Event of Default or Potential
Event of Default that would not be disclosed in the course of their
audit examination;
(vii) Accountants' Reports: promptly upon receipt thereof
(unless restricted by applicable professional standards), copies of all
reports submitted to Company by independent certified public
accountants in connection with each annual, interim or special audit of
the financial statements of Company and its Subsidiaries made by such
accountants, including, without limitation, any comment letter
submitted by such accountants to management in connection with their
annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by
Company to its security holders, (b) all regular and periodic reports
and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by Holdings or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority, and (c) all press releases and other statements made
available generally by Holdings or any of its Subsidiaries to the
public concerning material developments in the business of Holdings or
any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of
Company obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or
becoming aware that any Lender has given any notice (other than to
Administrative Agent) or taken any other action with respect to a
claimed Event of Default or Potential Event of Default, (b) that any
Person has given any notice to Holdings or any of its Subsidiaries or
taken any other action with respect to a claimed default or event or
condition of the type referred to in subsection 8.2, (c) of any
condition or event that would be required to be disclosed in a current
report filed by Company with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if Company were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officer's Certificate specifying the nature and
period of existence of such condition, event or change, or specifying
the notice given or action taken by any such Person and the nature of
such claimed Event of Default, Potential Event of Default, default,
event or condition,
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and what action Holdings or Company has taken, is taking and proposes
to take with respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any
officer of Company obtaining knowledge of (X) the institution of, or
non-frivolous threat of, any action, suit, proceeding (whether
administrative, judicial or otherwise), governmental investigation or
arbitration against or affecting Holdings or any of its Subsidiaries or
any property of Holdings or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by Company to
Lenders or (Y) any material development in any Proceeding that, in any
case:
(a) if adversely determined, has a reasonable
possibility of giving rise to a Material Adverse Effect; or
(b) seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or obtain relief as
a result of, the transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to Company to enable Lenders and their counsel to
evaluate such matters; and (b) within 45 days after the end of each
fiscal quarter of Company, a schedule of all Proceedings involving an
alleged liability of, or claims against or affecting, Holdings or any
of its Subsidiaries equal to or greater than $2,500,000 and promptly
after request by Administrative Agent such other information as may
be reasonably requested by Administrative Agent to enable
Administrative Agent and its counsel to evaluate any of such
Proceedings;
(xi) ERISA Events: promptly upon Company becoming aware of the
occurrence of any ERISA Event that would result in a material liability
of Company or any of its ERISA Affiliates, a written notice specifying
the nature thereof, what action Company or any of its ERISA Affiliates
has taken, is taking or proposes to take with respect thereto and, when
known, any action taken or threatened by the Internal Revenue Service,
the Department of Labor or the PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of (a)
all written notices received by Company or any of its ERISA Affiliates
from a Multiemployer Plan sponsor concerning an ERISA Event; and (b)
such other documents or governmental reports or filings relating to any
Employee Benefit Plan as Administrative Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any
event no later than the beginning of each Fiscal Year, a monthly
consolidated and consolidating plan and financial forecast for the next
succeeding Fiscal Year, including without limitation (a) forecasted
consolidated balance sheet and forecasted consolidated and
consolidating statements of income and consolidated statement of cash
flows of Company and its Subsidiaries for such Fiscal Year, together
with a pro forma Compliance Certificate for
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such Fiscal Year and an explanation of the assumptions on which such
forecasts are based, and (b) such other information and projections as
Administrative Agent may reasonably request;
(xiv) Insurance: as soon as practicable and in any event by
the last day of each Fiscal Year, a report in form and substance
satisfactory to Administrative Agent outlining all material insurance
coverage maintained as of the date of such report by Holdings and its
Subsidiaries and all material insurance coverage planned to be
maintained by Holdings and its Subsidiaries in the immediately
succeeding Fiscal Year;
(xv) Environmental Audits and Reports: as soon as practicable
following receipt thereof, copies of all environmental audits and
reports, whether prepared by personnel of Holdings or any of its
Subsidiaries or by independent consultants, with respect to significant
environmental matters at any Facility or which relate to an
Environmental Claim which could result in a Material Adverse Effect;
(xvi) Regulatory Notices: promptly upon receipt, notification
of any non-renewal, cancellation, termination, revocation, suspension,
impairment or material modification of, or of any hearing, proceeding
or investigation regarding, any license held by Holdings or any of its
Subsidiaries which is reasonably likely to have a Material Adverse
Effect;
(xvii) Holdings' Financial Statements: promptly upon their
becoming available, copies of all unaudited and audited financial
statements and reports sent or made available by Holdings to creditors
of Holdings; and
(xviii) Other Information: with reasonable promptness, such
other information and data with respect to Holdings or any of its
Subsidiaries as from time to time may be reasonably requested by
Administrative Agent.
For purposes of subsections 6.1(i), 6.1(ii) and 6.1(iii),
"consolidating" balance sheets of Company and its Subsidiaries refer to balance
sheets consolidating the financial position of the major operating group of
Company's Subsidiaries, which operating groups as of the Effective Date consist
of (1) DIMAC and its Subsidiaries and (2) AmeriComm Holdings and its
Subsidiaries.
6.2 Corporate Existence
Except as permitted under subsection 7.7, each of Holdings and Company
will, and will cause each of its Subsidiaries to, at all times preserve and keep
in full force and effect its corporate existence and all rights and franchises
material to the business of Holdings and its Subsidiaries (on a consolidated
basis).
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6.3 Payment of Taxes and Claims; Tax Consolidation.
A. Company will, and will cause each of its Subsidiaries to, pay all
taxes, assessments and other governmental charges imposed upon it or any of its
properties or assets or in respect of any of its income, businesses or
franchises before any penalty accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or may become a Lien upon
any of its properties or assets, prior to the time when any penalty or fine
shall be incurred with respect thereto; provided that no such charge or claim
need be paid if being contested in good faith by appropriate proceedings
promptly instituted and diligently conducted and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor.
B. Company will not, nor will it permit any of its Subsidiaries to,
file or consent to the filing of any consolidated income tax return with any
Person (other than with Holdings, Company or Subsidiaries of Company).
6.4 Maintenance of Properties; Insurance.
Company will, and will cause each of its Subsidiaries to, maintain or
cause to be maintained in good repair, working order and condition, ordinary
wear and tear excepted, all material properties used or useful in the business
of Company and its Subsidiaries and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof. Company will
maintain or cause to be maintained, with financially sound and reputable
insurers, insurance with respect to its properties and business and the
properties and businesses of its Subsidiaries against loss or damage of the
kinds customarily carried or maintained under similar circumstances by
corporations of established reputation engaged in similar businesses. Each such
policy of casualty insurance covering damage to or loss of property shall name
Administrative Agent for the benefit of Lenders as the loss payee thereunder for
all losses, subject to application of proceeds as required by subsection
2.4B(iii)(d), and shall provide for at least 30 days' prior written notice to
Administrative Agent of any modification or cancellation of such policy.
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6.5 Inspection; Lender Meeting.
Company shall, and shall cause each of its Subsidiaries to, permit any
authorized representatives designated by any Lender to visit and inspect any of
the properties of Company or any of its Subsidiaries, including its and their
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its and their affairs, finances and accounts with its
and their officers and independent public accountants, all upon reasonable
advance notice and at such reasonable times during normal business hours and as
often as may be reasonably requested. Without in any way limiting the foregoing,
Company will, upon the request of Administrative Agent, participate in a meeting
of Administrative Agent and Lenders once during each Fiscal Year to be held at
Company's corporate offices (or such other location as may be agreed to by
Company and Administrative Agent) at such time as may be agreed to by Company
and Administrative Agent.
6.6 Compliance with Laws, etc.
Company shall, and shall cause each of its Subsidiaries to, comply with
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which could reasonably be expected to
cause a Material Adverse Effect.
6.7 Environmental Disclosure and Inspection.
A. Company shall, and shall cause each of its Subsidiaries to, exercise
all due diligence in order to comply and cause (i) all tenants under any leases
or occupancy agreements affecting any portion of the Facilities and (ii) all
other Persons on or occupying such property, to comply with all Environmental
Laws, noncompliance with which could reasonably be expected to cause a Material
Adverse Effect.
B. Company agrees that Administrative Agent may, from time to time,
retain, at Company's expense, an independent professional consultant reasonably
acceptable to Company to review any report relating to Hazardous Materials
prepared by or for Company and to conduct its own investigation of any Facility
currently owned, leased, operated or used by Company or any of its Subsidiaries,
if (x) an Event of Default or Potential Event of Default shall have occurred and
be continuing, or (y) Administrative Agent reasonably believes (1) that an
occurrence relating to such Facility is likely to give rise to an Environmental
Claim or (2) that a violation of an Environmental Law on or around such Facility
has occurred, which could, in either such case, result in a Material Adverse
Effect. Company agrees to use all reasonable efforts to obtain permission for
Administrative Agent's professional consultant to conduct its own investigation
of any such Facility previously owned, leased, operated or used by Company or
any of its Subsidiaries. Company shall use its reasonable efforts to obtain for
Administrative Agent and its agents, employees, consultants and contractors the
right, upon reasonable notice to Company, to enter into or on to the Facilities
currently owned, leased, operated or used by Company or any of its Subsidiaries
to perform such tests on such property as are reasonably necessary to conduct
such a review and/or investigation. Any such investigation of any Facility shall
be conducted, unless otherwise agreed to by Company and Administrative Agent,
during
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normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at any such
Facility or to cause any damage or loss to any property at such Facility.
Company and Administrative Agent hereby acknowledge and agree that any report of
any investigation conducted at the request of Administrative Agent pursuant to
this subsection 6.7B will be obtained and shall be used by Administrative Agent
and Lenders for the purposes of Lenders' internal credit decisions, to monitor
and police the Loans and to protect Lenders' security interests, if any, created
by the Loan Documents. Administrative Agent agrees to deliver a copy of any such
report to Company with the understanding that Company acknowledges and agrees
that (i) it will indemnify and hold harmless Administrative Agent and each
Lender from any costs, losses or liabilities relating to Company's use of or
reliance on such report, (ii) neither Agent nor any Lender makes any
representation or warranty with respect to such report, and (iii) by delivering
such report to Company, neither Administrative Agent nor any Lender is requiring
or recommending the implementation of any suggestions or recommendations
contained in such report.
C. Company shall promptly advise Administrative Agent in writing and in
reasonable detail of (i) any Release of any Hazardous Materials required to be
reported to any federal, state, local or foreign governmental or regulatory
agency under any applicable Environmental Laws, (ii) any and all written
communications with respect to any Environmental Claims that have a reasonable
possibility of giving rise to a Material Adverse Effect or with respect to any
Release of Hazardous Materials required to be reported to any federal, state or
local governmental or regulatory agency, (iii) any remedial action taken by
Company or any other Person in response to (x) any Hazardous Materials on, under
or about any Facility, the existence of which has a reasonable possibility of
resulting in an Environmental Claim having a Material Adverse Effect, or (y) any
Environmental Claim that could have a Material Adverse Effect, (iv) Company's
discovery of any occurrence or condition on any real property adjoining or in
the vicinity of any Facility that could cause such Facility or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use thereof under any Environmental Laws, and (v) any request for information
from any governmental agency that fairly suggests such agency is investigating
whether Company or any of its Subsidiaries may be potentially responsible for a
Release of Hazardous Materials.
D. Company shall promptly notify Administrative Agent of (i) any
proposed acquisition of stock, assets, or property by Company or any of its
Subsidiaries that could reasonably be expected to expose Company or any of its
Subsidiaries to, or result in, Environmental Claims that could have a Material
Adverse Effect or that could reasonably be expected to have a material adverse
effect on any Governmental Authorization then held by Company or any of its
Subsidiaries and (ii) any proposed action to be taken by Company or any of its
Subsidiaries to commence manufacturing, industrial or other similar operations
that could reasonably be expected to subject Company or any of its Subsidiaries
to additional laws, rules or regulations, including, without limitation, laws,
rules and regulations requiring additional environmental permits or licenses,
that are materially different from the laws, rules and regulations applicable to
the operations of Company and its Subsidiaries as of the Closing Date.
E. Company shall, at its own expense, provide copies of such documents
or information as Administrative Agent may reasonably request in relation to any
matters disclosed
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pursuant to this subsection 6.7.
6.8 Company's Remedial Action Regarding Hazardous Materials.
Company shall promptly take, and shall cause each of its Subsidiaries
promptly to take, any and all necessary remedial action in connection with the
presence, storage, use, disposal, transportation or Release of any Hazardous
Materials on or under any Facility in order to comply with all applicable
Environmental Laws and Governmental Authorizations unless the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. In
the event Company or any of its Subsidiaries undertakes any remedial action with
respect to any Hazardous Materials on or under any Facility, Company or such
Subsidiary shall conduct and complete such remedial action in material
compliance with all applicable Environmental Laws, and in accordance with the
policies, orders and directives of all federal, state and local governmental
authorities except when, and only to the extent that, Company's or such
Subsidiary's liability for such presence, storage, use, disposal, transportation
or discharge of any Hazardous Materials is being contested in good faith by
Company or such Subsidiary.
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6.9 Execution of Subsidiary Guaranty and Collateral Documents by
Subsidiaries and Future Subsidiaries.
In the event that any Person that becomes a Subsidiary after the date
hereof in accordance with the provisions of subsection 7.7(vii) or (viii),
Company will promptly notify Administrative Agent of that fact and cause such
Subsidiary (at the time it becomes a Subsidiary) to execute and deliver to
Administrative Agent a counterpart of the Subsidiary Guaranty, the Pledge
Agreement and the Security Agreement, and to take all such further action and
execute all such further documents and instruments as may be required to grant
and perfect in favor of Administrative Agent, for the benefit of Lenders, a
First Priority security interest in all of the real, mixed and personal property
assets of such Subsidiary. Company shall deliver to Administrative Agent,
together with such Loan Documents, (i) (x) if such Subsidiary is a corporation,
(a) certified copies of such Subsidiary's Articles or Certificate of
Incorporation, together, if applicable, with a good standing certificate from
the Secretary of State of the jurisdiction of its incorporation, each to be
dated a recent date prior to their delivery to Administrative Agent, (b) a copy,
if applicable, of such Subsidiary's Bylaws, certified by its corporate secretary
or an assistant corporate secretary as of a recent date prior to their delivery
to Administrative Agent, (c) a certificate executed by the secretary or an
assistant secretary of such Subsidiary as to (i) the incumbency and signatures
of the officers of such Subsidiary executing the Subsidiary Guaranty, the
Collateral Documents and the other Loan Documents to which such Subsidiary is a
party and (ii) the fact that the attached resolutions of the Board of Directors
of such Subsidiary authorizing the execution, delivery and performance of the
Subsidiary Guaranty, such Collateral Documents and such other Loan Documents are
in full force and effect and have not been modified or rescinded, (y) if such
Subsidiary is a limited partnership, (a) from or with respect to such
Subsidiary's general partner, each of the items required to be delivered under
item (a) of clause (x) above if such Subsidiary were a corporation, (b)
certified copies of its Certificate of Limited Partnership, together with a good
standing certificate from the Secretary of State of its jurisdiction, each dated
a recent date prior to their delivery to Administrative Agent, and (c) copies of
its limited partnership agreement, certified as true, correct and in full force
and effect as of the date of its delivery to Administrative Agent, with no
amendments, modifications or supplements thereto, by the corporate secretary or
an assistant secretary of its general partner, and (iv) a favorable opinion of
counsel to such Subsidiary, in form and substance satisfactory to Administrative
Agent and its counsel, as to (a) the due organization and good standing of such
Subsidiary, (b) the due authorization, execution and delivery by such Subsidiary
of the Subsidiary Guaranty, the Collateral Documents and any other Loan
Documents to which it is a party and (c) the enforceability of the Subsidiary
Guaranty and such Collateral Documents against such Subsidiary, and (d) such
other matters as Administrative Agent may reasonably request, all of the
foregoing to be reasonably satisfactory in form and substance to Administrative
Agent and its counsel. In addition, Company shall promptly deliver a supplement
to Schedule 5.1 to Administrative Agent if any Subsidiary is created or acquired
pursuant to subsection 7.7(vii) or (viii).
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6.10 Interest Rate Protection.
At all times Company shall maintain in effect one or more Interest Rate
Agreements in form and substance satisfactory to Administrative Agent to the
extent necessary so that the sum of (i) the aggregate notional principal amount
of Indebtedness covered by such Interest Rate Agreements plus (ii) the aggregate
principal amount of Indebtedness of Company bearing interest at fixed rates,
equals or exceeds $100,000,000.
6.11 Further Assurances.
At any time or from time to time upon the request of Administrative
Agent, Company will, at its expense, promptly execute, acknowledge and deliver
such further documents and do such other acts and things as Administrative Agent
may reasonably request in order to effect fully the purposes of the Loan
Documents and to provide for payment of the Obligations in accordance with the
terms of this Agreement, the Notes and the other Loan Documents. In furtherance
and not in limitation of the foregoing, Company shall take, and cause each of
its Subsidiaries to take, such actions as Administrative Agent may reasonably
request from time to time (including, without limitation, the execution and
delivery of guaranties, security agreements, pledge agreements, mortgages, deeds
of trust, landlord's consents and estoppels, stock powers, financing statements
and other documents, the filing or recording of any of the foregoing, title
insurance with respect to any of the foregoing that relates to an interest in
real property, and the delivery of stock certificates and other collateral with
respect to which perfection is obtained by possession) to ensure that the
Obligations are guarantied by the Guarantors and are secured by substantially
all of the assets of Company and its Subsidiaries and all of the outstanding
capital stock of Company.
6.12 Conforming Leasehold Interests; Matters Relating to Additional Real
Property Collateral.
A. Notice of Property Acquisition. As promptly as practicable and in
any event no later than the date of acquisition by Company or any of its
Subsidiaries of any interest in real property (whether fee or leased), Company
shall deliver written notice to Administrative Agent of such acquisition.
B. Conforming Leasehold Interests. If Company or any of its
Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such
Subsidiary to, use its best efforts (without requiring Company or such
Subsidiary to relinquish any material rights or incur any material obligations
or to expend more than a nominal amount of money over and above the
reimbursement, if required, of the landlord's out-of-pocket costs, including
attorneys fees) to cause such Leasehold Property to be a Conforming Leasehold
Interest.
C. Additional Mortgages, Etc. From and after the Closing Date, in the
event that (i) Company or any of its Subsidiaries acquires any fee interest in
real property (ii) Company or any of its Subsidiaries acquires any leasehold
property (other than any leased property (a) with respect to which the aggregate
payments under the term of the lease are less than $150,000 per
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annum, (b) that does not contain any financial records not contained elsewhere,
(c) that does not have any property with an aggregate value in excess of
$250,000 and (d) that is not material to the operation of the business of
Company or any of its Subsidiaries (each such property being an "Excluded Leased
Asset"), or (iii) at the time any Person becomes a Subsidiary Guarantor, such
Person owns or holds any fee interest in real property or any leasehold interest
(other than an Excluded Leased Asset) (any such real property asset described in
the foregoing clauses (i), (ii) or (iii) being an "Additional Mortgaged
Property"), Company or such Subsidiary shall deliver to Administrative Agent, as
soon as practicable after such Person acquires such Additional Mortgaged
Property the following:
(i) Additional Mortgage and Assignment of Rents and Leases. A
fully executed and notarized Mortgage (an "Additional Mortgage") and a
fully executed and notarized Assignment of Rents and Leases, each in
proper form for recording in all appropriate places in all applicable
jurisdictions, encumbering the interest of such Loan Party in such
Additional Mortgaged Property;
(ii) Opinions of Counsel. (a) A favorable opinion of counsel
to such Loan Party, in form and substance satisfactory to
Administrative Agent and its counsel, as to the due authorization,
execution and delivery by such Loan Party of such Additional Mortgage
and such other matters as Administrative Agent may reasonably request,
and (b) if required by Administrative Agent, an opinion of counsel
(which counsel shall be reasonably satisfactory to Administrative
Agent) in the state in which such Additional Mortgaged Property is
located with respect to the enforceability of the form of Additional
Mortgage to be recorded in such state and such other matters (including
without limitation any matters governed by the laws of such state
regarding personal property security interests in respect of any
Collateral) as Administrative Agent may reasonably request, in each
case in form and substance reasonably satisfactory to Administrative
Agent;
(iii) Landlord Consent and Estoppel; Recorded Leasehold
Interest. In the case of any Additional Mortgaged Property consisting
of a Leasehold Property, (a) a Landlord Consent and Estoppel and (b)
evidence that such Leasehold Property is a Recorded Leasehold Interest;
(iv) Title Insurance. (a) An ALTA standard form mortgagee
title insurance policy or an unconditional commitment therefor (an
"Additional Mortgage Policy") issued by the Title Company with respect
to such Additional Mortgaged Property, in an amount satisfactory to
Administrative Agent, insuring fee simple title to, or a valid
leasehold interest in, such Additional Mortgaged Property vested in
such Loan Party and assuring Administrative Agent that such Additional
Mortgage creates a valid and enforceable First Priority mortgage Lien
on such Additional Mortgaged Property, subject only to a standard
survey exception, which Additional Mortgage Policy (1) shall include an
endorsement for mechanics' liens, for future advances under this
Agreement and for any other matters reasonably requested by
Administrative Agent and (2) shall provide for affirmative insurance
and such reinsurance as Administrative Agent may reasonably request,
all of the foregoing in form and substance reasonably satisfactory to
Administrative
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Agent; and (b) evidence satisfactory to Administrative Agent that such
Loan Party has (i) delivered to the Title Company all certificates and
affidavits required by the Title Company in connection with the
issuance of the Additional Mortgage Policy and (ii) paid to the Title
Company or to the appropriate governmental authorities all expenses and
premiums of the Title Company in connection with the issuance of the
Additional Mortgage Policy and all recording and stamp taxes (including
mortgage recording and intangible taxes) payable in connection with
recording the Additional Mortgage in the appropriate real estate
records;
(v) Title Report. If no Additional Mortgage Policy is required
with respect to such Additional Mortgaged Property, a title report
issued by the Title Company with respect thereto, dated not more than
30 days prior to the date such Additional Mortgage is to be recorded
and satisfactory in form and substance to Administrative Agent;
(vi) Copies of Documents Relating to Title Exceptions. Copies
of all recorded documents listed as exceptions to title or otherwise
referred to in the Additional Mortgage Policy or title report delivered
pursuant to clause (v) or (vi) above;
(vii) Matters Relating to Flood Hazard Properties. (a)
Evidence, which may be in the form of a letter from an insurance broker
or a municipal engineer, as to (1) whether such Additional Mortgaged
Property is a Flood Hazard Property and (2) if so, whether the
community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program, (b) if such
Additional Mortgaged Property is a Flood Hazard Property, such Loan
Party's written acknowledgement of receipt of written notification from
Administrative Agent (1) that such Additional Mortgaged Property is a
Flood Hazard Property and (2) as to whether the community in which such
Flood Hazard Property is located is participating in the National Flood
Insurance Program, and (c) in the event such Additional Mortgaged
Property is a Flood Hazard Property that is located in a community that
participates in the National Flood Insurance Program, evidence that
Company has obtained flood insurance in respect of such Flood Hazard
Property to the extent required under the applicable regulations of the
Board of Governors of the Federal Reserve System; and
(viii) Environmental Audit. Reports and other information, in
form, scope and substance satisfactory to Administrative Agent and
prepared by environmental consultants satisfactory to Administrative
Agent, concerning any environmental hazards or liabilities to which
Company or any of its Subsidiaries may be subject with respect to such
Additional Mortgaged Property;
provided, that notwithstanding anything to the contrary contained in this
subsection 6.12, neither Company nor any of its Subsidiaries shall be required
to deliver any of the items set forth in this subsection 6.12C with respect to
any property unless Administrative Agent requests delivery of such items.
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6.13 Year 2000 Problems.
Company shall (i) promptly advise Administrative Agent of any material
(A) disruption or delay in the implementation of the Plan of Correction, as the
same may be updated from time to time, including any determination by Company,
any senior manager of Company or any other Subsidiary of Company, or any
consultant known to Company or any other Subsidiary of Company with respect to
Year 2000 Problems ("Consultant") that there is or will be a failure to achieve
any of the objectives specifically identified in subdivision (ii) of subsection
5.19, or (B) change in the written Plan of Correction or related implementation
budget referred to in subdivision (v) of subsection 5.19, or any later version
thereof furnished to Administrative Agent; (ii) afford to Administrative Agent
and its representatives, upon three days' notice to Company, reasonable access
to Company's and its Subsidiaries' properties, personnel, service providers,
vendors and records for the purpose of enabling Administrative Agent to assess
the adequacy of, and the record of performance of Company and its Subsidiaries
with respect to, the Plan of Correction, related financial performance and
conformity of actual performance with related implementation budgets; and (iii)
periodically report to Administrative Agent, in such form as Administrative
Agent may reasonably request, on (a) the progress of Company and its
Subsidiaries in implementing the Plan of Correction, (b) the budget for, and
actual financial performance with respect to, implementation of the Plan of
Correction and (c) the assessment of Company, any senior manager of Company or
any other Subsidiary of Company, or any Consultant of the adequacy of the Plan
of Correction or the related implementation budget.
SECTION 7.
NEGATIVE COVENANTS
Company covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
Company shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this Section 7. Holdings covenants and agrees that, so long as any
of the Commitments hereunder shall remain in effect and until payment in full of
all of the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, Holdings shall perform all covenants in subsections 7.13A, 7.13B and
7.15.
7.1 Indebtedness.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, assume or guaranty, or otherwise become
or remain directly or indirectly liable with respect to, any Indebtedness,
except:
(i) Each of the Loan Parties may become and remain liable with
respect to its respective Obligations;
(ii) Company and its Subsidiaries, as applicable, may remain
liable with
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respect to Indebtedness described in Schedule 7.1 annexed hereto;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations permitted by subsection
7.4 and, upon any matured obligations actually arising pursuant
thereto, the Indebtedness corresponding to the Contingent Obligations
so extinguished;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Indebtedness under Capital Leases capitalized on the
consolidated balance sheet of Company and its Subsidiaries and other
Indebtedness secured by Liens permitted under subsection 7.2A(iii);
provided, that the aggregate amount of all Indebtedness outstanding
under this clause (iv) at any time shall not exceed $20,000,000;
(v) Company may become and remain liable with respect to
Indebtedness to any of its Subsidiaries, any Subsidiary Guarantor may
become and remain liable with respect to Indebtedness to Company, and
any Subsidiary of Company which is not a Subsidiary Guarantor may
become and remain liable with respect to Indebtedness to any other
Subsidiary of Company which is not a Subsidiary Guarantor; provided
that, in each case, (a) all such intercompany Indebtedness shall be
evidenced by promissory notes, (b) all such intercompany Indebtedness
owed by Company to any of its respective Subsidiaries shall be
unsecured and subordinated in right of payment to the payment in full
of the Obligations pursuant to the terms of the applicable promissory
notes or an intercompany subordination agreement, (c) any payment by
Company or by any Subsidiary of Company under any guaranty of the
Obligations shall result in a pro tanto reduction of the amount of any
intercompany Indebtedness owed by Company or by such Subsidiary to
Company or to any of its Subsidiaries for whose benefit such payment is
made and (d) each such Subsidiary Guarantor shall have executed and
delivered a counterpart of the Subsidiary Guaranty and the Pledge
Agreement and the Security Agreement;
(vi) Company may become and remain liable with respect to
Permitted Seller Paper in an aggregate principal amount not to exceed
$25,000,000 at any time outstanding;
(vii) Company and its Subsidiaries may remain liable with
respect to Permitted Earn Out Agreements in effect on the Closing Date,
and Company may become and remain liable with respect to Permitted Earn
Out Agreements after the Effective Date;
(viii) AmeriComm Holdings and its Subsidiaries may remain
liable with respect to Indebtedness under any Existing Senior Notes not
tendered pursuant to the Debt Tender Offer;
(ix) Company may become and remain liable with respect to the
Senior Subordinated Notes; and
(x) Company and its Subsidiaries may become and remain liable
with respect
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to other Indebtedness in an aggregate principal amount not to exceed at
any time outstanding $15,000,000.
7.2 Liens and Related Matters.
A. Prohibition on Liens. Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset of any kind
(including any document or instrument in respect of goods or accounts
receivable) of Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement, or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any state or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens described in Schedule 7.2A annexed hereto;
(iii) Purchase money security interests (including mortgages,
conditional sales, Capital Leases and any other title retention or
deferred purchase devices) in real or tangible personal property of
Company or any of its Subsidiaries existing or created at the time of
acquisition thereof or within 30 days thereafter, and the renewal,
extension and refunding of any such security interest in an amount not
exceeding the amount thereof remaining unpaid immediately prior to such
renewal, extension or refunding; provided, however, that such
Indebtedness is permitted by subsection 7.1(iv) or subsection 7.1(x)
hereof; and provided further, that Indebtedness which is not permitted
by subsection 7.1(iv) and is secured by Liens permitted under this
subsection 7.2A(iii) shall not (a) exceed $5,000,000 in aggregate
principal amount outstanding and (b) be owed to any Person other than a
Lender;
(iv) Liens on assets of Company and its Subsidiaries not
otherwise permitted under this subsection 7.2A, securing Indebtedness
in an aggregate amount not to exceed $2,500,000 at any time
outstanding;
(v) [Intentionally omitted]; and
(vi) Liens in favor of Administrative Agent granted pursuant
to the Collateral Documents.
B. Equitable Lien in Favor of Lenders. If Company or any of its
Subsidiaries shall create or assume any consensual Lien upon any of its
properties or assets, whether now owned or hereafter acquired, other than Liens
excepted by the provisions of subsection 7.2A, it shall make or cause to be made
effective provision whereby the Obligations will be secured by such Lien equally
and ratably with any and all other Indebtedness secured thereby as long as any
such Indebtedness shall be so secured; provided that, notwithstanding the
foregoing, this covenant shall not be construed as a consent by Requisite
Lenders to the creation or assumption of any
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such Lien not permitted by the provisions of subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific
property encumbered to secure payment of particular Indebtedness or to be sold
pursuant to an executed agreement with respect to an Asset Sale, neither Company
nor any of its Subsidiaries shall enter into any agreement prohibiting the
creation or assumption of any Lien upon any of its properties or assets, whether
now owned or hereafter acquired (other than in connection with the Senior
Subordinated Notes, the Holdings Notes and the Holdings PIK Notes).
D. No Restrictions on Subsidiary Distributions to Company or Other
Subsidiaries. Except (x) for encumbrances or restrictions under the Senior
Subordinated Note Indenture, and (y) as otherwise provided herein, Company will
not, and will not permit any of its Subsidiaries to, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any such Subsidiary to (i) pay dividends or make
any other distributions on any of such Subsidiary's capital stock owned by
Company or any other Subsidiary of Company, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to Company or any other Subsidiary of
Company, (iii) make loans or advances to Company or any other Subsidiary of
Company, or (iv) transfer any of its property or assets to Company or any other
Subsidiary of Company.
7.3 Investments; Joint Ventures.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, make or own any Investment in any Person, including any
Joint Venture, except:
(i) Company and its Subsidiaries may (a) continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company, (b) make and own additional Investments in any Subsidiary
which is a Subsidiary Guarantor at the time each such additional
Investment is made, and (c) own Investments in their respective
Subsidiaries to the extent that such Investments reflect an increase in
the value of such Subsidiaries;
(ii) Company and its Subsidiaries may make intercompany loans
to the extent permitted by subsection 7.1(v);
(iii) Company and its Subsidiaries may make and own
Investments in Cash Equivalents;
(iv) Company and its Subsidiaries may make Consolidated
Capital Expenditures permitted by subsection 7.6D;
(v) Company and its Subsidiaries may make and own Investments
in Subsidiaries acquired pursuant to acquisitions permitted pursuant to
subsection 7.7(vii);
(vi) Company and its Subsidiaries may make Investments
contemplated by the DIMAC Acquisition Agreement and the AmeriComm
Acquisition Agreement;
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(vii) Company and its Subsidiaries may make loans to officers
of Holdings and its Subsidiaries in an aggregate amount not to exceed
$500,000 at any time; and
(viii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time
$5,000,000; provided that the aggregate amount of such Investments in
any Fiscal Year shall not exceed $2,500,000.
7.4 Contingent Obligations.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or become or remain liable with respect to any
Contingent Obligation, except:
(i) Company may become and remain liable with respect to
Contingent Obligations in respect of Letters of Credit, and the
Subsidiary Guarantors may become and remain liable with respect to
Contingent Obligations arising under the Subsidiary Guaranty;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under Interest Rate Agreements
required under subsection 6.10; provided, that such Interest Rate
Agreements are entered into to protect against fluctuations in interest
rates and not for the purposes of speculation;
(iii) Company and its Subsidiaries may become and remain
liable with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets;
(iv) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees in the ordinary
course of business of the obligations of suppliers, landlords,
customers, franchisees and licensees of Company and its Subsidiaries in
an aggregate amount not to exceed at any time $500,000;
(v) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of unsecured
guaranties of any obligations (other than obligations in respect of
Permitted Earn Out Agreements, Permitted Seller Paper or Indebtedness
of Company permitted under subsection 7.1(ix)) of Company or any of its
Subsidiaries permitted under this Agreement in an aggregate amount not
to exceed at any time $1,000,000;
(vi) Subsidiaries of Company may become and remain liable with
respect to Contingent Obligations in respect of unsecured guaranties of
any Indebtedness of Company permitted under subsection 7.1(ix);
provided, that in each case the obligations of any such Subsidiary
under any such guaranty shall be subordinated in right of payment to
the Obligations pursuant to documentation containing subordination
provisions and other material terms reasonably satisfactory to
Administrative Agent;
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(vii) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule 7.4
annexed hereto; and
(viii) Company and its Subsidiaries may become and remain
liable with respect to other Contingent Obligations; provided that the
maximum aggregate liability, contingent or otherwise, of Company and
its Subsidiaries in respect of all such Contingent Obligations shall at
no time exceed $2,000,000.
7.5 Restricted Junior Payments.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, declare, order, pay, make or set apart any sum for any
Restricted Junior Payment; provided that, so long as no Event of Default has
occurred and is continuing or would result therefrom, (i) Company and its
Subsidiaries may make scheduled payments in respect of any Permitted Seller
Paper, (ii) Company and its Subsidiaries may make (x) regularly scheduled
payments of interest in respect of the Senior Subordinated Notes and any other
Subordinated Indebtedness and (y) Restricted Junior Payments to Holdings to
permit regularly scheduled payments of interest in respect of the Holdings Notes
and the Holdings PIK Notes, in each case in accordance with the terms of, and
only to the extent required by, and subject to the provisions contained in, the
indenture or other agreements pursuant to which such Subordinated Indebtedness,
Holdings Notes or Holdings PIK Notes were issued, in each case as such indenture
or other agreements may be amended from time to time to the extent permitted
under subsection 7.13, (iii) Company may make Restricted Junior Payments to
Holdings to permit the payment of the Management Fees under the Management
Services Agreement, (iv) Company may make Restricted Junior Payments to
Holdings, (a) in an aggregate amount not to exceed $500,000 in any Fiscal Year,
to the extent necessary to permit Holdings to pay general administrative costs
and expenses and (b) to the extent necessary to permit Holdings to discharge the
consolidated tax liabilities of Holdings and its Subsidiaries, (v) Company may
make Restricted Junior Payments to Holdings to the extent required for Holdings
to make, Restricted Junior Payments in an aggregate amount not to exceed
$2,500,000 in any Fiscal Year to the extent necessary to make repurchases of
capital stock (and options or warrants to purchase such capital stock) of
Holdings from employees upon termination (including by reason of death,
disability or retirement) of such employees, and (vi) so long as no Event of
Default or Potential Event of Default has occurred and is continuing or would be
caused thereby, Company may make Restricted Junior Payments of amounts to the
extent required for Holdings to repurchase, redeem, defease or otherwise prepay
or retire any Existing Senior Notes not tendered pursuant to the Debt Tender
Offer on terms (set forth in the Existing Senior Note Indenture or otherwise) no
less favorable in any material respect to Holdings, Company and Lenders than the
terms of the Debt Tender Offer; and, provided further, that any Restricted
Junior Payments by Company to Holdings permitted under this subsection shall be
applied by Holdings for the purposes specified in this subsection.
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7.6 Financial Covenants.
A. Minimum Interest Coverage Ratio. The ratio (the "Interest Coverage
Ratio") of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Interest
Expense for any four-Fiscal Quarter period (or such shorter measurement period
contemplated by the definition) ending during any of the periods set forth below
(each applicable four-Fiscal Quarter period being a "Calculation Period") shall
not be less than the correlative ratio indicated; provided that, for any
measurement of the Interest Coverage Ratio made prior to the completion of four
Fiscal Quarters following the Closing Date, Consolidated Interest Expense for
the relevant Calculation Period shall equal the product of (i) Consolidated
Interest Expense for the period from the Closing Date to the date of measurement
multiplied by (ii) a fraction, the numerator of which is 365 and the denominator
of which is the number of days during the period from the Closing Date to the
date of measurement.
<TABLE>
<CAPTION>
Period During Which Minimum Interest
Calculation Period Ends Coverage Ratio
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
<S> <C>
Closing Date through March 31, 1999 1.65:1.00
- ---------------------------------------------------------------------------------------------------
April 1, 1999 through December 31, 1999 1.80:1.00
- ---------------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 2.15:1.00
- ---------------------------------------------------------------------------------------------------
January 1, 2001 through December 31, 2001 2.35:1.00
- ---------------------------------------------------------------------------------------------------
January 1, 2002 through December 31, 2002 2.50:1.00
- ---------------------------------------------------------------------------------------------------
January 1, 2003 and thereafter 2.75:1.00
</TABLE>
B. Minimum Fixed Charge Coverage Ratio. The ratio (the "Fixed Charge
Coverage Ratio") of (i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed
Charges for any Calculation Period shall not be less than the correlative ratio
indicated; provided that, for any measurement of the Fixed Charge Coverage Ratio
made prior to the completion of four Fiscal Quarters following the Closing Date,
Consolidated Interest Expense for the relevant Calculation Period shall equal
the product of (i) Consolidated Interest Expense for the period from the Closing
Date to the date of measurement multiplied by (ii) a fraction, the numerator of
which is 365 and the denominator of which is the number of days during the
period from the Closing Date to the date of measurement, and each other
component of Consolidated Fixed Charges shall be measured from the Closing Date
to the date of measurement.
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<TABLE>
<CAPTION>
Minimum Fixed
Period During Which Charge
Calculation Period Ends Coverage Ratio
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
<S> <C>
Closing Date through December 31, 1999 1.00:1.00
- ------------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 1.05:1.00
- ------------------------------------------------------------------------------------------------
January 1, 2001 and thereafter 1.10:1.00
</TABLE>
C. Maximum Leverage Ratio. The ratio (the "Leverage Ratio") of (i) the
sum of (x) Consolidated Total Debt as of the last day (any such day being a
"Calculation Date") of any Fiscal Quarter ending during any of the periods set
forth below plus (y) so long as the Permitted Earn Out Agreements described on
Schedule 1.1(ii) annexed hereto have not been cancelled or otherwise terminated,
(1) the amount with respect to each such Permitted Earn Out Agreement set forth
on Schedule 7.6C annexed hereto less (2) with respect to each such Permitted
Earn Out Agreement, the aggregate amount of all payments made by Company and
its Subsidiaries under such Permitted Earn Out Agreement after the Closing Date
(to the extent such aggregate amount does not exceed the amount described in the
immediately preceding clause (1)), to (ii) Consolidated Adjusted EBITDA for the
four-Fiscal Quarter period ending on such Calculation Date shall not exceed the
correlative ratio indicated:
<TABLE>
<CAPTION>
Period During Which Maximum
Calculation Date Occurs Leverage Ratio
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C>
Closing Date through March 31, 1999 6.00:1.00
- ---------------------------------------------------------------------------------------------
April 1, 1999 through December 31, 1999 5.50:1.00
- ---------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 5.00:1.00
- ---------------------------------------------------------------------------------------------
January 1, 2001 through December 31, 2001 4.25:1.00
- ---------------------------------------------------------------------------------------------
January 1, 2002 through December 31, 2002 3.50:1.00
- ---------------------------------------------------------------------------------------------
January 1, 2003 and thereafter 3.00:1.00
</TABLE>
D. Consolidated Capital Expenditures. Company shall not, and shall not
permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in
any Fiscal Year (or specified portion thereof) indicated below, in an aggregate
amount in excess of the corresponding amount (the "Maximum Consolidated Capital
Expenditures Amount") set forth below opposite such Fiscal Year (or such portion
thereof); provided that the Maximum Consolidated Capital Expenditures Amount for
any Fiscal Year indicated below shall (a) be increased by the sum of (i) an
amount equal to the excess, if any (but in no event more than 40% of the Maximum
Consolidated Capital Expenditures Amount for the previous Fiscal Year (or
specified portion thereof) indicated below), of the Maximum Consolidated Capital
Expenditures Amount for the previous Fiscal Year (or such portion thereof) over
the actual amount of Consolidated Capital Expenditures for such previous Fiscal
Year (or such portion thereof) and (ii) an amount
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equal to 2.5% of the incremental revenues of Company and its Subsidiaries
(calculated on a consolidated basis in accordance with GAAP) for the previous
Fiscal Year resulting from acquisitions permitted under subsection 7.7(vii)
consummated during the previous Fiscal Year, calculated on a Pro Forma Basis,
but decreased by an amount equal to 2.5% of the incremental reduction in
revenues of Company and its Subsidiaries (calculated on a consolidated basis in
accordance with GAAP) for the previous Fiscal Year (or such portion thereof)
resulting from sales of, or other dispositions of, operating entities during the
previous Fiscal Year (or such portion thereof).
<TABLE>
<CAPTION>
Fiscal Year Maximum Consolidated
(or Portion Thereof) Capital Expenditures Amount
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
<S> <C>
Closing Date to December 31, 1998 $14,000,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 1999 $16,000,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2000 $16,000,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2001 $16,500,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2002 $17,000,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2003 $17,500,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2004 $18,000,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2005 $18,500,000
- -------------------------------------------------------------------------------------------------------
Fiscal Year 2006 and thereafter $19,000,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
E. Certain Calculations.
(i) With respect to calculations of Consolidated Adjusted EBITDA for
any four-Fiscal Quarter period including the Closing Date, such calculations
shall be made assuming that Consolidated Adjusted EBITDA for each of the
applicable Fiscal Quarters ending prior to the Closing Date is as set forth on
Schedule 7.6E annexed hereto.
(ii) With respect to any period during which new Subsidiaries, assets
or businesses are acquired pursuant to subsection 7.7(vii), for purposes of
determining compliance with the financial covenants set forth in this subsection
7.6, Consolidated Adjusted EBITDA and Consolidated Interest Expense shall be
calculated with respect to such periods and such Subsidiaries, assets or
businesses on a pro forma basis (including pro forma adjustments arising out of
events which are directly attributable to a specific transaction, are factually
supportable and are expected to have a continuing impact, in each case
determined on a basis consistent with Article 11 of Regulation S-X of the
Securities Act and as interpreted by the staff of the Securities and Exchange
Commission prior to December 1996 which would include cost savings resulting
from head count reductions, closure of facilities and similar restructuring
charges, which pro forma adjustments shall be certified by the chief financial
officer of Company) using the historical financial statements of all entities or
assets so acquired or to be acquired and the
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consolidated financial statements of Company and its Subsidiaries which shall be
reformulated (a) as if such acquisition, and any acquisitions which have been
consummated during such period, and any Indebtedness or other liabilities
incurred in connection with any such acquisition had been consummated or
incurred at the beginning of such period (and assuming that such Indebtedness
bears interest during any portion of the applicable measurement period prior to
the relevant acquisition at the weighted average of the interest rates
applicable to outstanding Loans during such period), and (b) otherwise in
conformity with certain procedures to be agreed upon between Administrative
Agent and Company, all such calculations to be in form and substance
satisfactory to Administrative Agent.
7.7 Restriction on Fundamental Changes; Asset Sales.
Company shall not, and shall not permit any of its Subsidiaries to,
alter the corporate, capital or legal structure of Company or any of its
Subsidiaries, create any new Subsidiaries or enter into any transaction of
merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease, sub-lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of its business, property or fixed assets, whether now owned or
hereafter acquired, or acquire by purchase or otherwise any part of the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person, except:
(i) any Subsidiary of Company may be merged with or into
Company or any wholly owned Subsidiary Guarantor, or be liquidated,
wound up or dissolved, or all or any part of its business, property or
assets may be conveyed, sold, leased, transferred or otherwise disposed
of, in one transaction or a series of transactions, to Company or any
wholly owned Subsidiary Guarantor; provided that, in the case of such a
merger involving Company, Company shall be the continuing or surviving
corporation, and in the case of any other such merger, such wholly
owned Subsidiary Guarantor shall be the continuing or surviving
corporation;
(ii) [Intentionally Omitted];
(iii) Company and its Subsidiaries may acquire inventory,
equipment and other assets in the ordinary course of business;
(iv) Company and its Subsidiaries may sell or otherwise
dispose of assets in transactions that do not constitute Asset Sales;
provided that the consideration received for such assets shall be in an
amount at least equal to the fair market value thereof (determined in
good faith by the board of directors of Company);
(v) Company and its Subsidiaries may sell the assets described
on Schedule 7.7 annexed hereto; provided that the consideration
received for such assets shall be in an amount at least equal to the
fair market value thereof (determined in good faith by the board of
directors of Company);
(vi) Company and its Subsidiaries may make Asset Sales in any
single Fiscal
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Year of assets that have, in the aggregate, a fair market value
(determined in good faith by the board of directors of Company) not in
excess of $7,500,000; provided that (x) the consideration received for
such assets shall be in an amount at least equal to the fair market
value thereof (determined in good faith by the board of directors of
Company); (y) not less than 80% of the consideration received therefor
shall be cash; and (z) the proceeds of such Asset Sales shall be
applied as required by subsection 2.4B(iii)(a);
(vii) Company and its Subsidiaries may acquire the stock or
other equity Securities of any Person that, as a result of such
acquisition, becomes a wholly-owned Subsidiary of Company or, through a
newly-created Subsidiary, may acquire the business, property or assets
of any Person; provided, that (q) Company shall give Administrative
Agent at least 10 days' notice of the proposed transaction, and copies
of the definitive documentation relating thereto, (r) any business
acquired shall be made in compliance with subsection 7.12 and all
applicable laws, (s) Company and its Subsidiaries shall own all of the
beneficial equity interests in the business acquired (t) any business
or property acquired shall be located in the United States, (u) any
business or property acquired shall have positive Consolidated Adjusted
EBITDA (provided that for purposes of this clause (u) the calculation
of Consolidated Adjusted EBITDA shall be made solely with respect to
such acquired business or property and not with respect to Company and
its Subsidiaries on a consolidated basis) on a Pro Forma Basis, (v)
upon the consummation of the acquisition in the case of a purchase of
equity Securities, such Person shall comply with the provisions of
subsection 6.9, (w) Company shall deliver an Officer's Certificate to
Administrative Agent and Lenders in form and substance reasonably
satisfactory to Administrative Agent, together with the related
financial statements, demonstrating in reasonable detail that, after
giving effect to the acquisition of such business (including any
Indebtedness incurred or assumed therein) (A) the Leverage Ratio,
determined on a Pro Forma Basis for the most recently completed four
Fiscal Quarters, shall be not be greater than the ratio set forth in
subsection 7.6C applicable at the time of such acquisition minus 0.25,
and (B) that Company and its Subsidiaries are otherwise in compliance
on a Pro Forma Basis, with the covenants set forth in subsection 7.6,
(x) on a Pro Forma Basis, the portion of Consolidated Adjusted EBITDA
attributable to such assets or Person being acquired, shall not exceed
25% of Consolidated Adjusted EBITDA (after giving effect to such
acquisition) for the four Fiscal Quarters most recently ended, (y)
after consummation of such acquisition, no Event of Default or
Potential Event of Default shall exist, and (z) after consummation of
such acquisition, the excess of Revolving Loan Commitments over the
Total Utilization of Revolving Loan Commitments shall be no less than
$7,500,000; and
(viii) Company may create new Subsidiaries; provided that,
concurrently with or prior to the formation of each such Subsidiary,
Company or such Subsidiary, as applicable, shall deliver each of the
items and execute each of the documents required pursuant to subsection
6.9.
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7.8 Sales and Lease-Backs.
Except for the transaction described in Schedule 7.8 annexed hereto,
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, become or remain liable as lessee or as a guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
property (whether real, personal or mixed), whether now owned or hereafter
acquired, (i) which Company or any of its Subsidiaries has sold or transferred
or is to sell or transfer to any other Person (other than Company or any of its
Subsidiaries) or (ii) which Company or any of its Subsidiaries intends to use
for substantially the same purpose as any other property which has been or is to
be sold or transferred by Company or any of its Subsidiaries to any Person
(other than Company or any of its Subsidiaries) in connection with such lease.
7.9 Sale or Discount of Receivables.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, sell with recourse, or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts receivable other
than private self-pay receivables and receivables over 180 days old.
7.10 Transactions with Shareholders and Affiliates.
Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any holder of 5% or more of any
class of equity Securities of Company or with any Affiliate of Company or of any
such holder, on terms that are less favorable to Company or that Subsidiary, as
the case may be, than those that might be obtained at the time from Persons who
are not such a holder or Affiliate; provided that the foregoing restriction
shall not apply to any transaction on or after the Effective Date between
Company and any of its Subsidiaries or between any of its Subsidiaries, (iii)
reasonable and customary fees paid to members of the boards of directors of
Company and its Subsidiaries, (iv) fees, expenses and other amounts payable to
the MDC Entities on the Closing Date, (v) the execution and delivery of the
DIMAC Acquisition Agreement and the AmeriComm Acquisition Agreement and the
documents delivered pursuant thereto and the consummation of the transactions
contemplated thereby, or (vi) fees, expenses and other amounts payable to the
MDC Entities or any of their respective Affiliates pursuant to the Management
Services Agreement.
7.11 Disposal of Subsidiary Stock.
Company shall not:
(i) directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of capital stock or other equity
Securities of any of its Subsidiaries, except as permitted under this
Agreement or the Collateral Documents or to qualify directors if
required by applicable law; or
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<PAGE>
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except as permitted under this Agreement
or the Collateral Documents, to Company or another wholly owned
Subsidiary of Company or to qualify directors if required by applicable
law.
7.12 Conduct of Business of Company.
Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than (i) the businesses engaged in by Company and
its Subsidiaries on the Closing Date and (ii) such other lines of business as
may be reasonably related thereto.
7.13 Amendments or Waivers of Related Agreements
A. Amendments or Waivers of Certain Related Agreements. Without the
prior written consent of Requisite Lenders, none of Holdings, Company nor any of
their respective Subsidiaries shall agree to any amendment, restatement,
supplement or other modification to, or waive any of its rights under, any
Related Agreement (other than amendments or other modifications to the Existing
Senior Note Indenture pursuant to the Consent Solicitation) if such amendment,
restatement, supplement, modification or waiver would be materially adverse to
the Lenders.
B. Amendments of Documents Relating to Subordinated Indebtedness.
Holdings and Company shall not, and shall not permit any of their respective
Subsidiaries to, amend or otherwise change the terms of any Subordinated
Indebtedness, or make any payment consistent with an amendment thereof or change
thereto, if the effect of such amendment or change is to increase the interest
rate on such Subordinated Indebtedness, change (to earlier dates) any dates upon
which payments of principal or interest are due thereon, change any event of
default or condition to an event of default with respect thereto (other than to
eliminate any such event of default or increase any grace period related
thereto), change the redemption, prepayment or defeasance provisions thereof,
change the subordination provisions thereof (or of any guaranty thereof), or
change any collateral therefor (other than to release such collateral), or if
the effect of such amendment or change, together with all other amendments or
changes made, is to increase materially the obligations of the obligor
thereunder or to confer any additional rights on the holders of such
Subordinated Indebtedness (or trustee or other representative on their behalf)
which would be adverse to Holdings, Company or Lenders.
C. Preferred Stock. Without the prior written approval of Requisite
Lenders, neither Company nor any Subsidiary of Company shall amend, restate,
supplement or otherwise modify its Certificate of Incorporation if the effect of
such amendment, restatement, supplement or modification is to provide for the
issuance of any preferred stock of Company or of any of its Subsidiaries or the
filing or amendment of any certificate of designation with respect thereto.
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<PAGE>
7.14 Fiscal Year
Neither Company nor any of its Subsidiaries shall change its Fiscal
Year-end from December 31.
7.15 Conduct of Business of Holdings.
Holdings shall engage in no business or activities and have no assets
other than (a) owning the stock of Company, (b) holding Cash or Cash
Equivalents, (c) issuing additional shares of common stock, (d) the payment of
taxes and other administrative activities in support of the operations of its
Subsidiaries, (e) the issuance of (i) up to $30,000,000 in aggregate principal
amount of Holdings Notes and (ii) any Holdings PIK Notes, (f) the issuance of
Permitted Seller Paper, (g) other activities for which Holdings receives
Restricted Junior Payments permitted under subsection 7.5, and (h) the
performance of its obligations hereunder and under the Holdings Guaranty and any
Collateral Documents.
SECTION 8.
EVENTS OF DEFAULT
IF any of the following conditions or events ("Events of Default")
shall occur:
8.1 Failure to Make Payments When Due.
Failure by Company to pay any installment of principal of any Loan when
due, whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; failure by Company to pay when due any amount payable to an Issuing
Lender in reimbursement of any drawing honored or payment made under a Letter of
Credit; or failure by Company to pay any interest on any Loan or any fee or any
other amount due under this Agreement within five days after the date due; or
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<PAGE>
8.2 Default in Other Agreements.
(i) Failure of Holdings or any of its Subsidiaries to pay when due (a)
any principal of or interest on any Indebtedness (other than Indebtedness
referred to in subsection 8.1) in an individual principal amount of $1,000,000
or more or any items of Indebtedness with an aggregate principal amount of
$2,500,000 or more or (b) any Contingent Obligation in an individual principal
amount of $1,000,000 or more or any Contingent Obligations with an aggregate
principal amount of $2,500,000 or more, in each case beyond the end of any grace
period provided therefor; or (ii) breach or default by Holdings or Company or
any of its Subsidiaries with respect to any other material term of the Holdings
Notes, the Holdings PIK Notes, the Senior Subordinated Note Indenture, the
Senior Subordinated Notes or any other material term of (a) any evidence of any
Indebtedness in an individual principal amount of $1,000,000 or more or any
items of Indebtedness with an aggregate principal amount of $2,500,000 or more
or any Contingent Obligation in an individual principal amount of $1,000,000 or
more or any Contingent Obligations with an aggregate principal amount of
$2,500,000 or more or (b) any loan agreement, mortgage, indenture or other
agreement relating to such Indebtedness or Contingent Obligation(s), if in any
case under this clause (ii) the effect of such breach or default is to cause, or
to permit the holder or holders of that Indebtedness or Contingent Obligation(s)
(or a trustee on behalf of such holder or holders) to cause, that Indebtedness
or Contingent Obligation(s) to become or be declared due and payable prior to
its stated maturity or the stated maturity of any underlying obligation, as the
case may be (upon the giving or receiving of notice, lapse of time, both, or
otherwise); or
8.3 Breach of Certain Covenants.
Failure of any Loan Party to perform or comply with any term or
condition contained in subsection 2.4, 2.5, 6.2 or Section 7 of this Agreement;
or
8.4 Breach of Warranty.
Any material representation, warranty, certification or other statement
made by Holdings or any of its Subsidiaries in any Loan Document or in any
statement or certificate at any time given by Holdings or any of its
Subsidiaries in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false in any material respect on the date as of which made;
or
8.5 Other Defaults Under Loan Documents.
Any Loan Party shall default in the performance of or compliance with
any term contained in this Agreement or any of the other Loan Documents, other
than any such term referred to in any other subsection of this Section 8, and
such default shall not have been remedied or waived within 30 days after the
earlier of (i) an officer of Company becoming aware of such default or (ii)
receipt by Company of notice from any Agent or any Lender of such default; or
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<PAGE>
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
(i) A court having jurisdiction in the premises shall enter a decree or
order for relief in respect of Holdings or Company or any of their respective
Subsidiaries in an involuntary case under the Bankruptcy Code or under any other
applicable bankruptcy, insolvency or similar law now or hereafter in effect,
which decree or order is not stayed; or any other similar relief shall be
granted under any applicable federal or state law; or (ii) an involuntary case
shall be commenced against Holdings or Company or any of their respective
Subsidiaries under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect; or a decree or order of a
court having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over Holdings or Company or any of their respective Subsidiaries, or over
all or a substantial part of its property, shall have been entered; or there
shall have occurred the involuntary appointment of an interim receiver, trustee
or other custodian of Company or any of its Subsidiaries for all or a
substantial part of its property; or a warrant of attachment, execution or
similar process shall have been issued against any substantial part of the
property of Holdings or Company or any of their respective Subsidiaries, and any
such event described in this clause (ii) shall continue for 60 days unless
dismissed, bonded or discharged; or
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
(i) Holdings or Company or any of their respective Subsidiaries shall
have an order for relief entered with respect to it or commence a voluntary case
under the Bankruptcy Code or under any other applicable bankruptcy, insolvency
or similar law now or hereafter in effect, or shall consent to the entry of an
order for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or Holdings or Company or any of
their respective Subsidiaries shall make any assignment for the benefit of
creditors; or (ii) Holdings or Company or any of their respective Subsidiaries
shall be unable, or shall fail generally, or shall admit in writing its
inability, to pay its debts as such debts become due; or the Board of Directors
of Holdings or Company or any of their respective Subsidiaries (or any committee
thereof) shall adopt any resolution or otherwise authorize any action to approve
any of the actions referred to in clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $2,000,000 or (ii)
in the aggregate at any time an amount in excess of $3,000,000 (in either case
not adequately covered by insurance as to which a solvent and unaffiliated
insurance company has acknowledged coverage) shall be entered or filed against
Holdings or Company or any of their respective Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
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8.9 Dissolution.
Any order, judgment or decree shall be entered against Holdings or
Company or any of their respective Subsidiaries decreeing the dissolution or
split up of Holdings or Company or that Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 30 days; or
8.10 Employee Benefit Plans.
There shall occur one or more ERISA Events which individually or in the
aggregate results in a Material Adverse Effect; or there shall exist an Unfunded
Current Liability, individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which there is no Unfunded Current Liability), which will have a Material
Adverse Effect; or
8.11 Change in Control.
(i) Prior to the consummation of any initial public offering of Company
common stock, (a) the MDC Entities shall at any time not own (directly or
indirectly), in the aggregate, at least 51% of the combined voting power of
Company's voting Securities (except as a result of the exercise of options
granted to management under the Stockholders Agreement, in which case the
percentage ownership of the MDC Entities of the combined voting power of
Company's voting Securities shall be at least 51%, as diluted thereby, but shall
in no event be less than 40%); (b) a majority of the members of the Board of
Directors of Company shall not be Continuing Directors; or (c) any Person (other
than the MDC Entities), including a "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act) which includes such Person, shall
purchase or otherwise acquire, directly or indirectly, beneficial ownership of
Securities of Company and, as a result of such purchase or acquisition, any
Person (together with its associates and Affiliates), shall directly or
indirectly beneficially own in the aggregate Securities representing more than
35% of the combined voting power of Company's voting Securities; or (ii) at any
time thereafter, (a) the MDC Entities together shall own, directly or
indirectly, in the aggregate, a lesser percentage of the combined voting power
of Company's voting Securities than any other holder, including a "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which
includes such holder, of such voting Securities; (b) a majority of the members
of the Board of Directors of Company shall not be Continuing Directors; or (b)
any Person (other than the MDC Entities), including a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) which includes such
Person, shall purchase or otherwise acquire, directly or indirectly, beneficial
ownership of Securities of Company and, as a result of such purchase or
acquisition, any Person (together with its associates and Affiliates), shall
directly or indirectly beneficially own in the aggregate Securities representing
more than 25% of the combined voting power of Company's voting Securities; or
(iii) at any time, the occurrence of a "Change of Control" (or any comparable
concept) as defined in the documentation for the Senior Subordinated Notes, the
Holdings Notes or the Holdings PIK Notes; or
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8.12 Invalidity of Guaranties.
At any time after the execution and delivery thereof, any Guaranty of
the Obligations of Company for any reason, other than the satisfaction in full
of all Obligations, ceases to be in full force and effect or is declared to be
null and void, or any Loan Party denies in writing that it has any further
liability, including without limitation with respect to future advances by
Lenders, under any Loan Document to which it is a party; or
8.13 Failure of Security.
Any Collateral Document shall, at any time, cease to be in full force
and effect (other than by reason of a release of Collateral thereunder in
accordance with the terms hereof or thereof, the satisfaction in full of the
Obligations or any other termination of such Collateral Document in accordance
with the terms hereof or thereof) or shall be declared null and void, or the
validity or enforceability thereof shall be contested in writing by any Loan
Party, or Administrative Agent shall not have or shall cease to have a valid
security interest in any Collateral purported to be covered thereby, perfected
and with the priority required by the relevant Collateral Document, for any
reason other than the failure of Administrative Agent or any Lender to take any
action within its control, subject only to Liens permitted under the applicable
Collateral Documents.
THEN (i) upon the occurrence of any Event of Default described in subsection 8.6
or 8.7, each of (a) the unpaid principal amount of and accrued interest on the
Loans, (b) an amount equal to the maximum amount that may at any time be drawn
under all Letters of Credit then outstanding (whether or not any beneficiary
under any such Letter of Credit shall have presented, or shall be entitled at
such time to present, the drafts or other documents or certificates required to
draw under such Letter of Credit) and (c) all other Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Company, and the obligation of each Lender to make any Loan, the
obligation of Administrative Agent to issue any Letter of Credit and the right
of any Lender to issue any Letter of Credit hereunder shall thereupon terminate,
and (ii) upon the occurrence and during the continuation of any other Event of
Default, Administrative Agent shall, upon the written request of Requisite
Lenders, by written notice to Company, declare all or any portion of the amounts
described in clauses (a) through (c) above to be, and the same shall forthwith
become, immediately due and payable, and the obligation of each Lender to make
any Loan, the obligation of Administrative Agent to issue any Letter of Credit
and the right of any Lender to issue any Letter of Credit hereunder shall
thereupon terminate; provided that the foregoing shall not affect in any way the
obligations of Lenders under subsection 3.3C(i) or the obligations of Lenders to
purchase participations in any unpaid Swing Line Loans as provided in subsection
2.1A(iv).
Any amounts described in clause (b) above, when received by
Administrative Agent, shall be held by Administrative Agent pursuant to the
terms of the Collateral Account Agreement and shall be applied as therein
provided.
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Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
such paragraph Company shall pay all arrears of interest and all payments on
account of principal which shall have become due otherwise than as a result of
such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to subsection 10.6, then Requisite Lenders, by written notice to Company, may at
their option rescind and annul such acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Potential Event of
Default or impair any right consequent thereon. The provisions of this paragraph
are intended merely to bind Lenders to a decision which may be made at the
election of Requisite Lenders and are not intended to benefit Company and do not
grant Company the right to require Lenders to rescind or annul any acceleration
hereunder or preclude Agents or Lenders from exercising any of the rights or
remedies available to them under any of the Loan Documents, even if the
conditions set forth in this paragraph are met.
SECTION 9.
AGENTS
9.1 Appointment.
A. CSFB is hereby appointed Administrative Agent and Arranger hereunder
and under the other Loan Documents. WDR is hereby appointed Syndication Agent
hereunder and under the other Loan Documents. First Union is hereby appointed
Documentation Agent hereunder and under the other Loan Documents. Each Lender
hereby authorizes each Agent to act as its agent in accordance with the terms of
this Agreement and the other Loan Documents. Each Agent agrees to act upon the
express conditions contained in this Agreement and the other Loan Documents, as
applicable. The provisions of this Section 9 are solely for the benefit of
Agents and Lenders and Company shall have no rights as a third party beneficiary
of any of the provisions thereof. In performing its functions and duties under
this Agreement, each Agent shall act solely as an agent of Lenders and does not
assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Company or any of its Subsidiaries.
On the Effective Date, all obligations of Arranger and Syndication Agent
hereunder, in each case solely in its capacity as Arranger or Syndication Agent,
shall terminate.
B. Appointment of Supplemental Collateral Agents. It is the purpose of
this Agreement and the other Loan Documents that there shall be no violation of
any law of any jurisdiction denying or restricting the right of banking
corporations or associations to transact business as agent or trustee in such
jurisdiction. It is recognized that in case of litigation under this Agreement
or any of the other Loan Documents, and in particular in case of the enforcement
of any of the Loan Documents, or in case Administrative Agent deems that by
reason of any present or future law of any jurisdiction Administrative Agent may
not exercise any of the rights, powers or remedies granted herein or in any of
the other Loan Documents or take any other action which may be desirable or
necessary in connection therewith, it may be necessary that
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Administrative Agent appoint an additional individual or institution as a
separate trustee, co-trustee, collateral agent or collateral co-agent (any such
additional individual or institution being referred to herein individually as a
"Supplemental Collateral Agent" and collectively as "Supplemental Collateral
Agents").
In the event that Administrative Agent appoints a Supplemental
Collateral Agent with respect to any Collateral, (i) each and every right,
power, privilege or duty expressed or intended by this Agreement or any of the
other Loan Documents to be exercised by or vested in or conveyed to
Administrative Agent with respect to such Collateral shall be exercisable by and
vest in such Supplemental Collateral Agent to the extent, and only to the
extent, necessary to enable such Supplemental Collateral Agent to exercise such
rights, powers and privileges with respect to such Collateral and to perform
such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to the exercise or performance
thereof by such Supplemental Collateral Agent shall run to and be enforceable by
either Administrative Agent or such Supplemental Collateral Agent, and (ii) the
provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to
Administrative Agent shall inure to the benefit of such Supplemental Collateral
Agent and all references therein to Administrative Agent shall be deemed to be
references to Administrative Agent and/or such Supplemental Collateral Agent, as
the context may require.
Should any instrument in writing from Company or any other Loan Party
be required by any Supplemental Collateral Agent so appointed by Administrative
Agent for more fully and certainly vesting in and confirming to him or it such
rights, powers, privileges and duties, Company shall, or shall cause such Loan
Party to, execute, acknowledge and deliver any and all such instruments promptly
upon request by Administrative Agent. In case any Supplemental Collateral Agent,
or a successor thereto, shall die, become incapable of acting, resign or be
removed, all the rights, powers, privileges and duties of such Supplemental
Collateral Agent, to the extent permitted by law, shall vest in and be exercised
by Administrative Agent until the appointment of a new Supplemental Collateral
Agent.
9.2 Powers; General Immunity.
A. Duties Specified. Each Lender irrevocably authorizes each Agent to
take such action on such Lender's behalf and to exercise such powers hereunder
and under the other Loan Documents as are specifically delegated to such Agent
by the terms hereof and thereof, together with such powers as are reasonably
incidental thereto. Each Agent shall have only those duties and responsibilities
that are expressly specified in this Agreement and the other Loan Documents and
it may perform such duties by or through its agents or employees. No Agent shall
have, by reason of this Agreement or any of the other Loan Documents, a
fiduciary relationship in respect of any Lender; and nothing in this Agreement
or any of the other Loan Documents, expressed or implied, is intended to or
shall be so construed as to impose upon any Agent any obligations in respect of
this Agreement or any of the other Loan Documents except as expressly set forth
herein or therein.
B. No Responsibility for Certain Matters. No Agent shall be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or
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sufficiency of this Agreement or any other Loan Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports or certificates or any other documents furnished by any
Agent to Lenders or by or on behalf of Company and/or its Subsidiaries to any
Agent or any Lender in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
Company or any other Person liable for the payment of any Obligations, nor shall
any Agent be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained in any of the Loan Documents or as to the use of the proceeds of the
Loans or the use of the Letters of Credit or as to the existence or possible
existence of any Event of Default or Potential Event of Default. Anything
contained in this Agreement to the contrary notwithstanding, Administrative
Agent shall not have any liability arising from confirmations of the amount of
outstanding Loans or the Total Utilization of Revolving Loan Commitments or the
component amounts thereof.
C. Exculpatory Provisions. Neither any Agent nor any of such Agent's
respective officers, directors, employees or agents shall be liable to Lenders
for any action taken or omitted by such Agent under or in connection with any of
the Loan Documents except to the extent caused by such Agent's gross negligence
or willful misconduct. If any Agent shall request instructions from Lenders with
respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, such Agent
shall be entitled to refrain from such act or taking such action unless and
until such Agent shall have received instructions from Requisite Lenders (or
such other Lenders as may be required to give such instructions under subsection
10.6). Without prejudice to the generality of the foregoing, (i) such Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Company and its Subsidiaries), accountants,
experts and other professional advisors selected by it; and (ii) no Lender shall
have any right of action whatsoever against such Agent as a result of such Agent
acting or (where so instructed) refraining from acting under this Agreement or
any of the other Loan Documents in accordance with the instructions of Requisite
Lenders (or such other Lenders as may be required to give such instructions
under subsection 10.6). Such Agent shall be entitled to refrain from exercising
any power, discretion or authority vested in it under this Agreement or any of
the other Loan Documents unless and until it has obtained the instructions of
Requisite Lenders (or such other Lenders as may be required to give such
instructions under subsection 10.6).
D. Agents Entitled to Act as Lender. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, any Agent in its individual capacity as a Lender hereunder.
With respect to its participation in the Loans and the Letters of Credit, each
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include such Agent
in its individual capacity. Each Agent and its Affiliates may accept deposits
from, lend money to and generally engage in
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any kind of banking, trust, financial advisory or other business with Company or
any of its Affiliates as if it were not performing the duties specified herein,
and may accept fees and other consideration from Company and/or its Subsidiaries
for services in connection with this Agreement and otherwise without having to
account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
Creditworthiness.
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the making of the Loans and the issuance of
Letters of Credit hereunder and that it has made and shall continue to make its
own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent
shall have any duty or responsibility, either initially or on a continuing
basis, to make any such investigation or any such appraisal on behalf of Lenders
or, except as expressly provided elsewhere in this Agreement to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before the making of the Loans or at any time or times
thereafter, and no Agent shall have any responsibility with respect to the
accuracy of or the completeness of any information provided to Lenders.
9.4 Right to Indemnity.
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify each Agent, to the extent that such Agent shall not have been
reimbursed by Company, for and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, counsel fees and disbursements) or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against such Agent in performing its duties hereunder or under the
other Loan Documents or otherwise in its capacity as such Agent in any way
relating to or arising out of this Agreement or the other Loan Documents;
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. If any indemnity furnished to any Agent for any purpose
shall, in the opinion of such Agent, be insufficient or become impaired, such
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
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9.5 Successor Administrative Agent and Swing Line Lender.
A. Successor Administrative Agent. Administrative Agent may resign at
any time by giving 30 days' prior written notice thereof to Lenders and Company.
Upon any such notice of resignation, Requisite Lenders shall have the right,
upon five Business Days' notice to Company, to appoint a successor
Administrative Agent. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent and
the retiring Administrative Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Administrative Agent's
resignation hereunder as Administrative Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement.
B. Successor Swing Line Lender. Any resignation of Administrative Agent
pursuant to subsection 9.5A shall also constitute the resignation of CSFB or its
successor as Swing Line Lender, and any successor Administrative Agent appointed
pursuant to subsection 9.5A shall, upon its acceptance of such appointment,
become the successor Swing Line Lender for all purposes hereunder. In such event
(i) Company shall prepay any outstanding Swing Line Loans made by the retiring
Administrative Agent in its capacity as Swing Line Lender, (ii) upon such
prepayment, the retiring Administrative Agent and Swing Line Lender shall
surrender the Swing Line Note held by it to Company for cancellation, and (iii)
Company shall issue a new Swing Line Note to the successor Administrative Agent
and Swing Line Lender substantially in the form of Exhibit VIII annexed hereto,
in the principal amount of the Swing Line Loan Commitment then in effect and
with other appropriate insertions.
9.6 Collateral Documents.
Each Lender hereby further authorizes Administrative Agent to enter
into each Collateral Document as secured party on behalf of and for the benefit
of Lenders and agrees to be bound by the terms of each Collateral Document;
provided that Administrative Agent shall not enter into or consent to any
amendment, modification, termination or waiver of any provision contained in any
Collateral Document without the prior consent of Requisite Lenders (or, if
required pursuant to subsection 10.6, all Lenders); provided further, however,
that, without further written consent or authorization from Requisite Lenders,
Administrative Agent may execute any documents or instruments necessary to
effect the release of any asset constituting Collateral from the Lien of the
applicable Collateral Document in the event that such asset is sold or otherwise
disposed of in a transaction effected in accordance with subsection 7.7(iii) or
7.7(iv). Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
(including without limitation through the exercise of a right of set-off against
call deposits of such Lender in which any funds on deposit in the Collateral
Account may from time to time be invested), it being understood and agreed that
all rights and remedies under the Collateral Documents may be exercised solely
by Administrative Agent for the benefit of Lenders in accordance with the terms
thereof.
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SECTION 10.
MISCELLANEOUS
10.1 Assignments and Participations in Loans, Letters of Credit.
A. General. Subject to subsection 10.1B, each Lender shall have the
right at any time to (i) sell, assign, transfer or negotiate to any Eligible
Assignee, or (ii) sell participations to any Person in, all or any part of its
Commitments (together with its Letters of Credit or participations therein made
or arising pursuant to its Revolving Loan Commitment) or any Loan or Loans made
by it or any other interest herein or in any other Obligations owed to it;
provided that no such sale, assignment, transfer or participation shall, without
the consent of Company, require Company to file a registration statement with
the Securities and Exchange Commission or apply to qualify such sale,
assignment, transfer or participation under the securities laws of any state;
provided further that no such sale, assignment or transfer described in clause
(i) above shall be effective unless and until an Assignment Agreement effecting
such sale, assignment or transfer shall have been accepted by Administrative
Agent and recorded in the Register as provided in subsection 10.1B(ii);
provided, further that no such sale, assignment, transfer or participation of
any Letter of Credit or any participation therein may be made separately from a
sale, assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation; and provided further, that anything
contained herein to the contrary notwithstanding, the Swing Line Loan Commitment
and the Swing Line Loans of Swing Line Lender may not be sold, assigned or
transferred as described in clause (i) above to any Person other than a
successor Administrative Agent and Swing Line Lender to the extent contemplated
by subsection 9.5. Except as otherwise provided in this subsection 10.1, no
Lender shall, as between Company and such Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or any granting of participations in, all or any part of its
Commitments or the Loans, the Letters of Credit or participations therein or the
other Obligations owed to such Lender.
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B. Assignments.
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(i) Amounts and Terms of Assignments. Each Commitment, Loan,
Letter of Credit, or participation therein or other Obligation may (a)
be assigned in any amount to (x) another Lender, (y) to an Affiliate of
the assigning Lender or another Lender or (z) with respect to any
Lender that is an investment fund that invests in commercial loans, any
other investment fund that invests in commercial loans and that is
managed by the same investment advisor as such Lender or by an
Affiliate of such investment advisor, so long as, in the case of
clauses (x), (y) or (z), any such Lender, is a Non-Defaulting Lender,
with the giving of notice to Company and Administrative Agent or (b) be
assigned in an aggregate amount of not less than $5,000,000 (or such
lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit, and participations therein and
other Obligations of the assigning Lender) to any other Eligible
Assignee with the consent of Administrative Agent and, if no Default or
Event of Default has occurred and is continuing, of Company (which
consent shall not be unreasonably withheld). To the extent of any such
assignment in accordance with either clause (a) or (b) above, the
assigning Lender shall be relieved of its obligations with respect to
its Commitments, Loans, Letters of Credit, or participations therein or
other Obligations or the portion thereof so assigned. The parties to
each such assignment shall execute and deliver to Administrative Agent,
for its acceptance and recording in the Register, an Assignment
Agreement, together with a processing fee of $3,500 payable by the
assigning Lender, such certificates, documents or other evidence, if
any, with respect to United States federal income tax withholding
matters as the assignee under such Assignment Agreement may be required
to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a)
and, if requested by Administrative Agent, a completed administrative
questionnaire in Administrative Agent's customary form with respect to
the assignee under such Assignment Agreement. Upon such execution,
delivery, acceptance and recordation, from and after the effective date
specified in such Assignment Agreement, (y) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder
and (z) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to
such Assignment Agreement, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment
Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall
cease to be a party hereto); provided that, anything contained in any
of the Loan Documents to the contrary notwithstanding, if such Lender
is the Issuing Lender with respect to any outstanding Letters of Credit
such Lender shall continue to have all rights and obligations of an
Issuing Lender with respect to such Letters of Credit until the
cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments
hereunder shall be modified to reflect the Commitments of such assignee
and any remaining Commitments of such assigning Lender and, if any such
assignment occurs after the issuance of the Notes hereunder, the
assigning Lender shall surrender its applicable Notes and, upon such
surrender, new Notes shall be issued to the assignee and, if
applicable, to the assigning Lender, substantially in the form of
Exhibit IV, Exhibit V, Exhibit VI or Exhibit VII annexed hereto, as the
case may be, with appropriate insertions, to reflect the new
Commitments and/or outstanding Term Loans
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of the assignee and the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in
Register. Upon its receipt of an Assignment Agreement executed by an
assigning Lender and an assignee representing that it is an Eligible
Assignee, together with the processing fee referred to in subsection
10.1B(i) and any certificates, documents or other evidence with respect
to United States federal income tax withholding matters that such
assignee may be required to deliver to Administrative Agent pursuant to
subsection 2.7B(iii), (a) Administrative Agent shall, if such
Assignment Agreement has been completed and is in substantially the
form of Exhibit XVII hereto and if Administrative Agent has consented
to the assignment evidenced thereby (to the extent such consent is
required pursuant to subsection 10.1B(i)), (a) accept such Assignment
Agreement by executing a counterpart thereof as provided therein (which
acceptance shall evidence any required consent of Administrative Agent
to such assignment), (b) record the information contained therein in
the Register, and (c) give prompt notice thereof to Company.
Administrative Agent shall maintain a copy of each Assignment Agreement
delivered to and accepted by it as provided in this subsection
10.1B(ii).
C. Participations. The holder of any participation, other than an
Affiliate of the Lender granting such participation, shall not be entitled to
require such Lender to take or omit to take any action hereunder except action
(i) effecting the extension of the final maturity of the Loan allocated to such
participation, (ii) effecting a reduction of the principal amount of or
affecting the rate of interest payable on any Loan allocated to such
participation, (iii) releasing all or substantially all of the Collateral, or
(iv) releasing all of the Guarantors from their obligations under the
Guaranties, and all amounts payable by Company hereunder (including, without
limitation, amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and
3.6) shall be determined as if such Lender had not sold such participation.
Company and each Lender hereby acknowledge and agree that, solely for purposes
of subsections 10.4 and 10.5, (a) any participation will give rise to a direct
obligation of Company to the participant and (b) the participant shall be
considered to be a "Lender".
D. Assignments to Federal Reserve Banks and Fund Trustees. In addition
to the assignments and participations permitted under the foregoing provisions
of this subsection 10.1, (i) any Lender may assign and pledge all or any portion
of its Loans, the other Obligations owed to such Lender and its Notes to any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any operating circular
issued by such Federal Reserve Bank and (ii) with the consent of Administrative
Agent and, if no Default or Event of Default has occurred and is continuing,
Company, any Lender which is an investment fund may pledge all or any portion of
its Notes, or Loans to its trustee in support of its obligation to its trustee;
provided that, in either case, (a) no Lender shall, as between Company and such
Lender, be relieved of any of its obligations hereunder as a result of any such
assignment and pledge and (b) in no event shall such Federal Reserve Bank or
such trustee be considered to be a "Lender" or be entitled to require the
assigning Lender to take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Company
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and its Subsidiaries in the possession of that Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject to subsection 10.20.
F. Limitation. No assignee, participant or other transferee or any
Lender's rights shall be entitled to receive any greater payment under
subsection 2.7 than such Lender would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with Company's prior
written consent or at a time when the circumstances giving rise to such greater
payment did not exist.
10.2 Expenses.
Whether or not the transactions contemplated hereby shall be
consummated, Company agrees to pay promptly (i) all the actual and reasonable
costs and out of pocket expenses of Administrative Agent in connection with the
preparation of the Loan Documents; (ii) all the actual and reasonable costs of
furnishing all opinions by counsel for Company (including without limitation any
opinions requested by Lenders as to any legal matters arising hereunder) and of
Company's and Holdings' performance of and compliance with all agreements and
conditions on its part to be performed or complied with under this Agreement and
the other Loan Documents including, without limitation, with respect to
confirming compliance with environmental and insurance requirements; (iii) the
reasonable fees, expenses and disbursements of counsel to Administrative Agent
(including allocated costs of internal counsel) in connection with the
negotiation, preparation, execution and administration of the Loan Documents and
the Loans and any consents, amendments, waivers or other modifications hereto or
thereto and any other documents or matters requested by Company; (iv) all other
actual and reasonable costs and expenses incurred by Administrative Agent in
connection with the negotiation, preparation and execution of the Loan Documents
and the transactions contemplated hereby and thereby; and (v) after the
occurrence of an Event of Default, all costs and expenses, including reasonable
attorneys' fees (including allocated costs of internal counsel) and costs of
settlement, incurred by Administrative Agent and Lenders in enforcing any
Obligations of or in collecting any payments due from Company hereunder or under
the other Loan Documents by reason of such Event of Default or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a "work-out" or pursuant to any insolvency or
bankruptcy proceedings.
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10.3 Indemnity.
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated,
Company agrees to defend, indemnify, pay and hold harmless Agents and Lenders,
and the officers, directors, employees, agents, attorneys and affiliates of
Agents and Lenders (collectively called the "Indemnitees") from and against any
and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the transactions
contemplated hereby or thereby (including without limitation Lenders' agreement
to make the Loans hereunder or the use or intended use of the proceeds of any of
the Loans or the issuance of Letters of Credit hereunder or the use or intended
use of any of the Letters of Credit) (collectively called the "Indemnified
Liabilities"); provided that Company shall not have any obligation to any
Indemnitee hereunder with respect to any Indemnified Liabilities to the extent,
and only to the extent, of any particular liability, obligation, loss, damage,
penalty, claim, cost, expense or disbursement that arose from the gross
negligence or willful misconduct of that Indemnitee as determined by a final
judgment of a court of competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, Company shall contribute the maximum portion that it is permitted
to pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitees or any of them.
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10.4 Set-Off; Security Interest in Deposit Accounts.
In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuance of any Event of Default each Lender is hereby authorized by
Company at any time or from time to time, without notice to Company or to any
other Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, including,
but not limited to, Indebtedness evidenced by certificates of deposit, whether
matured or unmatured, but not including trust accounts) and any other
Indebtedness at any time held or owing by that Lender (at any office of that
Lender wherever located) to or for the credit or the account of Company against
and on account of the obligations and liabilities of Company to that Lender
under this Agreement, the Notes, the Letters of Credit and participations
therein, including, but not limited to, all claims of any nature or description
arising out of or connected with this Agreement, the Notes, the Letters of
Credit and participations therein or any other Loan Document, irrespective of
whether or not (i) that Lender shall have made any demand hereunder or (ii) the
principal of or the interest on the Loans or any amounts in respect of the
Letters of Credit or any other amounts due hereunder shall have become due and
payable pursuant to Section 8 and although said obligations and liabilities, or
any of them, may be contingent or unmatured. Company hereby further grants to
Administrative Agent and each Lender a security interest in all deposits and
accounts maintained with Administrative Agent or such Lender as security for the
Obligations.
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10.5 Ratable Sharing.
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment (other than a voluntary prepayment of Loans made
and applied in accordance with the terms of this Agreement), by realization upon
security, through the exercise of any right of set-off or banker's lien, by
counterclaim or cross action or by the enforcement of any right under the Loan
Documents or otherwise, or as adequate protection of a deposit treated as cash
collateral under the Bankruptcy Code, receive payment or reduction of a
proportion of the aggregate amount of principal, interest, amounts payable in
respect of Letters of Credit, fees and other amounts then due and owing to that
Lender hereunder or under the other Loan Documents (collectively, the "Aggregate
Amounts Due" to such Lender) which is greater than the proportion received by
any other Lender in respect of the Aggregate Amounts Due to such other Lender,
then the Lender receiving such proportionately greater payment shall (i) notify
Administrative Agent and each other Lender of the receipt of such payment and
(ii) apply a portion of such payment to purchase participations (which it shall
be deemed to have purchased from each seller of a participation simultaneously
upon the receipt by such seller of its portion of such payment) in the Aggregate
Amounts Due to the other Lenders so that all such recoveries of Aggregate
Amounts Due shall be shared by all Lenders in proportion to the Aggregate
Amounts Due to them; provided that if all or part of such proportionately
greater payment received by such purchasing Lender is thereafter recovered from
such Lender upon the bankruptcy, reorganization or insolvency proceeding of
Company or otherwise, those purchases shall be rescinded and the purchase prices
paid for such participations shall be returned to such purchasing Lender ratably
to the extent of such recovery, but without interest. Company expressly consents
to the foregoing arrangement and agrees that any holder of a participation so
purchased may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by Company to that holder
with respect thereto as fully as if that holder were owed the amount of the
participation held by that holder.
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10.6 Amendments and Waivers.
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A. No amendment, modification, termination or waiver of any
provision of this Agreement, the Notes or of any other Loan Document, or
consent to any departure by Company or any other Loan Party therefrom, shall
in any event be effective without the written concurrence of Requisite
Lenders; provided that any such amendment, modification, termination, waiver
or consent which: reduces the principal amount of any of the Loans; reduces
the percentage specified in the definition of "Requisite Lenders" (it being
understood that, with the consent of Requisite Lenders, additional extensions
of credit pursuant to this Agreement may be included in the definition of
"Requisite Lenders" and, if applicable, the related definition of "Term Loan
Exposure" on substantially the same basis as the Term A Loans, Term B Loans,
Term B Loan Commitments, Term C Loans, Term C Loan Commitments, Revolving
Loans and Revolving Loan Commitments are included on the Effective Date);
changes in any manner any provision of this Agreement which, by its terms,
expressly requires the approval or concurrence of all Lenders; postpones the
scheduled final maturity date of any of the Loans; postpones the date or
waives or reduces the amount of any scheduled payment (but not prepayment) of
principal of any of the Loans or of any scheduled reduction of the Revolving
Credit Commitments; postpones the date on which any interest or any fees are
payable; decreases the interest rate borne by any of the Loans (other than
any waiver of any increase in the interest rate applicable to any of the
Loans pursuant to subsection 2.2E) or the amount of any fees payable
hereunder; increases the maximum duration of Interest Periods permitted
hereunder; releases all or a significant portion of the Collateral; releases
any of the Guarantors from their obligations under the Guaranties; reduces
the amount or postpones the due date of any amount payable in respect of, or
extends the required expiration date of, any Letter of Credit; changes the
obligations of Lenders relating to the purchase of participations in Letters
of Credit in any manner that could be adverse to any Issuing Lender; or
changes in any manner the provisions contained in subsection 8.1 or this
subsection 10.6; shall be effective only if evidenced by a writing signed by
or on behalf of all Lenders to whom are owed Obligations being directly
affected by such amendment, modification, termination, waiver or consent. In
addition, (i) any amendment, modification, termination or waiver of any of
the provisions contained in Section 4 shall be effective only if evidenced by
a writing signed by or on behalf of Administrative Agent and Requisite
Lenders, (ii) no amendment, modification, termination or waiver of any
provision of any Note shall be effective without the written concurrence of
the Lender which is the holder of that Note, (iii) no increase in the
Commitments of any Lender over the amount thereof then in effect shall be
effective without the written concurrence of that Lender, it being understood
and agreed that in no event shall waivers or modifications of conditions
precedent, covenants, Events of Default, Potential Events of Default or of a
mandatory prepayment or a reduction of any or all of the Commitments be
deemed to constitute an increase of the Commitment of any Lender and that an
increase in the available portion of any Commitment of any Lender shall not
be deemed to constitute an increase in the Commitment of such Lender, (iv) no
amendment, modification, termination or waiver of any provision of subsection
2.1A(iv) or any other provision of this Agreement relating to the Swing Line
Loan Commitment or the Swing Line Loans shall be effective without the
written concurrence of Swing Line Lender, (v) no amendment, modification,
termination or waiver of any provision of Section 3 relating to the rights or
obligations of any or all Issuing Lenders shall be effective without the
written concurrence of Administrative Agent and each Lender who is an Issuing
Lender with respect to any Letter of Credit then outstanding, (vi) no
amendment, modification, termination or waiver of any provision of Section 9
or of any other provision of this Agreement which, by its terms, expressly
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requires the approval or concurrence of Administrative Agent shall be
effective without the written concurrence of Administrative Agent.
Administrative Agent may, but shall have no obligation to, with the
concurrence of any Lender, execute amendments, modifications, waivers or
consents on behalf of that Lender, (vii) no amendment or modification of the
definition of "Requisite Class Lenders" shall be effective without the
consent of Requisite Class Lenders of each Class, and no amendment or
modification that alters, the required application of any repayments or
prepayments as between Classes pursuant to subsection 2.4C shall be effective
without the consent of Requisite Class Lenders of each Class which is being
allocated a lesser repayment or prepayment as a result thereof (although
Requisite Lenders may waive, in whole or in part, any mandatory prepayment so
long as the application, as between Classes, of any portion of such
prepayment which is still required to be made is not altered) and (viii) no
amendment, modification, termination or waiver of any Collateral Document
having the effect of securing additional Indebtedness (other than
Indebtedness comprising Obligations or Interest Rate Agreements) by the
Collateral shall be effective without the written concurrence of Lenders
having or holding more than 66 2/3% of the sum of the aggregate Term A Loan
Exposure of all Lenders plus the aggregate Term B Loan Exposure of all
Lenders plus the aggregate Term C Loan Exposure of all Lenders plus the
aggregate Revolving Loan Exposure of all Lenders. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on Company in any case shall
entitle Company to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this subsection 10.6 shall be binding upon each
Lender at the time outstanding, each future Lender and, if signed by Company,
on Company.
B. If, in connection with any proposed change, waiver, discharge or
termination to any of the provision of this Agreement as contemplated by the
proviso in the first sentence of this subsection 10.6, the consent of Requisite
Lenders is obtained but consent of one or more of such other Lenders whose
consent is required is not obtained, then Company may, so long as all
non-consenting Lenders are so treated, elect to terminate such Lender as a party
to this Agreement; provided that, concurrently with such termination, (i)
Company shall pay that Lender all principal, interest and fees and other amounts
due to be paid to such Lender with respect to all periods through such date of
termination, (ii) another financial institution satisfactory to Company and
Administrative Agent (or if Administrative Agent is also a Lender to be
terminated, the successor Administrative Agent) shall agree, as of such date, to
become a Lender for all purposes under this Agreement (whether by assignment or
amendment) and to assume all obligations of the Lender to be terminated as of
such date, and (iii) all documents and supporting materials necessary, in the
judgment of Administrative Agent (or if Administrative Agent is also a Lender to
be terminated, the successor Administrative Agent) to evidence the substitution
of such Lender shall have been received and approved by Administrative Agent as
of such date.
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10.7 Independence of Covenants.
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by United States mail or
courier service and shall be deemed to have been given when delivered in person
or by courier service, upon receipt of telecopy or telex, or four Business Days
after depositing it in the United States mail, registered or certified, with
postage prepaid and properly addressed; provided that notices to Administrative
Agent shall not be effective until received. For the purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or (i) as to Holdings, Company and Administrative
Agent, such other address as shall be designated by such Person in a written
notice delivered to the other parties hereto and (ii) as to each other party,
such other address as shall be designated by such party in a written notice
delivered to Administrative Agent.
10.9 Survival of Representations, Warranties and Agreements.
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4, 10.4, 10.5 and 10.20 shall survive the payment of the Loans, the
cancellation or expiration of the Letters of Credit and the reimbursement of any
amounts drawn or paid thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Administrative Agent or any Lender
in the exercise of any power, right or privilege hereunder or under any other
Loan Document shall impair such power, right or privilege or be construed to be
a waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other power, right or privilege. All rights and
remedies existing under this Agreement and the other Loan Documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available.
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10.11 Marshalling; Payments Set Aside.
Neither Administrative Agent nor any Lender shall be under any
obligation to marshal any assets in favor of Company or any other party or
against or in payment of any or all of the Obligations. To the extent that
Company makes a payment or payments to Administrative Agent or Lenders (or to
Administrative Agent for the benefit of Lenders), or Administrative Agent or
Lenders enforce any security interests or exercise their rights of setoff, and
such payment or payments or the proceeds of such enforcement or setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, any other state or federal law, common
law or any equitable cause, then, to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor or related thereto, shall be revived and continued in full
force and effect as if such payment or payments had not been made or such
enforcement or setoff had not occurred.
10.12 Severability.
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
The obligations of Lenders hereunder are several and no Lender shall be
responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
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10.14 Maximum Amount.
A. It is the intention of Company and the Lenders to conform strictly
to the usury and similar laws relating to interest from time to time in force,
and all agreements between the Loan Parties and their respective Subsidiaries
and the Lenders, whether now existing or hereafter arising and whether oral or
written, are hereby expressly limited so that in no contingency or event
whatsoever, whether by acceleration of maturity hereof or otherwise, shall the
amount paid or agreed to be paid in the aggregate to the Lenders as interest
(whether or not designated as interest, and including any amount otherwise
designated but deemed to constitute interest by a court of competent
jurisdiction) hereunder or under the other Loan Documents or in any other
agreement given to secure the indebtedness of Company to the Lenders, or in any
other document evidencing, securing or pertaining to the indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury or such
other laws (the "Maximum Amount"). If under any circumstances whatsoever
fulfillment of any provision hereof, or any of the other Loan Documents, at the
time performance of such provision shall be due, shall involve exceeding the
Maximum Amount, then, ipso facto, the obligation to be fulfilled shall be
reduced to the Maximum Amount. For the purposes of calculating the actual amount
of interest paid and/or payable hereunder in respect of laws pertaining to usury
or such other laws, all sums paid or agreed to be paid to the holder hereof for
the use, forbearance or detention of the indebtedness of Company evidenced
hereby, outstanding from time to time shall, to the extent permitted by
Applicable Law, be amortized, pro-rated, allocated and spread from the date of
disbursement of the proceeds of the Notes until payment in full of all of such
indebtedness, so that the actual rate of interest on account of such
indebtedness is uniform through the term hereof. The terms and provisions of
this subsection shall control and supersede every other provision of all
agreements between Company or any endorser of the Notes and the Lenders.
B. If under any circumstances any Lender shall ever receive an amount
which would exceed the Maximum Amount, such amount shall be deemed a payment in
reduction of the principal amount of the Loans and shall be treated as a
voluntary prepayment under subsection 2.4B(i) and shall be so applied in
accordance with subsection 2.4 hereof or if such excessive interest exceeds the
unpaid balance of the Loans and any other indebtedness of Company in favor of
such Lender, the excess shall be deemed to have been a payment made by mistake
and shall be refunded to Company.
10.15 Headings.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
10.16 Applicable Law.
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS
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PRINCIPLES.
10.17 Successors and Assigns.
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). Company's rights
or obligations hereunder nor any interest therein may not be assigned or
delegated by Company without the prior written consent of all Lenders.
10.18 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST HOLDINGS OR COMPANY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING
AND DELIVERING THIS AGREEMENT, EACH OF HOLDINGS AND COMPANY, FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEX- CLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO HOLDINGS OR COMPANY, AS APPLICABLE,
AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER HOLDINGS OR COMPANY, AS
APPLICABLE, IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST
HOLDINGS OR COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.18
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
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10.19 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/BORROWER RELATIONSHIP OR OTHER RELATIONSHIP THAT IS BEING ESTABLISHED.
The scope of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the subject matter of
this transaction, including, without limitation, contract claims, tort claims,
breach of duty claims and all other common law and statutory claims. Each party
hereto acknowledges that this waiver is a material inducement to enter into a
business relationship, that each has already relied on this waiver in entering
into this Agreement, and that each will continue to rely on this waiver in their
related future dealings. Each party hereto further warrants and represents that
it has reviewed this waiver with its legal counsel and that it knowingly and
voluntarily waives its jury trial rights following consultation with legal
counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY
REFERRING TO THIS SUBSECTION 10.19 AND EXECUTED BY EACH OF THE PARTIES HERETO),
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event
of litigation, this Agreement may be filed as a written consent to a trial by
the court.
10.20 Confidentiality.
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential by
Company in accordance with such Lender's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
lending or investing practices, it being understood and agreed by Company that
in any event a Lender may make disclosures reasonably required by any bona fide
assignee, transferee or participant in connection with the contemplated
assignment or transfer by such Lender of any Loans or any participation therein
or as required or requested by any governmental agency or representative thereof
or pursuant to legal process; provided that, unless specifically prohibited by
applicable law or court order, each Lender shall notify Company of any request
by any governmental agency or representative thereof (other than any such
request in connection with any examination of the financial condition of such
Lender by such governmental agency) for disclosure of any such non-public
information prior to disclosure of such information; and provided, further that
in no event shall any Lender be obligated or required to return any materials
furnished by Company or any of its Subsidiaries.
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10.21 Counterparts; Effectiveness.
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
It is the intention of each of the parties hereto that the Existing
Credit Agreement be amended and restated so as to preserve the perfection and
priority of all security interests securing indebtedness and obligations under
the Existing Credit Agreement and the other Loan Documents and that all
indebtedness and obligations of Company and its Subsidiaries hereunder and
thereunder shall be secured by the Collateral Documents and that this Agreement
shall not constitute a novation of the obligations and liabilities existing
under the Existing Credit Agreement or be deemed to evidence or constitute
repayment of all or any portion of any such obligations or liabilities. The
parties hereto further acknowledge and agree that this Agreement constitutes an
amendment of the Existing Credit Agreement made under the terms of subsection
10.6 thereof.
This Agreement shall become effective upon the execution of (i) a
counterpart hereof by each of the parties hereto and receipt by Company and
Administrative Agent of written or telephonic notification of such execution and
authorization of delivery hereof; provided that, unless and until all of the
conditions set forth in subsection 4.1 have been satisfied or waived in
accordance with subsection 10.6 of the Existing Credit Agreement, the Existing
Credit Agreement shall remain in full force and effect without giving effect to
the amendments set forth herein, all as if this Agreement had never been
executed and delivered.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
HOLDINGS AND COMPANY: DIMAC CORPORATION
By: /s/ Martin R. Lewis
--------------------------------
Name: Martin R. Lewis
Title: Chief Executive Officer
DIMAC HOLDINGS, INC.
By: /s/ Martin R. Lewis
--------------------------------
Name: Martin R. Lewis
Title: Chief Executive Officer
Notice Address for Company and Holdings:
5775 Peachtree Dunwoody Rd.
Suite C-150
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telephone: (404) 256-1123
Facsimile: (404) 705-9929
and a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Telephone: (212) 819-8752
Facsimile: (212) 819-7817
S-1
<PAGE>
AGENTS AND LENDERS: CREDIT SUISSE FIRST BOSTON,
individually and as Administrative Agent and
Arranger
By: /s/ Illegible
--------------------------------
Name:
Title:
By: /s/ Thomas G. Muoio
--------------------------------
Name: Thomas G. Muoio
Title: Vice President
Notice Address:
11 Madison Avenue
New York, New York 10010-3629
Attention: Jonathan Satran
Telephone: (212) 325-9936
Facsimile: (212) 325-8304
S-2
<PAGE>
WARBURG DILLON READ LLC,
as Syndication Agent
By: /s/ Michael Y. Leder
--------------------------------
Name: Michael Y. Leder
Title: Executive Director
Notice Address:
Warburg Dillon Read LLC
535 Madison Avenue
New York, New York 10022
Attention: Michael Leder
Telephone: (212) 906-7858
Facsimile: (212) 906-7116
S-3-A
<PAGE>
WARBURG DILLON READ LLC,
as Syndication Agent
By: /s/ P. W. Knight, Jr.
--------------------------------
Name: P. W. Knight, Jr.
Title: Managing Director
<PAGE>
UBS AG, STAMFORD BRANCH,
individually and as Syndication Agent
By: /s/ Michael Y. Leder
--------------------------------
Name: Michael Y. Leder
Title: Executive Director
Notice Address:
UBS AG, Stamford Branch
535 Madison Avenue
New York, New York 10022
Attention: Michael Leder
Telephone: (212) 906-7858
Facsimile: (212) 906-7116
S-3-B
<PAGE>
UBS AG, STAMFORD BRANCH
By: /s/ P. W. Knight, Jr.
--------------------------------
Name: P. W. Knight, Jr.
Title: Managing Director
<PAGE>
FIRST UNION NATIONAL BANK,
individually and as Documentation Agent
By: /s/ Henry R. Biedrzycki
--------------------------------
Name: Henry R. Biedrzycki
Title: Vice President
Notice Address:
First Union National Bank
One First Union Center
10th Floor
301 S. College Street
Charlotte, NC 28288-0608
Attention: Syndication Agency Services
Facsimile: (704) 383-0288
with a copy to:
One First Union Center
5th Floor
301 S. College Street
Charlotte, NC 28288-0735
Attention: Henry R. Biedrzycki
Facsimile: (704) 383-7037
S-4
<PAGE>
BANKBOSTON, N.A.
By: /s/ Julie V. Jalelian
--------------------------------
Name: Julie V. Jalelian
Title: Director
Notice Address:
BankBoston, N.A.
Mailstop 01-08-08
100 Federal Street
Boston, MA 02110
Attention: Julie Jalelian
Facsimile: (617) 434-3401
S-5
<PAGE>
FLEET BANK, N.A.
By: /s/ Russ J. Lopinto
--------------------------------
Name: Russ J. Lopinto
Title: Vice President
Notice Address:
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, NY 10036
Attention: Russ Lopinto
Facsimile: (212) 819-6202
S-6
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ David E. Yewer
--------------------------------
Name: David E. Yewer
Title: Vice President
By: /s/ Laura K. Connor
--------------------------------
Name: Laura K. Connor
Title: Senior Associate
Notice Address:
Bank Austria Creditanstalt Corporate Finance,
Inc.
Two Greenwich Plaza
Greenwich, CT 06830
Attention: David Yewer
Facsimile: (203) 861-1475
S-7
<PAGE>
FRANKLIN FLOATING RATE TRUST
By: /s/ Illegible
--------------------------------
Name:
Title:
Notice Address:
Franklin Floating Rate Trust
777 Mariners Island Blvd.
San Mateo, CA 94404
Attention: Richard Hsu
Facsimile: (650) 312-3346
S-8
<PAGE>
MARINE MIDLAND BANK
By: /s/ Susan L. LeFevre
--------------------------------
Name: SUSAN L. LeFEVRE
Title: AUTHORIZED SIGNATORY
Notice Address:
Marine Midland Bank
c/o HSBC Securities, Inc.
140 Broadway, 5th Floor
New York, NY 10005
Attention: Susan LeFevre
Facsimile: (212) 658-2586
S-9
<PAGE>
TORONTO DOMINION (TEXAS), INC.
By: /s/ Jorge A. Garcia
--------------------------------
Name: JORGE A. GARCIA
Title: VICE PRESIDENT
Notice Address:
The Toronto-Dominion Bank
909 Fannin, Suite 1700
Houston, TX 77010
Attention: David G. Parker
Facsimile: (713) 951-9921
with a copy to:
First Dominion Capital
1330 Avenue of the Americas, 37th Floor
New York, NY 10019
Attention: Credit Analyst
Facsimile: (212) 603-8506
S-10
<PAGE>
MERCANTILE BANK N.A.
By: /s/ John H. Phillips
--------------------------------
Name: JOHN H. PHILLIPS
Title: VICE PRESIDENT
Notice Address:
Mercantile Bank N.A.
7th & Washington
St. Louis, MO 63101
Attention: John H. Phillips
Facsimile: (314) 418-8292
S-11
<PAGE>
NATIONAL BANK OF CANADA
By: /s/ Theresa White
--------------------------------
Name: Theresa White
Title: Vice President
By: /s/ Bruce Gibson
--------------------------------
Name: Bruce Gibson
Title: Vice President
Notice Address:
National Bank of Canada
125 West 55th Street
New York, NY 10019
Attention: Theresa White
Facsimile: (212) 632-8545
S-14
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ B. Ross Smead
--------------------------------
Name: B. Ross Smead
Title: Vice President
Notice Address:
The Prudential Company of America
c/o Prudential Capital Group
Four Gateway Center
Newark, NJ 07102-4069
Attention: Laura J. Keller
Facsimile: (973) 802-7045
S-15
<PAGE>
STEIN ROE & FARNHAM INCORPORATED,
AS AGENT FOR KEYPORT LIFE
INSURANCE COMPANY
By: /s/ Brian W. Good
--------------------------------
Name: Brian W. Good
Title: Vice President & Portfolio Manager
Notice Address:
Stein Roe & Farnham
One South Wacker, 33rd Floor
Chicago, IL 60606
Attention: Brian Good
Facsimile: (312) 368-7857
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Attention: Patrick M. Hardiman and Ronald
H. Jacobson
Facsimile: (312) 558-5700
S-16
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Sonia L. Isaacs
--------------------------------
Name: Sonia L. Isaacs
Title: Vice President
Notice Address:
Union Bank of California, N.A.
445 South Figueroa Street
Los Angeles, CA 90071
Attention: Sonia Isaacs
Facsimile: (213) 236-5747
S-17
<PAGE>
JACKSON NATIONAL LIFE INSURANCE
COMPANY
BY: PPM AMERICA, INC., AS
ATTORNEY IN FACT, ON BEHALF
OF JACKSON NATIONAL LIFE
INSURANCE COMPANY
By: /s/ David Brett
--------------------------------
Name: David Brett
Title: Managing Director
Notice Address:
PPM America, Inc.
225 West Wacker Drive, Suite 1200
Chicago, IL 60606
Attention: Michael King
Facsimile: (312) 634-0054
S-18
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/ Jeffrey W. Maillet
--------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
Notice Address:
Van Kampen American Capital Prime Rate
Income Trust
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey Maillet
Facsimile: (630) 684-6740
S-20
<PAGE>
VAN KAMPEN AMERICAN CAPITAL
SENIOR FLOATING RATE FUND
By: /s/ Jeffrey W. Maillet
--------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President & Director
Notice Address:
Van Kampen American Capital Senior Floating
Rate Fund
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey Maillet
Facsimile: (630) 684-6740
S-21
<PAGE>
EXHIBIT I
NOTICE OF BORROWING
Pursuant to that certain Amended and Restated Credit Agreement dated as
of October 22, 1998, as amended, restated, supplemented or otherwise modified to
the date hereof (said Amended and Restated Credit Agreement, as so amended,
restated, supplemented or otherwise modified, being the "Credit Agreement"; the
terms defined therein and not otherwise defined herein being used herein as
therein defined), by and among DIMAC Corporation, a Delaware corporation
("Company"), DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
administrative agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as arranger, Warburg Dillon Read LLC, as syndication agent and
First Union National Bank, as documentation agent, this represents Company's
request to borrow as follows:
1. Date of borrowing:_____________
2. Amount of borrowing: i) Revolving Loans: $__________
ii) Term B Loans: $__________
iii) Term C Loans: $__________
3. Lender(s): / / a. Lenders, in accordance with their
applicable Pro Rata Shares
/ / b. Swing Line Lender
4. Type of Loans: / / a. Term B Loans
/ / b. Term C Loans
/ / c. Revolving Loans
/ / d. Swing Line Loan
5. Interest rate option: (1) / / a. Base Rate Loan(s)
/ / b. Eurodollar Rate Loans with an initial
Interest Period of ____________ month(s)
The proceeds of such Loans are to be deposited in Company's account at
Administrative Agent.
The undersigned officer, to the best of his or her knowledge, and
Company certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except to the
- --------
(1) Term Loans and Revolving Loans may be Base Rate Loans or Eurodollar Rate
Loans. Swing Line Loans shall be Base Rate Loans.
I-1
<PAGE>
extent such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties were
true and correct in all material respects on and as of such earlier
date;
(ii) No event has occurred and is continuing or would result
from the consummation of the borrowing contemplated hereby that would
constitute an Event of Default or a Potential Event of Default;
(iii) Each Loan Party has performed in all material respects
all agreements and satisfied all conditions which the Credit Agreement
provides shall be performed or satisfied by it on or before the date
hereof;
(iv) Each of the other conditions precedent set forth in
subsection 4.2 of the Credit Agreement will be satisfied as of the
proposed Funding Date; and
[Remainder of page intentionally left blank]
I-2
<PAGE>
(v) FOR REVOLVING LOANS: The amount of the proposed borrowing
will not cause the Total Utilization of Revolving Loan Commitments to
exceed the Revolving Loan Commitments.
DATED: DIMAC CORPORATION
--------------------
By:
------------------------------
Name:
Title:
I-3
<PAGE>
EXHIBIT II
[FORM OF NOTICE OF CONVERSION/CONTINUATION]
NOTICE OF CONVERSION/CONTINUATION
Pursuant to that certain Amended and Restated Credit Agreement dated as
of October 22, 1998, as amended, restated, supplemented or otherwise modified to
the date hereof (said Amended and Restated Credit Agreement, as so amended,
restated, supplemented or otherwise modified, being the "Credit Agreement"; the
terms defined therein and not otherwise defined herein being used herein as
therein defined), by and among DIMAC Corporation, a Delaware corporation
("Company"), DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
administrative agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as arranger, Warburg Dillon Read LLC, as syndication agent and
First Union National Bank, as documentation agent, this represents Company's
request to convert or continue loans as follows:
1. Date of conversion/continuation: __________________, [199_] [200_]
2. Amount of Loans being converted/continued: $___________________
3. Type of Loans being converted/continued:
/ / a. Term A Loans
/ / b. Term B Loans
/ / c. Term C Loans
/ / d. Revolving Loans
4. Nature of conversion/continuation:
/ / a. Conversion of Base Rate Loans to Eurodollar Rate Loans
/ / b. Conversion of Eurodollar Rate Loans to Base Rate Loans
/ / c. Continuation of Eurodollar Rate Loans as such
5. If Loans are being continued as or converted to Eurodollar
Rate Loans, the duration of the new Interest Period that
commences on the conversion/ continuation date:
_______________ month(s)
II-1
<PAGE>
In the case of a conversion to or continuation of Eurodollar Rate
Loans, the undersigned officer, to the best of his or her knowledge, and Company
certify that no Event of Default or Potential Event of Default has occurred and
is continuing under the Credit Agreement.
DATED: DIMAC CORPORATION
--------------------
By:
-------------------------------
Name:
Title:
II-2
<PAGE>
EXHIBIT III
[FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT]
NOTICE OF ISSUANCE OF LETTER OF CREDIT
Pursuant to that certain Amended and Restated Credit Agreement dated as
of October 22, 1998, as amended, restated, supplemented or otherwise modified to
the date hereof (said Amended and Restated Credit Agreement, as so amended,
restated, supplemented or otherwise modified, being the "Credit Agreement"; the
terms defined therein and not otherwise defined herein being used herein as
therein defined), by and among DIMAC Corporation, a Delaware corporation
("Company"), DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
administrative agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as arranger, Warburg Dillon Read LLC, as syndication agent and
First Union National Bank, as documentation agent, this represents Company's
request for the issuance of a Letter of Credit by Administrative Agent as
follows:
1. Date of issuance of Letter of Credit: ________________, [199_] [200_]
2. Type of Letter of Credit:
/ / a. Commercial Letter of Credit
/ / b. Standby Letter of Credit
3. Face amount of Letter of Credit: $________________________
4. Expiration date of Letter of Credit: ________________, [199_] [200_]
5. Name and address of beneficiary:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
III-1
<PAGE>
6. Attached hereto is:
/ / a. the verbatim text of such proposed Letter of Credit
/ / b. a description of the proposed terms and conditions of such
Letter of Credit, including a precise description of any
documents to be presented by the beneficiary which,
if presented by the beneficiary prior to the expiration date
of such Letter of Credit, would require the Issuing Lender to
make payment under such Letter of Credit.
The undersigned officer, to the best of his or her knowledge, and
Company certify that:
(i) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof to the same extent as
though made on and as of the date hereof, except to the extent such
representations and warranties specifically relate to an earlier date,
in which case such representations and warranties were true and correct
in all material respects on and as of such earlier date;
(ii) No event has occurred and is continuing or would result
from the issuance of the Letter of Credit contemplated hereby that
would constitute an Event of Default or a Potential Event of Default;
(iii) Company has performed in all material respects all
agreements and satisfied all conditions which the Credit Agreement
provides shall be performed or satisfied by it on or before the date
hereof;
(iv) The issuance of the proposed Letter of Credit will not
cause (a) the Letter of Credit Usage to exceed $___________ or (b) the
Total Utilization of Revolving Loan Commitments to exceed the Revolving
Loan Commitments; and
(v) Each of the other conditions precedent set forth in
subsection 4.2 of the Credit Agreement will be satisfied as of the
proposed date of issuance.
DATED: -------------------- DIMAC CORPORATION
By:
--------------------------------
Name:
Title:
III-2
<PAGE>
EXHIBIT IV
[FORM OF TERM A NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2004
$[1] New York, New York
[Effective Date]
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns, the
principal amount of [3] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of October 22, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Amended
and Restated Credit Agreement, as so amended, restated, supplemented or
otherwise modified, being the "Credit Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in consecutive
quarterly installments as set forth in the Credit Agreement, commencing on March
31, 2000 and ending on June 30, 2004. Each such installment shall be due on the
date specified in the Credit Agreement and in an amount determined in accordance
with the provisions thereof; provided that the last such installment shall be in
an amount sufficient to repay the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon.
- ----------------
[1] Insert amount of Lender's Term A Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Term A Loan in words.
IV-1
<PAGE>
This Note is one of Company's "Term A Notes" in the aggregate principal
amount of $55,000,000 and is issued, together with the other Term A Notes, to
amend and restate without interruption or novation, all indebtedness evidenced
by the Term A Notes (as defined in the Existing Credit Agreement) and is issued
pursuant to and entitled to the benefits of the Credit Agreement, to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Term A Loans evidenced hereby were made and are to be
repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register as provided in subsection 10.1B(ii) of the Credit Agreement, Company
and Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loan evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary Guaranty and
the Holdings Guaranty and is secured pursuant to the Collateral Documents.
IV-2
<PAGE>
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
DIMAC CORPORATION
By:
----------------------------------
Name:
Title:
IV-3
<PAGE>
EXHIBIT V
[FORM OF TERM B NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2006
$[1] New York, New York
[Effective Date]
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns, the
principal amount of [3] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of October 22, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Amended
and Restated Credit Agreement, as so amended, restated, supplemented or
otherwise modified, being the "Credit Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as Arranger,Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in consecutive
quarterly installments as set forth in the Credit Agreement, commencing on March
31, 2000 and ending on June 30, 2006. Each such installment shall be due on the
date specified in the Credit Agreement and in an amount determined in accordance
with the provisions thereof; provided that the last such installment shall be in
an amount sufficient to repay the entire unpaid principal balance of this Note,
together with all accrued and unpaid interest thereon.
- ----------------
[1] Insert amount of Lender's Term B Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Term B Loan in words.
V-1
<PAGE>
This Note is one of Company's "Term B Notes" in the aggregate principal
amount of $80,000,000 and is issued, together with the other Term B Notes, to
amend and restate without interruption or novation, all indebtedness evidenced
by the Term B Notes (as defined in the Existing Credit Agreement) and is issued
pursuant to and entitled to the benefits of the Credit Agreement, to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Term B Loans evidenced hereby were made and are to be
repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register as provided in subsection 10.1B(ii) of the Credit Agreement, Company
and Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loan evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary Guaranty and
the Holdings Guaranty and is secured pursuant to the Collateral Documents.
V-2
<PAGE>
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
DIMAC CORPORATION
By:
------------------------------
Name:
Title:
V-3
<PAGE>
EXHIBIT VI
[FORM OF TERM C NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE DECEMBER 31, 2006
$[1] New York, New York
[Effective Date]
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns, the
principal amount of [3] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of October 22, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Amended
and Restated Credit Agreement, as so amended, restated, supplemented or
otherwise modified, being the "Credit Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "Administrative Agent"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in consecutive
quarterly installments as set forth in the Credit Agreement, commencing on March
31, 2000 and ending on December 31, 2006. Each such installment shall be due on
the date specified in the Credit Agreement and in an amount determined in
accordance with the provisions thereof; provided that the last such installment
shall be in an amount sufficient to repay the entire unpaid principal balance of
this Note, together with all accrued and unpaid interest thereon.
This Note is one of Company's "Term C Notes" in the aggregate principal
amount of
- ----------------
[1] Insert amount of Lender's Term C Loan in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Term C Loan in words.
VI-1
<PAGE>
$60,000,000 and is issued, together with the other Term C Notes, to amend and
restate without interruption or novation, all indebtedness evidenced by the Term
C Notes (as defined in the Existing Credit Agreement) and is issued pursuant to
and entitled to the benefits of the Credit Agreement, to which reference is
hereby made for a more complete statement of the terms and conditions under
which the Term C Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register as provided in subsection 10.1B(ii) of the Credit Agreement, Company
and Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loan evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary Guaranty and
the Holdings Guaranty and is secured pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
VI-2
<PAGE>
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
DIMAC CORPORATION
By:
------------------------------------
Name:
Title:
VI-3
<PAGE>
EXHIBIT VII
[FORM OF REVOLVING NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2004
$[1] New York, New York
[Effective Date]
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("Company"), promises to pay to [2] ("Payee") or its registered assigns, on or
before June 30, 2004, the lesser of (x) [3] ($[1]) and (y) the unpaid principal
amount of all advances made by Payee to Company as Revolving Loans under the
Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of that certain
Amended and Restated Credit Agreement dated as of October 22, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Amended
and Restated Credit Agreement, as so amended, restated, supplemented or
otherwise modified, being the "Credit Agreement"; the terms defined therein and
not otherwise defined herein being used herein as therein defined), by and among
Company, DMAC Holdings, Inc., a Delaware corporation, the financial institutions
listed therein as Lenders, Credit Suisse First Boston, as Administrative Agent
(in such capacity, "Administrative Agent"), Credit Suisse First Boston, as
Arranger, Warburg Dillon Read LLC, as Syndication Agent and First Union National
Bank, as Documentation Agent.
This Note is one of Company's "Revolving Notes" in the aggregate
principal amount of $75,000,000 and is issued, together with the other
Revolving Notes, to amend and restate without interruption or novation, all
indebtedness evidenced by the Revolving Notes (as defined in the Existing
Credit Agreement) and is issued pursuant to and entitled to the benefits of
the Credit Agreement, to which reference is hereby made for a more complete
statement of the terms and conditions under which the Revolving Loans
evidenced hereby were made and are to be repaid.
- ----------------
[1] Insert amount of Lender's Revolving Loan Commitment in numbers.
[2] Insert Lender's name in capital letters.
[3] Insert amount of Lender's Revolving Loan Commitment in words.
VII-1
<PAGE>
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Unless and until an Assignment Agreement effecting the assignment or transfer of
this Note shall have been accepted by Administrative Agent and recorded in the
Register as provided in subsection 10.1B(ii) of the Credit Agreement, Company
and Administrative Agent shall be entitled to deem and treat Payee as the owner
and holder of this Note and the Loans evidenced hereby. Payee hereby agrees, by
its acceptance hereof, that before disposing of this Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid; provided, however, that
the failure to make a notation of any payment made on this Note shall not limit
or otherwise affect the obligations of Company hereunder with respect to
payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary Guaranty and
the Holdings Guaranty and is secured pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit
VII-2
<PAGE>
Agreement shall alter or impair the obligations of Company, which are absolute
and unconditional, to pay the principal of and interest on this Note at the
place, at the respective times, and in the currency herein prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly executed
and delivered by its officer thereunto duly authorized as of the date and at the
place first written above.
DIMAC CORPORATION
By:
------------------------------
Name:
Title:
VII-3
<PAGE>
TRANSACTIONS
ON
REVOLVING NOTE
<TABLE>
<CAPTION>
Outstanding
Type of Amount of Amount of Principal
Loan Made Loan Made Principal Paid Balance Notation
Date This Date This Date This Date This Date Made By
---- ----------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
VII-4
<PAGE>
EXHIBIT VIII
[FORM OF SWING LINE NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2004
$5,000,000.00 New York, New York
[Effective Date]
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("Company"), promises to pay to CREDIT SUISSE FIRST BOSTON ("Payee") or its
registered assigns, on or before June 30, 2004, the lesser of (x) FIVE MILLION
AND NO/100 DOLLARS ($5,000,000.00) and (y) the unpaid principal amount of all
advances made by Payee to Company as Swing Line Loans under the Credit Agreement
referred to below.
Company also promises to pay interest on the unpaid principal amount
hereof, from the date hereof until paid in full, at the rates and at the times
which shall be determined in accordance with the provisions of Amended and
Restated Credit Agreement dated as of October 22, 1998, as amended, restated,
supplemented or otherwise modified to the date hereof (said Amended and Restated
Credit Agreement, as so amended, restated, supplemented or otherwise modified,
being the "Credit Agreement"; the terms defined therein and not otherwise
defined herein being used herein as therein defined), by and among Company,
DIMAC Holdings, Inc., a Delaware corporation, the financial institutions listed
therein as Lenders, Credit Suisse First Boston, as Administrative Agent (in such
capacity, "Administrative Agent"), Credit Suisse First Boston, as Arranger,
Warburg Dillon Read LLC, as Syndication Agent and First Union National Bank, as
Documentation Agent.
This Note is Company's "Swing Line Note" and is issued to amend and
restate without interruption or novation, all indebtedness evidenced by the
Swing Line Note (as defined in the Existing Credit Agreement) and is issued
pursuant to and entitled to the benefits of the Credit Agreement, to which
reference is hereby made for a more complete statement of the terms and
conditions under which the Swing Line Loans evidenced hereby were made and are
to be repaid.
All payments of principal and interest in respect of this Note shall be
made in lawful money of the United States of America in same day funds at the
Funding and Payment Office or at such other place as shall be designated in
writing for such purpose in accordance with the terms of the Credit Agreement.
Whenever any payment on this Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and such
VIII-1
<PAGE>
extension of time shall be included in the computation of the payment of
interest on this Note.
This Note is subject to mandatory prepayment as provided in subsection
2.4B(iii) of the Credit Agreement and to prepayment at the option of Company as
provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance of the
principal amount of this Note, together with all accrued and unpaid interest
thereon, may become, or may be declared to be, due and payable in the manner,
upon the conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary Guaranty and
the Holdings Guaranty and is secured pursuant to the Collateral Documents.
The terms of this Note are subject to amendment only in the manner
provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment as
provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision of this
Note or the Credit Agreement shall alter or impair the obligations of Company,
which are absolute and unconditional, to pay the principal of and interest on
this Note at the place, at the respective times, and in the currency herein
prescribed.
Company promises to pay all costs and expenses, including reasonable
attorneys' fees, all as provided in subsection 10.2 of the Credit Agreement,
incurred in the collection and enforcement of this Note. Company and any
endorsers of this Note hereby consent to renewals and extensions of time at or
after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
[Remainder of page intentionally left blank]
VIII-2
<PAGE>
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
DIMAC CORPORATION
By:
--------------------------------
Name:
Title:
VIII-3
<PAGE>
TRANSACTIONS
ON
SWING LINE NOTE
<TABLE>
<CAPTION>
Outstanding
Amount of Amount of Principal
Loan Made Principal Paid Balance Notation
Date This Date This Date This Date Made By
---- --------- -------------- ----------- --------
<S> <C> <C> <C> <C>
</TABLE>
VIII-4
<PAGE>
EXHIBIT IX
[FORM OF SUBSIDIARY GUARANTY]
SUBSIDIARY GUARANTY
This SUBSIDIARY GUARANTY is entered into as of June 26, 1998, by THE
UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of DMAC Acquisition Corp., a
Delaware corporation ("Company") (each such undersigned Subsidiary a "Guarantor"
and collectively, "Guarantors"; provided that after the Closing Date, Guarantors
shall be deemed to include any Additional Guarantors (as hereinafter defined)),
in favor of and for the benefit of CREDIT SUISSE FIRST BOSTON ("CSFB"), as agent
for and representative of (in such capacity herein called "Guarantied Party")
the financial institutions ("Lenders") party to the Credit Agreement referred to
below and any Interest Rate Exchangers (as hereinafter defined).
RECITALS
A. Company has entered into that certain Credit Agreement dated as of
June 26, 1998 (said Credit Agreement, as it may hereafter be amended, restated,
supplemented or otherwise modified from time to time, being the "Credit
Agreement"; capitalized terms defined therein and not otherwise defined herein
being used herein as therein defined) with DMAC Holdings, Inc., Lenders, CSFB,
as Administrative Agent, and CSFB, as Syndication Agent and Arranger.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreements (collectively, the "Lender
Interest Rate Agreements") with or one or more Lenders or their Affiliates (in
such capacity, collectively, "Interest Rate Exchangers") in accordance with the
terms of the Credit Agreement, and it is desired that the obligations of Company
under the Lender Interest Rate Agreements, including without limitation the
obligation of Company to make payments thereunder in the event of early
termination thereof (all such obligations being the "Interest Rate
Obligations"), together with all obligations of Company under the Credit
Agreement and the other Loan Documents, be guarantied hereunder.
C. A portion of the proceeds of the Loans may be advanced to Guarantors
and thus the Guarantied Obligations (as hereinafter defined) are being incurred
for and will inure to the benefit of Guarantors (which benefits are hereby
acknowledged).
D. It is a condition precedent to the making of the initial Loans under
the Credit Agreement that Company's obligations thereunder be guarantied by
Guarantors.
E. Guarantors are willing irrevocably and unconditionally to guaranty
such
IX-1
<PAGE>
obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
in order to induce Lenders and Guarantied Party to enter into the Credit
Agreement and to make Loans and other extensions of credit thereunder and to
induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantors hereby agree as follows:
SECTION 1.
DEFINITIONS
1.1 Certain Defined Terms.
As used in this Guaranty, the following terms shall have the following
meanings unless the context otherwise requires:
"Beneficiaries" means Guarantied Party, Lenders and any
Interest Rate Exchangers.
"Guarantied Obligations" has the meaning assigned to that term
in subsection 2.1.
"Guaranty" means this Subsidiary Guaranty dated as of June 26,
1998, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"payment in full", "paid in full" or any similar term means
payment in full, in cash, of the Guarantied Obligations, including
without limitation all principal, interest, costs, fees and expenses
(including without limitation legal fees and expenses) of Beneficiaries
as required under the Loan Documents and the Lender Interest Rate
Agreements.
1.2 Interpretation.
(a) References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Guaranty unless otherwise specifically
provided.
(b) In the event of any conflict or inconsistency between the terms,
conditions and provisions of this Guaranty and the terms, conditions and
provisions of the Credit Agreement, the terms, conditions and provisions of this
Guaranty shall prevail.
IX-2
<PAGE>
SECTION 2.
THE GUARANTY
2.1 Guaranty of the Guarantied Obligations.
Subject to the provisions of subsection 2.2(a), Guarantors jointly and
severally hereby irrevocably and unconditionally guaranty the due and punctual
payment in full of all Guarantied Obligations when the same shall become due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. ss. 362(a)). The term "Guarantied Obligations" is used herein in its most
comprehensive sense and includes:
(a) any and all Obligations of Company and any and all
Interest Rate Obligations, in each case now or hereafter made, incurred
or created, whether absolute or contingent, liquidated or unliquidated,
whether due or not due, and however arising under or in connection with
the Credit Agreement and the other Loan Documents and the Lender
Interest Rate Agreements, including those arising under successive
borrowing transactions under the Credit Agreement which shall either
continue the Obligations of Company or from time to time renew them
after they have been satisfied and including interest which, but for
the filing of a petition in bankruptcy with respect to Company, would
have accrued on any Guarantied Obligations, whether or not a claim is
allowed against Company for such interest in the related bankruptcy
proceeding; and
(b) those expenses set forth in subsection 2.8 hereof.
IX-3
<PAGE>
2.2 Limitation on Amount Guarantied; Contribution by Guarantors.
(a) Anything contained in this Guaranty to the contrary
notwithstanding, if any Fraudulent Transfer Law (as hereinafter defined) is
determined by a court of competent jurisdiction to be applicable to the
obligations of any Guarantor under this Guaranty, the obligations of such
Guarantor hereunder shall be limited to a maximum aggregate amount equal to the
largest amount that would not render its obligations hereunder subject to
avoidance as a fraudulent transfer or conveyance under Section 548 of Title 11
of the United States Code or any applicable provisions of comparable state law
(collectively, the "Fraudulent Transfer Laws"), in each case after giving effect
to all other liabilities of such Guarantor, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Guarantor (i) in respect of intercompany indebtedness to
Company or other affiliates of Company to the extent that such indebtedness
would be discharged in an amount equal to the amount paid by such Guarantor
hereunder and (ii) under any guaranty of Subordinated Indebtedness which
guaranty contains a limitation as to maximum amount similar to that set forth in
this subsection 2.2(a), pursuant to which the liability of such Guarantor
hereunder is included in the liabilities taken into account in determining such
maximum amount) and after giving effect as assets to the value (as determined
under the applicable provisions of the Fraudulent Transfer Laws) of any rights
to subrogation, reimbursement, indemnification or contribution of such Guarantor
pursuant to applicable law or pursuant to the terms of any agreement (including
without limitation any such right of contribution under subsection 2.2(b) or
under the Holdings Guaranty as contemplated by subsection 2.2(b)).
(b) Guarantors under this Guaranty, and Holdings under the Holdings
Guaranty, together desire to allocate among themselves (collectively, the
"Contributing Guarantors"), in a fair and equitable manner, their obligations
arising under this Guaranty and the Holdings Guaranty. Accordingly, in the event
any payment or distribution is made on any date by any Guarantor under this
Guaranty or Holdings under the Holdings Guaranty (a "Funding Guarantor") that
exceeds its Fair Share (as defined below) as of such date, that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below) as of such date, with the result that
all such contributions will cause each Contributing Guarantor's Aggregate
Payments (as defined below) to equal its Fair Share as of such date. "Fair
Share" means, with respect to a Contributing Guarantor as of any date of
determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum
Amount (as defined below) with respect to such Contributing Guarantor to (y) the
aggregate of the Adjusted Maximum Amounts with respect to all Contributing
Guarantors multiplied by (ii) the aggregate amount paid or distributed on or
before such date by all Funding Guarantors under this Guaranty and the Holdings
Guaranty in respect of the obligations guarantied. "Fair Share Shortfall" means,
with respect to a Contributing Guarantor as of any date of determination, the
excess, if any, of the Fair Share of such Contributing Guarantor over the
Aggregate Payments of such Contributing Guarantor. "Adjusted Maximum Amount"
means, with respect to a Contributing Guarantor as of any date of determination,
the maximum aggregate amount of the obligations of such Contributing Guarantor
under this Guaranty or Holdings under the Holdings Guaranty, as applicable,
IX-4
<PAGE>
determined as of such date, in the case of any Guarantor, in accordance with
subsection 2.2(a); provided that, solely for purposes of calculating the
"Adjusted Maximum Amount" with respect to any Contributing Guarantor for
purposes of this subsection 2.2(b), any assets or liabilities of such
Contributing Guarantor arising by virtue of any rights to subrogation,
reimbursement or indemnification or any rights to or obligations of contribution
hereunder shall not be considered as assets or liabilities of such Contributing
Guarantor. "Aggregate Payments" means, with respect to a Contributing Guarantor
as of any date of determination, an amount equal to (i) the aggregate amount of
all payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty or Holdings under the Holdings Guaranty
(including in respect of this subsection 2.2(b) or subsection 2.2 of the
Holdings Guaranty) minus (ii) the aggregate amount of all payments received on
or before such date by such Contributing Guarantor from the other Contributing
Guarantors as contributions under this subsection 2.2(b) or subsection 2.2 of
the Holdings Guaranty. The amounts payable as contributions hereunder or under
subsection 2.2 of the Holdings Guaranty shall be determined as of the date on
which the related payment or distribution is made by the applicable Funding
Guarantor. The allocation among Contributing Guarantors of their obligations as
set forth in this subsection 2.2(b) and subsection 2.2 of the Holdings Guaranty
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder. Holdings is a third party beneficiary to the contribution
agreement set forth in subsection 2.2(b).
2.3 Payment by Guarantors; Application of Payments.
Subject to the provisions of subsection 2.2(a), Guarantors hereby
jointly and severally agree, in furtherance of the foregoing and not in
limitation of any other right which any Beneficiary may have at law or in equity
against any Guarantor by virtue hereof, that upon the failure of Company to pay
any of the Guarantied Obligations when and as the same shall become due, whether
at stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including amounts that would become due but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section
362(a)), Guarantors will upon demand pay, or cause to be paid, in cash, to
Guarantied Party for the ratable benefit of Beneficiaries, an amount equal to
the sum of the unpaid principal amount of all Guarantied Obligations then due as
aforesaid, accrued and unpaid interest on such Guarantied Obligations (including
without limitation interest which, but for the filing of a petition in
bankruptcy with respect to Company, would have accrued on such Guarantied
Obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding) and all other Guarantied Obligations then
owed to Beneficiaries as aforesaid. All such payments shall be applied promptly
from time to time by Guarantied Party as provided in subsection 2.4D of the
Credit Agreement.
IX-5
<PAGE>
2.4 Liability of Guarantors Absolute.
Each Guarantor agrees that its obligations hereunder are irrevocable,
absolute, independent and unconditional and shall not be affected by any
circumstance which constitutes a legal or equitable discharge of a guarantor or
surety other than payment in full of the Guarantied Obligations. In furtherance
of the foregoing and without limiting the generality thereof, each Guarantor
agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the
occurrence of an Event of Default under the Credit Agreement or the
occurrence of an Early Termination Date (as defined in a Master
Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International
Swap and Derivatives Association Inc. or a similar event under any
similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "Event of Default" for purposes of
this Guaranty) notwithstanding the existence of any dispute between
Company and any Beneficiary with respect to the existence of such Event
of Default.
(c) The obligations of each Guarantor hereunder are
independent of the obligations of Company under the Loan Documents or
the Lender Interest Rate Agreements and the obligations of any other
guarantor (including any other Guarantor) of the obligations of Company
under the Loan Documents or the Lender Interest Rate Agreements, and a
separate action or actions may be brought and prosecuted against such
Guarantor whether or not any action is brought against Company or any
of such other guarantors and whether or not Company is joined in any
such action or actions.
(d) Payment by any Guarantor of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge
any Guarantor's liability for any portion of the Guarantied Obligations
which has not been paid. Without limiting the generality of the
foregoing, if Guarantied Party is awarded a judgment in any suit
brought to enforce any Guarantor's covenant to pay a portion of the
Guarantied Obligations, such judgment shall not be deemed to release
such Guarantor from its covenant to pay the portion of the Guarantied
Obligations that is not the subject of such suit, and such judgment
shall not, except to the extent satisfied by such Guarantor, limit,
affect, modify or abridge any other Guarantor's liability hereunder in
respect of the Guarantied Obligations.
(e) Any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of any Guarantor's
liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the
time, place, manner or terms of payment of the
IX-6
<PAGE>
Guarantied Obligations, (ii) settle, compromise, release or discharge,
or accept or refuse any offer of performance with respect to, or
substitutions for, the Guarantied Obligations or any agreement relating
thereto and/or subordinate the payment of the same to the payment of
any other obligations; (iii) request and accept other guaranties of the
Guarantied Obligations and take and hold security for the payment of
this Guaranty or the Guarantied Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for
payment of the Guarantied Obligations, any other guaranties of the
Guarantied Obligations, or any other obligation of any Person
(including any other Guarantor) with respect to the Guarantied
Obligations; (v) enforce and apply any security now or hereafter held
by or for the benefit of such Beneficiary in respect of this Guaranty
or the Guarantied Obligations and direct the order or manner of sale
thereof, or exercise any other right or remedy that such Beneficiary
may have against any such security, in each case as such Beneficiary in
its discretion may determine consistent with the Credit Agreement or
the applicable Lender Interest Rate Agreement and any applicable
security agreement, including foreclosure on any such security pursuant
to one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable, and even though
such action operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of any Guarantor against
Company or any security for the Guarantied Obligations; and (vi)
exercise any other rights available to it under the Loan Documents or
the Lender Interest Rate Agreements.
(f) This Guaranty and the obligations of Guarantors hereunder
shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of the Guarantied Obligations),
including without limitation the occurrence of any of the following,
whether or not any Guarantor shall have had notice or knowledge of any
of them: (i) any failure or omission to assert or enforce or agreement
or election not to assert or enforce, or the stay or enjoining, by
order of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Loan Documents the Lender Interest Rate
Agreements, at law, in equity or otherwise) with respect to the
Guarantied Obligations or any agreement relating thereto, or with
respect to any other guaranty of or security for the payment of the
Guarantied Obligations; (ii) any rescission, waiver, amendment or
modification of, or any consent to departure from, any of the terms or
provisions (including without limitation provisions relating to events
of default) of the Credit Agreement, any of the other Loan Documents,
any of the Lender Interest Rate Agreements or any agreement or
instrument executed pursuant thereto, or of any other guaranty or
security for the Guarantied Obligations, in each case whether or not in
accordance with the terms of the Credit Agreement or such Loan
Document, such Lender Interest Rate Agreement or any agreement relating
to such other guaranty or security; (iii) the Guarantied Obligations,
or any agreement relating thereto, at any time being found to be
illegal, invalid or unenforceable in any respect; (iv) the application
of payments received from any source (other than payments received
pursuant to the other Loan Documents or any of the Lender Interest Rate
Agreements or from the proceeds of any security for the Guarantied
Obligations, except to the extent
IX-7
<PAGE>
such security also serves as collateral for indebtedness other than the
Guarantied Obligations) to the payment of indebtedness other than the
Guarantied Obligations, even though any Beneficiary might have elected
to apply such payment to any part or all of the Guarantied Obligations;
(v) any Beneficiary's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any
of its Subsidiaries and to any corresponding restructuring of the
Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any
of the Guarantied Obligations; (vii) any defenses, set-offs or
counterclaims which Company may allege or assert against any
Beneficiary in respect of the Guarantied Obligations, including, but
not limited to, failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and
usury; and (viii) any other act or thing or omission, or delay to do
any other act or thing, which may or might in any manner or to any
extent vary the risk of any Guarantor as an obligor in respect of the
Guarantied Obligations.
2.5 Waivers by Guarantors.
Each Guarantor hereby waives, for the benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of
payment or performance by such Guarantor, to (i) proceed against
Company, any other guarantor (including any other Guarantor) of the
Guarantied Obligations or any other Person, (ii) proceed against or
exhaust any security held from Company, any such other guarantor or any
other Person, (iii) proceed against or have resort to any balance of
any deposit account or credit on the books of any Beneficiary in favor
of Company or any other Person, or (iv) pursue any other remedy in the
power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including
without limitation any defense based on or arising out of the lack of
validity or the unenforceability of the Guarantied Obligations or any
agreement or instrument relating thereto or by reason of the cessation
of the liability of Company from any cause other than payment in full
of the Guarantied Obligations;
(c) 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;
(d) any defense based upon any Beneficiary's errors or
omissions in the administration of the Guarantied Obligations, except
behavior which amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of such Guarantor's
obligations hereunder, (ii) the benefit of any statute of
IX-8
<PAGE>
limitations affecting such Guarantor's liability hereunder or the
enforcement hereof, (iii) any rights to set-offs, recoupments and
counterclaims, and (iv) promptness, diligence and any requirement that
any Beneficiary protect, secure, perfect or insure any security
interest or lien or any property subject thereto;
(f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guaranty, notices of default under the
Credit Agreement, the Lender Interest Rate Agreements or any agreement
or instrument related thereto, notices of any renewal, extension or
modification of the Guarantied Obligations or any agreement related
thereto, notices of any extension of credit to Company and notices of
any of the matters referred to in subsection 2.4 and any right to
consent to any thereof; and
(g) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guaranty.
2.6 Guarantors' Rights of Subrogation, Contribution, Etc.
Until the Guarantied Obligations have been paid in full and the
Commitments terminated, each Guarantor hereby waives any claim, right or remedy,
direct or indirect, that such Guarantor now has or may hereafter have against
Company or any of its assets in connection with this Guaranty or the performance
by such Guarantor of its obligations hereunder, in each case whether such claim,
right or remedy arises in equity, under contract, by statute, under common
law or otherwise and including, without limitation, (a) any right of
subrogation, reimbursement or indemnification that such Guarantor now has or may
hereafter have against Company, (b) any right to enforce, or to participate in,
any claim, right or remedy that any Beneficiary now has or may hereafter have
against Company, and (c) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by any Beneficiary. In addition,
until the Guarantied Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled, each Guarantor shall withhold exercise of any right of
contribution or such Guarantor may have against any other guarantor (including
any other Guarantor) of the Guarantied Obligations (including without limitation
any such right of contribution under subsection 2.2(b) or under the Holdings
Guaranty as contemplated by subsection 2.2(b)). Each Guarantor further agrees
that, to the extent the waiver or agreement to withhold the exercise of its
rights of subrogation, reimbursement, indemnification and contribution as set
forth herein is found by a court of competent jurisdiction to be void or
voidable for any reason, any rights of subrogation, reimbursement or
indemnification such Guarantor may have against Company or against any
collateral or security, and any rights of contribution such Guarantor may have
against any such other guarantor, shall be junior and subordinate to any rights
any Beneficiary may have against Company, to all right, title and interest any
Beneficiary may have in any such collateral or security, and to any right any
Beneficiary may have against such other guarantor. If any amount shall be paid
to any Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guarantied
Obligations shall not have been paid in full, such amount
IX-9
<PAGE>
shall be held in trust for Guarantied Party on behalf of Beneficiaries and shall
forthwith be paid over to Guarantied Party for the benefit of Beneficiaries to
be credited and applied against the Guarantied Obligations, whether matured or
unmatured, in accordance with the terms hereof.
2.7 Subordination of Other Obligations.
Any indebtedness of Company or any Guarantor now or hereafter held by
any Guarantor (the "Obligee Guarantor") is hereby subordinated in right of
payment to the Guarantied Obligations, and any such indebtedness collected or
received by the Obligee Guarantor after an Event of Default has occurred and is
continuing shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of the Obligee Guarantor under any other provision of this Guaranty.
2.8 Expenses.
Guarantors jointly and severally agree to pay, or cause to be paid, on
demand, and to save Beneficiaries harmless against liability for, any and all
costs and expenses (including fees and disbursements of counsel and allocated
costs of internal counsel) incurred or expended by any Beneficiary in connection
with the enforcement of or preservation of any rights under this Guaranty.
2.9 Continuing Guaranty.
This Guaranty is a continuing guaranty and shall remain in effect until
all of the Guarantied Obligations shall have been paid in full and the
Commitments shall have terminated and all Letters of Credit shall have expired
or been cancelled. Each Guarantor hereby irrevocably waives any right to revoke
this Guaranty as to future transactions giving rise to any Guarantied
Obligations.
2.10 Authority of Guarantors or Company.
It is not necessary for any Beneficiary to inquire into the capacity or
powers of any Guarantor or Company or the officers, directors or any agents
acting or purporting to act on behalf of any of them.
IX-10
<PAGE>
2.11 Financial Condition of Company.
Any Loans may be granted to Company or continued from time to time, and
any Lender Interest Rate Agreement may be entered into from time to time, in
each case without notice to or authorization from any Guarantor regardless of
the financial or other condition of Company at the time of any such grant or
continuation or at the time such Lender Interest Rate Agreement is entered into,
as the case may be. No Beneficiary shall have any obligation to disclose or
discuss with any Guarantor its assessment, or any Guarantor's assessment, of the
financial condition of Company. Each Guarantor has adequate means to obtain
information from Company on a continuing basis concerning the financial
condition of Company and its ability to perform its obligations under the Loan
Documents and the Lender Interest Rate Agreements, and each Guarantor assumes
the responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Guarantied Obligations. Each Guarantor hereby waives and relinquishes any duty
on the part of any Beneficiary to disclose any matter, fact or thing relating to
the business, operations or conditions of Company now known or hereafter known
by any Beneficiary.
2.12 Rights Cumulative.
The rights, powers and remedies given to Beneficiaries by this Guaranty
are cumulative and shall be in addition to and independent of all rights, powers
and remedies given to Beneficiaries by virtue of any statute or rule of law or
in any of the other Loan Documents, any of the Lender Interest Rate Agreements
or any agreement between any Guarantor and any Beneficiary or Beneficiaries or
between Company and any Beneficiary or Beneficiaries. Any forbearance or failure
to exercise, and any delay by any Beneficiary in exercising, any right, power or
remedy hereunder shall not impair any such right, power or remedy or be
construed to be a waiver thereof, nor shall it preclude the further exercise of
any such right, power or remedy.
2.13 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty.
(a) So long as any Guarantied Obligations remain outstanding, no
Guarantor shall, without the prior written consent of Guarantied Party acting
pursuant to the instructions of Requisite Obligees (as defined in subsection
3.14), commence or join with any other Person in commencing any bankruptcy,
reorganization or insolvency proceedings of or against Company. The obligations
of Guarantors under this Guaranty shall not be reduced, limited, impaired,
discharged, deferred, suspended or terminated by any proceeding, voluntary or
involuntary, involving the bankruptcy, insolvency, receivership, reorganization,
liquidation or arrangement of Company or by any defense which Company may have
by reason of the order, decree or decision of any court or administrative body
resulting from any such proceeding.
(b) Each Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by
IX-11
<PAGE>
operation of law by reason of the commencement of said proceeding, such interest
as would have accrued on such portion of the Guarantied Obligations if said
proceedings had not been commenced) shall be included in the Guarantied
Obligations because it is the intention of Guarantors and Beneficiaries that the
Guarantied Obligations which are guarantied by Guarantors pursuant to this
Guaranty should be determined without regard to any rule of law or order which
may relieve Company of any portion of such Guarantied Obligations. Guarantors
will permit any trustee in bankruptcy, receiver, debtor in possession, assignee
for the benefit of creditors or similar person to pay Guarantied Party, or allow
the claim of Guarantied Party in respect of, any such interest accruing after
the date on which such proceeding is commenced.
(c) In the event that all or any portion of the Guarantied Obligations
are paid by Company, the obligations of Guarantors hereunder shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of such payment(s) are rescinded or recovered
directly or indirectly from any Beneficiary as a preference, fraudulent transfer
or otherwise, and any such payments which are so rescinded or recovered shall
constitute Guarantied Obligations for all purposes under this Guaranty.
2.14 Notice of Events.
As soon as any Guarantor obtains knowledge thereof, such Guarantor
shall give Guarantied Party written notice of any condition or event which has
resulted in a breach of or noncompliance with any term, condition or covenant
contained herein.
2.15 Set Off.
In addition to any other rights any Beneficiary may have under law or
in equity, if any amount shall at any time be due and owing by any Guarantor to
any Beneficiary under this Guaranty, such Beneficiary is authorized at any time
or from time to time upon the occurrence and during the continuation of any
Event of Default, without notice (any such notice being hereby expressly
waived), to set off and to appropriate and to apply any and all deposits
(general or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to such Guarantor and any other property
of such Guarantor held by any Beneficiary to or for the credit or the account of
such Guarantor against and on account of the Guarantied Obligations and
liabilities of such Guarantor to any Beneficiary under this Guaranty.
IX-12
<PAGE>
2.16 Discharge of Guaranty Upon Sale of Guarantor.
If all of the stock of any Guarantor or any of its successors in
interest under this Guaranty shall be sold or otherwise disposed of (including
by merger or consolidation) in an Asset Sale not prohibited by subsection 7.7 of
the Credit Agreement or otherwise consented to by Requisite Lenders, the
Guaranty of such Guarantor or such successor in interest, as the case may be,
hereunder shall automatically be discharged and released without any further
action by any Beneficiary or any other Person effective as of the time of such
Asset Sale; provided that, as a condition precedent to such discharge and
release, Guarantied Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Guarantied Party
of the applicable Net Cash Proceeds.
SECTION 3.
MISCELLANEOUS
3.1 Survival of Warranties.
All agreements, representations and warranties made herein shall
survive the execution and delivery of this Guaranty and the other Loan Documents
and the Lender Interest Rate Agreements and any increase in the Commitments
under the Credit Agreement.
3.2 Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier and shall be deemed to have been
given when delivered in person or by courier service, or upon receipt of
telefacsimile or three Business Days after depositing it in the United States
mail with postage pre-paid and properly addressed; provided, notices to
Guarantied Party shall not be effective until received. For purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or, as to any party, such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
3.3 Severability.
In case any provision in or obligation under this Guaranty shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
IX-13
<PAGE>
3.4 Amendments and Waivers.
No amendment, modification, termination or waiver of any provision of
this Guaranty, and no consent to any departure by any Guarantor therefrom, shall
in any event be effective without the written concurrence of Guarantied Party
and, in the case of any such amendment or modification, each Guarantor against
whom enforcement of such amendment or modification is sought. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
3.5 Headings.
Section and subsection headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this
Guaranty for any other purpose or be given any substantive effect.
3.6 Applicable Law; Rules of Construction.
THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF GUARANTORS AND
BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
The rules of construction set forth in subsection 1.3 of the Credit Agreement
shall be applicable to this Guaranty mutatis mutandis.
3.7 Successors and Assigns.
This Guaranty is a continuing guaranty and shall be binding upon each
Guarantor and its respective successors and assigns. This Guaranty shall inure
to the benefit of Beneficiaries and their respective successors and assigns. No
Guarantor shall assign this Guaranty or any of the rights or obligations of such
Guarantor hereunder without the prior written consent of all Lenders. Any
Beneficiary may, without notice or consent, assign its interest in this Guaranty
in whole or in part. The terms and provisions of this Guaranty shall inure to
the benefit of any transferee or assignee of any Loan, and in the event of such
transfer or assignment the rights and privileges herein conferred upon such
Beneficiary shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions hereof.
IX-14
<PAGE>
3.8 Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GUARANTOR ARISING OUT OF
OR RELATING TO THIS GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND
CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS GUARANTY, EACH GUARANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GUARANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SUBSECTION 3.2; (IV) AGREES THAT SERVICE AS PROVIDED
IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GUARANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT BENEFICIARIES
RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GUARANTOR IN THE COURTS OF ANY OTHER
JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402
OR OTHERWISE.
IX-15
<PAGE>
3.9 Waiver of Trial by Jury.
EACH GUARANTOR AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, EACH
BENEFICIARY HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS GUARANTY. The scope
of this waiver is intended to be all encompassing of any and all disputes that
may be filed in any court and that relate to the subject matter of this
transaction, including without limitation contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. Each Guarantor
and, by its acceptance of the benefits hereof, each Beneficiary (i) acknowledges
that this waiver is a material inducement for such Guarantor and Beneficiaries
to enter into a business relationship, that such Guarantor and Beneficiaries
have already relied on this waiver in entering into this Guaranty or accepting
the benefits thereof, as the case may be, and that each will continue to rely on
this waiver in their related future dealings and (ii) further warrants and
represents that each has reviewed this waiver with its legal counsel, and that
each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED BY GUARANTIED
PARTY AND EACH GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY. In the
event of litigation, this Guaranty may be filed as a written consent to a trial
by the court.
3.10 No Other Writing.
This writing is intended by Guarantors and Beneficiaries as the final
expression of this Guaranty and is also intended as a complete and exclusive
statement of the terms of their agreement with respect to the matters covered
hereby. No course of dealing, course of performance or trade usage, and no parol
evidence of any nature, shall be used to supplement or modify any terms of this
Guaranty. There are no conditions to the full effectiveness of this Guaranty.
3.11 Further Assurances.
At any time or from time to time, upon the request of Guarantied Party,
Guarantors shall execute and deliver such further documents and do such other
acts and things as Guarantied Party may reasonably request in order to effect
fully the purposes of this Guaranty.
IX-16
<PAGE>
3.12 Additional Guarantors.
The initial Guarantors hereunder shall be such of the Subsidiaries of
Company as are signatories hereto on the date hereof. From time to time
subsequent to the date hereof, additional Subsidiaries of Company may become
parties hereto, as additional Guarantors (each an "Additional Guarantor"), by
executing a counterpart of this Guaranty. Upon delivery of any such counterpart
to Administrative Agent, notice of which is hereby waived by Guarantors, each
such Additional Guarantor shall be a Guarantor and shall be as fully a party
hereto as if such Additional Guarantor were an original signatory hereof. Each
Guarantor expressly agrees that its obligations arising hereunder shall not be
affected or diminished by the addition or release of any other Guarantor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Guarantor hereunder. This Guaranty
shall be fully effective as to any Guarantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Guarantor hereunder.
3.13 Counterparts; Effectiveness.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same instrument.
This Guaranty shall become effective as to each Guarantor upon the execution of
a counterpart hereof by such Guarantor (whether or not a counterpart hereof
shall have been executed by any other Guarantor) and receipt by Guarantied Party
of written or telephonic notification of such execution and authorization of
delivery thereof.
IX-17
<PAGE>
3.14 Guarantied Party as Agent.
(a) Guarantied Party has been appointed to act as Guarantied Party
hereunder by Lenders and, by their acceptance of the benefits hereof, Interest
Rate Exchangers. Guarantied Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action, solely in
accordance with this Guaranty and the Credit Agreement; provided that Guarantied
Party shall exercise, or refrain from exercising, any remedies hereunder in
accordance with the instructions of (i) Requisite Lenders or (ii) after payment
in full of all Obligations under the Credit Agreement and the other Loan
Documents, the cancellation or expiration of all the Letters of Credit and the
termination of the Commitments, the holders of a majority of the aggregate
notional amount (or, with respect to any Lender Interest Rate Agreement that has
been terminated in accordance with its terms, the amount then due and payable
(exclusive of expenses and similar payments but including any early termination
payments then due) under such Lender Interest Rate Agreement) under all Lender
Interest Rate Agreements (Requisite Lenders or, if applicable, such holders
being referred to herein as "Requisite Obligees"). In furtherance of the
foregoing provisions of this subsection 3.14, each Interest Rate Exchanger, by
its acceptance of the benefits hereof, agrees that it shall have no right
individually to enforce this Guaranty, it being understood and agreed by such
Interest Rate Exchanger that all rights and remedies hereunder may be exercised
solely by Guarantied Party for the benefit of Beneficiaries in accordance with
the terms of this subsection 3.14.
(b) Guarantied Party shall at all times be the same Person that is
Administrative under the Credit Agreement. Written notice of resignation by
Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Guarantied Party under this Guaranty;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Guarantied Party under this Guaranty;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor
Guarantied Party under this Guaranty. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Guarantied Party under this Guaranty, and the
retiring or removed Guarantied Party under this Guaranty shall promptly (i)
transfer to such successor Guarantied Party all sums held hereunder, together
with all records and other documents necessary or appropriate in connection with
the performance of the duties of the successor Guarantied Party under this
Guaranty, and (ii) take such other actions as may be necessary or appropriate in
connection with the assignment to such successor Guarantied Party of the rights
created hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure to its benefit as
to any actions taken or omitted to be taken by it under this Guaranty while it
was Guarantied Party hereunder.
IX-18
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[Remainder of page intentionally left blank]
IX-19
<PAGE>
IN WITNESS WHEREOF, each of the undersigned Guarantors has caused this
Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of the date first written above.
Each of the entities listed on Schedule
A annexed hereto
By:
------------------------------------
on behalf of each of the entities listed on
Schedule A annexed hereto
Name:
Title:
Notice Address:
See Schedule A
IX-20
<PAGE>
Schedule A
Name Notice Address for each Guarantor
- ---- ---------------------------------
DIMAC Marketing Corporation c/o AmeriComm Holdings, Inc.
Palm Coast Data Inc. 5775 Peachtree Rd.
The McClure Group Inc. Dunwoody, Suite C150
Wilcox & Associates Inc. Atlanta, Ga 30342
MBS/Multimode Inc. Attn: Neil Gordon
DIMAC Direct Inc.
IX-21
<PAGE>
IN WITNESS WHEREOF, the undersigned Additional Guarantor has caused
this Guaranty to be duly executed and delivered by its officer thereunto duly
authorized as of ______________, [199_] [200_].
[NAME OF ADDITIONAL GUARANTOR]
By:
----------------------------------
Name:
Title:
Notice Address:
------------------------------
------------------------------
------------------------------
------------------------------
IX-22
<PAGE>
EXHIBIT X
[FORM OF HOLDINGS GUARANTY]
HOLDINGS GUARANTY
This HOLDINGS GUARANTY is entered into as of June 26, 1998 by
DMAC HOLDINGS, INC., a Delaware corporation ("Guarantor"), in favor of and for
the benefit of CREDIT SUISSE FIRST BOSTON, as agent for and representative of
(in such capacity herein called "Guarantied Party") the financial institutions
("Lenders") party to the Credit Agreement referred to below and any Interest
Rate Exchangers (as hereinafter defined), and, subject to subsection 3.12, for
the benefit of the other Beneficiaries (as hereinafter defined).
RECITALS
A. DMAC Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Guarantor ("Company"), has entered into that certain
Credit Agreement dated as of June 26, 1998 with Guarantied Party, as
Administrative Agent, Syndication Agent and Arranger, and Lenders (said Credit
Agreement, as it may hereafter be amended, supplemented or otherwise modified
from time to time, being the "Credit Agreement"; capitalized terms defined
therein and not otherwise defined herein being used herein as therein defined).
B. Company may from time to time enter, or may from time to
time have entered into, one or more Interest Rate Agreements (collectively, the
"Lender Interest Rate Agreements") with or one or more Lenders (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be guarantied hereunder.
C. It is a condition precedent to the making of the initial
Loans under the Credit Agreement that Company's obligations thereunder be
guarantied by Guarantor.
D. Guarantor is willing irrevocably and unconditionally to
guaranty such obligations of Company.
NOW, THEREFORE, based upon the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and in order to induce Lenders and Guarantied Party to enter into
the Credit Agreement and to make Loans and other extensions of credit thereunder
and to induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, Guarantor hereby agrees as follows:
X-1
<PAGE>
SECTION 1. DEFINITIONS
1.1 Certain Defined Terms. As used in this Guaranty, the following
terms shall have the following meanings unless the context otherwise requires:
"Beneficiaries" means Guarantied Party, Lenders and any
Interest Rate Exchangers.
"Guarantied Obligations" has the meaning assigned to that term
in subsection 2.1.
"Guaranty" means this Holdings Guaranty dated as of June 26,
1998, as it may be amended, restated, supplemented or otherwise
modified from time to time.
"payment in full", "paid in full" or any similar term means
payment in full, in cash, of the Guarantied Obligations, including
without limitation all principal, interest, costs, fees and expenses
(including, without limitation, legal fees and expenses) of
Beneficiaries as required under the Loan Documents and the Lender
Interest Rate Agreements.
1.2 Interpretation.
(a) References to "Sections" and "subsections" shall be to
Sections and subsections, respectively, of this Guaranty unless
otherwise specifically provided.
(b) In the event of any conflict or inconsistency between the
terms, conditions and provisions of this Guaranty and the terms,
conditions and provisions of the Credit Agreement, the terms,
conditions and provisions of this Guaranty shall prevail.
SECTION 2. THE GUARANTY
2.1 Guaranty of the Guarantied Obligations. Guarantor hereby
irrevocably and unconditionally guaranties, as primary obligor and not merely as
surety, the due and punctual payment in full of all Guarantied Obligations when
the same shall become due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. ss. 362(a)). The term "Guarantied Obligations" is
used herein in its most comprehensive sense and includes:
(a) any and all Obligations of Company and any and all
Interest Rate Obligations, in each case now or hereafter made, incurred
or created, whether absolute or contingent, liquidated or unliquidated,
whether due or not due, and however arising under or in connection with
the Credit Agreement and the other Loan Documents and the Lender
Interest Rate Agreements, including those arising under successive
borrowing transactions under the Credit Agreement which shall either
continue the Obligations of Company or from time to time renew them
after they have been satisfied and including
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interest which, but for the filing of a petition in bankruptcy with
respect to Company, would have accrued on any Guarantied Obligations,
whether or not a claim is allowed against Company for such interest in
the related bankruptcy proceeding; and
(b) those expenses set forth in subsection 2.9 hereof.
2.2 Contribution by Guarantor. Guarantor under this Guaranty, and each
Subsidiary Guarantor under the Subsidiary Guaranty, together desire to allocate
among themselves (collectively, the "Contributing Guarantors"), in a fair and
equitable manner, their obligations arising under this Guaranty and the
Subsidiary Guaranty. Accordingly, in the event any payment or distribution is
made on any date by Guarantor under this Guaranty or a Subsidiary Guarantor
under the Subsidiary Guaranty (a "Funding Guarantor") that exceeds its Fair
Share (as defined below) as of such date, that Funding Guarantor shall be
entitled to a contribution from each of the other Contributing Guarantors in the
amount of such other Contributing Guarantor's Fair Share Shortfall (as defined
below) as of such date, with the result that all such contributions will cause
each Contributing Guarantor's Aggregate Payments (as defined below) to equal its
Fair Share as of such date. "Fair Share" means, with respect to a Contributing
Guarantor as of any date of determination, an amount equal to (i) the ratio of
(x) the Fair Share Contribution Amount (as defined below) with respect to such
Contributing Guarantor to (y) the aggregate of the Fair Share Contribution
Amounts with respect to all Contributing Guarantors multiplied by (ii) the
aggregate amount paid or distributed on or before such date by all Funding
Guarantors under this Guaranty and the Subsidiary Guaranty in respect of the
obligations guarantied. "Fair Share Shortfall" means, with respect to a
Contributing Guarantor as of any date of determination, the excess, if any, of
the Fair Share of such Contributing Guarantor over the Aggregate Payments of
such Contributing Guarantor. "Fair Share Contribution Amount" means, with
respect to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty or the Subsidiary Guaranty, as applicable, that would not render its
obligations hereunder or thereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States Code
or any applicable provisions of comparable state law; provided that, solely for
purposes of calculating the "Fair Share Contribution Amount" with respect to any
Contributing Guarantor for purposes of this subsection 2.2, any assets or
liabilities of such Contributing Guarantor arising by virtue of any rights to
subrogation, reimbursement or indemnification or any rights to or obligations of
contribution hereunder or under subsection 2.2(b) of the Subsidiary Guaranty
shall not be considered as assets or liabilities of such Contributing Guarantor.
"Aggregate Payments" means, with respect to a Contributing Guarantor as of any
date of determination, an amount equal to (i) the aggregate amount of all
payments and distributions made on or before such date by such Contributing
Guarantor in respect of this Guaranty or the Subsidiary Guaranty, as applicable
(including, without limitation, in respect of this subsection 2.2 or subsection
2.2(b) of the Subsidiary Guaranty), minus (ii) the aggregate amount of all
payments received on or before such date by such Contributing Guarantor from the
other Contributing Guarantors as contributions under this subsection 2.2 or
subsection 2.2(b) of the Subsidiary Guaranty. The amounts payable as
contributions hereunder and under subsection 2.2(b) of the Subsidiary Guaranty
shall be determined as of the date on which the related payment or distribution
is made by the applicable Funding Guarantor. The allocation among Contributing
Guarantors of their obligations as set forth in this
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subsection 2.2 and subsection 2.2(b) of the Subsidiary Guaranty shall not be
construed in any way to limit the liability of any Contributing Guarantor
hereunder or under the Subsidiary Guaranty. Each Subsidiary Guarantor is a third
party beneficiary to the contribution agreement set forth in this subsection
2.2.
2.3 Payment by Guarantor; Application of Payments. Guarantor hereby
agrees, in furtherance of the foregoing and not in limitation of any other right
which any Beneficiary may have at law or in equity against Guarantor by virtue
hereof, that upon the failure of Company to pay any of the Guarantied
Obligations when and as the same shall become due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or otherwise
(including amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss. 362(a)),
Guarantor will upon demand pay, or cause to be paid, in cash, to Guarantied
Party for the ratable benefit of Beneficiaries, an amount equal to the sum of
the unpaid principal amount of all Guarantied Obligations then due as aforesaid,
accrued and unpaid interest on such Guarantied Obligations (including, without
limitation, interest which, but for the filing of a petition in bankruptcy with
respect to Company, would have accrued on such Guarantied Obligations, whether
or not a claim is allowed against Company for such interest in the related
bankruptcy proceeding) and all other Guarantied Obligations then owed to
Beneficiaries as aforesaid. All such payments shall be applied promptly from
time to time by Guarantied Party as provided in subsection 2.4D of the Credit
Agreement.
2.4 Liability of Guarantor Absolute. Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and unconditional
and shall not be affected by any circumstance which constitutes a legal or
equitable discharge of a guarantor or surety other than payment in full of the
Guarantied Obligations. In furtherance of the foregoing and without limiting the
generality thereof, Guarantor agrees as follows:
(a) This Guaranty is a guaranty of payment when due and not of
collectibility.
(b) Guarantied Party may enforce this Guaranty upon the
occurrence of an Event of Default under the Credit Agreement or the
occurrence of an Early Termination Date (as defined in a Master
Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International
Swap and Derivatives Association Inc. or a similar event under any
similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "Event of Default" for purposes of
this Agreement) notwithstanding the existence of any dispute between
Company and any Beneficiary with respect to the existence of such Event
of Default.
(c) The obligations of Guarantor hereunder are independent of
the obligations of Company under the Loan Documents or the Lender
Interest Rate Agreements and the obligations of any other guarantor
(including any Subsidiary Guarantor) of the obligations of Company
under the Loan Documents or the Lender Interest Rate Agreements, and a
separate action or actions may be brought and prosecuted against
Guarantor whether or not any action is brought against Company or any
of such other guarantors and whether
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or not Company is joined in any such action or actions.
(d) Guarantor's payment of a portion, but not all, of the
Guarantied Obligations shall in no way limit, affect, modify or abridge
Guarantor's liability for any portion of the Guarantied Obligations
which has not been paid. Without limiting the generality of the
foregoing, if Guarantied Party is awarded a judgment in any suit
brought to enforce Guarantor's covenant to pay a portion of the
Guarantied Obligations, such judgment shall not be deemed to release
Guarantor from its covenant to pay the portion of the Guarantied
Obligations that is not the subject of such suit.
(e) Any Beneficiary, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or
enforceability of this Guaranty or giving rise to any reduction,
limitation, impairment, discharge or termination of Guarantor's
liability hereunder, from time to time may (i) renew, extend,
accelerate, increase the rate of interest on, or otherwise change the
time, place, manner or terms of payment of the Guarantied Obligations,
(ii) settle, compromise, release or discharge, or accept or refuse any
offer of performance with respect to, or substitutions for, the
Guarantied Obligations or any agreement relating thereto and/or
subordinate the payment of the same to the payment of any other
obligations; (iii) request and accept other guaranties of the
Guarantied Obligations and take and hold security for the payment of
this Guaranty or the Guarantied Obligations; (iv) release, surrender,
exchange, substitute, compromise, settle, rescind, waive, alter,
subordinate or modify, with or without consideration, any security for
payment of the Guarantied Obligations, any other guaranties (including
the Subsidiary Guaranty) of the Guarantied Obligations, or any other
obligation of any Person with respect to the Guarantied Obligations;
(v) enforce and apply any security now or hereafter held by or for the
benefit of such Beneficiary in respect of this Guaranty or the
Guarantied Obligations and direct the order or manner of sale thereof,
or exercise any other right or remedy that such Beneficiary may have
against any such security, in each case as such Beneficiary in its
discretion may determine consistent with the Credit Agreement or the
applicable Lender Interest Rate Agreement and any applicable security
agreement, including foreclosure on any such security pursuant to one
or more judicial or nonjudicial sales, whether or not every aspect of
any such sale is commercially reasonable, and even though such action
operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of Guarantor against Company or
any security for the Guarantied Obligations; and (vi) exercise any
other rights available to it under the Loan Documents or the Lender
Interest Rate Agreements.
(f) This Guaranty and the obligations of Guarantor hereunder
shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any
reason (other than payment in full of the Guarantied Obligations),
including without limitation the occurrence of any of the following,
whether or not Guarantor shall have had notice or knowledge of any of
them: (i) any failure or omission to assert or enforce or agreement or
election not to assert or enforce, or the stay or enjoining, by order
of court, by operation of law or otherwise, of the exercise or
enforcement of, any claim or demand or any right, power or remedy
(whether arising under the Loan Documents or the Lender Interest Rate
Agreements, at law, in equity or
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otherwise) with respect to the Guarantied Obligations or any agreement
relating thereto, or with respect to the Subsidiary Guaranty or any
other guaranty of or security for the payment of the Guarantied
Obligations; (ii) any rescission, waiver, amendment or modification of,
or any consent to departure from, any of the terms or provisions
(including without limitation provisions relating to events of default)
of the Credit Agreement, any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement or instrument executed
pursuant thereto, or of the Subsidiary Guaranty or any other guaranty
or security for the Guarantied Obligations, in each case whether or not
in accordance with the terms of the Credit Agreement or such Loan
Document, such Lender Interest Rate Agreement or any agreement relating
to the Subsidiary Guaranty or such other guaranty or security; (iii)
the Guarantied Obligations, or any agreement relating thereto, at any
time being found to be illegal, invalid or unenforceable in any
respect; (iv) the application of payments received from any source
(other than payments received pursuant to the other Loan Documents or
any of the Lender Interest Rate Agreements or from the proceeds of any
security for the Guarantied Obligations, except to the extent such
security also serves as collateral for indebtedness other than the
Guarantied Obligations) to the payment of indebtedness other than the
Guarantied Obligations, even though any Beneficiary might have elected
to apply such payment to any part or all of the Guarantied Obligations;
(v) any Beneficiary's consent to the change, reorganization or
termination of the corporate structure or existence of Company or any
of its Subsidiaries and to any corresponding restructuring of the
Guarantied Obligations; (vi) any failure to perfect or continue
perfection of a security interest in any collateral which secures any
of the Guarantied Obligations; (vii) any defenses, set-offs or
counterclaims which Company may allege or assert against any
Beneficiary in respect of the Guarantied Obligations, including, but
not limited to, failure of consideration, breach of warranty, payment,
statute of frauds, statute of limitations, accord and satisfaction and
usury; and (viii) any other act or thing or omission, or delay to do
any other act or thing, which may or might in any manner or to any
extent vary the risk of Guarantor as an obligor in respect of the
Guarantied Obligations.
2.5 Waivers by Guarantor. Guarantor hereby waives, for the
benefit of Beneficiaries:
(a) any right to require any Beneficiary, as a condition of
payment or performance by Guarantor, to (i) proceed against Company,
any other guarantor (including any Subsidiary Guarantor) of the
Guarantied Obligations or any other Person, (ii) proceed against or
exhaust any security held from Company, any such other guarantor or any
other Person, (iii) proceed against or have resort to any balance of
any deposit account or credit on the books of any Beneficiary in favor
of Company or any other Person, or (iv) pursue any other remedy in the
power of any Beneficiary whatsoever;
(b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including,
without limitation, any defense based on or arising out of the lack of
validity or the unenforceability of the Guarantied Obligations or any
agreement or instrument relating thereto or by reason of the cessation
of the liability of Company from any cause other than payment in full
of the Guarantied
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Obligations;
(c) 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;
(d) any defense based upon any Beneficiary's errors or
omissions in the administration of the Guarantied Obligations, except
behavior which amounts to bad faith;
(e) (i) any principles or provisions of law, statutory or
otherwise, which are or might be in conflict with the terms of this
Guaranty and any legal or equitable discharge of Guarantor's
obligations hereunder, (ii) the benefit of any statute of limitations
affecting Guarantor's liability hereunder or the enforcement hereof,
(iii) any rights to set-offs, recoupments and counterclaims, and (iv)
promptness, diligence and any requirement that any Beneficiary protect,
secure, perfect or insure any security interest or lien or any property
subject thereto;
(f) notices, demands, presentments, protests, notices of
protest, notices of dishonor and notices of any action or inaction,
including acceptance of this Guaranty, notices of default under the
Credit Agreement, the Lender Interest Rate Agreements or any agreement
or instrument related thereto, notices of any renewal, extension or
modification of the Guarantied Obligations or any agreement related
thereto, notices of any extension of credit to Company and notices of
any of the matters referred to in subsection 2.4 and any right to
consent to any thereof; and
(g) any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate guarantors or
sureties, or which may conflict with the terms of this Guaranty.
2.7 Guarantor's Rights of Subrogation, Contribution, Etc. Guarantor
hereby waives any claim, right or remedy, direct or indirect, that Guarantor now
has or may hereafter have against Company or any of its assets in connection
with this Guaranty or the performance by Guarantor of its obligations hereunder,
in each case whether such claim, right or remedy arises in equity, under
contract, by statute, under common law or otherwise and including, without
limitation, (a) any right of subrogation, reimbursement or indemnification that
Guarantor now has or may hereafter have against Company, (b) any right to
enforce, or to participate in, any claim, right or remedy that any Beneficiary
now has or may hereafter have against Company, and (c) any benefit of, and any
right to participate in, any collateral or security now or hereafter held by any
Beneficiary. In addition, until the Guarantied Obligations shall have been
indefeasibly paid in full and the Commitments shall have terminated and all
Letters of Credit shall have expired or been cancelled, Guarantor shall withhold
exercise of any right of contribution Guarantor may have against any other
guarantor of the Guarantied Obligations. Guarantor further agrees that, to the
extent the waiver or agreement to withhold the exercise of its rights of
subrogation, reimbursement, indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of
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subrogation, reimbursement or indemnification Guarantor may have against Company
or against any collateral or security, and any rights of contribution Guarantor
may have against any such other guarantor, shall be junior and subordinate to
any rights any Beneficiary may have against Company, to all right, title and
interest any Beneficiary may have in any such collateral or security, and to any
right any Beneficiary may have against such other guarantor. If any amount shall
be paid to Guarantor on account of any such subrogation, reimbursement,
indemnification or contribution rights at any time when all Guarantied
Obligations shall not have been paid in full, such amount shall be held in trust
for Guarantied Party on behalf of Beneficiaries and shall forthwith be paid over
to Guarantied Party for the benefit of Beneficiaries to be credited and applied
against the Guarantied Obligations, whether matured or unmatured, in accordance
with the terms hereof.
2.8 Subordination of Other Obligations. Any indebtedness of Company now
or hereafter held by Guarantor is hereby subordinated in right of payment to the
Guarantied Obligations, and any such indebtedness of Company to Guarantor
collected or received by Guarantor after an Event of Default has occurred and is
continuing shall be held in trust for Guarantied Party on behalf of
Beneficiaries and shall forthwith be paid over to Guarantied Party for the
benefit of Beneficiaries to be credited and applied against the Guarantied
Obligations but without affecting, impairing or limiting in any manner the
liability of Guarantor under any other provision of this Guaranty.
2.9 Expenses. Guarantor agrees to pay, or cause to be paid, on demand,
and to save Beneficiaries harmless against liability for, any and all costs and
expenses (including fees and disbursements of counsel and allocated costs of
internal counsel) incurred or expended by any Beneficiary in connection with the
enforcement of or preservation of any rights under this Guaranty.
2.10 Continuing Guaranty; Termination of Guaranty. This Guaranty is a
continuing guaranty and shall remain in effect until all of the Guarantied
Obligations shall have been paid in full and the Commitments shall have
terminated and all Letters of Credit shall have expired or been cancelled.
Guarantor hereby irrevocably waives any right to revoke this Guaranty as to
future transactions giving rise to any Guarantied Obligations.
2.11 Authority of Guarantor or Company. It is not necessary for any
Beneficiary to inquire into the capacity or powers of Guarantor or Company or
the officers, directors or any agents acting or purporting to act on behalf of
any of them.
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2.12 Financial Condition of Company. Any Loans may be granted to
Company or continued from time to time, and any Lender Interest Rate Agreement
may be entered into from time to time, in each case without notice to or
authorization from Guarantor regardless of the financial or other condition of
Company at the time of any such grant or continuation or at the time such Lender
Interest Rate Agreement is entered into, as the case may be. No Beneficiary
shall have any obligation to disclose or discuss with Guarantor its assessment,
or Guarantor's assessment, of the financial condition of Company. Guarantor has
adequate means to obtain information from Company on a continuing basis
concerning the financial condition of Company and its ability to perform its
obligations under the Loan Documents and the Lender Interest Rate Agreements,
and Guarantor assumes the responsibility for being and keeping informed of the
financial condition of Company and of all circumstances bearing upon the risk of
nonpayment of the Guarantied Obligations. Guarantor hereby waives and
relinquishes any duty on the part of any Beneficiary to disclose any matter,
fact or thing relating to the business, operations or conditions of Company now
known or hereafter known by any Beneficiary .
2.13 Rights Cumulative. The rights, powers and remedies given to
Beneficiaries by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to Beneficiaries by virtue
of any statute or rule of law or in any of the other Loan Documents, any of the
Lender Interest Rate Agreements or any agreement between Guarantor and any
Beneficiary or Beneficiaries or between Company and any Beneficiary or
Beneficiaries. Any forbearance or failure to exercise, and any delay by any
Beneficiary in exercising, any right, power or remedy hereunder shall not impair
any such right, power or remedy or be construed to be a waiver thereof, nor
shall it preclude the further exercise of any such right, power or remedy.
2.14 Bankruptcy; Post-Petition Interest; Reinstatement of Guaranty. (a)
So long as any Guarantied Obligations remain outstanding, Guarantor shall not,
without the prior written consent of Guarantied Party acting pursuant to the
instructions of Requisite Obligees (as defined in subsection 3.12), commence or
join with any other Person in commencing any bankruptcy, reorganization or
insolvency proceedings of or against Company. The obligations of Guarantor under
this Guaranty shall not be reduced, limited, impaired, discharged, deferred,
suspended or terminated by any proceeding, voluntary or involuntary, involving
the bankruptcy, insolvency, receivership, reorganization, liquidation or
arrangement of Company or by any defense which Company may have by reason of the
order, decree or decision of any court or administrative body resulting from any
such proceeding.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Guarantied Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guarantied Obligations ceases to accrue by operation of law by reason of
the commencement of said proceeding, such interest as would have accrued on such
portion of the Guarantied Obligations if said proceedings had not been
commenced) shall be included in the Guarantied Obligations because it is the
intention of Guarantor and Beneficiaries that the Guarantied Obligations which
are guarantied by Guarantor pursuant to this Guaranty should be determined
without regard to any rule of law or order which may relieve Company of any
portion of such Guarantied Obligations. Guarantor will permit any trustee in
bankruptcy, receiver, debtor in possession, assignee for the benefit of
creditors or
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similar person to pay Guarantied Party, or allow the claim of Guarantied Party
in respect of, any such interest accruing after the date on which such
proceeding is commenced.
(c) In the event that all or any portion of the Guarantied
Obligations are paid by Company, the obligations of Guarantor hereunder shall
continue and remain in full force and effect or be reinstated, as the case may
be, in the event that all or any part of such payment(s) are rescinded or
recovered directly or indirectly from any Beneficiary as a preference,
fraudulent transfer or otherwise, and any such payments which are so rescinded
or recovered shall constitute Guarantied Obligations for all purposes under this
Guaranty.
2.15 Notice of Events. As soon as Guarantor obtains knowledge thereof,
Guarantor shall give Guarantied Party written notice of any condition or event
which has resulted in a breach of or noncompliance with any term, condition or
covenant contained herein.
2.16 Set Off. In addition to any other rights any Beneficiary may have
under law or in equity, if any amount shall at any time be due and owing by
Guarantor to any Beneficiary under this Guaranty, such Beneficiary is authorized
at any time or from time to time upon the occurrence and during the continuance
of an Event of Default without notice (any such notice being hereby expressly
waived), to set off and to appropriate and to apply any and all deposits
(general or special, including but not limited to indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness of such Beneficiary owing to Guarantor and any other property of
Guarantor held by any Beneficiary to or for the credit or the account of
Guarantor against and on account of the Guarantied Obligations and liabilities
of Guarantor to any Beneficiary under this Guaranty.
SECTION 3. MISCELLANEOUS
3.1 Survival of Warranties. All agreements, representations and
warranties made herein shall survive the execution and delivery of this Guaranty
and the other Loan Documents and the Lender Interest Rate Agreements and any
increase in the Commitments under the Credit Agreement.
3.2 Notices. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served, telexed
or sent by telefacsimile or United States mail or courier and shall be deemed to
have been given when delivered in person or by courier service, or upon receipt
of telefacsimile or three Business Days after depositing it in the United States
mail with postage pre-paid and properly addressed; provided, notices to
Guarantied Party shall not be effective until received. For purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or, as to any party, such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
3.3 Severability. In case any provision in or obligation under this
Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
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3.4 Amendments and Waivers. No amendment, modification, termination or
waiver of any provision of this Guaranty, and no consent to any departure by
Guarantor therefrom, shall in any event be effective without the written
concurrence of Guarantied Party and, in the case of any such amendment or
modification, Guarantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
3.5 Headings. Section and subsection headings in this Guaranty are
included herein for convenience of reference only and shall not constitute a
part of this Guaranty for any other purpose or be given any substantive effect.
3.6 Applicable Law. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF
GUARANTOR AND BENEFICIARIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Guaranty mutatis mutandis.
3.7 Successors and Assigns. This Guaranty is a continuing guaranty and
shall be binding upon Guarantor and its successors and assigns. This Guaranty
shall inure to the benefit of Beneficiaries and their respective successors and
assigns. Guarantor shall not assign this Guaranty or any of the rights or
obligations of Guarantor hereunder without the prior written consent of all
Lenders. Any Beneficiary may, without notice or consent, assign its interest in
this Guaranty in whole or in part. The terms and provisions of this Guaranty
shall inure to the benefit of any transferee or assignee of any Loan, and in the
event of such transfer or assignment the rights and privileges herein conferred
upon such Beneficiary shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof.
3.8 Consent to Jurisdiction and Service of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GUARANTOR ARISING OUT OF OR RELATING TO THIS
GUARANTY, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY
EXECUTING AND DELIVERING THIS AGREEMENT, GUARANTOR, FOR ITSELF AND IN CONNECTION
WITH ITS PROPERTIES, IRREVOCABLY
(I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE
JURISDICTION AND VENUE OF SUCH COURTS;
(II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS;
(III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, TO GUARANTOR AT
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ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 3.2;
(IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER GUARANTOR IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT;
(V) AGREES THAT BENEFICIARIES RETAIN THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS
AGAINST GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION; AND
(VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 3.8
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO
THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW
SECTION 5-1402 OR OTHERWISE.
3.9 Waiver of Trial by Jury. GUARANTOR AND, BY ITS ACCEPTANCE OF THE
BENEFITS HEREOF, EACH BENEFICIARY HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF
THIS GUARANTY. The scope of this waiver is intended to be all-encompassing of
any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims and all other common law and
statutory claims. Guarantor and, by its acceptance of the benefits hereof, each
Beneficiary (i) acknowledges that this waiver is a material inducement for
Guarantor and Beneficiaries to enter into a business relationship, that
Guarantor and Beneficiaries have already relied on this waiver in entering into
this Guaranty or accepting the benefits thereof, as the case may be, and that
each will continue to rely on this waiver in their related future dealings and
(ii) further warrants and represents that each has reviewed this waiver with its
legal counsel, and that each knowingly and voluntarily waives its jury trial
rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 3.9 AND EXECUTED
BY GUARANTIED PARTY AND GUARANTOR), AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY.
In the event of litigation, this Guaranty may be filed as a written consent to a
trial by the court.
3.10 No Other Writing. This writing is intended by Guarantor and
Beneficiaries as the final expression of this Guaranty and is also intended as a
complete and exclusive statement of the terms of their agreement with respect to
the matters covered hereby. No course of dealing, course of performance or trade
usage, and no parol evidence of any nature, shall be used to supplement or
modify any terms of this Guaranty. There are no conditions to the full
effectiveness of this Guaranty.
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3.11 Further Assurances. At any time or from time to time, upon the
request of Guarantied Party, Guarantor shall execute and deliver such further
documents and do such other acts and things as Guarantied Party may reasonably
request in order to effect fully the purposes of this Guaranty.
3.12 Guarantied Party as Agent.
(a) Guarantied Party has been appointed to act as Guarantied
Party hereunder by Lenders and, by their acceptance of the benefits hereof,
Interest Rate Exchangers. Guarantied Party shall be obligated, and shall have
the right hereunder, to make demands, to give notices, to exercise or refrain
from exercising any rights, and to take or refrain from taking any action,
solely in accordance with this Guaranty and the Credit Agreement; provided that
Guarantied Party shall exercise, or refrain from exercising, any remedies
hereunder in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the cancellation or expiration of all the Letters of
Credit and the termination of the Commitments, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "Requisite Obligees"). In furtherance
of the foregoing provisions of this subsection 3.12, each Interest Rate
Exchanger, by its acceptance of the benefits hereof, agrees that it shall have
no right individually to enforce this Guaranty, it being understood and agreed
by such Interest Rate Exchanger that all rights and remedies hereunder may be
exercised solely by Guarantied Party for the benefit of Beneficiaries in
accordance with the terms of this subsection 3.12.
(b) Guarantied Party shall at all times be the same Person
that is Agent under the Credit Agreement. Written notice of resignation by Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute notice
of resignation as Guarantied Party under this Guaranty; removal of Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute removal
as Guarantied Party under this Guaranty; and appointment of a successor Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute
appointment of a successor Guarantied Party under this Guaranty. Upon the
acceptance of any appointment as Agent under subsection 9.5 of the Credit
Agreement by a successor Agent, that successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Guarantied Party under this Guaranty, and the retiring or
removed Guarantied Party under this Guaranty shall promptly (i) transfer to such
successor Guarantied Party all sums held hereunder, together with all records
and other documents necessary or appropriate in connection with the performance
of the duties of the successor Guarantied Party under this Guaranty, and (ii)
take such other actions as may be necessary or appropriate in connection with
the assignment to such successor Guarantied Party of the rights created
hereunder, whereupon such retiring or removed Guarantied Party shall be
discharged from its duties and obligations under this Guaranty. After any
retiring or removed Guarantied Party's resignation or removal hereunder as
Guarantied Party, the provisions of this Guaranty shall inure
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to its benefit as to any actions taken or omitted to be taken by it under this
Guaranty while it was Guarantied Party hereunder.
3.13 Counterparts; Effectiveness.
This Guaranty may be executed in any number of counterparts and by the
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original for all purposes; but
all such counterparts together shall constitute but one and the same instrument.
This Guaranty shall become effective as to Guarantor upon the execution of a
counterpart hereof by Guarantor and receipt by Guarantied Party of written or
telephonic notification of such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first written above.
DMAC HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
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<PAGE>
EXHIBIT XI
[FORM OF PLEDGE AGREEMENT]
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") is dated as of June 26, 1998,
and entered into by and among DMAC ACQUISITION CORP., a Delaware corporation
("Company"), DMAC HOLDINGS, INC., a Delaware corporation ("Holdings"), each of
THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of Company (each of such
undersigned Subsidiaries being a "Subsidiary Pledgor" and collectively
"Subsidiary Pledgors", and each of Company, Holdings and Subsidiary Pledgors
being a "Pledgor" and collectively "Pledgors"; provided that after the Closing
Date, "Pledgors" shall be deemed to include any Additional Pledgors (as
hereinafter defined)) and CREDIT SUISSE FIRST BOSTON, as agent for and
representative of (in such capacity herein called "Secured Party") the financial
institutions ("Lenders") party to the Credit Agreement referred to below and any
Interest Rate Exchangers (as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pledgors are the legal and beneficial owners of (i) the shares of
stock (the "Pledged Shares") described in Part A of Schedule I annexed hereto
and issued by the corporations named therein and (ii) the indebtedness (the
"Pledged Debt") described in Part B of said Schedule I and issued by the
obligors named therein.
B. Pursuant to Credit Agreement dated as of June 26, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, restated, supplemented or otherwise modified, being
the "Credit Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among Company, Holdings,
and the financial institutions listed therein as Lenders, Credit Suisse First
Boston, as Administrative Agent (in such capacity, "Administrative Agent"), and
Credit Suisse First Boston, as Syndication Agent and Arranger, Lenders have made
certain commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Company.
C. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with
all obligations of Company under the Credit Agreement and the other Loan
Documents, be
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secured hereunder.
D. Subsidiary Pledgors have executed and delivered that certain
Subsidiary Guaranty dated as of June 26, 1998 (said Subsidiary Guaranty, as it
may hereafter be amended, restated, supplemented or otherwise modified from time
to time, being the "Subsidiary Guaranty") and Holdings has executed and
delivered that certain Holdings Guaranty dated as of June 26, 1998 (said
Holdings Guaranty, as it may hereafter be amended, supplemented or otherwise
modified from time to time, being the "Holdings Guaranty") in favor of Secured
Party for the benefit of Lenders and any Interest Rate Exchangers, pursuant to
which each Subsidiary Pledgor and Holdings have guarantied the prompt payment
and performance when due of all obligations of Company under the Credit
Agreement and all obligations of Company under the Lender Interest Rate
Agreements, including without limitation the obligation of Company to make
payments thereunder in the event of early termination thereof.
E. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that each Pledgor shall have granted the
security interests and undertaken the obligations contemplated by this
Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into Lender Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Pledgor hereby agrees with
Secured Party as follows:
SECTION 1. Pledge of Security.
Each Pledgor hereby pledges and assigns to Secured Party, and hereby
grants to Secured Party a security interest in, all of Pledgor's right, title
and interest in and to the following (the "Pledged Collateral"):
(a) the Pledged Shares owned by such Pledgor and the
certificates representing such Pledged Shares and any interest of such
Pledgor in the entries on the books of any financial intermediary
pertaining to such Pledged Shares, and all dividends, cash, warrants,
rights, instruments and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of such Pledged Shares;
(b) the Pledged Debt owned by such Pledgor and the instruments
evidencing such Pledged Debt, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such Pledged Debt;
(c) all additional shares of, and all securities convertible
into and warrants, options and other rights to purchase or otherwise
acquire, stock of any issuer of any Pledged Shares from time to time
acquired by such Pledgor in any manner (which shares
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shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such additional shares,
securities, warrants, options or other rights and any interest of such
Pledgor in the entries on the books of any financial intermediary
pertaining to such additional shares (all such shares, securities,
warrants, options, rights, certificates, instruments and interests
collectively being "Additional Pledged Shares"), and all dividends,
cash, warrants, rights, instruments and other property or proceeds from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of such Additional Pledged Shares;
(d) all additional indebtedness from time to time owed to such
Pledgor by any obligor on any Pledged Debt and the instruments
evidencing such indebtedness, and all interest, cash, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such indebtedness;
(e) all shares of, and all securities convertible into and
warrants, options and other rights to purchase or otherwise acquire,
stock of any Person that, after the date of this Agreement, becomes, as
a result of any occurrence, a direct Subsidiary of such Pledgor (which
shares shall be deemed to be part of the Pledged Shares), the
certificates or other instruments representing such shares, securities,
warrants, options or other rights and any interest of such Pledgor in
the entries on the books of any financial intermediary pertaining to
such shares (all such shares, securities, warrants, options, rights,
certificates, instruments and interests collectively being "New Pledged
Shares"), and all dividends, cash, warrants, rights, instruments and
other property or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of
such shares, securities, warrants, options or other rights;
(f) all indebtedness from time to time owed to such Pledgor by
any Person that, after the date of this Agreement, becomes, as a result
of such any occurrence, a direct or indirect Subsidiary of such
Pledgor, and all interest, cash, instruments and other property or
proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such
indebtedness; and
(g) to the extent not covered by clauses (a) through (f)
above, all proceeds of any or all of the foregoing Pledged Collateral.
For purposes of this Agreement, the term "proceeds" includes whatever
is receivable or received when Pledged Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary, and includes, without limitation, proceeds
of any indemnity or guaranty payable to such Pledgor or Secured Party
from time to time with respect to any of the Pledged Collateral.
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SECTION 2. Security for Obligations.
This Agreement secures, and the Pledged Collateral pledged and assigned
by each Pledgor is collateral security for, the prompt payment or performance in
full when due, whether at stated maturity, by required prepayment, declaration,
acceleration, demand or otherwise (including without limitation the payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured
Obligations with respect to such Pledgor. "Secured Obligations" means
(a) with respect to Company, all obligations and liabilities
of every nature of Company now or hereafter existing under or arising
out of or in connection with the Credit Agreement and the other Loan
Documents and any Lender Interest Rate Agreements,
(b) with respect to each Subsidiary Pledgor and Additional
Pledgor, all obligations and liabilities of every nature of Pledgors
now or hereafter existing under or arising out of or in connection with
the Subsidiary Guaranty, and
(c) with respect to Holdings, all obligations and liabilities
of every nature of Holdings now or hereafter existing under or arising
out or in connection with the Holdings Guaranty.
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Pledgors now or hereafter existing under this Agreement.
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SECTION 3. Delivery of Pledged Collateral.
All certificates or instruments representing or evidencing the Pledged
Collateral shall be delivered to and held by or on behalf of Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by the appropriate Pledgor's endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Secured Party. Upon the occurrence and
during the continuation of an Event of Default (as defined in the Credit
Agreement) or the occurrence of an Early Termination Date (as defined in a
Master Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International Swap and
Derivatives Association Inc. or a similar event under any similar swap
agreement) under any Lender Interest Rate Agreement (either such occurrence
being an "Event of Default" for purposes of this Agreement), Secured Party shall
have the right, without notice to any Pledgor, to transfer to or to register in
the name of Secured Party or any of its nominees any or all of the Pledged
Collateral, subject only to the revocable rights specified in Section 7(a). In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 4. Representations and Warranties.
Each Pledgor represents and warrants as follows:
(a) Due Authorization, etc. of Pledged Collateral. All of the
Pledged Shares owned by such Pledgor have been duly authorized and
validly issued and are fully paid and non-assessable. All of the
Pledged Debt owned by such Pledgor has been duly authorized,
authenticated or issued, and delivered and is the legal, valid and
binding obligation of the issuers thereof and is not in default.
(b) Description of Pledged Collateral. The Pledged Shares
owned by such Pledgor constitute the percentage of the issued and
outstanding shares of stock of each issuer thereof set forth on
Schedule I annexed hereto, and there are no outstanding warrants,
options or other rights to purchase, or other agreements outstanding
with respect to, or property that is now or hereafter convertible into,
or that requires the issuance or sale of, any Pledged Shares. The
Pledged Debt owned by such Pledgor constitutes all of the issued and
outstanding intercompany indebtedness evidenced by a promissory note of
the respective issuers thereof owing to such Pledgor.
(c) Ownership of Pledged Collateral. Such Pledgor is the
legal, record and beneficial owner of the Pledged Collateral owned by
such Pledgor free and clear of any Lien except for the security
interest created by this Agreement.
(d) Perfection. The pledge of the Pledged Collateral pursuant
to this Agreement creates a valid and perfected first priority security
interest in the Pledged
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Collateral, securing the payment of the Secured Obligations.
SECTION 5. Transfers and Other Liens; Additional Pledged Collateral; etc.
Each Pledgor shall:
(a) not, except as expressly permitted by the Credit
Agreement, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Pledged Collateral, (ii) create or suffer to exist any Lien upon or
with respect to any of the Pledged Collateral, except for the security
interest under this Agreement, or (iii) permit any issuer of Pledged
Shares to merge or consolidate unless all the outstanding capital stock
of the surviving or resulting corporation is, upon such merger or
consolidation, pledged hereunder and no cash, securities or other
property is distributed in respect of the outstanding shares of any
other constituent corporation; provided that in the event any Pledgor
makes an Asset Sale permitted by the Credit Agreement and the assets
subject to such Asset Sale are Pledged Shares, Secured Party shall
release the Pledged Shares that are the subject of such Asset Sale to
such Pledgor free and clear of the lien and security interest under
this Agreement concurrently with the consummation of such Asset Sale;
and provided further, that as a condition precedent to such release,
Secured Party shall have received evidence satisfactory to it that
arrangements satisfactory to it have been made for delivery to Secured
Party of the Net Cash Proceeds of such Asset Sale in the event and to
the extent that all or any portion of such Net Cash Proceeds are
required to be applied to prepay the Loans under the Credit Agreement.
(b) (i) cause each issuer of Pledged Shares not to issue any
stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to a Pledgor, (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all additional shares of stock or other securities of
each issuer of Pledged Shares, and (iii) pledge hereunder, immediately
upon its acquisition (directly or indirectly) thereof, any and all
shares of stock of any Person that, after the date of this Agreement,
becomes, as a result of any occurrence, a direct Subsidiary of any
Pledgor;
(c) (i) pledge hereunder, immediately upon their issuance, any
and all instruments or other evidences of additional indebtedness from
time to time owed to such Pledgor by any obligor on the Pledged Debt,
and (ii) pledge hereunder, immediately upon their issuance, any and all
instruments or other evidences of indebtedness from time to time owed
to such Pledgor by any Person that after the date of this Agreement
becomes, as a result of any occurrence, a direct or indirect Subsidiary
of any Pledgor;
(d) promptly deliver to Secured Party all written notices
received by it with respect to the Pledged Collateral; and
(e) pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against,
the Pledged Collateral, except to the
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extent the validity thereof is being contested in good faith;
provided that such Pledgor shall in any event pay such taxes,
assessments, charges, levies or claims not later than five days prior
to the date of any proposed sale under any judgement, writ or warrant
of attachment entered or filed against Pledgor or any of the Pledged
Collateral as a result of the failure to make such payment.
SECTION 6. Further Assurances; Pledge Amendments.
(a) Each Pledgor agrees that from time to time, at the expense of
Pledgors, such Pledgor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Collateral. Without limiting the generality of the foregoing, such
Pledgor will: (i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby and (ii) at
Secured Party's request, appear in and defend any action or proceeding that may
affect such Pledgor's title to or Secured Party's security interest in all or
any part of the Pledged Collateral.
(b) Each Pledgor further agrees that it will, upon obtaining any
additional shares of stock or other securities required to be pledged hereunder
as provided in Section 5(b) or (c), promptly (and in any event within five
Business Days) deliver to Secured Party a Pledge Amendment, duly executed by
such Pledgor, in substantially the form of Schedule II annexed hereto (a "Pledge
Amendment"), in respect of the additional Pledged Shares or Pledged Debt to be
pledged pursuant to this Agreement. Each Pledgor hereby authorizes Secured Party
to attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares or Pledged Debt listed on any such Pledge Amendment delivered to Secured
Party shall for all purposes hereunder be considered Pledged Collateral;
provided that the failure of a Pledgor to execute a Pledge Amendment with
respect to any additional Pledged Shares or Pledged Debt pledged pursuant to
this Agreement shall not impair the security interest of Secured Party therein
or otherwise adversely affect the rights and remedies of Secured Party hereunder
with respect thereto.
SECTION 7. Voting Rights; Dividends; Etc.
(a) Pledgors' Rights. So long as no Event of Default shall have
occurred and be continuing:
(i) Pledgors shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agreement or the Credit Agreement;
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(ii) Pledgors shall be entitled to receive and retain, and to
utilize free and clear of the lien of this Agreement, any and all
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all
(1) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property
received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral,
(2) dividends and other distributions paid or payable
in cash in respect of any Pledged Collateral in connection
with a partial or total liquidation or dissolution or in
connection with a reduction of capital, capital surplus or
paid-in-surplus, and
(3) cash paid, payable or otherwise distributed in
respect of principal or in redemption of or in exchange for
any Pledged Collateral,
shall be, and shall forthwith be delivered to Secured Party to hold as,
Pledged Collateral and shall, if received by a Pledgor, be received in
trust for the benefit of Secured Party, be segregated from the other
property or funds of such Pledgor and be forthwith delivered to Secured
Party as Pledged Collateral in the same form as so received (with all
necessary endorsements); and
(iii) Secured Party shall promptly execute and deliver (or
cause to be executed and delivered) to Pledgors all such proxies,
dividend payment orders and other instruments as Pledgors may from time
to time reasonably request for the purpose of enabling Pledgors to
exercise the voting and other consensual rights which they are entitled
to exercise pursuant to paragraph (i) above and to receive the
dividends, principal or interest payments which they are authorized to
receive and retain pursuant to paragraph (ii) above.
(b) Secured Party's Rights. Upon acceleration of the maturity of the
Loans in accordance with Section 8 of the Credit Agreement and upon the
occurrence and during the continuation of an Event of Default:
(i) upon written notice from Secured Party to a Pledgor, all
rights of such Pledgor to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) shall cease, and all such rights shall thereupon become
vested in Secured Party who shall thereupon have the sole right to
exercise such voting and other consensual rights;
(ii) all rights of Pledgors to receive the dividends and
interest payments which they would otherwise be authorized to receive
and retain pursuant to Section 7(a)(ii) shall cease, and all such
rights shall thereupon become vested in Secured Party who shall
thereupon have the sole right to receive and hold as Pledged Collateral
such dividends and interest payments; and
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(iii) all dividends, principal and interest payments which are
received by a Pledgor contrary to the provisions of paragraph (ii) of
this Section 7(b) shall be received in trust for the benefit of Secured
Party, shall be segregated from other funds of such Pledgor and shall
forthwith be paid over to Secured Party as Pledged Collateral in the
same form as so received (with any necessary endorsements).
(c) Irrevocable Proxy. In order to permit Secured Party to exercise the
voting and other consensual rights which it may be entitled to exercise pursuant
to Section 7(b)(i) and to receive all dividends and other distributions which it
may be entitled to receive under Section 7(a)(ii) or Section 7(b)(ii), (i) each
Pledgor shall promptly execute and deliver (or cause to be executed and
delivered) to Secured Party all such proxies, dividend payment orders and other
instruments as Secured Party may from time to time reasonably request and (ii)
without limiting the effect of the immediately preceding clause (i), each
Pledgor hereby grants to Secured Party an IRREVOCABLE PROXY to vote the Pledged
Shares owned by such Pledgor and to exercise all other rights, powers,
privileges and remedies to which a holder of the Pledged Shares would be
entitled (including without limitation giving or withholding written consents of
shareholders, calling special meetings of shareholders and voting at such
meetings), which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Shares on the
record books of the issuer thereof) by any other Person (including the issuer of
the Pledged Shares or any officer or agent thereof), upon the occurrence of an
Event of Default and which proxy shall only terminate upon the payment in full
of the Secured Obligations.
SECTION 8. Secured Party Appointed Attorney-in-Fact.
Each Pledgor hereby irrevocably appoints Secured Party as such
Pledgor's attorney-in-fact, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor, Secured Party or otherwise, from time
to time in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) to file one or more financing or continuation statements,
or amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of such Pledgor;
(b) to ask, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made
payable to such Pledgor representing any dividend, principal or
interest payment or other distribution in respect of the Pledged
Collateral or any part thereof and to give full discharge for the same;
and
(d) to file any claims or take any action or institute any
proceedings that
XI-9
<PAGE>
Secured Party may deem necessary or desirable for the collection of
any of the Pledged Collateral or otherwise to enforce the rights of
Secured Party with respect to any of the Pledged Collateral.
SECTION 9. Secured Party May Perform.
If any Pledgor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Pledgors under Section 13(b).
SECTION 10. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect
its interest in the Pledged Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Pledged Collateral, it being understood that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
XI-10
<PAGE>
SECTION 11. Remedies.
(a) If any Event of Default shall have occurred and be continuing,
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (the "Code") (whether
or not the Code applies to the affected Pledged Collateral), and Secured Party
may also in its sole discretion, without notice except as specified below, sell
the Pledged Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange or broker's board or at any of Secured Party's
offices or elsewhere, for cash, on credit or for future delivery, at such time
or times and at such price or prices and upon such other terms as Secured Party
may deem commercially reasonable, irrespective of the impact of any such sales
on the market price of the Pledged Collateral. Secured Party or any Lender or
Interest Rate Exchanger may be the purchaser of any or all of the Pledged
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders and Interest Rate Exchangers (but not any Lender or Lenders or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees (as defined in Section 15(a))
shall otherwise agree in writing), shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at any such public sale, to use and apply any of the
Secured Obligations as a credit on account of the purchase price for any Pledged
Collateral payable by Secured Party at such sale. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right on the
part of any Pledgor, and each Pledgor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Pledgor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given. Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. Each Pledgor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Pledged Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Pledged Collateral to more than one offeree. If
the proceeds of any sale or other disposition of the Pledged Collateral are
insufficient to pay all the Secured Obligations, Pledgors shall be jointly and
severally liable for the deficiency and the fees of any attorneys employed by
Secured Party to collect such deficiency.
(b) Each Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws, Secured
Party may be compelled, with respect to any sale of all or any part of the
Pledged Collateral conducted without prior registration or qualification of such
Pledged Collateral under the Securities Act and/or such state securities laws,
to limit purchasers to those who will agree, among other things, to acquire the
Pledged Collateral for their own account, for investment and not with a view to
the distribution or resale
XI-11
<PAGE>
thereof. Each Pledgor acknowledges that any such private sales may be at prices
and on terms less favorable than those obtainable through a public sale without
such restrictions and, notwithstanding such circumstances, such Pledgor agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that Secured Party shall have no obligation to engage in
public sales and no obligation to delay the sale of any Pledged Collateral for
the period of time necessary to permit the issuer thereof to register it for a
form of public sale requiring registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should, agree to
so register it.
(c) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, each Pledgor shall and
shall cause each issuer of any Pledged Shares owned by such Pledgor to be sold
hereunder from time to time to furnish to Secured Party all such information as
Secured Party may request in order to determine the number of shares and other
instruments included in the Pledged Collateral which may be sold by Secured
Party in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.
SECTION 12. Application of Proceeds.
All proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral shall be applied as provided in subsection 2.4D of the Credit
Agreement.
SECTION 13. Indemnity and Expenses.
(a) Pledgors jointly and severally agree to indemnify Secured Party,
each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Pledgors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Pledgor to perform or observe any of the provisions hereof.
(c) The obligations of Pledgors in this Section 13 shall survive the
termination of this Agreement and the discharge of Pledgors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
XI-12
<PAGE>
SECTION 14. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (a) remain in full force and effect until the
payment in full of all Secured Obligations, the cancellation or termination of
the Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Pledged Collateral
shall revert to the applicable Pledgors. Upon any such termination Secured Party
will, at Pledgors' expense, execute and deliver to Pledgors such documents as
Pledgors shall reasonably request to evidence such termination and Pledgors
shall be entitled to the return, upon their request and at their expense,
against receipt and without recourse to Secured Party, of such of the Pledged
Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof.
SECTION 15. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Pledged Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 11 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the cancellation or expiration of all Letters of Credit
and the termination of the Commitments, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "Requisite Obligees"). In furtherance
of the foregoing provisions of this Section 15(a), each Interest Rate Exchanger,
by its acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Pledged Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Secured Party for the benefit of
Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 15(a).
XI-13
<PAGE>
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums, securities and other items of Collateral
held hereunder, together with all records and other documents necessary or
appropriate in connection with the performance of the duties of the successor
Secured Party under this Agreement, and (ii) execute and deliver to such
successor Secured Party such amendments to financing statements, and take such
other actions, as may be necessary or appropriate in connection with the
assignment to such successor Secured Party of the security interests created
hereunder, whereupon such retiring or removed Secured Party shall be discharged
from its duties and obligations under this Agreement. After any retiring or
removed Administrative Agent's resignation or removal hereunder as Secured
Party, the provisions of this Agreement shall inure to its benefit as to any
actions taken or omitted to be taken by it under this Agreement while it was
Secured Party hereunder.
SECTION 16. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Pledgor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Secured Party and, in the case of any such amendment or modification, by
Pledgors; provided that any Pledge Amendment in the form of Schedule II annexed
hereto or any amendment hereto pursuant to Section 19 shall be effective upon
execution by any Pledgor and Pledgors hereby waive any requirement of notice of
or consent to any such Pledge Amendment or amendment. Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.
XI-14
<PAGE>
SECTION 17. Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or telex (with received answerback), or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed; provided that notices to Secured Party shall not be effective until
received. For the purposes hereof, the address of each party hereto shall be as
provided in subsection 10.8 of the Credit Agreement or as set forth under such
party's name on the signature pages hereof or such other address as shall be
designated by such party in a written notice delivered to the other parties
hereto.
SECTION 18. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 19. Additional Pledgors.
The initial Subsidiary Pledgors hereunder shall be such of the
Subsidiaries of Company as are signatories hereto on the date hereof. From time
to time subsequent to the date hereof, additional Subsidiaries of Company may
become parties hereto, as additional Pledgors (each an "Additional Pledgor"), by
executing an acknowledgement to this Agreement substantially in the form of
Schedule III annexed hereto. Upon delivery of any such counterpart to
Administrative Agent and Secured Party, notice of which is hereby waived by
Pledgors, each such Additional Pledgor shall be a Pledgor and shall be as fully
a party hereto as if such Additional Pledgor were an original signatory hereto.
Each Pledgor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Pledgor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Pledgor hereunder. This Agreement
shall be fully effective as to any Pledgor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Pledgor hereunder.
XI-15
<PAGE>
SECTION 20. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 21. Headings.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 22. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR PLEDGED COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.
XI-16
<PAGE>
SECTION 23. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY PLEDGOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 17; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 23 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
XI-17
<PAGE>
SECTION 24. Waiver of Jury Trial.
PLEDGORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Each Pledgor and Secured Party acknowledge that this waiver is
a material inducement for Pledgors and Secured Party to enter into a business
relationship, that Pledgors and Secured Party have already relied on this waiver
in entering into this Agreement and that each will continue to rely on this
waiver in their related future dealings. Each Pledgor and Secured Party further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 24 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 25. Counterparts.
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XI-18
<PAGE>
IN WITNESS WHEREOF, Pledgors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DMAC ACQUISITION CORP.
By:
-----------------------------------------------
Name:
Title:
DMAC HOLDINGS, INC.
By:
-----------------------------------------------
Name:
Title:
Each of the entities listed on Schedule A annexed
hereto
By:
-----------------------------------------------
on behalf of each of the entities listed on
Schedule A annexed hereto
Name:
Title:
S-1
<PAGE>
CREDIT SUISSE FIRST BOSTON,
as Secured Party
By:
-----------------------------------------------
Name:
Title:
By:
-----------------------------------------------
Name:
Title:
S-2
<PAGE>
Schedule A
Name Notice Address for
each Subsidiary Pledgor
DIMAC Marketing Corporation c/o AmeriComm Holdings, Inc.
Palm Coast Data Inc. 5775 Peachtree Rd.
The McClure Group Inc. Dunwoody, Suite C150
Wilcox & Associates Inc. Atlanta, Ga 30342
MBS/Multimode Inc. Attn: Neil Gordon
DIMAC Direct Inc.
Sch.A-1
<PAGE>
SCHEDULE I
TO PLEDGE AGREEMENT
Attached to and forming a part of the Pledge Agreement dated as of June
26, 1998, by and among the Pledgors referred to therein and Credit Suisse First
Boston, as Secured Party.
Part A
<TABLE>
<CAPTION>
Percent-
age of
Out-
Stock Number standing
Class of Certificate Par of Shares
Pledgor Stock Issuer Stock Nos. Value Shares Pledged
- ----------------------- -------------------- ------------------ ---------------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Part B
Pledgor Debt Issuer Amount of
Indebtedness
------------------------ --------------------- ---------------------
<S> <C> <C>
</TABLE>
Sch.-I-1
<PAGE>
SCHEDULE II
TO PLEDGE AGREEMENT
[FORM OF PLEDGE AMENDMENT]
This Pledge Amendment, dated _______________, [199_] [200_] is
delivered pursuant to Section 6(b) of the Pledge Agreement referred to below.
The undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement dated as of June 26, 1998, by and among the Pledgors referred
to therein and Credit Suisse First Boston, as Secured Party (the "Pledge
Agreement", capitalized terms defined therein being used herein as therein
defined), and that the [Pledged Shares] [Pledged Debt] listed on this Pledge
Amendment shall be deemed to be part of the [Pledged Shares] [Pledged Debt] and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.
[NAME OF PLEDGOR]
By:
---------------------------------------
Name:
Title:
<TABLE>
<CAPTION>
Class of Percentage of
Stock Stock Par Number of Outstanding
Stock Issuer Certificate Nos. Value Shares Shares Pledged
--------------------------- ---------------- ------------------- --------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Amount of
Debt Issuer Indebtedness
----------------------------- -----------------------
<S> <C>
</TABLE>
Sch.-II-1
<PAGE>
SCHEDULE III
TO PLEDGE AGREEMENT
[FORM OF PLEDGE ACKNOWLEDGEMENT]
This Pledge Acknowledgement, dated _______________, [199_] [200_], is
delivered pursuant to Section 19 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Acknowledgement may be attached to
the Pledge Agreement dated June 26, 1998, by and among the Pledgors referred to
therein and Credit Suisse First Boston, as Secured Party (as amended, restated,
supplemented or otherwise modified to the date hereof, the "Pledge Agreement",
capitalized terms defined therein being used herein as therein defined), that
the undersigned by executing and delivering this Acknowledgement hereby becomes
a Pledgor under the Pledge Agreement in accordance with Section 19 thereof and
agrees to be bound by all of the terms thereof, and that the [Pledged Shares]
[Pledged Debt] listed on this Pledge Acknowledgement shall be deemed to be part
of the [Pledged Shares] [Pledged Debt] and shall become part of the Pledged
Collateral and shall secure all Secured Obligations.
[NAME OF ADDITIONAL PLEDGOR]
By:
----------------------------------------
Name:
Title:
Notice Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Sch.-III-1
<PAGE>
<TABLE>
<CAPTION>
Class of Percentage of
Stock Stock Par Number of Outstanding
Stock Issuer Certificate Nos. Value Shares Shares Pledged
-------------------------- -------------- --------------------- ------------ ---------------- --------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Amount of
Debt Issuer Indebtedness
------------------------- ------------------------
<S> <C>
</TABLE>
Sch.-III-2
<PAGE>
EXHIBIT XII
[FORM OF SECURITY AGREEMENT]
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") is dated as of June 26, 1998
and entered into by and among DMAC ACQUISITION CORP., a Delaware corporation
("Company"), each of THE UNDERSIGNED DIRECT AND INDIRECT SUBSIDIARIES of Company
(each of such undersigned Subsidiaries being a "Subsidiary Grantor" and
collectively "Subsidiary Grantors", and each of Company and Subsidiary Grantors
being a "Grantor" and collectively "Grantors"; provided that after the Closing
Date, "Grantors" shall include any Additional Grantors (as hereinafter defined))
and CREDIT SUISSE FIRST BOSTON, as agent for and representative of (in such
capacity herein called "Secured Party") the financial institutions ("Lenders")
party to the Credit Agreement referred to below and any Interest Rate Exchangers
(as hereinafter defined).
PRELIMINARY STATEMENTS
A. Pursuant to Credit Agreement dated as of June 26, 1998, as amended,
restated, supplemented or otherwise modified to the date hereof (said Credit
Agreement, as so amended, restated, supplemented or otherwise modified, being
the "Credit Agreement"; the terms defined therein and not otherwise defined
herein being used herein as therein defined), by and among Company, DMAC
Holdings, Inc., the financial institutions listed therein as Lenders, Credit
Suisse First Boston, as Administrative Agent (in such capacity, "Administrative
Agent"), and Credit Suisse First Boston, as Syndication Agent and Arranger,
Lenders have made certain commitments, subject to the terms and conditions set
forth in the Credit Agreement, to extend certain credit facilities to Company.
B. Company may from time to time enter, or may from time to time have
entered, into one or more Interest Rate Agreement (collectively, the "Lender
Interest Rate Agreements") with one or more Lenders or their Affiliates (in such
capacity, collectively, "Interest Rate Exchangers") in accordance with the terms
of the Credit Agreement, and it is desired that the obligations of Company under
the Lender Interest Rate Agreements, including without limitation the obligation
of Company to make payments thereunder in the event of early termination thereof
(all such obligations being the "Interest Rate Obligations"), together with all
obligations of Company under the Credit Agreement and the other Loan Documents,
be secured hereunder.
C. Subsidiary Grantors have executed and delivered that certain
Subsidiary Guaranty dated as of June 26, 1998 (said Subsidiary Guaranty, as it
may hereafter be amended, restated, supplemented or otherwise modified from time
to time, being the "Subsidiary Guaranty") in favor of Secured Party for the
benefit of Lenders and any Interest Rate Exchangers, pursuant to
XII-1
<PAGE>
which each Subsidiary Grantor has guarantied the prompt payment and performance
when due of all obligations of Company under the Credit Agreement and all
obligations of Company under the Lender Interest Rate Agreements, including
without limitation the obligation of Company to make payments thereunder in the
event of early termination thereof.
D. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Grantors shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and other extensions of credit under the Credit Agreement
and to induce Interest Rate Exchangers to enter into the Lender Interest Rate
Agreements, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, each Grantor hereby agrees with
Secured Party as follows:
SECTION 1. Grant of Security.
Each Grantor hereby assigns to Secured Party, and hereby grants to
Secured Party a security interest in, all of such Grantor's right, title and
interest in and to the following, in each case whether now or hereafter existing
or in which Grantor now has or hereafter acquires an interest and wherever the
same may be located (the "Collateral"):
(a) all equipment in all of its forms (including, but not
limited to, all machinery, all computers, all data processing, computer
or office equipment, all furniture and all trucks and other vehicles),
all parts thereof and all accessions thereto (any and all such
equipment, parts and accessions being the "Equipment");
(b) all inventory in all of its forms (including, but not
limited to, (i) all goods held by such Grantor for sale or lease or to
be furnished under contracts of service or so leased or furnished, (ii)
all raw materials, work in process, finished goods, and materials used
or consumed in the manufacture, packing, shipping, advertising,
selling, leasing, furnishing or production of such inventory or
otherwise used or consumed in such Grantor's business, (iii) all goods
in which such Grantor has an interest in mass or a joint or other
interest or right of any kind, and (iv) all goods which are returned to
or repossessed by such Grantor) and all accessions thereto and products
thereof (all such inventory, accessions and products being the
"Inventory") and all negotiable and non-negotiable documents of title
(including without limitation warehouse receipts, dock receipts and
bills of lading) issued by any Person covering any Inventory (any such
negotiable document of title being a "Negotiable Document of Title");
(c) all accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other rights and obligations of
any kind owned by or owing to such Grantor and all rights in, to and
under all security agreements, leases and other contracts securing or
otherwise relating to any such accounts, contract rights, chattel
paper, documents, instruments, general intangibles or other obligations
(any and all such
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accounts, contract rights, chattel paper, documents,
instruments, general intangibles and other obligations being the
"Accounts", and any and all such security agreements, leases and other
contracts being the "Related Contracts");
(d) all agreements to which such Grantor is a party, as each
such agreement may be amended, restated, supplemented or otherwise
modified from time to time (said agreements, as so amended, restated,
supplemented or otherwise modified, being referred to herein
individually as an "Assigned Agreement" and collectively as the
"Assigned Agreements"), including, without limitation, (i) all rights
of such Grantor to receive moneys due or to become due under or
pursuant to the Assigned Agreements, (ii) all rights of such Grantor to
receive proceeds of any insurance, indemnity, warranty or guaranty with
respect to the Assigned Agreements, (iii) all claims of such Grantor
for damages arising out of any breach of or default under the Assigned
Agreements, and (iv) all rights of such Grantor to terminate, amend,
supplement, modify or exercise rights or options under the Assigned
Agreements, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder;
(e) all cash, money, currency and deposit accounts, including
without limitation demand, time, savings, passbooks or similar accounts
maintained with Lenders or other banks, savings and loan associations
or other financial institutions (but excluding deposit accounts
maintained in trust by such Grantor or otherwise segregated from other
funds of such Grantor for the benefit of customers of such Grantor and
containing only funds owing to such customers);
(f) the "Intellectual Property Collateral", which term means:
(i) all rights, title and interest (including rights
acquired pursuant to a license or otherwise but only to the
extent permitted by agreements governing such license or other
use) in and to all trademarks, service marks, designs, logos,
indicia, tradenames, trade dress, corporate names, company
names, business names, fictitious business names, trade styles
and/or other source and/or business identifiers and
applications pertaining thereto, owned by such Grantor, or
hereafter adopted and used, in its business (including,
without limitation, the trademarks specifically identified in
Schedule 1(a), as the same may be amended pursuant hereto from
time to time) (collectively, the "Trademarks"), all
registrations that have been or may hereafter be issued or
applied for thereon in the United States and any state thereof
and in foreign countries (including, without limitation, the
registrations and applications specifically identified in
Schedule 1(a), as the same may be amended pursuant hereto from
time to time) (the "Trademark Registrations"), all common law
and other rights (but in no event any of the obligations) in
and to the Trademarks in the United States and any state
thereof and in foreign countries (the "Trademark Rights"), and
all goodwill of such Grantor's business symbolized by the
Trademarks and associated therewith (the "Associated
Goodwill"):
(ii) all rights, title and interest (including rights
acquired pursuant to a
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<PAGE>
license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all
patents and patent applications and rights and interests in
patents and patent applications under any domestic or foreign
law that are presently, or in the future may be, owned or held
by such Grantor and all patents and patent applications and
rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in
the future may be, owned by such Grantor in whole or in part
(including, without limitation, the patents and patent
applications listed in Schedule 1(b), as the same may be
amended pursuant hereto from time to time), all rights (but
not obligations) corresponding thereto (including, without
limitation, the right (but not the obligation), exercisable
only upon the occurrence and during the continuation of an
Event of Default, to sue for past, present and future
infringements in the name of such Grantor or in the name of
Secured Party or Lenders), and all reissues, divisions,
continuations, renewals, extensions and continuations-in-part
thereof (all of the foregoing being collectively referred to
as the "Patents"); it being understood that the rights and
interests included in the Intellectual Property Collateral
hereby shall include, without limitation, all rights and
interests pursuant to licensing or other contracts in favor of
such Grantor pertaining to patent applications and patents
presently or in the future owned or used by third parties but,
in the case of third parties which are not Affiliates of such
Grantor, only to the extent permitted by such licensing or
other contracts and, if not so permitted, only with the
consent of such third parties; and
(iii) all rights, title and interest (including
rights acquired pursuant to a license or otherwise but only to
the extent permitted by agreements governing such license or
other use) under copyright in various published and
unpublished works of authorship including, without limitation,
computer programs, computer data bases, other computer
software, layouts, trade dress, drawings, designs, writings,
and formulas owned by Grantor (including, without limitation,
the works listed on Schedule 1(c), as the same may be amended
pursuant hereto from time to time) (collectively, the
"Copyrights"), all copyright registrations issued to such
Grantor and applications for copyright registration that have
been or may hereafter be issued or applied for thereon by
Grantor in the United States and any state thereof and in
foreign countries (including, without limitation, the
registrations listed on Schedule 1(c), as the same may be
amended pursuant hereto from time to time) (collectively, the
"Copyright Registrations"), all common law and other rights in
and to the Copyrights in the United States and any state
thereof and in foreign countries including all copyright
licenses (but with respect to such copyright licenses, only to
the extent permitted by such licensing arrangements) (the
"Copyright Rights"), including, without limitation, each of
the Copyrights, rights, titles and interests in and to the
Copyrights and works protectable by copyright, which are
presently, or in the future may be, owned, created (as a work
for hire for the benefit of such Grantor), authored (as a work
for hire for the benefit of such Grantor), or acquired by such
Grantor, in whole or in part, and all Copyright Rights with
respect thereto and all Copyright Registrations therefor,
heretofore or hereafter granted or applied for, and all
XII-4
<PAGE>
renewals and extensions thereof, throughout the world,
including all proceeds thereof (such as, by way of example and
not by limitation, license royalties and proceeds of
infringement suits), the right (but not the obligation) to
renew and extend such Copyright Registrations and Copyright
Rights and to register works protectable by copyright and the
right (but not the obligation) to sue for past, present and
future infringements of the Copyrights and Copyright Rights;
(g) all information used or useful or arising from the
business including all goodwill, trade secrets, trade secret rights,
know-how, customer lists, processes of production, ideas, confidential
business information, techniques, processes, formulas, and all other
proprietary information;
(h) to the extent not included in any other paragraph of this
Section 1, all other general intangibles (including without limitation
tax refunds, rights to payment or performance, choses in action and
judgments taken on any rights or claims included in the Collateral);
(i) all plant fixtures, business fixtures and other fixtures
and storage and office facilities, and all accessions thereto and
products thereof;
(j) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software
that at any time evidence or contain information relating to any of the
Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon; and
(k) all proceeds, products, rents and profits of or from any
and all of the foregoing Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any
of the foregoing Collateral. For purposes of this Agreement, the term
"proceeds" includes whatever is receivable or received when Collateral
or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in, any of such Grantor's rights or interests in any license, contract
or agreement to which such Grantor is a party or any of its rights or interests
thereunder to the extent, but only to the extent, that such a grant would, under
the terms of such license, contract or agreement or otherwise, result in a
breach of the terms of, or constitute a default under any license, contract or
agreement to which such Grantor is a party (other than to the extent that any
such term would be rendered ineffective pursuant to Section 9-318(4) of the
Uniform Commercial Code of any relevant jurisdiction or any other applicable law
(including the Bankruptcy Code) or principles of equity); provided, that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and such Grantor shall be deemed to
have granted a security interest in, all such rights and interests as if such
provision had never been in effect.
XII-5
<PAGE>
SECTION 2. Security for Obligations.
This Agreement secures, and the Collateral assigned by each Grantor is
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including without limitation the payment of amounts that
would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all Secured Obligations
with respect to such Grantor. "Secured Obligations" means:
(a) with respect to Company, all obligations and liabilities
of every nature of Company now or hereafter existing under or arising
out of or in connection with the Credit Agreement and the other Loan
Documents and any Lender Interest Rate Agreement, and
(b) with respect to each Subsidiary Grantor and Additional
Grantor, all obligations and liabilities of every nature of Grantors
now or hereafter existing under or arising out of or in connection with
the Subsidiary Guaranty;
in each case together with all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but for the
filing of a petition in bankruptcy with respect to Company, would accrue on such
obligations, whether or not a claim is allowed against Company for such interest
in the related bankruptcy proceeding), reimbursement of amounts drawn under
Letters of Credit, payments for early termination of Lender Interest Rate
Agreements, fees, expenses, indemnities or otherwise, whether voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or
unliquidated, whether or not jointly owed with others, and whether or not from
time to time decreased or extinguished and later increased, created or incurred,
and all or any portion of such obligations or liabilities that are paid, to the
extent all or any part of such payment is avoided or recovered directly or
indirectly from Secured Party or any Lender or Interest Rate Exchanger as a
preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantors now or hereafter existing under this Agreement.
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<PAGE>
SECTION 3. Grantors Remain Liable.
Anything contained herein to the contrary notwithstanding, (a) each
Grantor shall remain liable under any contracts and agreements included in the
Collateral, to the extent set forth therein, to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by Secured Party of any of its rights hereunder shall
not release any Grantor from any of its duties or obligations under the
contracts and agreements included in the Collateral, and (c) Secured Party shall
not have any obligation or liability under any contracts and agreements included
in the Collateral by reason of this Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of any Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Representations and Warranties.
Each Grantor represents and warrants as follows:
(a) Ownership of Collateral. Except as expressly permitted by
the Credit Agreement and for the security interest created by this
Agreement, such Grantor owns the Collateral owned by such Grantor free
and clear of any Lien.
(b) Locations of Equipment and Inventory. All of the Equipment
and Inventory is, as of the date hereof, located at the places
specified in Schedule 4(b) annexed hereto.
(c) Negotiable Documents of Title. No Negotiable Documents of
Title are outstanding with respect to any of the Inventory.
(d) Office Locations. The chief place of business, the chief
executive office and the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel paper that
evidence Accounts are, and, except as set forth on Schedule 4(d)
annexed hereto, have been for the four month period preceding the date
hereof, located at the locations set forth on Schedule 4(d) annexed
hereto.
(e) Names. No Grantor has in the past done, and no Grantor now
does, business under any other name (including any trade-name or
fictitious business name) except the names listed in Schedule 4(e)
annexed hereto.
(f) Delivery of Certain Collateral. All notes and other
instruments (excluding checks) comprising any and all items of
Collateral have been delivered to Secured Party duly endorsed and
accompanied by duly executed instruments of transfer or assignment in
blank.
XII-7
<PAGE>
(g) Intellectual Property Collateral.
(i) a true and complete list of all Trademark Registrations
and Trademark applications owned, held (whether pursuant to a
license or otherwise) or used by such Grantor, in whole or in
part, is set forth in Schedule 1(a);
(ii) a true and complete list of all Patents owned, held
(whether pursuant to a license or otherwise) or used by such
Grantor, in whole or in part, is set forth in Schedule 1(b);
(iii) a true and complete list of all Copyright Registrations
and applications for Copyright Registrations held (whether
pursuant to a license or otherwise) by such Grantor, in whole
or in part, is set forth in Schedule 1(c);
(iv) after reasonable inquiry, such Grantor is not aware of
any pending or threatened claim by any third party that any of
the Intellectual Property Collateral owned, held or used by
such Grantor is invalid or unenforceable; and
(v) no effective security interest or other Lien covering all
or any part of the Intellectual Property Collateral is on file
in the United States Patent and Trademark Office or the United
States Copyright Office.
(h) Perfection. The security interests in the Collateral
granted to Secured Party for the ratable benefit of the Lenders and
Interest Rate Exchangers hereunder constitute valid security interests
in the Collateral. Upon the filing of UCC financing statements naming
each Grantor as "debtor", naming Secured Party as "secured party" and
describing the Collateral in the filing offices set forth on Schedule
4(h) annexed hereto, and in the case of the Intellectual Property
Collateral, in addition the filing of a Grant of Trademark Security
Interest, substantially in the form of Exhibit I and a Grant of Patent
Security Interest, substantially in the form of Exhibit II, with the
United States Patent and Trademark Office and the filing of a Grant of
Copyright Security Interest, substantially in the form of Exhibit III,
with the United States Copyright Office, the security interests in the
Collateral granted to Secured Party for the ratable benefit of the
Lenders and Interest Rate Exchangers will, to the extent a security
interest in the Collateral may be perfected by filing UCC financing
statements and, in the case of the Intellectual Property Collateral, in
addition to the filing of such UCC Financing Statements, by the filing
of a Grant of Trademark Security Interest and Grant of Patent Security
Interest with the United States Patent and Trademark Office and a Grant
of Copyright Security Interest with the United State Copyright Office,
constitute perfected security interests therein prior to all other
Liens.
XII-8
<PAGE>
SECTION 5. Further Assurances.
(a) Each Grantor agrees that from time to time, at the expense of
Grantors, such Grantor will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or desirable,
or that Secured Party may request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, each Grantor will:
(i) at the request of Secured Party, mark conspicuously each item of chattel
paper included in the Accounts, each Related Contract and, at the request of
Secured Party, each of its records pertaining to the Collateral, with a legend,
in form and substance satisfactory to Secured Party, indicating that such
Collateral is subject to the security interest granted hereby, (ii) at the
request of Secured Party, deliver and pledge to Secured Party hereunder all
promissory notes and other instruments (including checks) and all original
counterparts of chattel paper constituting Collateral, duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party, (iii) use commercially reasonable
efforts to obtain any necessary consents of third parties to the assignment and
perfection of a security interest to Secured Party with respect to any
Collateral, (iv) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be granted hereby, (v) promptly
after the acquisition by such Grantor of any item of Equipment which is covered
by a certificate of title under a statute of any jurisdiction under the law of
which indication of a security interest on such certificate is required as a
condition of perfection thereof, execute and file with the registrar of motor
vehicles or other appropriate authority in such jurisdiction an application or
other document requesting the notation or other indication of the security
interest created hereunder on such certificate of title, (vi) within 30 days
after the end of each calendar year and June 30 of each calendar year, deliver
to Secured Party copies of all such applications or other documents filed during
such semiannual period and copies of all such certificates of title issued
during such semiannual period indicating the security interest created hereunder
in the items of Equipment covered thereby, (vii) at any reasonable time, upon
request by Secured Party, exhibit the Collateral to and allow inspection of the
Collateral by Secured Party, or persons designated by Secured Party, and (viii)
at Secured Party's request, appear in and defend any action or proceeding that
may affect such Grantor's title to or Secured Party's security interest in all
or any part of the Collateral.
(b) Without limiting the generality of the foregoing clause (a), if any
Grantor shall hereafter obtain rights to any new Intellectual Property
Collateral or become entitled to the benefit of (i) any patent application or
patent or any reissue, division, continuation, renewal, extension or
continuation-in-part of any Patent or any improvement of any Patent; or (ii) any
Copyright Registration, application for Registration or renewals or extension of
any Copyright, then in any such case, the provisions of this Agreement shall
automatically apply thereto. Each Grantor shall promptly notify Secured Party in
writing of any of the foregoing rights acquired by such Grantor after the
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<PAGE>
date hereof and of (i) any Trademark Registrations issued or application for a
Trademark Registration or application for a Patent made, and (ii) any Copyright
Registrations issued or applications for Copyright Registration made, in any
such case, after the date hereof. Promptly after the filing of an application
for any (1) Trademark Registration; (2) Patent; and (3) Copyright Registration,
each Grantor shall execute and deliver to Secured Party and record in all places
where this Agreement is recorded a Security Agreement Supplement, substantially
in the form of Exhibit IV, pursuant to which such Grantor shall grant to Secured
Party a security interest to the extent of its interest in such Intellectual
Property Collateral; provided, if, in the reasonable judgment of such Grantor,
after due inquiry, granting such interest would result in the grant of a
Trademark Registration or Copyright Registration in the name of Secured Party,
such Grantor shall give written notice to Secured Party as soon as reasonably
practicable and the filing shall instead be undertaken as soon as practicable
but in no case later than immediately following the grant of the applicable
Trademark Registration or Copyright Registration, as the case may be.
(c) Each Grantor hereby authorizes Secured Party to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of any Grantor. Each Grantor
agrees that a carbon, photographic or other reproduction of this Agreement or of
a financing statement signed by such Grantor shall be sufficient as a financing
statement and may be filed as a financing statement in any and all
jurisdictions.
(d) Each Grantor hereby authorizes Secured Party to modify this
Agreement without obtaining such Grantor's approval of or signature to such
modification by amending Schedules 1(a), 1(b), and 1(c), as applicable, to
include reference to any right, title or interest in any existing Intellectual
Property Collateral or any Intellectual Property Collateral acquired or
developed by any Grantor after the execution hereof or to delete any reference
to any right, title or interest in any Intellectual Property Collateral in which
any Grantor no longer has or claims any right, title or interest.
(e) Each Grantor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
SECTION 6. Certain Covenants of Grantors.
Each Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or
in violation of any provision of this Agreement or any applicable
statute, regulation or ordinance or any policy of insurance covering
the Collateral;
(b) notify Secured Party of any change in such Grantor's name,
identity or corporate structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any
change in such Grantor's chief place of business, chief executive
office or residence or the office where such Grantor keeps its records
regarding the Accounts and all originals of all chattel
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<PAGE>
paper that evidence Accounts; and
(d) pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against,
the Collateral, except to the extent the validity thereof is being
contested in good faith; provided that such Grantor shall in any event
pay such taxes, assessments, charges, levies or claims not later than
five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against such Grantor or
any of the Collateral as a result of the failure to make such payment.
SECTION 7. Special Covenants With Respect to Equipment and Inventory.
Each Grantor shall:
(a) keep the Equipment and Inventory owned by such Grantor at
the places therefor specified on Schedule 4(b) annexed hereto or, upon
30 days' prior written notice to Secured Party, at such other places in
jurisdictions where all action that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any
security interest granted or purported to be granted hereby, or to
enable Secured Party to exercise and enforce its rights and remedies
hereunder, with respect to such Equipment and Inventory shall have been
taken;
(b) cause the Equipment owned by such Grantor to be maintained
and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with such
Grantor's past practices. Each Grantor shall promptly furnish to
Secured Party a statement respecting any material loss or damage to any
of the Equipment owned by such Grantor;
(c) keep correct and accurate records of Inventory owned by
such Grantor, itemizing and describing the kind, type and quantity of
such Inventory, such Grantor's cost therefor and (where applicable) the
current list prices for such Inventory;
(d) if any Inventory is in possession or control of any of
such Grantor's agents or processors, if the aggregate book value of all
such Inventory exceeds $500,000, and in any event upon the occurrence
of an Event of Default (as defined in the Credit Agreement) or the
occurrence of an Early Termination Date (as defined in a Master
Agreement or an Interest Rate Swap Agreement or Interest Rate and
Currency Exchange Agreement in the form prepared by the International
Swap and Derivatives Association Inc. or a similar event under any
similar swap agreement) under any Lender Interest Rate Agreement
(either such occurrence being an "Event of Default" for purposes of
this Agreement), instruct such agent or processor to hold all such
Inventory for the account of Secured Party and subject to the
instructions of Secured Party.
(e) promptly upon the issuance and delivery to such Grantor of
any
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<PAGE>
Negotiable Document of Title, deliver such Negotiable Document of
Title to Secured Party.
SECTION 8. Insurance.
Each Grantor shall, at its own expense, maintain insurance with respect
to the Equipment and Inventory in accordance with the terms of the Credit
Agreement.
SECTION 9. Special Covenants with respect to Accounts and Related Contracts.
(a) Each Grantor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Accounts and Related Contracts, and all originals of all chattel paper that
evidence Accounts, at the location therefor specified in Section 4 or, upon 30
days' prior written notice to Secured Party, at such other location in a
jurisdiction where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any security interest
granted or purported to be granted hereby, or to enable Secured Party to
exercise and enforce its rights and remedies hereunder, with respect to such
Accounts and Related Contracts shall have been taken. Each Grantor will hold and
preserve such records and chattel paper and will permit representatives of
Secured Party at any time during normal business hours to inspect and make
abstracts from such records and chattel paper, and each Grantor agrees to render
to Secured Party, at Grantor's cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto. Promptly upon the
request of Secured Party, each Grantor shall deliver to Secured Party complete
and correct copies of each Related Contract.
(b) Each Grantor shall, for not less than 3 years from the date on
which such Account arose, maintain (i) complete records of each Account of such
Grantor, including records of all payments received, credits granted and
merchandise returned, and (ii) all documentation relating thereto.
(c) Except as otherwise provided in this subsection (c), each Grantor
shall continue to collect, at its own expense, all amounts due or to become due
to such Grantor under the Accounts and Related Contracts. In connection with
such collections, each Grantor may take (and, at Secured Party's direction,
shall take) such action as such Grantor or Secured Party may deem necessary or
advisable to enforce collection of amounts due or to become due under the
Accounts; provided, however, that Secured Party shall have the right at any
time, upon the occurrence and during the continuation of an Event of Default or
a Potential Event of Default and upon written notice to such Grantor of its
intention to do so, to notify the account debtors or obligors under any Accounts
of the assignment of such Accounts to Secured Party and to direct such account
debtors or obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to
XII-12
<PAGE>
Secured Party, to notify each Person maintaining a lockbox or similar
arrangement to which account debtors or obligors under any Accounts have been
directed to make payment to remit all amounts representing collections on checks
and other payment items from time to time sent to or deposited in such lockbox
or other arrangement directly to Secured Party and, upon such notification and
at the expense of Grantors, to enforce collection of any such Accounts and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as such Grantor might have done. After receipt by such
Grantor of the notice from Secured Party referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including checks and other
instruments) received by such Grantor in respect of the Accounts and the Related
Contracts shall be received in trust for the benefit of Secured Party hereunder,
shall be segregated from other funds of such Grantor and shall be forthwith paid
over or delivered to Secured Party in the same form as so received (with any
necessary endorsement) to be held as cash Collateral and applied as provided by
Section 18, and (ii) such Grantor shall not adjust, settle or compromise the
amount or payment of any Account, or release wholly or partly any account debtor
or obligor thereof, or allow any credit or discount thereon.
SECTION 10. Special Provisions With Respect to the Assigned Agreements.
(a) Each Grantor shall at its expense:
(i) if consistent with sound business practices, perform and
observe all terms and provisions of the Assigned Agreements to be
performed or observed by it, maintain the Assigned Agreements in full
force and effect, enforce the Assigned Agreements in accordance with
their terms, and take all such action to such end as may be from time
to time requested by Secured Party; and
(ii) upon the reasonable request of Secured Party, furnish to
Secured Party, promptly upon receipt thereof, copies of all notices,
requests and other documents received by such Grantor under or pursuant
to the Assigned Agreements, and from time to time (A) furnish to
Secured Party such information and reports regarding the Assigned
Agreements as Secured Party may reasonably request and (B) upon request
of Secured Party make to the parties to such Assigned Agreements such
demands and requests for information and reports or for action as such
Grantor is entitled to make under the Assigned Agreements.
(b) Upon the occurrence and during the continuance of an Event of
Default, no Grantor shall:
(i) cancel or terminate any of the Assigned Agreements or
consent to or accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give
any consent, waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned
Agreements;
(iv) consent to or permit or accept any prepayment of amounts
to become due under or in connection with the Assigned Agreements,
except as expressly provided
XII-13
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therein; or
(v) take any other action in connection with the Assigned
Agreements that would materially impair the value of the interest or
rights of such Grantor thereunder or that would materially impair the
interest or rights of Secured Party.
SECTION 11. Deposit Accounts.
Upon the occurrence and during the continuation of an Event of Default,
Secured Party may exercise dominion and control over, and refuse to permit
further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Secured Party constituting
part of the Collateral.
SECTION 12. Special Provisions With Respect to the Intellectual Property
Collateral.
(a) Each Grantor shall:
(i) diligently keep reasonable records respecting the
Intellectual Property Collateral and at all times keep at least one
complete set of its records concerning such Collateral at its chief
executive office or principal place of business;
(ii) hereafter use commercially reasonable efforts so as not
to permit the inclusion in any contract to which it hereafter becomes a
party of any provision that could or might in any way materially impair
or prevent the creation of a security interest in, or the assignment
of, such Grantor's rights and interests in any property included within
the definitions of any Intellectual Property Collateral acquired under
such contracts;
(iii) take all steps deemed appropriate in Grantor's
commercially reasonable judgement to protect the secrecy of all trade
secrets relating to the products and services sold or delivered under
or in connection with the Intellectual Property Collateral, including,
without limitation, where appropriate entering into confidentiality
agreements with employees and labeling and restricting access to secret
information and documents;
(iv) use proper statutory notice in connection with its use of
any of the Intellectual Property Collateral;
(v) use a commercially appropriate standard of quality (which
may be consistent with such Grantor's past practices) in the
manufacture, sale and delivery of products and services sold or
delivered under or in connection with the Trademarks; and
(vi) furnish to Secured Party from time to time at Secured
Party's reasonable request statements and schedules further identifying
and describing any Intellectual Property Collateral and such other
reports in connection with such Collateral, all in reasonable detail.
XII-14
<PAGE>
(b) Except as otherwise provided in this Section 12, each Grantor shall
continue to collect, at its own expense, all amounts due or to become
due to such Grantor in respect of the Intellectual property Collateral
or any portion thereof. In connection with such collections, each
Grantor may take (and, at Secured Party's reasonable direction, shall
take) such action as such Grantor or Secured Party may deem reasonably
necessary or advisable to enforce collection of such amounts; provided,
Secured Party shall have the right at any time, upon the occurrence and
during the continuation of an Event of Default and upon written notice
to such Grantor of its intention to do so, to notify the obligors with
respect to any such amounts of the existence of the security interest
created hereby and to direct such obligors to make payment of all such
amounts directly to Secured Party, and, upon such notification and at
the expense of such Grantor, to enforce collection of any such amounts
and to adjust, settle or compromise the amount or payment thereof, in
the same manner and to the same extent as such Grantor might have done.
After receipt by any Grantor of the notice from Secured Party referred
to in the proviso to the preceding sentence and during the continuation
of any Event of Default, (i) all amounts and proceeds (including checks
and other instruments) received by each Grantor in respect of amounts
due to such Grantor in respect of the Intellectual Property Collateral
or any portion thereof shall be received in trust for the benefit of
Secured Party hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over or delivered to Secured Party
in the same form as so received (with any necessary endorsement) to be
held as cash Collateral and applied as provided by Section 18, and (ii)
such Grantor shall not adjust, settle or compromise the amount or
payment of any such amount or release wholly or partly any obligor with
respect thereto or allow any credit or discount thereon.
(c) Each Grantor shall have the duty diligently, through counsel
reasonably acceptable to Secured Party, to prosecute, file and/or make,
unless and until such Grantor, in its commercially reasonable judgment,
decides otherwise, (i) any application relating to any of the
Intellectual Property Collateral owned, held or used by such Grantor
and identified on Schedules 1(a), 1(b) or 1(c), as applicable, that is
pending as of the date of this Agreement, (ii) any Copyright
Registration on any existing or future unregistered but copyrightable
works (except for works of nominal commercial value or with respect to
which such Grantor has determined in the exercise of its commercially
reasonable judgment that it shall not seek registration), (iii)
application on any future patentable but unpatented innovation or
invention comprising Intellectual Property Collateral, and (iv) any
Trademark opposition and cancellation proceedings, renew Trademark
Registrations and Copyright Registrations and do any and all acts which
are necessary or desirable, as determined in such Grantor's
commercially reasonable judgment, to preserve and maintain all rights
in all Intellectual Property Collateral. Any expenses incurred in
connection therewith shall be borne solely by Grantors. Subject to the
foregoing, each Grantor shall give Secured Party prior written notice
of any abandonment of any Intellectual Property Collateral or any
pending patent application or any Patent.
(d) Except as provided herein, each Grantor shall have the right to
commence and
XII-15
<PAGE>
prosecute in its own name, as real party in interest, for its own
benefit and at its own expense, such suits, proceedings or other
actions for infringement, unfair competition, dilution,
misappropriation or other damage, or reexamination or reissue
proceedings as are in its commercially reasonable judgment necessary to
protect the Intellectual Property Collateral. Secured Party shall
provide, at such Grantor's expense, all reasonable and necessary
cooperation in connection with any such suit, proceeding or action
including, without limitation, joining as a necessary party. Each
Grantor shall promptly, following its becoming aware thereof, notify
Secured Party of the institution of, or of any adverse determination
in, any proceeding (whether in the United States Patent and Trademark
Office, the United States Copyright Office or any federal, state, local
or foreign court) or regarding such Grantor's ownership, right to use,
or interest in any Intellectual Property Collateral. Each Grantor shall
provide to Secured Party any information with respect thereto requested
by Secured Party.
(e) In addition to, and not by way of limitation of, the granting of a
security interest in the Collateral pursuant hereto, each Grantor,
effective upon the occurrence and during the continuation of an Event
of Default and upon written notice from Secured Party, shall grant,
sell, convey, transfer, assign and set over to Secured Party, for its
benefit and the ratable benefit of Lenders, all of such Grantor's
right, title and interest in and to the Intellectual Property
Collateral to the extent necessary to enable Secured Party to use,
possess and realize on the Intellectual Property Collateral and to
enable any successor or assign to enjoy the benefits of the
Intellectual Property Collateral. This right shall inure to the benefit
of all successors, assigns and transferees of Secured Party and its
successors, assigns and transferees, whether by voluntary conveyance,
operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license shall be granted free
of charge, without requirement that any monetary payment whatsoever be
made to such Grantor. In addition, each Grantor hereby grants to
Secured Party and its employees, representatives and agents the right
to visit such Grantor's and any of its Affiliate's or subcontractor's
plants, facilities and other places of business that are utilized in
connection with the manufacture, production, inspection, storage or
sale of products and services sold or delivered under any of the
Intellectual Property Collateral (or which were so utilized during the
prior six month period), and to inspect the quality control and all
other records relating thereto upon reasonable advance written notice
to such Grantor and at reasonable dates and times and as often as may
be reasonably requested. If and to the extent that any Grantor is
permitted to license the Intellectual Property Collateral, Secured
Party shall promptly enter into a non-disturbance agreement or other
similar arrangement, at such Grantor's request and expense, with such
Grantor and any licensee of any Intellectual Property Collateral
permitted hereunder in form and substance reasonably satisfactory to
Secured Party pursuant to which (i) Secured Party shall agree not to
disturb or interfere with such licensee's rights under its license
agreement with such Grantor so long as such licensee is not in default
thereunder, and (ii) such licensee shall acknowledge and agree that the
Intellectual Property Collateral licensed to it is subject to the
security interest created in favor of Secured Party and the other terms
of this Agreement.
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<PAGE>
SECTION 13. Transfers and Other Liens.
No Grantor shall:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except as permitted by the
Credit Agreement; or
(b) except for the security interest created by this
Agreement, create or suffer to exist any Lien upon or with respect to
any of the Collateral to secure the indebtedness or other obligations
of any Person.
SECTION 14. Secured Party Appointed Attorney-in-Fact.
Each Grantor hereby irrevocably appoints Secured Party as such
Grantor's attorney-in-fact, with full authority in the place and stead of such
Grantor and in the name of such Grantor, Secured Party or otherwise, from time
to time in Secured Party's discretion to take any action and to execute any
instrument that Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including without limitation:
(a) upon the occurrence and during the continuance of an Event
of Default, to obtain and adjust insurance required to be maintained by
such Grantor or paid to Secured Party pursuant to Section 8;
(b) upon the occurrence and during the continuance of an Event
of Default, to ask for, demand, collect, sue for, recover, compound,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(c) upon the occurrence and during the continuance of an Event
of Default, to receive, endorse and collect any drafts or other
instruments, documents and chattel paper in connection with clauses (a)
and (b) above;
(d) upon the occurrence and during the continuance of an Event
of Default, to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens
permitted under this Agreement or the Credit Agreement) levied or
placed upon or threatened against the Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments
made by Secured Party to become obligations of such Grantor to Secured
Party, due and payable immediately without demand;
(f) upon the occurrence and during the continuance of an Event
of Default, to
XII-17
<PAGE>
sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts and
other documents relating to the Collateral; and
(g) upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as fully
and completely as though Secured Party were the absolute owner thereof
for all purposes, and to do, at Secured Party's option and Grantors'
expense, at any time or from time to time, all acts and things that
Secured Party deems necessary to protect, preserve or realize upon the
Collateral and Secured Party's security interest therein in order to
effect the intent of this Agreement, all as fully and effectively as
such Grantor might do.
SECTION 15. Secured Party May Perform.
If any Grantor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
such Grantor under Section 20(b).
SECTION 16. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Secured Party shall be deemed to
have exercised reasonable care in the custody and preservation of Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which Secured Party accords its own property.
XII-18
<PAGE>
SECTION 17. Remedies.
XII-19
<PAGE>
If any Event of Default shall have occurred and be continuing, Secured
Party may exercise in respect of the Collateral, in addition to all other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party on default under the Uniform Commercial Code as
in effect in any relevant jurisdiction (the "Code") (whether or not the Code
applies to the affected Collateral), and also may (a) require each Grantor to,
and each Grantor hereby agrees that it will at its expense and upon request of
Secured Party forthwith, assemble all or part of the Collateral as directed by
Secured Party and make it available to Secured Party at a place to be designated
by Secured Party that is reasonably convenient to both parties, (b) enter onto
the property where any Collateral is located and take possession thereof with or
without judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of any Grantor's premises or place custodians
in exclusive control thereof, remain on such premises and use the same and any
of such Grantor's equipment for the purpose of completing any work in process,
taking any actions described in the preceding clause (c) and collecting any
Secured Obligation, and (e) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party or
any Lender or Interest Rate Exchanger may be the purchaser of any or all of the
Collateral at any such sale and Secured Party, as agent for and representative
of Lenders and Interest Rate Exchangers (but not any Lender or Lenders or
Interest Rate Exchanger or Interest Rate Exchangers in its or their respective
individual capacities unless Requisite Obligees (as defined in Section 22(a))
shall otherwise agree in writing), shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Collateral sold at any such public sale, to use and apply any of the Secured
Obligations as a credit on account of the purchase price for any Collateral
payable by Secured Party at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Grantor, and each Grantor hereby waives (to the extent permitted by
applicable law) all rights of redemption, stay and/or appraisal which it now has
or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Each Grantor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to such Grantor of the
time and place of any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Each Grantor hereby waives any claims against Secured Party arising
by reason of the fact that the price at which any Collateral may have been sold
at such a private sale was less than the price which might have been obtained at
a public sale, even if Secured Party accepts the first offer received and does
not offer such Collateral to more than one offeree. If the proceeds of any sale
or other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantors shall be jointly and severally liable for the deficiency
and the fees of any attorneys employed by Secured Party to collect such
deficiency.
SECTION 18. Additional Remedies for Intellectual Property Collateral.
XII-20
<PAGE>
(a) Anything contained herein to the contrary notwithstanding, upon the
occurrence and during the continuation of an Event of Default, (i) Secured Party
shall have the right (but not the obligation) to bring suit, in the name of any
Grantor, Secured Party or otherwise, to enforce any Intellectual Property
Collateral, in which event each Grantor shall, at the request of Secured Party,
do any and all lawful acts and execute any and all documents required by Secured
Party in aid of such enforcement and each Grantor shall promptly, upon demand,
reimburse and indemnify Secured Party as provided in Sections 10.2 and 10.3 of
the Credit Agreement and Section 20 hereof, as applicable, in connection with
the exercise of its rights under this Section, and, to the extent that Secured
Party shall elect not to bring suit to enforce any Intellectual Property
Collateral as provided in this Section, each Grantor agrees to use all
reasonable measures, whether by action, suit, proceeding or otherwise, to
prevent the infringement of any of the Intellectual Property Collateral by
others and for that purpose agrees to use its commercially reasonable judgement
in maintaining any action, suit or proceeding against any Person so infringing
reasonably necessary to prevent such infringement; (ii) upon written demand from
Secured Party, each Grantor shall execute and deliver to Secured Party an
assignment or assignments of the Intellectual Property Collateral and such other
documents as are necessary or appropriate to carry out the intent and purposes
of this Agreement; (iii) each Grantor agrees that such an assignment and/or
recording shall be applied to reduce the Secured Obligations outstanding only to
the extent that Secured Party (or any Lender) receives cash proceeds in respect
of the sale of, or other realization upon, the Intellectual Property Collateral;
and (iv) within five Business Days after written notice from Secured Party, each
Grantor shall make available to Secured Party, to the extent within such
Grantor's power and authority, such personnel in such Grantor's employ on the
date of such Event of Default as Secured Party may reasonably designate, by
name, title or job responsibility, to permit such Grantor to continue, directly
or indirectly, to produce, advertise and sell the products and services sold or
delivered by such Grantor under or in connection with the Trademarks, Trademark
Registrations and Trademark Rights, such persons to be available to perform
their prior functions on Secured Party's behalf and to be compensated by Secured
Party at such Grantor's expense on a per diem, pro-rata basis consistent with
the salary and benefit structure applicable to each as of the date of such Event
of Default.
(b) If (i) an Event of Default shall have occurred and, by reason of
cure, waiver, modification, amendment or otherwise, no longer be continuing,
(ii) no other Event of Default shall have occurred and be continuing, (iii) an
assignment to Secured Party of any rights, title and interests in and to the
Intellectual Property Collateral shall have been previously made. and (iv) the
Secured Obligations shall not have become immediately due and payable, upon the
written request of any Grantor, Secured Party shall promptly execute and deliver
to such Grantor such assignments as may be necessary to reassign to such Grantor
any such rights, title and interests as may have been assigned to Secured Party
as aforesaid, subject to any disposition thereof that may have been made by
Secured Party; provided, after giving effect to such reassignment, Secured
Party's security interest granted pursuant hereto, as well as all other rights
and remedies of Secured Party granted hereunder, shall continue to be in full
force and effect; and provided further, the rights, title and interests so
reassigned shall be free and clear of all Liens other than Liens (if any)
encumbering such rights, title and interest at the time of their assignment to
Secured Party and Permitted Encumbrances.
XII-21
<PAGE>
SECTION 19. Application of Proceeds.
Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral shall be applied as provided
in subsection 2.4D of the Credit Agreement.
SECTION 20. Indemnity and Expenses.
(a) Grantors jointly and severally agree to indemnify Secured Party,
each Lender and each Interest Rate Exchanger from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including without limitation enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's or
such Lender's or Interest Rate Exchanger's gross negligence or willful
misconduct as finally determined by a court of competent jurisdiction.
(b) Grantors jointly and severally agree to pay to Secured Party upon
demand the amount of any and all costs and expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, that Secured
Party may incur in connection with (i) the administration of this Agreement,
(ii) the custody, preservation, use or operation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder, or (iv) the failure
by any Grantor to perform or observe any of the provisions hereof.
(c) The obligations of Grantors in this Section 20 shall survive the
termination of this Agreement and the discharge of Grantors' other obligations
under this Agreement, the Lender Interest Rate Agreements, the Credit Agreement
and the other Loan Documents.
XII-22
<PAGE>
SECTION 21. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Grantors and their respective successors and
assigns, and (c) inure, together with the rights and remedies of Secured Party
hereunder, to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (c), but
subject to the provisions of subsection 10.1 of the Credit Agreement, any Lender
may assign or otherwise transfer any Loans held by it to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lenders herein or otherwise. Upon the payment in full of all
Secured Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantors. Upon any such termination Secured Party will,
at Grantors' expense, execute and deliver to Grantors such documents as Grantors
shall reasonably request to evidence such termination.
SECTION 22. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders and, by their acceptance of the benefits hereof, Interest Rate
Exchangers. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement; provided that Secured
Party shall exercise, or refrain from exercising, any remedies provided for in
Section 17 in accordance with the instructions of (i) Requisite Lenders or (ii)
after payment in full of all Obligations under the Credit Agreement and the
other Loan Documents, the cancellation or expiration of all Letters of Credit
and the termination of the Commitments, the holders of a majority of the
aggregate notional amount (or, with respect to any Lender Interest Rate
Agreement that has been terminated in accordance with its terms, the amount then
due and payable (exclusive of expenses and similar payments but including any
early termination payments then due) under such Lender Interest Rate Agreement)
under all Lender Interest Rate Agreements (Requisite Lenders or, if applicable,
such holders being referred to herein as "Requisite Obligees"). In furtherance
of the foregoing provisions of this Section 21(a), each Interest Rate Exchanger,
by its acceptance of the benefits hereof, agrees that it shall have no right
individually to realize upon any of the Collateral hereunder, it being
understood and agreed by such Interest Rate Exchanger that all rights and
remedies hereunder may be exercised solely by Secured Party for the benefit of
Lenders and Interest Rate Exchangers in accordance with the terms of this
Section 22(a).
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured
XII-23
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Party under this Agreement; removal of Administrative Agent pursuant to
subsection 9.5 of the Credit Agreement shall also constitute removal as Secured
Party under this Agreement; and appointment of a successor Administrative Agent
pursuant to subsection 9.5 of the Credit Agreement shall also constitute
appointment of a successor Secured Party under this Agreement. Upon the
acceptance of any appointment as Administrative Agent under subsection 9.5 of
the Credit Agreement by a successor Administrative Agent, that successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring or removed Secured Party
under this Agreement, and the retiring or removed Secured Party under this
Agreement shall promptly (i) transfer to such successor Secured Party all sums,
securities and other items of Collateral held hereunder, together with all
records and other documents necessary or appropriate in connection with the
performance of the duties of the successor Secured Party under this Agreement,
and (ii) execute and deliver to such successor Secured Party such amendments to
financing statements, and take such other actions, as may be necessary or
appropriate in connection with the assignment to such successor Secured Party of
the security interests created hereunder, whereupon such retiring or removed
Secured Party shall be discharged from its duties and obligations under this
Agreement. After any retiring or removed Administrative Agent's resignation or
removal hereunder as Secured Party, the provisions of this Agreement shall inure
to its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was Secured Party hereunder.
SECTION 23. Additional Grantors.
The initial Subsidiary Grantors hereunder shall be such of the
Subsidiaries of Company as are signatories hereto on the date hereof. From time
to time subsequent to the date hereof, additional Subsidiaries of Company may
become parties hereto as additional Grantors (each an "Additional Grantor"), by
executing an acknowledgement to this Agreement substantially in the form of
Exhibit V annexed hereto. Upon delivery of any such acknowledgement to
Administrative Agent and Secured Party, notice of which is hereby waived by
Grantors, each such Additional Grantor shall be a Grantor and shall be as fully
a party hereto as if such Additional Grantor were an original signatory hereto.
Each Grantor expressly agrees that its obligations arising hereunder shall not
be affected or diminished by the addition or release of any other Grantor
hereunder, nor by any election of Administrative Agent not to cause any
Subsidiary of Company to become an Additional Grantor hereunder. This Agreement
shall be fully effective as to any Grantor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Grantor hereunder.
XII-24
<PAGE>
SECTION 24. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by any Grantor therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Secured Party and, in the case of any such amendment or modification, by
Grantors; provided that any amendment hereto pursuant to Section 23 shall be
effective upon execution by any Additional Grantor and Grantors hereby waive any
requirement of notice of or consent to any such amendment. Any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which it was given.
SECTION 25. Notices.
Any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telexed or sent by
telefacsimile or United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile, or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed; provided that notices to
Secured Party shall not be effective until received. For the purposes hereof,
the address of each party hereto shall be as provided in subsection 10.8 of the
Credit Agreement or as set forth under such party's name on the signature pages
hereof or such other address as shall be designated by such party in a written
notice delivered to the other parties hereto.
SECTION 26. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 27. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
XII-25
<PAGE>
SECTION 28. Headings.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 29. Governing Law; Terms; Rules of Construction.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined. The
rules of construction set forth in subsection 1.3 of the Credit Agreement shall
be applicable to this Agreement mutatis mutandis.
XII-26
<PAGE>
SECTION 30. Consent to Jurisdiction and Service of Process.
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY GRANTOR ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY
STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY
OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH GRANTOR, FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY
AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II)
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH GRANTOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 25; (IV) AGREES THAT SERVICE AS PROVIDED IN
CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH
GRANTOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES
EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT SECURED PARTY
RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
BRING PROCEEDINGS AGAINST SUCH GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION;
AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 30 RELATING TO JURISDICTION
AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE
UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE.
XII-27
<PAGE>
SECTION 31. Waiver of Jury Trial.
GRANTORS AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT. The scope of this waiver is intended to be all-encompassing
of any and all disputes that may be filed in any court and that relate to the
subject matter of this transaction, including without limitation contract
claims, tort claims, breach of duty claims, and all other common law and
statutory claims. Each Grantor and Secured Party acknowledge that this waiver is
a material inducement for Grantors and Secured Party to enter into a business
relationship, that Grantors and Secured Party have already relied on this waiver
in entering into this Agreement and that each will continue to rely on this
waiver in their related future dealings. Each Grantor and Secured Party further
warrant and represent that each has reviewed this waiver with its legal counsel,
and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN
WAIVER SPECIFICALLY REFERRING TO THIS SECTION 30 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.
SECTION 32. Counterparts.
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
XII-28
<PAGE>
IN WITNESS WHEREOF, Grantors and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DMAC ACQUISITION CORP.
By:
-----------------------------------------------
Name:
Title:
Each of the entities listed on Schedule A annexed
hereto
By:
-----------------------------------------------
on behalf of each of the entities listed on
Schedule A annexed hereto
Name:
XII-29
<PAGE>
Schedule A
Name Notice Address for each Subsidiary
Grantor
DIMAC Marketing Corporation c/o AmeriComm Holdings, Inc.
Palm Coast Data Inc. 5775 Peachtree Rd.
The McClure Group Inc. Dunwoody, Suite C150
Wilcox & Associates Inc. Atlanta, Ga 30342
MBS/Multimode Inc. Attn: Neil Gordon
DIMAC Direct Inc.
XII-30
<PAGE>
CREDIT SUISSE FIRST BOSTON,
as Secured Party
By:
-----------------------------------------
Name:
Title:
By:
-----------------------------------------
Name:
Title:
XII-31
<PAGE>
SCHEDULE 1(a) TO
SECURITY AGREEMENT
Trademarks:
<TABLE>
<CAPTION>
Trademark Registration Registration
Registered Owner Description Number Date
------------------------- ------------------- ------------------ -----------------
<S> <C> <C> <C>
</TABLE>
XII-32
<PAGE>
SCHEDULE 1(b) TO
SECURITY AGREEMENT
Patents Issued:
<TABLE>
<CAPTION>
Patent No. Issue Date Invention Inventor
------------------- --------------- ----------------- --------------
<S> <C> <C> <C>
</TABLE>
Patents Pending:
<TABLE>
<CAPTION>
Applicant's Date Application
Name Filed Number Invention Inventor
--------------- ----------- ------------------ --------------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
XII-33
<PAGE>
SCHEDULE 1(c) TO
SECURITY AGREEMENT
U.S. Copyrights:
<TABLE>
<CAPTION>
Title Registration No. Date of Issue Registered Owner
- ----- ---------------- ------------- ----------------
<S> <C> <C> <C>
</TABLE>
Foreign Copyright Registrations:
<TABLE>
<CAPTION>
Country Title Registration No. Date of Issue
- ------- ----- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
Pending U.S. Copyright Registrations & Applications:
Title Reference No. Date of Application Copyright Claimant
- ----- ------------- ------------------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
Pending Foreign Copyright Registrations & Applications:
<TABLE>
<CAPTION>
Country Title Registration No. Date of Issue
- ------- ----- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
XII-34
<PAGE>
SCHEDULE 4(b)
TO
SECURITY AGREEMENT
Locations of Equipment and Inventory
<TABLE>
<CAPTION>
Name of Company/Limited Partner- Locations of Equipment and Inventory
ship
- --------------------------------- ------------------------------------
<S> <C>
</TABLE>
XII-35
<PAGE>
SCHEDULE 4(d)
TO
SECURITY AGREEMENT
Office Locations
<TABLE>
<CAPTION>
Name of Company/Limited Partnership Office Locations
- ----------------------------------- ----------------
<S> <C>
</TABLE>
XII-36
<PAGE>
SCHEDULE 4(e)
TO
SECURITY AGREEMENT
Other Names
<TABLE>
<CAPTION>
Name of Company/Limited Partnership Other Names
- ----------------------------------- -----------
<S> <C>
</TABLE>
XII-37
<PAGE>
SCHEDULE 4(h)
TO
SECURITY AGREEMENT
Filing Offices
XII-38
<PAGE>
EXHIBIT I TO
SECURITY AGREEMENT
[FORM OF GRANT OF TRADEMARK SECURITY INTEREST]
GRANT OF TRADEMARK SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("Grantor"), owns
and uses in its business, and will in the future adopt and so use, various
intangible assets, including the Trademark Collateral (as defined below); and
WHEREAS, [Grantor] [and DMAC Acquisition Corp., a Delaware corporation
("Company"),] and DMAC Holdings, Inc., a Delaware corporation, have entered into
a Credit Agreement dated as of June 26, 1998 (said Credit Agreement, as it may
heretofore have been and as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with the
financial institutions named therein (collectively, together with their
respective successors and assigns party to the Credit Agreement from time to
time, the "Lenders") and Credit Suisse First Boston, as administrative agent for
the Lenders (in such capacity, "Secured Party") and as syndication agent and
arranger, pursuant to which Lenders have made certain commitments, subject to
the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to [Company] [Grantor]; and
WHEREAS, [Company] [Grantor] may from time to time enter, or may from
time to time have entered, into one or more Interest Rate Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more Lenders
(in such capacity, collectively, "Lender Counterparties"); and
[WHEREAS, Grantor has executed and delivered that certain Subsidiary
Guaranty dated as of June 26, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Guaranty") in favor of Secured Party for the benefit of Lenders and
any Lender Counterparties, pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Company under the Credit
Agreement and the other Loan Documents and all obligations of Company under the
Lender Interest Rate Agreements, including without limitation the obligation of
Company to make payments thereunder in the event of early termination thereof;
and]
WHEREAS, pursuant to the terms of a Security Agreement dated as of June
26, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Security Agreement"), among Grantor, Secured Party and the other grantors named
therein, Grantor has agreed to create in favor of Secured Party a secured and
protected interest in, and Secured Party has agreed to become a secured creditor
with respect to, the Trademark Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy
XII-I-1
<PAGE>
of which are hereby acknowledged, subject to the terms and conditions of the
Credit Agreement and the Security Agreement, Grantor hereby grants to Secured
Party a security interest in all of Grantor's right, title and interest in and
to the following, in each case whether now or hereafter existing or in which
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "Trademark Collateral"):
(i) all rights, title and interest (including rights acquired pursuant
to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all
trademarks, service marks, designs, logos, indicia, tradenames, trade
dress, corporate names, company names, business names, fictitious
business names, trade styles and/or other source and/or business
identifiers and applications pertaining thereto, owned by such Grantor,
or hereafter adopted and used, in its business (including, without
limitation, the trademarks specifically identified in Schedule A)
(collectively, the "Trademarks"), all registrations that have been or
may hereafter be issued or applied for thereon in the United States and
any state thereof and in foreign countries (including, without
limitation, the registrations and applications specifically identified
in Schedule A) (the "Trademark Registrations"), all common law and
other rights (but in no event any of the obligations) in and to the
Trademarks in the United States and any state thereof and in foreign
countries (the "Trademark Rights"), and all goodwill of such Grantor's
business symbolized by the Trademarks and associated therewith (the
"Associated Goodwill"); and
(ii) all proceeds, products, rents and profits of or from any and all
of the foregoing Trademark Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any
of the foregoing Trademark Collateral. For purposes of this Grant of
Trademark Security Interest, the term "proceeds" includes whatever is
receivable or received when Trademark Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Trademark Collateral include, and Grantor shall be not deemed to have granted a
security interest in, any of Grantor's rights or interests in any license,
contract or agreement to which Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which Grantor is a party; provided, that immediately
upon the ineffectiveness, lapse or termination of any such provision, the
Trademark Collateral shall include, and Grantor shall be deemed to have granted
a security interest in, all such rights and interests as if such provision had
never been in effect.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the Trademark
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
XII-I-2
<PAGE>
IN WITNESS WHEREOF, Grantor has caused this Grant of Trademark Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the _____ day of _____, _____.
[NAME OF GRANTOR]
By:
-------------------------------------------
Name:
Title:
XII-I-3
<PAGE>
SCHEDULE A
TO
GRANT OF TRADEMARK SECURITY INTEREST
<TABLE>
<CAPTION>
United States
Trademark Registration Registration
Registered Owner Description Number Date
- ---------------- -------------- ------------ ------------
<S> <C> <C> <C>
</TABLE>
XI-I-A-1
<PAGE>
EXHIBIT II TO
SECURITY AGREEMENT
[FORM OF GRANT OF PATENT SECURITY INTEREST]
GRANT OF PATENT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("Grantor"), owns
and uses in its business, and will in the future adopt and so use, various
intangible assets, including the Patent Collateral (as defined below); and
WHEREAS, [Grantor] [and DMAC Acquisition Corp., a Delaware corporation
("Company"),] and DMAC Holdings, Inc., a Delaware corporation, have entered into
a Credit Agreement dated as of June 26, 1998 (said Credit Agreement, as it may
heretofore have been and as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with the
financial institutions named therein (collectively, together with their
respective successors and assigns party to the Credit Agreement from time to
time, the "Lenders") and Credit Suisse First Boston, as administrative agent for
the Lenders (in such capacity, "Secured Party") and as syndication agent and
arranger, pursuant to which Lenders have made certain commitments, subject to
the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to [Company] [Grantor]; and
WHEREAS, [Company] [Grantor] may from time to time enter, or may from
time to time have entered, into one or more Interest Rate Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more Lenders
(in such capacity, collectively, "Lender Counterparties"); and
[WHEREAS, Grantor has executed and delivered that certain Subsidiary
Guaranty dated as of June 26, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Guaranty") in favor of Secured Party for the benefit of Lenders and
any Lender Counterparties, pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Company under the Credit
Agreement and the other Loan Documents and all obligations of Company under the
Lender Interest Rate Agreements, including without limitation the obligation of
Company to make payments thereunder in the event of early termination thereof;
and]
WHEREAS, pursuant to the terms of a Security Agreement dated as of June
26, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Security Agreement"), among Grantor, Secured Party and the other grantors named
therein, Grantor has agreed to create in favor of Secured Party a secured and
protected interest in, and Secured Party has agreed to become a secured creditor
with respect to, the Patent Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy
XII-II-1
<PAGE>
of which are hereby acknowledged, subject to the terms and conditions of the
Credit Agreement and the Security Agreement, Grantor hereby grants to Secured
Party a security interest in all of Grantor's right, title and interest in and
to the following, in each case whether now or hereafter existing or in which
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "Patent Collateral"):
(i) all rights, title and interest (including rights acquired pursuant
to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) in and to all patents
and patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or
in the future may be, owned or held by such Grantor and all patents and
patent applications and rights, title and interests in patents and
patent applications under any domestic or foreign law that are
presently, or in the future may be, owned by such Grantor in whole or
in part (including, without limitation, the patents and patent
applications listed in Schedule A), all rights (but not obligations)
corresponding thereto to sue for past, present and future infringements
and all re-issues, divisions, continuations, renewals, extensions and
continuations-in-part thereof (all of the foregoing being collectively
referred to as the "Patents"); and
(ii) all proceeds, products, rents and profits of or from any and all
of the foregoing Patent Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any
of the foregoing Patent Collateral. For purposes of this Grant of
Patent Security Interest, the term "proceeds" includes whatever is
receivable or received when Patent Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Patent Collateral include, and Grantor shall be not deemed to have granted a
security interest in, any of Grantor's rights or interests in any license,
contract or agreement to which Grantor is a party or any of its rights or
interests thereunder to the extent, but only to the extent, that such a grant
would, under the terms of such license, contract or agreement or otherwise,
result in a breach of the terms of, or constitute a default under any license,
contract or agreement to which Grantor is a party; provided, that immediately
upon the ineffectiveness, lapse or termination of any such provision, the Patent
Collateral shall include, and Grantor shall be deemed to have granted a security
interest in, all such rights and interests as if such provision had never been
in effect.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the Patent
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Grant of Patent Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the ____ day of
XII-II-2
<PAGE>
_______, ____.
[NAME OF GRANTOR]
By:
--------------------------------------------
Name:
Title:
XII-II-3
<PAGE>
SCHEDULE A
TO
GRANT OF PATENT SECURITY INTEREST
Patents Issued:
<TABLE>
<CAPTION>
Patent No. Issue Date Invention Inventor
---------- ---------- --------- --------
<S> <C> <C> <C>
</TABLE>
Patents Pending:
<TABLE>
<CAPTION>
Applicant's Date Application
Name Filed Number Invention Inventor
----------- ----- ----------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
XII-II-A-1
<PAGE>
EXHIBIT III TO
SECURITY AGREEMENT
[FORM OF GRANT OF COPYRIGHT SECURITY INTEREST]
GRANT OF COPYRIGHT SECURITY INTEREST
WHEREAS, [NAME OF GRANTOR], a ___________ corporation ("Grantor"), owns
and uses in its business, and will in the future adopt and so use, various
intangible assets, including the Copyright Collateral (as defined below); and
WHEREAS, [Grantor] [and DMAC Acquisition Corp., a Delaware corporation
("Company"),] and DMAC Holdings, Inc., a Delaware corporation, have entered into
a Credit Agreement dated as of June 26, 1998 (said Credit Agreement, as it may
heretofore have been and as it may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Credit Agreement") with the
financial institutions named therein (collectively, together with their
respective successors and assigns party to the Credit Agreement from time to
time, the "Lenders") and Credit Suisse First Boston, as administrative agent for
the Lenders (in such capacity, "Secured Party") and as syndication agent and
arranger, pursuant to which Lenders have made certain commitments, subject to
the terms and conditions set forth in the Credit Agreement, to extend certain
credit facilities to [Company] [Grantor]; and
WHEREAS, [Company] [Grantor] may from time to time enter, or may from
time to time have entered, into one or more Interest Rate Agreements
(collectively, the "Lender Interest Rate Agreements") with one or more Lenders
(in such capacity, collectively, "Lender Counterparties"); and
[WHEREAS, Grantor has executed and delivered that certain Subsidiary
Guaranty dated as of June 26, 1998 (said Subsidiary Guaranty, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Guaranty") in favor of Secured Party for the benefit of Lenders and
any Lender Counterparties, pursuant to which Grantor has guarantied the prompt
payment and performance when due of all obligations of Company under the Credit
Agreement and the other Loan Documents and all obligations of Company under the
Lender Interest Rate Agreements, including without limitation the obligation of
Company to make payments thereunder in the event of early termination thereof;
and]
WHEREAS, pursuant to the terms of a Security Agreement dated as of June
26, 1998 (as amended, supplemented or otherwise modified from time to time, the
"Security Agreement"), among Grantor, Secured Party and the other grantors named
therein, Grantor has agreed to create in favor of Secured Party a secured and
protected interest in, and Secured Party has agreed to become a secured creditor
with respect to, the Copyright Collateral;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy
XII-III-1
<PAGE>
of which are hereby acknowledged, subject to the terms and conditions of the
Credit Agreement and the Security Agreement, Grantor hereby grants to Secured
Party a security interest in all of Grantor's right, title and interest in and
to the following, in each case whether now or hereafter existing or in which
Grantor now has or hereafter acquires an interest and wherever the same may be
located (the "Copyright Collateral"):
(i) all rights, title and interest (including rights acquired pursuant
to a license or otherwise but only to the extent permitted by
agreements governing such license or other use) under copyright in
various published and unpublished works of authorship including,
without limitation, computer programs, computer data bases, other
computer software layouts, trade dress, drawings, designs, writings,
and formulas (including, without limitation, the works listed on
Schedule A, as the same may be amended pursuant hereto from time to
time) (collectively, the "Copyrights"), all copyright registrations
issued to Grantor and applications for copyright registration that have
been or may hereafter be issued or applied for thereon in the United
States and any state thereof and in foreign countries (including,
without limitation, the registrations listed on Schedule A, as the same
may be amended pursuant hereto from time to time) (collectively, the
"Copyright Registrations"), all common law and other rights in and to
the Copyrights in the United States and any state thereof and in
foreign countries including all copyright licenses (but with respect to
such copyright licenses, only to the extent permitted by such licensing
arrangements) (the "Copyright Rights"), including, without limitation,
each of the Copyrights, rights, titles and interests in and to the
Copyrights and works protectable by copyright, which are presently, or
in the future may be, owned, created (as a work for hire for the
benefit of Grantor), authored (as a work for hire for the benefit of
Grantor), or acquired by Grantor, in whole or in part, and all
Copyright Rights with respect thereto and all Copyright Registrations
therefor, heretofore or hereafter granted or applied for, and all
renewals and extensions thereof, throughout the world, including all
proceeds thereof (such as, by way of example and not by limitation,
license royalties and proceeds of infringement suits), the right (but
not the obligation) to renew and extend such Copyright Registrations
and Copyright Rights and to register works protectable by copyright and
the right (but not the obligation) to sue in the name of such Grantor
or in the name of Secured Party or Lenders for past, present and future
infringements of the Copyrights and Copyright Rights; and
(ii) all proceeds, products, rents and profits of or from any and all
of the foregoing Copyright Collateral and, to the extent not otherwise
included, all payments under insurance (whether or not Secured Party is
the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any
of the foregoing Copyright Collateral. For purposes of this Grant of
Copyright Security Interest, the term "proceeds" includes whatever is
receivable or received when Copyright Collateral or proceeds are sold,
exchanged, collected or otherwise disposed of, whether such disposition
is voluntary or involuntary.
Notwithstanding anything herein to the contrary, in no event shall the
Copyright Collateral include, and Grantor shall be not deemed to have granted a
security interest in, any
XII-III-2
<PAGE>
of Grantor's rights or interests in any license, contract or agreement to which
Grantor is a party or any of its rights or interests thereunder to the extent,
but only to the extent, that such a grant would, under the terms of such
license, contract or agreement or otherwise, result in a breach of the terms of,
or constitute a default under any license, contract or agreement to which
Grantor is a party; provided, that immediately upon the ineffectiveness, lapse
or termination of any such provision, the Copyright Collateral shall include,
and Grantor shall be deemed to have granted a security interest in, all such
rights and interests as if such provision had never been in effect.
Grantor does hereby further acknowledge and affirm that the rights and
remedies of Secured Party with respect to the security interest in the Copyright
Collateral granted hereby are more fully set forth in the Security Agreement,
the terms and provisions of which are incorporated by reference herein as if
fully set forth herein.
IN WITNESS WHEREOF, Grantor has caused this Grant of Copyright Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the ____ day of ______, ____.
[NAME OF GRANTOR]
By:
--------------------------------------------
Name:
Title:
XII-III-3
<PAGE>
SCHEDULE A
TO
GRANT OF COPYRIGHT SECURITY INTEREST
U.S. Copyrights:
<TABLE>
<CAPTION>
Title Registration No. Date of Issue Registered Owner
- ----- ---------------- ------------- ----------------
<S> <C> <C> <C>
</TABLE>
Foreign Copyright Registrations:
<TABLE>
<CAPTION>
Country Title Registration No. Date of Issue
- ------- ----- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
Pending U.S. Copyright Registrations & Applications:
<TABLE>
<CAPTION>
Title Reference No. Date of Application Copyright Claimant
- ----- ------------- ------------------- ------------------
<S> <C> <C> <C>
</TABLE>
Pending Foreign Copyright Registrations & Applications:
<TABLE>
<CAPTION>
Country Title Registration No. Date of Issue
- ------- ----- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
XII-III-A-1
<PAGE>
EXHIBIT IV TO
SECURITY AGREEMENT
SECURITY AGREEMENT SUPPLEMENT
This SECURITY AGREEMENT SUPPLEMENT, dated _______, is delivered
pursuant to the Security Agreement, dated as of June 26, 1998 (as it may be from
time to time amended, modified or supplemented, the "Security Agreement"), among
DMAC Acquisition Corp., the other Grantors named therein, and Credit Suisse
First Boston, as Secured Party. Capitalized terms used herein not otherwise
defined herein shall have the meanings ascribed thereto in the Security
Agreement.
Subject to the terms and conditions of the Security Agreement, Grantor
hereby grants to Secured Party a security interest in all of Grantor's right,
title and interest in and to the Intellectual Property Collateral listed on
Supplemental Schedule [1(a)] [1(b)] [1.(c)] attached hereto the following, in
each case whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located. All such
[Intellectual Property Collateral] shall be deemed to be part of the Collateral
and hereafter subject to each of the terms and conditions of the Security
Agreement.
IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly
executed and delivered by its duly authorized officer as of ______________.
[GRANTOR]
By:
---------------------------------------
Name:
Title:
XII-IV-1
<PAGE>
EXHIBIT V TO
SECURITY AGREEMENT
[FORM OF ACKNOWLEDGEMENT]
This ACKNOWLEDGEMENT, dated _______, is delivered pursuant to Section
23 of the Security Agreement referred to below. The undersigned hereby agrees
that this Acknowledgement may be attached to the Security Agreement, dated as of
June 26, 1998 (as it may be from time to time amended, modified or supplemented,
the "Security Agreement"; capitalized terms used herein not otherwise defined
herein shall have the meanings ascribed therein), among DMAC Acquisition Corp.,
the other Grantors named therein, and Credit Suisse First Boston, as Secured
Party, that the undersigned by executing and delivering this Acknowledgement
hereby becomes a Grantor under the Security Agreement in accordance with Section
23 thereof and agrees to be bound by all of the terms thereof, and that the
Patents, Trademarks, Trademark Registrations, Copyrights and Copyright
Registrations described on this Acknowledgement shall be deemed to be part of
the and shall become part of the Collateral and shall secure all Secured
Obligations.
[NAME OF ADDITIONAL GRANTOR]
By:
---------------------------------
Name:
Title:
Trademarks:
<TABLE>
<CAPTION>
Trademark Registration Registration
Registered Owner Description Number Date
---------------- ----------- ------------ -------------
<S> <C> <C> <C>
</TABLE>
Patents Issued:
<TABLE>
<CAPTION>
Patent No. Issue Date Invention Inventor
---------- ---------- --------- --------
<S> <C> <C> <C>
</TABLE>
XII-V-1
<PAGE>
Patents Pending:
<TABLE>
<CAPTION>
Applicant's Date Application
Name Filed Number Invention Inventor
-------------- ------- ----------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
U.S. Copyrights:
<TABLE>
<CAPTION>
Copyright Registration No. Date of Issue Registered Owner
- --------- ---------------- ------------- ----------------
<S> <C> <C> <C>
</TABLE>
Foreign Copyright Registrations:
<TABLE>
<CAPTION>
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
Pending U.S. Copyrights:
<TABLE>
<CAPTION>
Copyright Reference No. Date of Application Copyright Claimant
- --------- ------------- ------------------- --------- --------
<S> <C> <C> <C> <C>
</TABLE>
XII-V-2
<PAGE>
Pending Foreign Copyrights:
<TABLE>
<CAPTION>
Country Copyright Registration No. Date of Issue
- ------- --------- ---------------- -------------
<S> <C> <C> <C>
</TABLE>
XII-V-3
<PAGE>
EXHIBIT XIII
[FORM OF COMPLIANCE CERTIFICATE]
COMPLIANCE CERTIFICATE
THE UNDERSIGNED HEREBY CERTIFIES THAT:
(1) I am the duly elected [Title] of DIMAC Corporation,
a Delaware corporation ("Company");
(2) I have reviewed the terms of that certain Amended and
Restated Credit Agreement dated as of October 22, 1998, by and among
Company, DIMAC Holdings, Inc., the financial institutions listed
therein as Lenders, Credit Suisse First Boston, as Administrative
Agent, Credit Suisse First Boston, as Arranger, Warburg Dillon Read
LLC, as Syndication Agent and First Union National Bank, as
Documentation Agent, as amended, restated, supplemented or otherwise
modified to the date hereof (said Amended and Restated Credit
Agreement, as so amended, restated, supplemented or otherwise modified,
being the "Credit Agreement"; the terms defined therein and not
otherwise defined in this Certificate (including Attachment No. 1
annexed hereto and made a part hereof) being used in this Certificate
as therein defined), and the terms of the other Loan Documents, and I
have made, or have caused to be made under my supervision, a review in
reasonable detail of the transactions and condition of Holdings and its
Subsidiaries during the accounting period covered by the attached
financial statements; and
(3) The examination described in paragraph (2) above did not
disclose, and I have no knowledge of, the existence of any condition or
event which constitutes an Event of Default or Potential Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate[,
except as set forth below].
[Set forth [below] [in a separate attachment to this Certificate] are
all exceptions to paragraph (3) above listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
Company has taken, is taking, or proposes to take with respect to each such
condition or event:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------]
XIII-1
<PAGE>
The foregoing certifications, together with the computations set forth
in Attachment No. 1 annexed hereto and made a part hereof and the financial
statements delivered with this Certificate in support hereof, are made and
delivered this __________ day of _____________, [199_] [200_] pursuant to
subsection 6.1(iv) of the Credit Agreement.
DIMAC CORPORATION
By:
--------------------------------------------
Name:
Title:
XIII-2
<PAGE>
ATTACHMENT NO. 1
TO COMPLIANCE CERTIFICATE
This Attachment No. 1 is attached to and made a part of a Compliance
Certificate dated as of ____________, [199_][200_] and pertains to the period
from ____________, [199_][200_] to ____________, [199_][200_]. Subsection
references herein relate to subsections of the Credit Agreement.
A. Indebtedness
1. Indebtedness under Capital Leases of the type described in
subsection 7.1(iv):
$
-------------
2. Maximum Indebtedness Permitted under subsection 7.1(iv) (after
Phase II Completion Date):
$20,000,000
3. Indebtedness under Permitted Seller paper described in
subsection 7.1(vi);
$
-------------
4. Maximum Indebtedness permitted under subsection
7.1(vi);
$25,000,000
5. Indebtedness of the type described under subsection 7.1(x):
$
-------------
6. Maximum indebtedness of the type described under subsection
(x):
$15,000,000
B. Liens
1. Indebtedness secured by Liens described in 7.2A(iii):
$
-------------
2. Maximum Indebtedness permitted to be secured under subsection
7.2A(iii):
$5,000,000
3. Indebtedness secured by Liens described in subsection
7.2A(iv):
$
-------------
4. Maximum Indebtedness permitted to be secured by Liens under
subsection 7.2A(iv):
$2,500,000
C. Investments
XIII-3
<PAGE>
1. Investments of the type described in subsection 7.3(vii):
$
-------------
2. Maximum permitted under subsection 7.3(vii) per Fiscal Year:
$500,000
3. Investments of the type described in subsection 7.3(viii)
(limited to $2,500,000 in any fiscal year)
$
-------------
4. Aggregate Maximum permitted under subsection 7.3(viii)
$5,000,000
D. Contingent Obligations
1. Contingent Obligations of the type described in subsec-
tion 7.4(iv):
$
-------------
2. Maximum permitted under subsection 7.4(iv):
$500,000
3. Contingent Obligations of the type described in subsection
7.4(v):
$
-------------
4. Maximum permitted under subsection 7.4(v): $1,000,000
5. Contingent Obligations of the type described in
subsection 7.4(ix)
$
-------------
6. Maximum permitted under subsection 7.4(ix)
$2,000,000
E. Minimum Interest Coverage Ratio (for the Calculation Period
ending _____________, [199_] [200_])
1. Consolidated Net Income:
$
-------------
2. Consolidated Interest Expense:
$
-------------
3. Provisions for taxes based on income:
$
-------------
4. Total depreciation expense:
$
-------------
5. Total amortization expense:
$
-------------
XIII-4
<PAGE>
6. Other non-cash items reducing Consolidated Net Income:
$
-------------
7. All one time cash compensation payments made in connection
with the Acquisition:
$
-------------
8. Items described on Schedule 1.1(i):
$
-------------
9. Other non-cash items increasing Consolidated Net Income:
$
-------------
10. Any payments made under Permitted Earn-Out Agreements and
Management Fees to the extent otherwise deducted in
determining Consolidated Net Income:
$
-------------
11. Any payments (net of indemnification) by Company and its
Subsidiaries of demands, obligations, interest, penalties,
suits, judgements, orders, liabilities, debts, claims,
actions, causes of action, costs and expenses in connection
with the postal investigation disclosed on Schedule 5.14 of
the DIMAC Acquisition Agreement:
$
-------------
12. Consolidated Adjusted EBITDA (taking into account any
adjustments required pursuant to 7.6E) ((E.1 + E.2 + E.3 + E.4
+ E.5 + E.6 + E.7 + E.8) (E.9 + E.10 + E.11)):
$
-------------
13. Consolidated Interest Expense:
$
-------------
14. Interest Coverage Ratio ((E.13):(E.14)):
_____:1.00
15. Minimum Interest Coverage Ratio required under subsection
7.6A:
_____:1.00
F. Minimum Fixed Charge Coverage Ratio (for Calculation
Period ending _____________, [199_] [200_])
1. Consolidated Adjusted EBITDA (E.12 above):
$
-------------
2. Scheduled repayments of principal of all Indebtedness (as
reduced by prepayments thereon previously made):
$
-------------
3. Consolidated Interest Expense (E.13 above):
$
-------------
4. Consolidated Capital Expenditures (other than Designated
Capital Expenditures):
$
-------------
XIII-5
<PAGE>
5. Taxes based on income actually paid in cash: $
-------------
6. Consolidated Fixed Charges (H.2 + H.3 + H.4 + H.5):
$
-------------
7. Fixed Charge Coverage Ratio ((H.1):(H.6)):
_____:1.00
8. Minimum Fixed Charge Coverage Ratio required under subsection
7.6C:
_____:1.00
G. Maximum Leverage Ratio (as of _____________, [199_] [200_])
1. Consolidated Total Debt plus (y) so long as the Permitted
----
Earn Out Agreements described on Schedule 1.1(ii) of
the Credit Agreement have not been cancelled or
otherwise terminated, (1) the amount with respect to each
such Permitted Earn Out Agreement set forth on
Schedule 7.6C of the Credit Agreement less (2) with
respect to each such Permitted Earn Out Agreement, the
aggregate amount of all payments made by Company and
its Subsidiaries under such Permitted Earn Out
Agreement after the Closing Date (to the extent such
aggregate amount does not exceed the amount described
in the immediately preceding clause (1)):
$
-------------
2. Consolidated Adjusted EBITDA for the Calculation Period ended
on the above date (E.12 above):
$
-------------
3. Leverage Ratio (G.1 - G.2): _____:1.00
4. Maximum Leverage Ratio permitted under subsection 7.6B:
_____:1.00
H. Consolidated Capital Expenditures (for the Fiscal Year ending December
31, [199_] [200_] [to date])
1. Consolidated Capital Expenditures:
$
-------------
2. Maximum Consolidated Capital Expenditures Amount permitted
under subsection 7.6D (as adjusted (calculations and
supporting information therefor attached hereto) in accordance
with the provisos to such subsection):
$
-------------
I. Fundamental Changes
1. Aggregate fair market value of assets sold in Asset Sales
described in subsection 7.7(vi) during the period commencing
_________________, [199_] [200_]:
XIII-6
<PAGE>
$
-------------
2. Total consideration received in respect of such Asset Sales:
$
-------------
3. Maximum permitted under subsection 7.7(vi)
$7,500,000
4. Cash portion of consideration for Asset Sales described in
subsection 7.7(vi):
$
-------------
5. Percentage of consideration received in cash ((J.4):(J.2)):
-----%
6. Minimum percentage required under subsection 7.7(vi): 80%
XIII-7
<PAGE>
EXHIBIT XIV
[INTENTIONALLY DELETED]
<PAGE>
EXHIBIT XV
[INTENTIONALLY DELETED]
<PAGE>
EXHIBIT XVI
[FORM OF ASSIGNMENT AGREEMENT]
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this "Agreement") is entered into by and
between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to that certain Amended and Restated Credit Agreement
described in the Schedule of Terms (said Amended and Restated Credit Agreement,
as amended, restated, supplemented or otherwise modified to the date hereof and
as it may hereafter be amended, restated, supplemented or otherwise modified
from time to time, being the "Credit Agreement", the terms defined therein and
not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective upon the Settlement Date specified in Item 4 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents with respect to
Assignor's Commitments and outstanding Loans, if any, which represents, as of
the Settlement Date, the percentage interest specified in Item 3 of the Schedule
of Terms of all rights and obligations of Lenders arising under the Credit
Agreement and the other Loan Documents with respect to the Commitments and any
outstanding Loans (the "Assigned Share"). Without limiting the generality of the
foregoing, the parties hereto hereby expressly acknowledge and agree that any
assignment of all or any portion of Assignor's rights and obligations relating
to Assignor's Revolving Loan Commitment shall include (i) in the event Assignor
is an Issuing Lender with respect to any outstanding Letters of Credit (any such
Letters of Credit being "Assignor Letters of Credit"), the sale to Assignee of a
participation in the Assignor Letters of Credit and any drawings thereunder as
contemplated by subsection 3.1C of the Credit Agreement and (ii) the sale to
Assignee of a ratable portion of any participations previously purchased by
Assignor pursuant to said subsection 3.1C with respect to any Letters of Credit
other than the Assignor Letters of Credit.
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately
XVI-1
<PAGE>
available funds in accordance with the applicable payment instructions set forth
in Item 5 of the Schedule of Terms.
(c) Assignor hereby represents and warrants that Item 3 of the Schedule
of Terms correctly sets forth the amount of the Commitments, the outstanding
Term A Loans, the outstanding Term B Loans, the outstanding Term C Loans and the
Pro Rata Share corresponding to the Assigned Share.
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents, and shall be deemed to have made all of the covenants and agreements
contained in the Loan Documents, arising out of or otherwise related to the
Assigned Share, and (ii) Assignor shall be absolutely released from any of such
obligations, covenants and agreements assumed or made by Assignee in respect of
the Assigned Share. Assignee hereby acknowledges and agrees that the agreement
set forth in this Section 1(d) is expressly made for the benefit of Company,
Agents, Assignor and the other Lenders and their respective successors and
permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the assignment by
Assignor and the assumption by Assignee of Assignor's rights and obligations
with respect to the Assigned Share, (ii) any other assignments by Assignor of a
portion of its rights and obligations with respect to the Commitments and any
outstanding Loans shall have no effect on the Commitments, the outstanding Term
A Loans, the outstanding Term B Loans, the outstanding Term C Loans and the Pro
Rata Share corresponding to the Assigned Share as set forth in Item 3 of the
Schedule of Terms or on the interest of Assignee in any outstanding Revolving
Loans corresponding thereto, and (iii) from and after the Settlement Date,
Administrative Agent shall make all payments under the Credit Agreement in
respect of the Assigned Share (including without limitation all payments of
principal and accrued but unpaid interest, commitment fees and letter of credit
fees with respect thereto) (1) in the case of any such interest and fees that
shall have accrued prior to the Settlement Date, to Assignor, and (2) in all
other cases, to Assignee; provided that Assignor and Assignee shall make
payments directly to each other to the extent necessary to effect any
appropriate adjustments in any amounts distributed to Assignor and/or Assignee
by Administrative Agent under the Loan Documents in respect of the Assigned
Share in the event that, for any reason whatsoever, the payment of consideration
contemplated by Section 1(b) occurs on a date other than the Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor shall not be responsible to Assignee for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in
XVI-2
<PAGE>
any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
Assignor to Assignee or by or on behalf of Company or of any other Loan Party to
Assignor or Assignee in connection with the Loan Documents and the transactions
contemplated thereby or for the financial condition or business affairs of
Company or any other Person liable for the payment of any Obligations, nor shall
Assignor be required to ascertain or inquire as to the performance or observance
of any of the terms, conditions, provisions, covenants or agreements contained
in any of the Loan Documents or as to the use of the proceeds of the Loans or
the use of the Letters of Credit or as to the existence or possible existence of
any Event of Default or Potential Event of Default.
(c) Assignee represents and warrants that it is an Eligible Assignee;
that it has experience and expertise in the making or purchasing of loans such
as the Loans; that it has acquired the Assigned Share for its own account in the
ordinary course of its business and without a view to distribution of the Loans
within the meaning of the Securities Act or the Exchange Act or other federal
securities laws (it being understood that, subject to the provisions of
subsection 10.1 of the Credit Agreement, the disposition of the Assigned Share
or any interests therein shall at all times remain within its exclusive
control); and that it has received, reviewed and approved a copy of the Credit
Agreement (including all Exhibits and Schedules thereto).
(d) Assignee represents and warrants that it has received from Assignor
such financial information regarding Company and its Subsidiaries as is
available to Assignor and as Assignee has requested, that it has made its own
independent investigation of the financial condition and affairs of Company and
its Subsidiaries in connection with the assignment evidenced by this Agreement,
and that it has made and shall continue to make its own appraisal of the
creditworthiness of Company and its Subsidiaries. Assignor shall have no duty or
responsibility, either initially or on a continuing basis, to make any such
investigation or any such appraisal on behalf of Assignee or to provide Assignee
with any other credit or other information with respect thereto, whether coming
into its possession before the making of the initial Loans or at any time or
times thereafter, and Assignor shall not have any responsibility with respect to
the accuracy of or the completeness of any information provided to Assignee.
(e) Each party to this Agreement represents and warrants to the other
party hereto that it has full power and authority to enter into this Agreement
and to perform its obligations hereunder in accordance with the provisions
hereof, that this Agreement has been duly authorized, executed and delivered by
such party and that this Agreement constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity.
XVI-3
<PAGE>
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.
(c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex, or three
Business Days after depositing it in the United States mail with postage prepaid
and properly addressed. For the purposes hereof, the notice address of each of
Assignor and Assignee shall be as set forth on the Schedule of Terms or, as to
either such party, such other address as shall be designated by such party in a
written notice delivered to the other such party. In addition, the notice
address of Assignee set forth on the Schedule of Terms shall serve as the
initial notice address of Assignee for purposes of subsection 10.8 of the Credit
Agreement.
(d) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5- 1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
XVI-4
<PAGE>
(h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
giving of notice to Company, (iii) the receipt by Administrative Agent of the
processing and recordation fee referred to in subsection 10.1B(i) of the Credit
Agreement, (iv) in the event Assignee is a Non-US Lender (as defined in
subsection 2.7B(iii)(a) of the Credit Agreement), the delivery by Assignee to
Administrative Agent of such forms, certificates or other evidence with respect
to United States federal income tax withholding matters as Assignee may be
required to deliver to Administrative Agent pursuant to said subsection
2.7B(iii)(a), (v) the execution of a counterpart hereof by Administrative Agent
as evidence of its consent hereto to the extent required under subsection
10.1B(i) of the Credit Agreement and as evidence of its acceptance hereof in
accordance with subsection 10.1B(ii) of the Credit Agreement, (vi) the receipt
by Administrative Agent of originals or telefacsimiles of the counterparts
described above and authorization of delivery thereof, and (vii) the recordation
by Administrative Agent in the Register of the pertinent information regarding
the assignment effected hereby in accordance with subsection 10.1B(ii) of the
Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
XVI-5
<PAGE>
SCHEDULE OF TERMS
1. Company: DIMAC CORPORATION
2. Name and Date of Credit Agreement: Amended and Restated Credit
Agreement dated as of October 22, 1998, by and among Company, DIMAC
Holdings, Inc., the financial institutions listed therein as Lenders,
Credit Suisse First Boston, as Administrative Agent, Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication
Agent and First Union National Bank, as Documentation Agent.
3. Amounts:
<TABLE>
<CAPTION>
Re: Term A Re: Term B Re: Term C Re: Revolving
Loans Loans Loans Loans
----- ----- ----- -----
<S> <C> <C> <C> <C>
(a) Aggregate Com- $__________ $__________ $__________ $__________
mitments of all
Lenders:
(b) Assigned _________% _________% _________% _________%
Share/Pro Rata
Share:
(c) Amount of As- $__________ $__________ $__________ $__________
signed Share of
Commitments:
(d) Amount of As- $__________ $__________ $__________
signed Share of
Term Loans:
</TABLE>
4. Settlement Date: ____________, [199_][200_]
5. Assignor's Payment Instructions:
ASSIGNOR:
______________________________
______________________________
______________________________
Attention:____________________
Reference:____________________
6. Assignor's Notice Address:
XVI-6
<PAGE>
ASSIGNOR:
______________________________
______________________________
______________________________
______________________________
Attention:____________________
Reference:____________________
7. Assignee Information:
Lending Institution:________________________________________________
Address: ________________________________________________
________________________________________________
________________________________________________
Telephone: __________ Telex No.: __________
Telefax: __________ Answerback: __________
CONTACT - Credit Name:____________________________________________
Address:______________________________________
Telephone:____________________________________
Telefax:______________________________________
8. Assignee's Payment Instructions:
Bank Name: _________________________________________________
ABA/Routing No. _________________________________________________
Account Name _________________________________________________
Account No. _________________________________________________
For further credit: _________________________________________________
Account No. _________________________________________________
Attention: _________________________________________________
Reference: _________________________________________________
XVI-7
<PAGE>
9. Signatures:
[NAME OF ASSIGNOR], [NAME OF ASSIGNEE],
as Assignee as Assignor
By:_____________________ By:
Name: Name:
Title: Title:
[Consented to and accepted in [Consented to and accepted in
accordance with subsec- accordance with subsec-
tions 10.1B(i) of the Credit tions 10.1B(i) and (ii) of the Credit
Agreement Agreement
DIMAC CORPORATION CREDIT SUISSE FIRST
BOSTON,
as Administrative Agent
By:_______________________ By:__________________________
Name: Name:
Title:] Title:
By:__________________________
Name:
Title:]
XVI-8
<PAGE>
EXHIBIT XVII
[FORM OF COLLATERAL ACCOUNT AGREEMENT]
COLLATERAL ACCOUNT AGREEMENT
This COLLATERAL ACCOUNT AGREEMENT (this "Agreement") is dated as of
June 26, 1998 and entered into by and between DMAC ACQUISITION CORP., a Delaware
corporation ("Pledgor"), and CREDIT SUISSE FIRST BOSTON ("CSFB"), as agent for
and representative of (in such capacity herein called "Secured Party") the
financial institutions ("Lenders") party to the Credit Agreement referred to
below.
PRELIMINARY STATEMENTS
A. Pursuant to that certain Credit Agreement dated as of June 26, 1998
(said Credit Agreement, as it may hereafter be amended, restated, supplemented
or otherwise modified from time to time, being the "Credit Agreement"; the terms
defined therein and not otherwise defined herein being used herein as therein
defined), by and among Pledgor, DMAC Holdings, Inc., CSFB, as Administrative
Agent, and CSFB, as Syndication Agent and Arranger, Lenders have made certain
commitments, subject to the terms and conditions set forth in the Credit
Agreement, to extend certain credit facilities to Pledgor.
B. It is a condition precedent to the initial extensions of credit by
Lenders under the Credit Agreement that Pledgor shall have granted the security
interests and undertaken the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make Loans and issue Letters of Credit under the Credit Agreement and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Pledgor hereby agrees with Secured Party as follows:
SECTION 1. Certain Definitions.
The following terms used in this Agreement shall have the following
meanings:
"Collateral" means (i) the Collateral Account, (ii) all
amounts on deposit from time to time in the Collateral Account, (iii)
all interest, cash, instruments, securities and other property from
time to time received, receivable or otherwise distributed in respect
of or in exchange for any or all of the Collateral, and (iv) to the
extent not covered by clauses (i) through (iii) above, all proceeds of
any or all of the foregoing Collateral.
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"Collateral Account" means the restricted deposit account
established and maintained by Secured Party pursuant to subsection
2(a).
"Secured Obligations" means all obligations and liabilities of
every nature of Pledgor now or hereafter existing under or arising out
of or in connection with the Credit Agreement and the other Loan
Documents and all extensions or renewals thereof, whether for
principal, interest (including without limitation interest that, but
for the filing of a petition in bankruptcy with respect to Pledgor,
would accrue on such obligations), reimbursement of amounts drawn under
Letters of Credit, fees, expenses, indemnities or otherwise, whether
voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such
obligations or liabilities that are paid, to the extent all or any part
of such payment is avoided or recovered directly or indirectly from
Secured Party or any Lender as a preference, fraudulent transfer or
otherwise, and all obligations of every nature of Pledgor now or
hereafter existing under this Agreement.
SECTION 2. Establishment and Operation of Collateral Account.
(a) Secured Party is hereby authorized to establish and maintain at its
office at _____________________________________________, as a blocked account in
the name of Secured Party and under the sole dominion and control of Secured
Party, a restricted deposit account designated as "DMAC Acquisition Corp.
Collateral Account".
(b) The Collateral Account shall be operated in accordance with the
terms of this Agreement.
(c) All amounts at any time held in the Collateral Account shall be
beneficially owned by Pledgor but shall be held in the name of Secured Party
hereunder, for the benefit of Lenders, as collateral security for the Secured
Obligations upon the terms and conditions set forth herein. Pledgor shall have
no right to withdraw, transfer or, except as expressly set forth herein,
otherwise receive any funds deposited into the Collateral Account.
(d) Anything contained herein to the contrary notwithstanding, the
Collateral Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.
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SECTION 3. Deposits of Cash Collateral.
(a) All deposits of funds in the Collateral Account shall be made by
wire transfer (or, if applicable, by intra-bank transfer from another account of
Pledgor) of immediately available funds in accordance with written wire transfer
instructions provided to Pledgor by Secured Party. Pledgor shall, promptly after
initiating a transfer of funds to the Collateral Account, give notice to Secured
Party by telefacsimile of the date, amount and method of delivery of such
deposit.
(b) If an Event of Default has occurred and is continuing and, in
accordance with Section 8 of the Credit Agreement, Pledgor is required to pay to
Secured Party an amount equal to the maximum amount that may at any time be
drawn under all Letters of Credit then outstanding under the Credit Agreement or
if Pledgor is required to cash collateralize Letters of Credit pursuant to
subsection 2.4C(i) of the Credit Agreement, Pledgor shall deliver funds in such
an amount for deposit in the Collateral Account in accordance with Section 3(a).
Upon any drawing under any outstanding Letter of Credit in respect of which
Pledgor has deposited in the Collateral Account any amounts described above,
Secured Party shall apply such amounts to reimburse the Issuing Lender for the
amount of such drawing. In the event the amount deposited in the Collateral
Account pursuant to this Section 3(b) exceeds the maximum amount available to be
drawn under all Letters of Credit, Secured Party shall apply such excess amount
then on deposit in the Collateral Account in accordance with subsection 2.4D of
the Credit Agreement.
(c) Pledgor shall, promptly after initiating a transfer of funds to the
Collateral Account, give notice to Secured Party by telefacsimile of the date,
amount and method of delivery of such deposit.
SECTION 4. Pledge of Security for Secured Obligations.
Pledgor hereby pledges and assigns to Secured Party, and hereby grants
to Secured Party a security interest in, all of Pledgor's right, title and
interest in and to the Collateral as collateral security for the prompt payment
or performance in full when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise (including the
payment of amounts that would become due but for the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C. ss.362(a)), of all
Secured Obligations.
SECTION 5. No Investment of Amounts in the Collateral Account; Interest on
Amounts in the Collateral Account.
(a) Cash held by Secured Party in the Collateral Account shall not be
invested by Secured Party but instead shall be maintained as a cash deposit in
the Collateral Account pending application thereof as elsewhere provided in this
Agreement.
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(b) To the extent permitted under Regulation Q of the Board of
Governors of the Federal Reserve System, any cash held in the Collateral Account
shall bear interest at the standard rate paid by Secured Party to its customers
for deposits of like amounts and terms.
(c) Subject to Secured Party's rights under Section 12, any interest
earned on deposits of cash in the Collateral Account in accordance with
subsection 5(b) shall be deposited directly in, and held in the Collateral
Account.
SECTION 6. Representations and Warranties.
Pledgor represents and warrants as follows:
(a) Ownership of Collateral. Pledgor is (or at the time of
transfer thereof to Secured Party will be) the legal and beneficial
owner of the Collateral from time to time transferred by Pledgor to
Secured Party, free and clear of any Lien except for the security
interest created by this Agreement.
(b) Governmental Authorizations. No authorization, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for either (i) the grant by
Pledgor of the security interest granted hereby, (ii) the execution,
delivery or performance of this Agreement by Pledgor, or (iii) the
perfection of or the exercise by Secured Party of its rights and
remedies hereunder (except as may have been taken by or at the
direction of Pledgor).
(c) Perfection. The pledge and assignment of the Collateral
pursuant to this Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the
Secured Obligations.
(d) Other Information. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Pledgor with
respect to the Collateral is accurate and complete in all respects.
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SECTION 7. Further Assurances.
Pledgor agrees that from time to time, at the expense of Pledgor,
Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that Secured
Party may request, in order to perfect and protect any security interest granted
or purported to be granted hereby or to enable Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, Pledgor will: (a) execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as Secured
Party may request, in order to perfect and preserve the security interests
granted or purported to be granted hereby and (b) at Secured Party's request,
appear in and defend any action or proceeding that may affect Pledgor's
beneficial title to or Secured Party's security interest in all or any part of
the Collateral.
SECTION 8. Transfers and other Liens.
Pledgor agrees that it will not (a) sell, assign (by operation of law
or otherwise) or otherwise dispose of any of the Collateral or (b) create or
suffer to exist any Lien upon or with respect to any of the Collateral, except
for the security interest under this Agreement.
SECTION 9. Secured Party Appointed Attorney-in-Fact.
Pledgor hereby irrevocably appoints Secured Party as Pledgor's
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of Pledgor, Secured Party or otherwise, from time to time in Secured
Party's discretion to take any action and to execute any instrument that Secured
Party may deem necessary or advisable to accomplish the purposes of this
Agreement, including without limitation to file one or more financing or
continuation statements, or amendments thereto, relative to all or any part of
the Collateral without the signature of Pledgor.
SECTION 10. Secured Party May Perform.
If Pledgor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
Pledgor under subsection 10.2 of the Credit Agreement.
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SECTION 11. Standard of Care.
The powers conferred on Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the exercise of reasonable care in the custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral, it being
understood that Secured Party shall have no responsibility for (a) taking any
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Collateral) to preserve rights
against any parties with respect to any Collateral or (b) taking any necessary
steps to collect or realize upon the Secured Obligations or any guarantee
therefor, or any part thereof, or any of the Collateral. Secured Party shall be
deemed to have exercised reasonable care in the custody and preservation of
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Secured Party accords its own property of like
kind.
SECTION 12. Remedies.
(a) If any Event of Default or Potential Event of Default shall have
occurred and be continuing, Secured Party may (i) transfer any or all of the
Collateral to an account established in Secured Party's name (whether at Secured
Party or otherwise) or (ii) otherwise register title to any Collateral in the
name of Secured Party or one of its nominees or agents, without reference to any
interest of Pledgor.
(b) If any Event of Default shall have occurred and be continuing,
subject to the provisions of subsection 3(b), Secured Party may exercise in
respect of the Collateral, in addition to all other rights and remedies
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code as in effect in any relevant
jurisdiction (the "Code") (whether or not the Code applies to the affected
Collateral).
(c) If the proceeds of any disposition of the Collateral are
insufficient to pay all the Secured Obligations, Pledgor shall be liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.
(d) Anything contained herein to the contrary notwithstanding, any of
the Collateral consisting of cash held by Secured Party in the Collateral
Account shall be subject to Secured Party's rights of set-off under subsection
10.4 of the Credit Agreement.
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SECTION 13. Continuing Security Interest; Transfer of Loans.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the payment in
full of the Secured Obligations, the cancellation or termination of the
Commitments and the cancellation or expiration of all outstanding Letters of
Credit, (b) be binding upon Pledgor, its successors and assigns, and (c) inure,
together with the rights and remedies of Secured Party hereunder, to the benefit
of Secured Party and its successors, transferees and assigns. Without limiting
the generality of the foregoing clause (c), but subject to the provisions of
subsection 10.1 of the Credit Agreement, any Lender may assign or otherwise
transfer any Loans held by it to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to
Lenders herein or otherwise. Upon the payment in full of all Secured
Obligations, the cancellation or termination of the Commitments and the
cancellation or expiration of all outstanding Letters of Credit, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to Pledgor. Upon any such termination Secured Party shall, at Pledgor's
expense, execute and deliver to Pledgor such documents as Pledgor shall
reasonably request to evidence such termination and Pledgor shall be entitled to
the return, upon its request and at its expense, against receipt and without
recourse to Secured Party, of such of the Collateral as shall not have been
otherwise applied pursuant to the terms hereof.
SECTION 14. Secured Party as Agent.
(a) Secured Party has been appointed to act as Secured Party hereunder
by Lenders. Secured Party shall be obligated, and shall have the right
hereunder, to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking any action (including
without limitation the release or substitution of Collateral), solely in
accordance with this Agreement and the Credit Agreement.
(b) Secured Party shall at all times be the same Person that is
Administrative Agent under the Credit Agreement. Written notice of resignation
by Administrative Agent pursuant to subsection 9.5 of the Credit Agreement shall
also constitute notice of resignation as Secured Party under this Agreement;
removal of Administrative Agent pursuant to subsection 9.5 of the Credit
Agreement shall also constitute removal as Secured Party under this Agreement;
and appointment of a successor Administrative Agent pursuant to subsection 9.5
of the Credit Agreement shall also constitute appointment of a successor Secured
Party under this Agreement. Upon the acceptance of any appointment as
Administrative Agent under subsection 9.5 of the Credit Agreement by a successor
Administrative Agent, that successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Secured Party under this Agreement, and the retiring
or removed Secured Party under this Agreement shall promptly (i) transfer to
such successor Secured Party all sums held by Secured Party hereunder (which
shall be deposited in a new Collateral Account established and maintained by
such successor Secured Party), together with all records and other documents
necessary or appropriate in connection
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with the performance of the duties of the successor Secured Party under this
Agreement, and (ii) execute and deliver to such successor Secured Party such
amendments to financing statements, and take such other actions, as may be
necessary or appropriate in connection with the assignment to such successor
Secured Party of the security interests created hereunder, whereupon such
retiring or removed Secured Party shall be discharged from its duties and
obligations under this Agreement. After any retiring or removed Administrative
Agent's resignation or removal hereunder as Secured Party, the provisions of
this Agreement shall inure to its benefit as to any actions taken or omitted to
be taken by it under this Agreement while it was Secured Party hereunder.
SECTION 15. Amendments; Etc.
No amendment, modification, termination or waiver of any provision of
this Agreement, and no consent to any departure by Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by Pledgor. Any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which it was given.
SECTION 16. Notices.
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or United States mail
or courier service and shall be deemed to have been given when delivered in
person or by courier service, upon receipt of telefacsimile or telex (with
received answerback), or three Business Days after depositing it in the United
States mail with postage prepaid and properly addressed; provided that notices
to Secured Party shall not be effective until received. For the purposes hereof,
the address of each party hereto shall be as provided in subsection 10.8 of the
Credit Agreement.
SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of Secured Party in the exercise of any
power, right or privilege hereunder shall impair such power, right or privilege
or be construed to be a waiver of any default or acquiescence therein, nor shall
any single or partial exercise of any such power, right or privilege preclude
any other or further exercise thereof or of any other power, right or privilege.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
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SECTION 18. Severability.
In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 19. Headings.
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 20. Governing Law; Terms.
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE CODE PROVIDES
THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER,
IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK. Unless otherwise defined herein
or in the Credit Agreement, terms used in Articles 8 and 9 of the Uniform
Commercial Code in the State of New York are used herein as therein defined.
SECTION 21. Counterparts.
This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
DMAC ACQUISITION CORP.
By:
---------------------------------
Name:
Title:
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CREDIT SUISSE FIRST BOSTON,
as Secured Party
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
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EXHIBIT XVIII
[FORM OF CERTIFICATE RE NON-BANK STATUS]
CERTIFICATE RE NON-BANK STATUS
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of October 22, 1998 (said Amended and Restated Credit
Agreement, as amended, restated, supplemented or otherwise modified to the date
hereof, being the "Credit Agreement"), by and among DIMAC Corporation, a
Delaware corporation, DIMAC Holdings, Inc., a Delaware corporation, the
financial institutions listed therein as Lenders ("Lenders"), Credit Suisse
First Boston, as Administrative Agent for Lenders, Credit Suisse First Boston,
as Arranger, Warburg Dillon Read LLC, as Syndication Agent and First Union
National Bank, as Documentation Agent. Pursuant to subsection 2.7B(iii) of the
Credit Agreement, the undersigned hereby certifies that it is not a "bank" or
other Person described in Section 881(c)(3) of the Internal Revenue Code of
1986, as amended.
[NAME OF LENDER]
By:
---------------------------------
Name:
Title:
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EXHIBIT XIX
[FORM OF PERMITTED SELLER PAPER]
___% NON-NEGOTIABLE SUBORDINATED NOTE
[Insert Date] $ _________
[DIMAC CORPORATION] [DIMAC HOLDINGS, INC.], a Delaware
corporation (the "Borrower"), hereby promises upon the terms and subject to the
provisions hereof to pay to [NAME OF SELLER] (the "Holder"), the principal
amount of [_______] Dollars ($_______).
This % Non-Negotiable Junior Subordinated Note (the "Note") was issued
pursuant to the Purchase Agreement (the "Purchase Agreement") dated as of
[__________, [199_] [200_], between the Borrower and the Holder.
1. Definitions. As used herein, the following terms shall
have the following meanings:
"Indebtedness" means (i) all obligations for borrowed money or
for the deferred purchase price of property or services (including, without
limitation, all obligations contingent or otherwise in connection with
acceptance, letter of credit or similar facilities), (ii) all obligations
evidenced by bonds, notes, debentures or other similar instruments or
securities, (iii) all indebtedness created or arising under any sale and
leaseback arrangement, conditional sale or other title retention agreement with
respect to property owned or acquired (whether or not the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (iv) all rental obligations under
capital leases to the extent not included in clause (iii) above, (v) all
guarantees (direct or indirect), all contingent reimbursement obligations under
undrawn letters of credit and all other contingent obligations in respect of, or
obligations to purchase or otherwise acquire or to assure payment of,
indebtedness of others and (vi) indebtedness of others secured by any lien upon
property, whether or not assumed, but only to the extent of such property's fair
market value.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
"Senior Agent" shall mean Credit Suisse First Boston, as
Administrative Agent for the Lenders under the Senior Credit Agreement, and its
successors in such capacity, or if there is then no acting Administrative Agent
under the Senior Credit Agreement, financial institutions holding a majority in
principal amount of the Senior Debt outstanding thereunder.
"Senior Credit Agreement" shall mean the Amended and Restated
Credit
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Agreement, dated as of October 22, 1998, by and among the Borrower, [DIMAC
Corporation] [DIMAC Holdings, Inc.], a Delaware corporation, Credit Suisse First
Boston, as Administrative Agent and Arranger, Warburg Dillon Read LLC, as
Syndication Agent and First Union National Bank, as Documentation Agent and the
financial institutions listed therein as Lenders, as amended, restated, modified
or supplemented from time to time hereafter, together with any credit agreement
or similar document from time to time executed by the Borrower to evidence any
Refinancing (as defined in the definition of Senior Indebtedness) or successive
Refinancings.
"Senior Indebtedness" shall mean (i) all Obligations (as
defined in the Senior Credit Agreement) (including Contingent Obligations, as
defined in the Senior Credit Agreement) now or hereafter incurred pursuant to
and in accordance with the terms of the Senior Debt Documents, (ii) any
additional Indebtedness incurred under or pursuant to the Senior Credit
Agreement and the other Senior Debt Documents whether such Obligations or
additional Indebtedness involve principal prepayment charges, interest
(including, without limitation, interest accruing after the filing of a petition
initiating any proceeding under the Bankruptcy Code, whether or not allowed as a
claim in such proceeding) indemnities or reimbursement of fees, expenses or
other amounts, and (iii) any indebtedness incurred for the purpose of
refinancing, restructuring, extending or renewing (collectively, "Refinancing")
the obligations of the Borrower under the Senior Credit Agreement as set forth
in clauses (i) and (ii) above.
"Senior Debt Documents" shall mean the Senior Credit Agreement
and all other documents and instruments delivered or filed in connection with
the creation or incurrence of any Senior Indebtedness (including, without
limitation, the guaranty agreements executed and delivered by the subsidiaries
of the Borrower in respect of the Obligations under the Senior Credit
Agreement).
"Senior Lenders" shall mean the financial institutions party
to the Senior Credit Agreement as "Lenders" from time to time.
2. Payment of Interest. Interest shall accrue on the unpaid
principal amount of this Note from the date hereof at the rate of [ ]% per annum
[NOT TO EXCEED ___%] (the "Interest Rate"), calculated on the basis of a 365 day
year. The Borrower shall pay interest semi-annually in arrears on the fifteenth
day of January and July in each year (each, an "Interest Payment Date")
commencing on ____________, [199_][200_].
3. Payment of Principal.
(a) Scheduled Payment. Subject to the provisions of Section 4
hereof, on [_____________], [199_][200_] (the "Maturity Date"), the Borrower
shall pay to the holder of this Note the entire principal amount of this Note,
plus all accrued and unpaid interest hereon which is then unpaid.
(b) Optional Prepayments. Subject to the provisions of Section
4 hereof, the Borrower may, at any time and from time to time, without premium
or penalty, prepay all or a portion of the unpaid principal amount of this Note,
together with unpaid interest accrued since the preceding Interest Payment Date
to which interest has been paid on such portion of the
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principal amount which it is prepaying; provided, that no such prepayment shall
be made if such prepayment is then prohibited by the terms of any Senior
Indebtedness. A prepayment of less than all of the unpaid principal amount of
this Note shall not relieve the Borrower of its obligation to make the scheduled
payment on this Note on the Maturity Date. Each partial payment under this Note
shall first be credited to accrued and unpaid interest on the principal being
prepaid, and the remainder shall be credited to principal. Whenever any payment
to be made hereunder shall be due on a date which is not a business day, the
payment shall be made on the next succeeding business day and such extension of
time shall be included in the computation of interest with respect to such
payment
4. Subordination.
(a) Agreement to Subordinate. The Borrower and, by its
acceptance hereof, each Holder agree that the indebtedness of the Borrower
evidenced by this Note, whether for principal, interest or any other amount
payable under or in respect hereof and all rights or claims arising out of or
associated with such Indebtedness (the "Subordinated Obligations"), shall be
junior and subordinate in right of payment to the prior payment in full in cash
of all Senior Indebtedness, in accordance with the provisions of this Section 4.
Each holder of Senior Indebtedness shall be deemed to have acquired Senior
Indebtedness in reliance upon the agreements of the Borrower and the holder of
this Note contained in this Section 4. The provisions of this Section 4 shall be
reinstated if at any time any payment of any of the Senior Indebtedness is
rescinded or must otherwise be returned by any holder of Senior Indebtedness or
any representative of such holder upon the insolvency, bankruptcy or
reorganization of the Borrower. Any provision of this Note to the contrary
notwithstanding (other than the provision contained in Section 6), the Borrower
shall not make, and no Holder shall accept, any payment or prepayment of
principal, or prepayment of other amounts due thereunder, of any kind whatsoever
(including without limitation by distribution of assets, set off, exchange or
any other manner) with respect to the Subordinated Obligations at any time when
any of the Senior Indebtedness remains outstanding. Holder may receive interest
payments in respect of the Subordinated Obligations in accordance with the terms
of this Note except to the extent and at the times prohibited or restricted by
the provisions of this Section 4. In no event shall the Holder commence any
action or proceeding to contest the provisions of this Section 4 or the priority
of the Liens (as defined in the Senior Credit Agreement) granted to the holders
of the Senior Indebtedness by the Borrower. No Holder shall take, accept or
receive any collateral security from the Borrower for the payment of the
Subordinated Obligations.
(b) Liquidation, Dissolution, Bankruptcy. In the event of any
insolvency, bankruptcy, dissolution, winding up, liquidation, arrangement,
reorganization, marshalling of assets or liabilities, composition, assignment
for the benefit of creditors or other similar proceedings relating to the
Borrower, its debts, its property or its operations, whether voluntary or
involuntary, including, without limitation the filing of any petition or the
taking of any action to commence any of the foregoing (which, in the case of
action by a third party, is not dismissed within 60 days) (a "Bankruptcy
Event"), all Senior Indebtedness shall first be paid in full in cash or other
immediately available funds before Holder shall be entitled to receive or retain
any payment or distribution of assets of the Borrower with respect to any
Subordinated Obligations. In the event of any such Bankruptcy Event, any payment
or distribution of assets to which
XIX-3
<PAGE>
Holder would be entitled if the Subordinated Obligations were not subordinated
to the Senior Indebtedness in accordance with this Section 4, whether in cash,
property, securities or otherwise, shall be paid or delivered by the debtor,
custodian, trustee or agent or other Person making such payment or distribution,
or by the Holder if received by it, directly to the Senior Agent on behalf of
the holders of the Senior Indebtedness for application to the payment of the
Senior Indebtedness remaining unpaid, to the extent necessary to make payment in
full in cash or other immediately available funds of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution
to or for the holders of the Senior Indebtedness.
(c) No Payments with Respect to Subordinated Obligations in
Certain Circumstances.
(i) In circumstances in which Section 4(b) is not
applicable, no payment of any nature (including, without limitation, any
distribution of assets) in respect of the Subordinated Obligations (including,
without limitation, pursuant to any judgment with respect thereto or on account
of the purchase or redemption or other acquisition of Subordinated Obligations,
by set off, prepayment exchange or other manner) shall be made by or on behalf
of the Borrower if, at the time of such payment:
(A) a default in the payment when due
(whether at the maturity thereof, or upon acceleration of
maturity or otherwise and without giving effect to any
applicable grace periods) of all or any portion of the Senior
Indebtedness (whether of principal, interest or any other
amount with respect thereto) shall have occurred, and such
default shall not have been cured or waived in accordance with
the terms of the Senior Debt Documents; or
(B) subject to the last sentence of this
Section 4(c), (x) the Borrower shall have received notice from
the Senior Agent of the occurrence of one or more Events of
Default (as defined in the Senior Credit Agreement) in respect
of the Senior Indebtedness (other than payment defaults
described in Section 4(c)(i)(A) above), (y) any such Event of
Default shall not have been cured or waived in accordance with
the terms of the Senior Debt Documents, and (z) 180 days shall
not have elapsed since the date such notice was received.
The Borrower may resume payments (and may make any payments
missed due to the application of Section 4(c)(i)) in respect of the Subordinated
Obligations or any judgment with respect thereto:
(A) in the case of a default referred to in
clause (A) of this Section 4(c)(i), upon a cure or waiver
thereof in accordance with the terms of the Senior Debt
Documents; or
(B) in the case of an Event of Default or
Events of Default referred to in clause (B) of this Section
4(c)(i), upon the earlier to occur of (1) the cure or waiver
of all such Events of Default in accordance with the terms of
the Senior Debt Documents, or (2) the expiration of such
period of 180 days.
XIX-4
<PAGE>
(ii) Following any acceleration of the maturity of any Senior
Indebtedness and as long as such acceleration shall continue
unrescinded and unannulled, such Senior Indebtedness shall first be
paid in full in cash before any payment is made on account of or
applied on the Subordinated Obligations.
(iii) The Borrower shall give prompt written notice to the
Holder of (x) any default in respect of Senior Obligations referred to
in Section 4(c)(i)(A) and (y) any notice of the type described in
Section 4(c)(i)(B) from the Senior Agent.
(d) When Distribution Must Be Paid Over. In the event that
Holder shall receive any payment or distribution of assets that Holder is not
entitled to receive or retain under the provisions of this Note, Holder shall
hold any amount so received in trust for the holders of Senior Indebtedness,
shall segregate such assets from other assets held by Holder and shall forthwith
turn over such payment or distribution (without liability for interest thereon)
to the Senior Agent on behalf of the holders of Senior Indebtedness in the form
received (with any necessary endorsement) to be applied to Senior Indebtedness.
(e) Exercise of Remedies. So long as any Senior Indebtedness
is outstanding (including any loans, any letters of credit, any commitments to
lend or any lender guarantees), Holder (solely in its capacity as a holder of
this Note) shall not exercise any rights or remedies with respect to an Event of
Default under this Note, including, without limitation, any action (l) to demand
or sue for collection of amounts payable hereunder, (2) to accelerate the
principal of this Note, or (3) to commence or join with any other creditor
(other than the holder of a majority in principal amount of the Senior
Indebtedness) in commencing any proceeding in connection with or premised on the
occurrence of a Bankruptcy Event prior to the earlier of:
(A) the payment in full in cash or other
immediately available funds of all Senior Indebtedness;
(B) the initiation of a proceeding (other
than a proceeding prohibited by clause (3) of this Section
4(e)) in connection with or premised upon the occurrence of a
Bankruptcy Event;
(C) the expiration of 180 days immediately
following the receipt by the Senior Agent of notice of the
occurrence of such Event of Default from the Holder; and
(D) the acceleration of the maturity of the
Senior Indebtedness; provided, however, that if, with respect
to (B) and (D) above, such proceeding or acceleration,
respectively, is rescinded, or with respect to (C) above,
during such 180-day period such Event of Default has been
cured or waived, the prohibition against taking the actions
described in this section 4(e) shall automatically be
reinstated as of the date of the rescission, cure or waiver,
as applicable. In all events, unless an event described in
clause (A), (B) or (D) above has occurred and not been
rescinded, the Holder shall give thirty (30) days prior
written notice to the Senior
XIX-5
<PAGE>
Agent before taking any action described in this Section 4(e), which notice
shall describe with specificity the action that the Holder in good faith intends
to take.
(f) Acceleration of Payment of Note. If this Note is declared
due and payable prior to the Maturity Date, no direct or indirect payment that
is due solely by reason of such declaration shall be made, nor shall application
be made of any distribution of assets of the Borrower (whether by set off or in
any other manner, including, without limitation, from or by way of collateral)
to the payment, purchase or other acquisition or retirement of this Note,
unless, in either case, (i) all amounts due or to become due on or in respect of
the Senior Indebtedness shall have been previously paid in full in cash, (ii)
all commitments to lend under Senior Indebtedness shall have been terminated,
(iii) all letters of credit shall have been cancelled or otherwise terminated,
(iv) all guarantees constituting Senior Indebtedness shall have been terminated
and (v) all lender guarantees constituting Senior Indebtedness shall have been
permanently reduced to zero.
(g) Proceedings Against Borrower. So long as any Senior
Indebtedness is outstanding (including any loans, any commitments to lend, any
letters of credit or any lender guarantees, Holder (solely in its capacity as a
holder of this Note) shall not commence any bankruptcy, insolvency,
reorganization or other similar proceeding against Borrower.
(h) Amending Senior Indebtedness. Any holder of Senior
Indebtedness may, at any time and from time to time, without the consent of or
notice to Holder (i) modify or amend the terms of the Senior Indebtedness
provided that such Senior Indebtedness cannot be extended or renewed past [**
December 31, 2007 **], (ii) sell, exchange, release, fail to perfect a lien on
or a security interest in or otherwise in any manner deal with or apply any
property pledged or mortgaged to secure, or otherwise securing, Senior
Indebtedness, (iii) release any guarantor or any other person liable in any
manner for the Senior Indebtedness, (iv) exercise or refrain from exercising any
rights against Borrower or any other person, (v) apply any sums by whomever paid
or however realized to Senior Indebtedness or (vi) take any other action that
might be deemed to impair in any way the rights of the holder of this Note. Any
and all of such actions may be taken by the holders of Senior Indebtedness
without incurring responsibility to Holder and without impairing or releasing
the obligations of Holder to the holders of Senior Indebtedness.
(i) Certain Rights in Bankruptcy. Holder hereby
irrevocably authorizes and empowers each holder of Senior Indebtedness (and its
representative or representatives) to demand, sue for, collect and receive all
payments and distributions under the terms of this Note, to file and prove all
claims (including claims in bankruptcy) relating to this Note, to exercise any
right to vote arising with respect to this Note and any claims hereunder in any
bankruptcy, insolvency or similar proceeding and take any and all other
actions in the name of Holder (solely in its capacity as a holder of this Note),
as such holder of Senior Indebtedness determines to be necessary or appropriate.
(j) Subrogation. No payment or distribution to any holder of
Senior Indebtedness pursuant to the provisions of this Note shall entitle Holder
to exercise any right of subrogation in respect thereof until (i)(1) all Senior
Indebtedness shall have been paid in full in
XIX-6
<PAGE>
cash, (2) all commitments to lend under Senior Indebtedness shall have been
terminated, (3) all letters of credit shall have been cancelled or otherwise
terminated, (4) all guarantees constituting Senior Indebtedness shall have been
terminated and (5) all lender guarantees constituting Senior Indebtedness shall
have been permanently reduced to zero or (ii) all holders of Senior Indebtedness
have consented in writing to the taking of such action.
(k) Relative Rights. The provisions of this Section 4 are for
the benefit of the holders of Senior Indebtedness (and their successors and
assigns) and shall be enforceable by them directly against Holder. Holder
acknowledges and agrees that any breach of the provisions of this Section 4 will
cause irreparable harm for which the payment of monetary damages may be
inadequate. For this reason, Holder agrees that, in addition to any remedies at
law or equity to which a holder of the Senior Indebtedness may be entitled, a
holder of the Senior Indebtedness will be entitled to an injunction or other
equitable relief to prevent breaches of the provisions of this Section 4 and/or
to compel specific performance of such provisions. The provisions of this
Section 4 shall continue to be effective or be reinstated, as the case may be,
if at any time any payment of Senior Indebtedness is rescinded or must otherwise
be returned by any holder of Senior Indebtedness upon the occurrence of a
Bankruptcy Event or otherwise, all as though such payment had not been made. The
provisions of this Section 4 are not intended to impair and shall not impair as
between Borrower and Holder, the obligation of Borrower, which is absolute and
unconditional, to pay Holder all amounts owing under this Note.
(l) Reliance on Orders and Decrees. Subject to the provisions
of Section 4(d) hereof, upon any payment or distribution of assets of Borrower,
whether in cash, property, securities or otherwise, Holder shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which any insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to Holder for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 4.
5. Events of Default.
(a) Definition. The following shall be an "Event of Default"
under this Note;
(i) the Borrower shall fail to make any payment of
interest on this Note when the same shall become due and payable and
such failure shall continue for a period of 5 days;
(ii) the Borrower shall fail to make any payment of
the principal of this Note when the same shall become due and payable,
whether on the Maturity Date or otherwise;
(iii) (A) the Borrower shall commence any case,
proceeding or action
XIX-7
<PAGE>
(x) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to its debts, or
(y) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its
assets, (B) the Borrower shall make a general assignment for the
benefit of its creditors, (C) there shall be commenced against the
Borrower any case, proceeding or other action of a nature referred to
in clause (A) above which shall not have been vacated or discharged
within 60 days from the commencement thereof, or (iv) a court shall
enter a decree or order for relief in any involuntary case under Title
11 of the United States Code, as amended from time to time, or any
applicable bankruptcy or similar law now or hereafter in effect, which
decree or order is not stayed, vacated, discharged, or bonded pending
appeal within 60 days from the entry thereof; or
(iv) the acceleration of the maturity of the Senior
Indebtedness.
(b) Remedies. If an Event of Default shall occur and be
continuing, then, subject to the provisions of Section 4, the Holder may, upon
written notice to the Borrower, declare all amounts owing under this Note to be
immediately due and payable.
Subject to the immediately preceding paragraph and to Section
4 above, the Holder shall also have all other rights in respect of this Note
following the occurrence and during the continuance of an Event of Default which
are available pursuant to applicable law or in equity.
[6. Right of Set-Off. Anything in this Note to the contrary
notwithstanding, nothing in this Note shall preclude the Borrower from timely
exercising such Borrower's right pursuant to Section ______ of the Purchase
Agreement to set-off indemnification claims against this Note and/or interest
payments under this Note.]
7. No Presentment. The Borrower, for itself and any guarantors
hereof, and their successors and assigns, waives presentment, demand, protest
and notice thereof or of dishonor, and waives any right to be released by reason
of any extension of time or change in the terms of payment.
8. Amendment. So long as any Senior Indebtedness (including
any letter of credit or lender guarantee) is outstanding or there is a
commitment to lend any Senior Indebtedness (including any commitment under the
Senior Debt Documents) the terms of this Note may be amended only with the
consent of the Senior Agent. Subject to the foregoing, without the consent of
the Senior Agent hereof, this Note may be amended by the Borrower and the Holder
to cure any ambiguity, defect or inconsistency that does not affect the
subordination provisions hereof or the rights of the Senior Lenders.
9. Cancellation. After all unpaid principal and interest owed
on this Note has been paid in full, this Note shall be surrendered to the
Borrower for cancellation and shall
XIX-8
<PAGE>
not be reissued.
10. Transfer Restrictions: Acknowledgment of Security
Interest. This Note shall not be transferrable by the Holder hereof without the
prior written consent of the Borrower (which consent shall not be unreasonably
withheld). The Holder hereby acknowledges, and agrees to, the Borrower's grant
of its interest herein to the Lenders under the Credit Agreement, dated as of
the date hereof, to collaterally secure the Borrower's obligations under such
Credit Agreement.
11. Payment of Expenses. The Borrower agrees to pay all costs
and expenses (including reasonable attorneys' fees) reasonably incurred by the
Holder after the occurrence and during the continuance of an Event of Default in
enforcing any obligations under this Note or in collecting any payments due from
Borrower under this Note (including in connection with a bankruptcy or
insolvency proceeding with respect to the Borrower).
12. Governing Law. The construction, validity and
interpretation of this Note shall be governed by and construed in accordance
with the domestic laws of the State of New York, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.
13. Descriptive Headings. The descriptive headings of this
Note are inserted for convenience only, and do not constitute a part of this
Note.
[Remainder of page intentionally left blank.]
XIX-9
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed and delivered this Note
on the date first written above.
[DIMAC CORPORATION]
[DIMAC HOLDINGS, INC.]
By:
------------------------------------
Name:
Title:
Agreed:
[NAME OF SELLER]
By:
-------------------------------
Name:
Title:
XIX-10
<PAGE>
EXHIBIT XX
[FORM OF MORTGAGE]
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND LEASES AND FIXTURE FILING ([*STATE*])
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND
LEASES AND FIXTURE FILING ([*STATE*]) (this "Mortgage") is dated as of October
22, 1998 by and from AMERICOMM DIRECT MARKETING, INC., a Delaware corporation
("Mortgagor"), whose address is c/o DIMAC Corporation, 5775 Peachtree Dunwoody
Road, Suite C150, Atlanta, Georgia 30342 to CREDIT SUISSE FIRST BOSTON ("CSFB"),
as Administrative Agent (in such capacity "Agent") for the Lenders listed in the
Credit Agreement (defined below) and all successor Administrative Agents and
assigns (Agent and all successor Agents and assigns, "Mortgagee"), having an
address at 11 Madison Avenue, New York, New York 10010-3629.
ARTICLE I.
DEFINITIONS
Section A. Definitions. All capitalized terms used herein
without definition shall have the respective meanings ascribed to them in that
certain Amended and Restated Credit Agreement dated as of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") by and among DIMAC CORPORATION, a Delaware corporation, as borrower
("Borrower"), DIMAC HOLDINGS, INC., as a guarantor, the lenders listed on the
signature pages thereof ("Lenders"),CSFB, as administrative agent and arranger,
WARBURG DILLON READ LLC, as syndication agent, and FIRST UNION NATIONAL BANK, as
documentation agent. As used herein, the following terms shall have the
following meanings:
1. "Indebtedness": (1) All (a) principal indebtedness of
Borrower to Mortgagee and the Lenders, together with interest thereon, under the
Term A Loans, the Term B Loans, the Term C Loans, the Revolving Loans and the
Swing Line Loans, as evidenced by the Term A Notes, the Term B Notes, the Term C
Notes, the Revolving Notes and the Swing Line Note (such Notes and any and all
modifications, substitutions, extensions, renewals and replacements thereof are
collectively referred to herein as the "Mortgage Notes") of even date herewith,
and (b) other amounts evidenced or secured by the Loan Documents, including
without limitation, reimbursement obligations in respect of Letters of Credit,
together with interest thereon and other amounts payable with respect thereto,
and (c) principal, interest and other amounts including without limitation
future or additional advances, which may hereafter be loaned by Mortgagee or the
Lenders or any of them under or in connection with the Credit Agreement or any
of the other Loan Documents, whether evidenced by a promissory note or other
instrument which, by its terms, is secured hereby, the full and prompt payment
of which has been guaranteed by Mortgagor pursuant to the terms of a Subsidiary
Guaranty dated as of June 26, 1998, a counterpart of which was executed by
Mortgagor as of even date hereof and (2)
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<PAGE>
all other indebtedness, obligations and liabilities now or hereafter existing of
any kind of Mortgagor or Borrower to Mortgagee or the Lenders under documents
which recite that they are intended to be secured by this Mortgage. Pursuant to
the Credit Agreement, the Lenders have agreed to provide Borrower with a
revolving credit facility, which permits Borrower to borrow certain principal
amounts, repay all or a portion of such principal amounts, and reborrow the
amounts previously paid to the Lenders, all upon satisfaction of certain
conditions stated in the Credit Agreement. The amount of such revolving credit
facility may increase and decrease from time to time as the Lenders advance,
Borrower repays, and the Lenders re-advance sums on account of the revolving
credit, all as more fully described in the Credit Agreement. Additionally,
pursuant to the Credit Agreement, Borrower will enter into Lender Interest Rate
Agreements. The term "Indebtedness" shall include any and all advances and
re-advances under the revolving credit feature of the Credit Agreement and any
and all amounts under the Lender Interest Rate Agreements entered into with one
or more of the Lenders or any Affiliates thereof.
2. "Mortgaged Property": All of Mortgagor's interest in (1)
the fee interest in the real property described in Exhibit A attached hereto and
incorporated herein by this reference, together with any greater estate therein
as hereafter may be acquired by Mortgagor (the "Land"), (2) all improvements now
owned or hereafter acquired by Mortgagor, now or at any time situated, placed or
constructed upon the Land (the "Improvements"; the Land and Improvements are
collectively referred to as the "Premises"), (3) all materials, supplies,
equipment, apparatus and other items of personal property now owned or hereafter
acquired by Mortgagor and now or hereafter attached to, installed in or used in
connection with any of the Improvements or the Land, and water, gas, electrical,
telephone, storm and sanitary sewer facilities and all other utilities now owned
or hereafter acquired by Mortgagor, whether or not situated in easements (the
"Fixtures"), (4) all reserves, escrows or impounds required under the Credit
Agreement and all deposit accounts maintained by Mortgagor with respect to the
Mortgaged Property (the "Deposit Accounts"), (5) all leases, licenses,
concessions, occupancy agreements or other agreements (written or oral, now or
at any time in effect) which grant to any Person a possessory interest in, or
the right to use, all or any part of the Mortgaged Property, together with all
related security and other deposits (the "Leases"), (6) all of the rents,
revenues, royalties, income, proceeds, profits, security and other types of
deposits, and other benefits paid or payable by parties to the Leases for using,
leasing, licensing possessing, operating from, residing in, selling or otherwise
enjoying the Mortgaged Property (the "Rents"), (7) all other agreements, such as
construction contracts, architects' agreements, engineers' contracts, utility
contracts, maintenance agreements, management agreements, service contracts,
listing agreements, guaranties, warranties, permits, licenses, certificates and
entitlements in any way relating to the construction, use, occupancy, operation,
maintenance, enjoyment or ownership of the Mortgaged Property (the "Property
Agreements"), (8) all rights, privileges, tenements, hereditaments,
rights-of-way, easements, appendages and appurtenances appertaining to the
foregoing, (9) all property tax refunds (the "Tax Refunds"), (10) all
accessions, replacements and substitutions for any of the foregoing and all
proceeds thereof (the "Proceeds"), (11) all insurance policies, unearned
premiums therefor and proceeds from such policies covering any of the above
property now or hereafter acquired by Mortgagor (the "Insurance"), and (12) all
of Mortgagor's right, title and interest in and to any awards, damages,
remunerations, reimbursements, settlements or compensation
XX-2
<PAGE>
hereafter to be made by any governmental authority pertaining to the Land,
Improvements, Fixtures or tangible personal property affixed to, placed upon,
used in connection with, arising from or otherwise related to, the Premises (the
"Condemnation Awards"). As used in this Mortgage, the term "Mortgaged Property"
shall mean all or, where the context permit or requires, any portion of the
above or any interest therein.
3. "Obligations": All of the agreements, covenants,
conditions, warranties, representations and other obligations of Mortgagor
(including, without limitation, the obligation to repay the Indebtedness) under
the Subsidiary Guaranty, the Credit Agreement and the other Loan Documents.
4. "UCC": The Uniform Commercial Code of [**State**] or, if
the creation, perfection and enforcement of any security interest herein granted
is governed by the laws of a state other than [**State**], then, as to the
matter in question, the Uniform Commercial Code in effect in that state.
ARTICLE II.
GRANT
Section A. Grant. [** For Ten Dollars and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged and **] to secure the full and timely payment of the Indebtedness
and the full and timely performance of the Obligations, Mortgagor MORTGAGES,
GRANTS, BARGAINS, ASSIGNS, SELLS and CONVEYS, to Mortgagee, for the benefit of
the Lenders, the Mortgaged Property, subject, however, to the Permitted
Encumbrances and other Liens permitted pursuant to the Credit Agreement, TO HAVE
AND TO HOLD the Mortgaged Property to Mortgagee, for the benefit of the Lenders,
and Mortgagor does hereby bind itself, its successors and assigns to WARRANT AND
FOREVER DEFEND the title to the Mortgaged Property unto Mortgagee, for the
benefit of the Lenders.
ARTICLE III.
WARRANTIES, REPRESENTATIONS AND COVENANTS
Mortgagor warrants, represents and covenants to Mortgagee, for
the benefit of the Lenders, as follows:
Section A. Title to Mortgaged Property and Lien of this
Instrument. Mortgagor owns the Mortgaged Property free and clear of any liens,
claims or interests, except the Permitted Encumbrances and other Liens permitted
pursuant to the Credit Agreement. This Mortgage creates a valid, enforceable
First Priority Lien and security interest against the Mortgaged Property.
Section B. First Lien Status. Mortgagor shall preserve and
protect the First Priority Lien and security interest status of this Mortgage
and the other Loan Documents. If any lien or security interest (other than the
Permitted Encumbrances, other Liens permitted pursuant to the Credit Agreement
or this Mortgage) is asserted against the Mortgaged Property,
XX-3
<PAGE>
Mortgagor shall promptly, and at its expense, (a) give Mortgagee a detailed
written notice of such lien or security interest (including origin, amount and
other terms) promptly after Mortgagor has notice thereof, and (b) pay the
underlying claim in full or take such other action so as to cause it to be
released or contest the same in compliance with the requirements of the Credit
Agreement (including the requirement of providing a bond or other security
satisfactory to Mortgagee).
Section C. Payment and Performance. Mortgagor shall perform
the Obligations in full when they are required to be performed.
Section D. Replacement of Fixtures. Mortgagor shall not,
without the prior written consent of Mortgagee, permit any of the Fixtures to be
removed at any time from the Land or Improvements, unless the removed item is
removed temporarily for maintenance and repair or, if removed permanently, is
permitted under the Credit Agreement or first approved in writing by Mortgagee.
Section E. Other Covenants. All of the covenants of Borrower
in the Credit Agreement are incorporated herein by reference and, together with
covenants in this Article 3, shall be covenants running with the land.
Section F. Condemnation Awards and Insurance Proceeds.
1. Condemnation Awards. Mortgagor assigns all awards
and compensation to which it is entitled for any condemnation or other taking,
or any purchase in lieu thereof, to Mortgagee, for the benefit of the Lenders,
and authorizes Mortgagee to collect and receive such awards and compensation and
to give proper receipts and acquittances therefor, subject to the terms of the
Credit Agreement.
2. Insurance Proceeds. Mortgagor assigns to
Mortgagee, for the benefit of the Lenders, all of Mortgagor's right, title and
interest in all proceeds of any insurance policies insuring against loss or
damage to the Mortgaged Property. Mortgagor authorizes Mortgagee to collect and
receive such proceeds and authorizes and directs the issuer of each of such
insurance policies to make payment for all such losses directly to Mortgagee,
instead of to Mortgagor and Mortgagee jointly, except to the extent provided
otherwise in the Credit Agreement. Such proceeds shall be applied as required by
the Credit Agreement.
ARTICLE IV.
[Intentionally Omitted]
ARTICLE V.
DEFAULT AND FORECLOSURE
Section A. Remedies. If an Event of Default exists, Mortgagee
may, at Mortgagee's election, exercise any or all of the following rights,
remedies and recourses:
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<PAGE>
1. Acceleration. The Indebtedness shall automatically become
immediately due and payable, if required by the Credit Agreement and in
accordance with the Credit Agreement, or if the Credit Agreement does not
require automatic acceleration, Mortgagee may declare the Indebtedness to be
immediately due and payable, pursuant to and in accordance with the Credit
Agreement, without further notice, presentment, protest, notice of intent to
accelerate, notice of acceleration, demand or action of any nature whatsoever
(each of which hereby is expressly waived by Mortgagor), whereupon the same
shall become immediately due and payable.
2. Entry on Mortgaged Property. Enter the Mortgaged Property
and take exclusive possession thereof and of all books, records and accounts
relating thereto or located thereon. If Mortgagor remains in possession of the
Mortgaged Property after an Event of Default and without Mortgagee's prior
written consent, Mortgagee may invoke any legal remedies to dispossess
Mortgagor.
3. Operation of Mortgaged Property. Hold, lease, develop,
manage, operate or otherwise use the Mortgaged Property upon such terms and
conditions as Mortgagee may deem reasonable under the circumstances (making such
repairs, alternations, additions and improvements and taking other actions, from
time to time, as Mortgagee deems necessary or desirable), and apply all Rents
and other amounts collected by Mortgagee in connection therewith in accordance
with the provisions of Section 5.7.
4. Foreclosure and Sale. Institute proceedings for the
complete foreclosure of this Mortgage, either by judicial action or by power of
sale, in which case the Mortgaged Property may be sold for cash or credit in one
or more parcels. With respect to any notices required or permitted under the
UCC, Mortgagor agrees that ten (10) days' prior written notice shall be deemed
commercially reasonable. At any such sale by virtue of any judicial proceedings,
power of sale, or any other legal right, remedy or recourse, the title to and
right of possession of any such property shall pass to the purchaser thereof,
and to the fullest extent permitted by law, Mortgagor shall be completely and
irrevocably divested of all of its right, title, interest, claim, equity, equity
of redemption, and demand whatsoever, either at law or in equity, in and to the
property sold and such sale shall be a perpetual bar both at law and in equity
against Mortgagor, and against all other Persons claiming or to claim the
property sold or any part thereof, by, through or under Mortgagor. Mortgagee or
any of the Lenders may be a purchaser at such sale and if Mortgagee is the
highest bidder, Mortgagee may credit the portion of the purchase price that
would be distributed to Mortgagee against the Indebtedness in lieu of paying
cash. In the event this Mortgage is foreclosed by judicial action, appraisement
of the Mortgaged Property is waived.
5. Receiver. Make application to a court of competent
jurisdiction for, and obtain from such court as a matter of strict right and
without notice to Mortgagor or regard to the adequacy of the Mortgaged Property
for the repayment of the Indebtedness, the appointment of a receiver of the
Mortgaged Property, and Mortgagor irrevocably consents to such appointment. Any
such receiver shall have all the usual powers and duties of receivers in similar
cases, including the full power to rent, maintain and otherwise operate the
Mortgaged Property upon such terms as may be approved by the court, and shall
apply such Rents in accordance with
XX-5
<PAGE>
the provisions of Section 5.7.
6. Other. Exercise all other rights, remedies and recourses
granted under the Loan Documents or otherwise available at law or in equity.
Section B. Separate Sales. The Mortgaged Property may be sold
in one or more parcels and in such manner and order as Mortgagee in its sole
discretion may elect; the right of sale arising out of any Event of Default
shall not be exhausted by any one or more sales.
Section C. Remedies Cumulative, Concurrent and Nonexclusive.
Mortgagee and the Lenders shall have all rights, remedies and recourses granted
in the Loan Documents and available at law or equity (including the UCC), which
rights (a) shall be cumulated and concurrent, (b) may be pursued separately,
successively or concurrently against Mortgagor or others obligated under the
Loan Documents, or against the Mortgaged Property, or against any one or more of
them, at the sole discretion of Mortgagee or the Lenders, (c) may be exercised
as often as occasion therefor shall arise, and the exercise or failure to
exercise any of them shall not be construed as a waiver or release thereof or of
any other right, remedy or recourse, and (d) are intended to be, and shall be,
nonexclusive. No action by Mortgagee or the Lenders in the enforcement of any
rights, remedies or recourses under the Loan Documents or otherwise at law or
equity shall be deemed to cure any Event of Default.
Section D. Release of and Resort to Collateral. Mortgagee may
release, regardless of consideration and without the necessity for any notice to
or consent by the holder of any subordinate lien on the Mortgaged Property, any
part of the Mortgaged Property without, as to the remainder, in any way
impairing, affecting, subordinating or releasing the lien or security interest
created in or evidenced by the Loan Documents or their status as a First
Priority Lien and security interest in and to the Mortgaged Property. For
payment of the Indebtedness, Mortgagee may resort to any other security in such
order and manner as Mortgagee may elect.
Section E. Waiver of Redemption, Notice and Marshalling of
Assets. To the fullest extent permitted by law, Mortgagor hereby irrevocably and
unconditionally waives and releases (a) all benefit that might accrue to
Mortgagor by virtue of any present or future statute of limitations or law or
judicial decision exempting the Mortgaged Property from attachment, levy or sale
on execution or providing for any stay of execution, exemption from civil
process, redemption or extension of time for payment, (b) except as provided in
the Credit Agreement, all notices of any Event of Default or of Mortgagee's
election to exercise or the actual exercise of any right, remedy or recourse
provided for under the Loan Documents, and (c) any right to a marshalling of
assets or a sale in inverse order of alienation.
Section F. Discontinuance of Proceedings. If Mortgagee or the
Lenders shall have proceeded to invoke any right, remedy or recourse permitted
under the Loan Documents and shall thereafter elect to discontinue or abandon it
for any reason, Mortgagee or the Lenders shall have the unqualified right to do
so and, in such an event, Mortgagor and Mortgagee or the Lenders shall be
restored to their former positions with respect to the Indebtedness, the
Obligations, the Loan Documents, the Mortgaged Property and otherwise, and the
rights, remedies, recourses and powers of Mortgagee or the Lenders shall
continue as if the
XX-6
<PAGE>
right, remedy or recourse had never been invoked, but no such discontinuance or
abandonment shall waive any Event of Default which may then exist or the right
of Mortgagee or the Lenders thereafter to exercise any right, remedy or recourse
under the Loan Documents for such Event of Default.
Section G. Application of Proceeds. The proceeds of any sale
of, and the Rents and other amounts generated by the holding, leasing,
management, operation or other use of the Mortgaged Property, shall be applied
by Mortgagee (or the receiver, if one is appointed) in the following order
unless otherwise required by applicable law:
1. to the payment of the costs and expenses of taking
possession of the Mortgaged Property and of holding, using, leasing, repairing,
improving and selling the same, including, without limitation (1) receiver's
fees and expenses, including the repayment of the amounts evidenced by any
receiver's certificates, (2) court costs, (3) reasonable attorneys' and
accountants' fees and expenses, and (4) reasonable costs of advertisement;
2. to the payment of the Indebtedness and performance of the
Obligations in such manner and order of preference as Mortgagee in its sole
discretion may determine; and
3. the balance, if any, to the payment of the Persons legally
entitled thereto.
Section H. Occupancy After Foreclosure. Any sale of the
Mortgaged Property or any part thereof in accordance with Section 5.1(d) will
divest all right, title and interest of Mortgagor in and to the property sold.
Subject to applicable law, any purchaser at a foreclosure sale will receive
immediate possession of the property purchased. If Mortgagor retains possession
of such property or any part thereof subsequent to such sale, Mortgagor will be
considered a tenant at sufferance of the purchaser, and will, if Mortgagor
remains in possession after demand to remove, be subject to eviction and
removal, forcible or otherwise, with or without process of law.
Section I. Additional Advances and Disbursements; Costs of
Enforcement.
1. If any Event of Default exists, Mortgagee and each of the
Lenders shall have the right, but not the obligation, to cure such Event of
Default in the name and on behalf of Mortgagor. All reasonable sums advanced and
reasonable expenses incurred at any time by Mortgagee or any Lender under this
Section 5.9, or otherwise under this Mortgage or any of the other Loan Documents
or applicable law, shall bear interest from the date that such sum is advanced
or expense incurred, to and including the date of reimbursement, computed at the
rate or rates at which interest is then computed on the Indebtedness, and all
such sums, together with interest thereon, shall be secured by this Mortgage.
2. Mortgagor shall pay all reasonable expenses (including
reasonable attorneys' fees and expenses) of or incidental to the perfection and
enforcement of this Mortgage and the other Loan Documents, or the enforcement,
compromise or settlement of the Indebtedness or any claim under this Mortgage
and the other Loan Documents, and for the
XX-7
<PAGE>
curing thereof, or for defending or asserting the rights and claims of Mortgagee
or the Lenders in respect thereof, by litigation or otherwise.
Section J. No Mortgagee in Possession. Neither the enforcement
of any of the remedies under this Article 5, the assignment of the Rents and
Leases under Article 6, the security interests under Article 7, nor any other
remedies afforded to Mortgagee or the Lenders under the Loan Documents, at law
or in equity shall cause Mortgagee or any Lender to be deemed or construed to be
a mortgagee in possession of the Mortgaged Property, to obligate Mortgagee or
any Lender to lease the Mortgaged Property or attempt to do so, or to take any
action, incur any expense, or perform or discharge any obligation, duty or
liability whatsoever under any of the Leases or otherwise.
ARTICLE VI.
ASSIGNMENT OF RENTS AND LEASES
Section A. Assignment. In furtherance of and in addition to
the assignment made by Mortgagor in Section 2.1 of this Mortgage, Mortgagor
hereby absolutely and unconditionally assigns, sells, transfers and conveys to
Mortgagee, for the benefit of the Lenders, all of its right, title and interest
in and to all Leases, whether now existing or hereafter entered into, and all of
its right, title and interest in and to all Rents. This assignment is an
absolute assignment and not an assignment for additional security only. So long
as no Event of Default shall have occurred and be continuing, Mortgagor shall
have a revocable license from Mortgagee to exercise all rights extended to the
landlord under the Leases, including the right to receive and collect all Rents
and to hold the Rents in trust for use in the payment and performance of the
Obligations and to otherwise use the same. The foregoing license is granted
subject to the conditional limitation that no Event of Default shall have
occurred and be continuing. Upon the occurrence and during the continuance of an
Event of Default, whether or not legal proceedings have commenced, and without
regard to waste, adequacy of security for the Obligations or solvency of
Mortgagor, the license herein granted shall automatically expire and terminate,
without notice by Mortgagee (any such notice being hereby expressly waived by
Mortgagor).
Section B. Perfection Upon Recordation. Mortgagor acknowledges
that Mortgagee has taken all actions necessary to obtain, and that upon
recordation of this Mortgage Mortgagee shall have, to the extent permitted under
applicable law, a valid and fully perfected, first priority, present assignment
of the Rents arising out of the Leases and all security for such Leases.
Mortgagor acknowledges and agrees that upon recordation of this Mortgage
Mortgagee's interest in the Rents shall be deemed to be fully perfected,
"choate" and enforced as to Mortgagor and all third parties, including, without
limitation, any subsequently appointed trustee in any case under Title 11 of the
United States Code (the "Bankruptcy Code"), without the necessity of commencing
a foreclosure action with respect to this Mortgage, making formal demand for the
Rents, obtaining the appointment of a receiver or taking any other affirmative
action.
Section C. Bankruptcy Provisions. Without limitation of the
absolute nature of the assignment of the Rents hereunder, Mortgagor and
Mortgagee agree that (a) this Mortgage
XX-8
<PAGE>
shall constitute a "security agreement" for purposes of Section 552(b) of the
Bankruptcy Code, (b) the security interest created by this Mortgage extends to
property of Mortgagor acquired before the commencement of a case in bankruptcy
and to all amounts paid as Rents and (c) such security interest shall extend to
all Rents acquired by the estate after the commencement of any case in
bankruptcy.
Section D. No Merger of Estates. So long as part of the
Indebtedness and the Obligations secured hereby remain unpaid and undischarged,
the fee and leasehold estates to the Mortgaged Property shall not merge, but
shall remain separate and distinct, notwithstanding the union of such estates
either in Mortgagor, Mortgagee, any tenant or any third party by purchase or
otherwise.
ARTICLE VII.
SECURITY AGREEMENT
Section A. Security Interest. This Mortgage constitutes a
"security agreement" on personal property within the meaning of the UCC and
other applicable law and with respect to the Fixtures, Deposit Accounts, Leases,
Rents, Property Agreements, Tax Refunds, Proceeds, Insurance and Condemnation
Awards. To this end, Mortgagor grants to Mortgagee, for the benefit of the
Lenders, a First Priority security interest in the Fixtures, Deposit Accounts,
Leases, Rents, Property Agreements, Tax Refunds, Proceeds, Insurance,
Condemnation Awards and all other Mortgaged Property which is personal property
to secure the payment of the Indebtedness and performance of the Obligations,
and agrees that Mortgagee shall have all the rights and remedies of a secured
party under the UCC with respect to such property. Any notice of sale,
disposition or other intended action by Mortgagee with respect to the Fixtures,
Deposit Accounts, Leases, Rents, Property Agreements, Tax Refunds, Proceeds,
Insurance and Condemnation Awards sent to Mortgagor at least ten (10) days prior
to any action under the UCC shall constitute reasonable notice to Mortgagor.
Section B. Financing Statements; Chief Executive Office.
Mortgagor shall execute and deliver to Mortgagee, in form and substance
satisfactory to Mortgagee, such financing statements and such further assurances
as Mortgagee may, from time to time, reasonably consider necessary to create,
perfect and preserve Mortgagee's security interest hereunder and Mortgagee may
cause such statements and assurances to be recorded and filed, at such times and
places as may be required or permitted by law to so create, perfect and preserve
such security interest. All such financing statements required to be executed
and delivered shall disclose all such UCC information to be provided on Exhibit
B, attached hereto and incorporated herein by this reference.
Section C. Fixture Filing. This Mortgage shall also constitute
a "fixture filing" for the purposes of the UCC against all of the Mortgaged
Property which is or is to become fixtures. Information concerning the security
interest herein granted may be obtained at the addresses of Debtor (Mortgagor)
and Secured Party (Mortgagee) as set forth in the first paragraph of this
Mortgage.
ARTICLE VIII.
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<PAGE>
[Intentionally Omitted]
ARTICLE IX.
MISCELLANEOUS
Section A. Notices. Any notice required or permitted to be
given under this Mortgage shall be given in accordance with Section 10.8 of the
Credit Agreement.
Section B. Covenants Running with the Land. All Obligations
contained in this Mortgage are intended by Mortgagor and Mortgagee to be, and
shall be construed as, covenants running with the Mortgaged Property. As used
herein, "Mortgagor" shall refer to the party named in the first paragraph of
this Mortgage and to any subsequent owner of all or any portion of the Mortgaged
Property. All Persons who may have or acquire an interest in the Mortgaged
Property shall be deemed to have notice of, and be bound by, the terms of the
Credit Agreement and the other Loan Documents; however, no such party shall be
entitled to any rights thereunder without the prior written consent of
Mortgagee.
Section C. Change in Tax Law. Upon the enactment of or change
in (including, without limitation, a change in interpretation of) any applicable
law (i) deducting or allowing Mortgagor to deduct from the value of the
Mortgaged Property for the purpose of taxation any lien or security interest
thereon or (ii) subjecting Mortgagee or any of the Lenders to any tax or
changing the basis of taxation of mortgages, deeds of trust, or other liens or
debts secured thereby, or the manner of collection of such taxes, in each such
case, so as to affect this Mortgage, the Indebtedness or Mortgagee, and the
result is to increase the taxes imposed upon or the cost to Mortgagee of
maintaining the Indebtedness, or to reduce the amount of any payments receivable
hereunder, then, and in any such event, Mortgagor shall, on demand, pay to
Mortgagee and the Lenders additional amounts to compensate for such increased
costs or reduced amounts, provided that if any such payment or reimbursement
shall be unlawful, or taxable to Mortgagee, or would constitute usury or render
the Indebtedness wholly or partially usurious under applicable law, then
Mortgagee or the Requisite Lenders may, at their option, declare the
Indebtedness immediately due and payable or require Mortgagor to pay or
reimburse Mortgagee or the Lenders for payment of the lawful and non-usurious
portion thereof.
Section D. Mortgage Tax. Mortgagor shall (i) pay when due any
tax imposed upon it or upon Mortgagee or any Lender pursuant to the tax law of
the state in which the Mortgaged Property is located in connection with the
execution, delivery and recordation of this Mortgage, and (ii) prepare, execute
and file any form required to be prepared, executed and filed in connection
therewith.
Section E. Attorney-in-Fact. Mortgagor hereby irrevocably
appoints Mortgagee and its successors and assigns, as its attorney-in-fact with
full power of substitution, which agency is coupled with an interest, (a) to
execute and/or record any notices of completion, cessation of labor or any other
notices that Mortgagee deems appropriate to protect Mortgagee's interest, if
Mortgagor shall fail to do so within ten (10) days after written request by
Mortgagee, (b) upon the issuance of a deed pursuant to the foreclosure of this
Mortgage or the delivery of a
XX-10
<PAGE>
deed in lieu of foreclosure, to execute all instruments of assignment,
conveyance or further assurance with respect to the Fixtures, Deposit Accounts,
Leases, Rents, Property Agreements, Tax Refunds, Proceeds, Insurance and
Condemnation Awards in favor of the grantee of any such deed and as may be
necessary or desirable for such purpose, (c) to prepare, execute and file or
record financing statements, continuation statements, applications for
registration and like papers necessary to create, perfect or preserve
Mortgagee's security interests and rights in or to any of the Mortgaged
Property, and (d) while any Event of Default exists, to perform any obligation
of Mortgagor hereunder, however: (1) Mortgagee shall not under any circumstances
be obligated to perform any obligation of Mortgagor; (2) any reasonable sums
advanced by Mortgagee in such performance shall be added to and included in the
Indebtedness and shall bear interest at the rate or rates at which interest is
then computed on the Indebtedness; (3) Mortgagee as such attorney-in-fact shall
only be accountable for such funds as are actually received by Mortgagee; and
(4) Mortgagee shall not be liable to Mortgagor or any other person or entity for
any failure to take any action which it is empowered to take under this Section
9.5.
Section F. Successors and Assigns. This Mortgage shall be
binding upon and inure to the benefit of Mortgagee and Mortgagor and their
respective successors and assigns. Except as otherwise permitted by the Credit
Agreement, Mortgagor shall not, without the prior written consent of Mortgagee,
assign any rights, duties or obligations hereunder.
Section G. No Waiver. Any failure by Mortgagee or the Lenders
to insist upon strict performance of any of the terms, provisions or conditions
of the Loan Documents shall not be deemed to be a waiver of same, and Mortgagee
and the Lenders shall have the right at any time to insist upon strict
performance of all of such terms, provisions and conditions.
Section H. Credit Agreement. If any conflict or inconsistency
exists between this Mortgage and the Credit Agreement, the Credit Agreement
shall govern.
Section I. Release or Reconveyance. Upon payment in full of
the Loans and all other then accrued Indebtedness or upon a sale of the
Mortgaged Property in accordance with the provisions of the Credit Agreement,
Mortgagee, at Mortgagor's reasonable expense, shall release the liens and
security interests created by this Mortgage or reconvey the Mortgaged Property
to Mortgagor.
Section J. Waiver of Stay, Moratorium and Similar Rights.
Mortgagor agrees, to the full extent that it may lawfully do so, that it will
not at any time insist upon or plead or in any way take advantage of any stay,
marshalling of assets, extension, redemption or moratorium law now or hereafter
in force and effect so as to prevent or hinder the enforcement of the provisions
of this Mortgage or the Indebtedness secured hereby, or any agreement between
Mortgagor and Mortgagee or any rights or remedies of Mortgagee.
Section K. Applicable Law. The provisions of this Mortgage
regarding the creation, perfection and enforcement of the liens and security
interests herein granted shall be governed by and construed under the laws of
the state in which the Mortgaged Property is located. All other provisions of
this Mortgage shall be governed by the laws of the State of New York (including,
without limitation, Section 5-1401 of the General Obligations Law of the State
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<PAGE>
of New York), without regard to conflicts of laws principles.
Section L. Headings. The Article, Section and Subsection
titles hereof are inserted for convenience of reference only and shall in no way
alter, modify or define, or be used in construing, the text of such Articles,
Sections or Subsections.
Section M. Entire Agreement. This Mortgage and the other Loan
Documents embody the entire agreement and understanding between Mortgagee and
Mortgagor and supersede all prior agreements and understandings between such
parties relating to the subject matter hereof and thereof. Accordingly, the Loan
Documents may not be contradicted by evidence of prior, contemporaneous or
subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.
Section N. Reduction Of Secured Amount. In the event that the
amount secured by the Mortgage is less than the aggregate Indebtedness evidenced
by the Mortgage Notes, then the amount secured shall be reduced only by the last
and final sums that Mortgagor or Borrower repays with respect to the
Indebtedness and shall not be reduced by any intervening repayments of the
Indebtedness. So long as the balance of the Indebtedness exceeds the amount
secured, any payments of the Indebtedness shall not be deemed to be applied
against, or to reduce, the portion of the Indebtedness secured by this
Mortgagor. Such payments shall instead be deemed to reduce only such portions of
the Indebtedness as are secured by other collateral located outside of the state
in which the Mortgaged Property is located or are unsecured.
ARTICLE X.
[Intentionally Omitted]
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has on the date set forth in the
acknowledgement hereto, effective as of the date first above written, caused
this instrument to be duly EXECUTED AND DELIVERED by authority duly given.
MORTGAGOR: AMERICOMM DIRECT MARKETING, INC.,
a Delaware corporation
By:
--------------------------------
Name:
Title:
S-1
<PAGE>
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the ____ day of October in the year 1998 before me, the undersigned, a notary
public in and for said state, personally appeared _______________, personally
known to me or proved to me on the basis of satisfactory evidence (New York
Driver License No. _______________) to be the individual(s) whose name(s) is
(are) subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their capacity(ies), and that by
his/her/their signature(s) on the instrument, the individual(s), or the person
upon behalf of which the individual(s) acted, executed the instrument.
- -----------------------------------------------------------
(Signature and office of individual taking acknowledgement)
------------------------------------------
(Print Name:)
S-2
<PAGE>
EXHIBIT A
Legal Description of premises located at: [** TO BE COMPLETED **]
A-1-1
<PAGE>
EXHIBIT B
UCC INFORMATION
Debtor:
Name: AmeriComm Direct Marketing, Inc.
Corporate Structure: a Delaware corporation
Notice Address: c/o DIMAC Corporation
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
State in which Mortgagor's
Chief Executive Office is
located: [** **]
Secured Party:
Credit Suisse First Boston,
as Administrative Agent
11 Madison Avenue
New York, New York 10010-3629
Attn: Jonathan Safran
Secured Party acts as Administrative Agent for the Lenders party from time to
time to the Credit Agreement. Information regarding the security interest held
by the Lenders, for which Secured Party acts as Administrative Agent, may be
obtained by contacting Secured Party at the address set forth above.
Exh. B-1
<PAGE>
EXHIBIT XXI
[FORM OF ACKNOWLEDGEMENT AND CONSENT
TO AMENDED AND RESTATED CREDIT AGREEMENT]
This ACKNOWLEDGEMENT AND CONSENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Acknowledgement and Consent" ) is dated as of October 22, 1998
and entered into by the undersigned, and is made with reference to that certain
Amended and Restated Credit Agreement dated as of the date hereof (the "Restated
Credit Agreement" ), by and among DIMAC Corporation, a Delaware corporation
("Company" ), DIMAC Holdings, Inc., a Delaware corporation ("Holdings" ), the
financial institutions listed on the signature pages attached thereto each
individually referred to herein as a "Lender" and collectively as "Lenders" ),
Credit Suisse First Boston ("CSFB" ), as Administrative Agent, CSFB, as
Arranger, Warburg Dillon Read LLC ("WDR" ), as Syndication Agent and First Union
National Bank ("First Union" ), as Documentation Agent, which amends and
restates that certain Credit Agreement dated as of June 26, 1998, as amended on
July 29, 1998 (as so amended and as it may be heretofore have been further
amended, restated supplemented or otherwise modified prior to the date hereof,
the "Existing Credit Agreement") by and among Company, the lenders party
thereto, CSFB, as administrative agent, WDR, as syndication agent and First
Union, as documentation agent. Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Restated Credit
Agreement.
XXI-1
<PAGE>
Company is a party to the Pledge Agreement, Security Agreement and
Collateral Account Agreement, in each case as amended through the Effective
Date, pursuant to which Company has secured the Obligations of the Company by
granting to the Administrative Agent (for the benefit of the Agents and Lenders,
(i) a first priority lien on substantially all of its property and (ii) a first
priority pledge of all the capital stock of its direct Subsidiaries. Holdings is
a party to the Holdings Guaranty and Pledge Agreement, in each case as amended
through the Effective Date, pursuant to which such Holdings has granted to the
Administrative Agent, for the benefit of Agents and Lenders, (i) a first
priority lien on substantially all of its respective property and (ii) a first
priority pledge of all the capital stock of its direct Subsidiaries to secure
the obligations of Holdings under the Holdings Guaranty. Each of the Persons
indicated as Subsidiary Guarantors on the signature pages hereof (each, a
"Subsidiary Guarantor" ) is a party to the Subsidiary Guaranty, Pledge Agreement
and Security Agreement, in each case as amended through the Effective Date,
pursuant to which such Subsidiary Guarantor has granted to the Administrative
Agent, for the benefit of the Agents and Lenders, (i) a first priority lien on
substantially all of its respective property and (ii) a first priority pledge of
all the capital stock of its direct Subsidiaries to secure the obligations of
such Subsidiary Guarantor under the Subsidiary Guaranty. Certain of the
Subsidiary Guarantors are parties to the Closing Date Mortgages, pursuant to
which each such Subsidiary Guarantor has granted to Administrative Agent, for
the benefit of the Agents and Lenders a first priority lien on the Closing Date
Properties to secure the obligations of such Subsidiary Guarantor under the
Subsidiary Guaranty. Company, Holdings and the Subsidiary Guarantors are
collectively referred to herein as the "Credit Support Parties", and the
Subsidiary Guaranty, Holdings Guaranty, Pledge Agreement, Security Agreement,
Closing Date Mortgages and Collateral Account Agreement are collectively
referred to herein as the "Credit Support Documents".
Each Credit Support Party hereby acknowledges that it has reviewed
the terms and provisions of the Restated Credit Agreement and consents to the
amendment and restatement of the Existing Credit Agreement effected pursuant to
the Restated Credit Agreement. Each Credit Support Party hereby confirms that
each Credit Support Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or secure, as the case
may be, to the fullest extent possible the payment and performance of all
"Obligations", "Guarantied Obligations" and "Secured Obligations," as the case
may be (in each case as such terms are defined in the applicable Credit Support
Document), including without limitation the payment and performance of all such
"Obligations, Guarantied Obligations or Secured Obligations," as the case may
be, in respect of the Obligations of Company now or hereafter existing under or
in respect of the Restated Credit Agreement and the Notes defined therein.
Without limiting the generality of the foregoing, each Credit Support Party
hereby acknowledges and confirms the understanding and intent of such party
that, upon the Effective Date, the definition of "Obligations" contained in the
Restated Credit Agreement includes the obligations of Company under the Term A
Notes, Term B Notes, Term C Notes, Revolving Notes and Swing Line Note which
amend and restate the Notes (as such term is defined in the Existing Credit
Agreement).
Each Credit Support Party acknowledges and agrees that any of the
Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and
XXI-2
<PAGE>
that all of its obligations thereunder (which obligations on the date hereof
remain absolute and unconditional and are not subject to any defense, set-off or
counterclaim) shall be valid and enforceable and shall not be impaired or
limited by the execution or effectiveness of this Acknowledgment and Consent.
Each Credit Support Party represents and warrants that all representations and
warranties contained in the Restated Credit Agreement and the Credit Support
Documents to which it is a party or otherwise bound are true and correct in all
material respects on and as of the Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true
and correct in all material respects on and as of such earlier date.
Each Subsidiary Guarantor acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Acknowledgment
and Consent, such Credit Support Party is not required by the terms of the
Existing Credit Agreement or any other Loan Document (as such term is defined in
the Existing Credit Agreement) to consent to the amendments to the Existing
Credit Agreement effected pursuant to the Restated Credit Agreement and (ii)
nothing in the Restated Credit Agreement, this Acknowledgement and Consent or
any other Loan Document shall be deemed to require the consent of such Credit
Support Party to any future amendments to the Restated Credit Agreement.
THIS ACKNOWLEDGEMENT AND CONSENT AND THE RIGHTS AND OBLIGATIONS OF
THE UNDERSIGNED SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5- 1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
XXI-3
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Acknowledgement and Consent to be duly executed and delivered by their
respective officers thereunto duly authorized as of the date first written
above.
COMPANY: DIMAC CORPORATION
By:
---------------------------------
Name:
Title:
HOLDINGS: DIMAC HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
Notice Address for Company and Holdings:
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
Attn: Chief Financial Officer
and a copy to:
White & Case
1155 Avenue of the Americas
New York, NY 10036
Attn: Frank L. Schiff, Esq.
XXI-4
<PAGE>
SUBSIDIARY
GUARANTORS: DIMAC MARKETING CORP.
PALM COAST DATA INC.
THE MCCLURE GROUP INC.
WILCOX & ASSOCIATES INC.
MBS/MULTIMODE INC.
DIMAC DIRECT INC.
BY:
----------------------------
Name:
Title:
Notice Address for all Subsidiary
Guarantors:
c/o AmeriComm Holdings, Inc.
5775 Peachtree Dunwoody Road
Suite C150
Atlanta, Georgia 30342
Attn: Chief Financial Officer
XXI-5
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Exhibit 10.4
DIMAC HOLDINGS, INC
and
DIMAC CORPORATION
15 1/2% Senior Notes due October 22, 2009,
Common Stock
and
Warrants to Purchase Shares of Common Stock
of
DIMAC Holdings, Inc.
SECURITIES PURCHASE AGREEMENT
Dated as of October 22, 1998
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<TABLE>
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TABLE OF CONTENTS
Page
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<S> <C>
SECTION 1. PURCHASE AND SALE OF SECURITIES 1
1.1 Issue of Securities 1
1.2 Purchase and Sale of Securities 3
1.3 Registration of Securities 5
1.4 Delivery Expenses 5
1.5 Issue Taxes 5
1.6 Direct Payment 6
1.7 Lost, Etc. Securities 6
1.8 Indemnification 6
1.9 Further Actions 8
1.10 Stay, Extension and Usury Laws 9
1.11 ERISA Notices 9
1.12 Inconsistent Agreements 10
1.13 Inspection of Properties and Records 10
1.14 Board of Directors Observation Rights 10
1.15 Private Placement Number 11
1.16 Rating of the Notes 11
1.17 Financial Statements and Reports 11
1.18 Pre-Emptive Rights 14
1.19 Other Covenants 16
SECTION 2. CLOSING CONDITIONS 17
2.1 Delivery of Documents 17
2.2 Legal Investment; Purchase Permitted by Applicable Laws 19
2.3 Payment of Fees 19
2.4 Compliance with Agreements 20
2.5 Completion of Other Transactions 20
2.6 Truth of Representations and Warranties 21
2.7 Proceedings Satisfactory 21
2.8 Consents and Permits 21
2.9 No Material Adverse Effect 21
2.10 No Material Judgment or Order 21
SECTION 3. REPRESENTATIONS AND WARRANTIES OF DIMAC OPERATING AND DIMAC
HOLDINGS 21
3.1 Authorization; Capitalization 22
3.2 No Violation or Conflict; No Default 23
3.3 Use of Proceeds 23
3.4 No Material Adverse Change; Financial Statements 23
3.5 Full Disclosure 24
3.6 Third Party Consents 25
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
3.7 No Violation of Regulations of Board of Governors of Federal Reserve System 25
3.8 Private Offering 25
3.9 Governmental Regulations 26
3.10 Brokers 26
3.11 Solvency 26
3.12 Representations and Warranties 26
3.13 Litigation 27
3.14 Labor Relations 27
3.15 Taxes 27
3.16 Environmental Matters 28
3.17 ERISA 29
3.18 Intellectual Property 30
3.19 Compliance with Laws 30
3.20 Survival of Representations and Warranties 30
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER 30
4.1 Purchase for Own Account 30
4.2 Accredited Investor 31
4.3 Authorization 31
4.4 Securities Restricted 31
4.5 ERISA 32
SECTION 5. DEFINITIONS 32
5.1 Definitions 32
5.2 Rules of Construction 38
SECTION 6. MISCELLANEOUS 38
6.1 Amendments and Waivers 38
6.2 Notices 38
6.3 Successors and Assigns 39
6.4 Counterparts 39
6.5 Headings 39
6.6 Governing Law; Submission to Jurisdiction 39
6.7 Entire Agreement 39
6.8 Severability 40
6.9 Further Assurances 40
6.10 Disclosure of Financial Information 40
</TABLE>
Annexes:
- --------
Annex A Warrant Agreement
Annex B Indenture
Annex C Notes Registration Rights Agreement
ii
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Page
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Annex D Stockholders' Agreement (including supplemental letter)
Annex E Opinion of Counsel to DIMAC Holdings and DIMAC Operating
Schedules:
- ----------
1.1
1.2
3.1(a)
3.1(b)
3.17
iii
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SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement dated as of October 22, 1998 (this
"Agreement") is entered into by and among DIMAC Holdings, Inc., a Delaware
corporation ("DIMAC Holdings"), DIMAC Corporation, a Delaware corporation
("DIMAC Operating"), and the purchasers listed on the signature pages hereto
(each a "Purchaser" and collectively, the "Purchasers").
Capitalized terms not otherwise defined herein shall have the meanings
ascribed to such terms in Section .
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, DIMAC Operating and DIMAC
Holdings agree, jointly and severally, and each of the Purchasers agrees,
severally but not jointly, as follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1. Issue of Securities
(a) On or before the Closing, DIMAC Holdings will have authorized the
original issue and sale to the Purchasers, in the respective amounts set
forth on Schedule 1.1 hereto, of (i) $30,000,000 aggregate principal amount
of its 15 1/2% Senior Notes due October 22, 2009, Series A (the "Series A
Notes"), (ii) 20,000 shares (the "Shares") of its Common Stock, par value
$.001 per share ("Common Stock"), and (iii) warrants (the "Warrants") to
purchase an aggregate of 28,205 shares of Common Stock, pursuant to a
Warrant Agreement in the form attached hereto as Annex A (the "Warrant
Agreement").
The Series A Notes will be issued pursuant to an indenture in the form
attached hereto as Annex B (the "Indenture"), to be dated as of October 22,
1998, between DIMAC Holdings and Wilmington Trust Company, a Delaware
banking corporation, as trustee (the "Trustee"). Each Holder of Series A
Notes will have certain registration rights as set forth in the
Registration Rights Agreement in the form attached hereto as Annex C (the
"Notes Registration Rights Agreement"). Pursuant to the Notes Registration
Rights Agreement, the DIMAC Holdings will agree, among other things, to
file with the SEC (i) a registration statement under the Securities Act
(the "Exchange Offer Registration Statement") relating to, among other
things, the 15 1/2% Senior Notes due October 22, 2009, Series B, of DIMAC
Holdings (the "Series B Notes" and, together with the Series A Notes, the
"Notes"), identical in all material respects to the Series A Notes (except
that the Series B Notes shall have been registered pursuant to such
registration statement and shall not be subject to any registration rights
of the holders thereof) to be offered in exchange for the Series A Notes
(such offer to exchange being referred to as the "Registered Exchange
Offer") and/or (ii) under certain circumstances, a shelf registration
statement pursuant to Rule 415 under the Act (the "Shelf Registration
Statement") relating to the resale by certain holders of the Series A
Notes.
In addition, on or before the Closing, DIMAC Holdings shall authorize
the issue and delivery of PIK Notes pursuant to Section 1 of the Notes. The
aggregate principal amount of the Notes outstanding at any time may not
exceed $30,000,000 plus the aggregate
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principal amount of PIK Notes issued pursuant to Section 1 of the Notes.
The Notes, the Shares and the Warrants shall each individually be referred
to herein as a "Security" and collectively referred to herein as the
"Securities."
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act,
the Series A Notes shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
THAT IS TWO YEARS (OR SUCH SHORTER PERIOD THAT MAY HEREAFTER BE
PROVIDED UNDER RULE 144(k) AS PERMITTING RESALES BY NON-AFFILIATES OF
RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH DIMAC HOLDINGS,
INC. (THE "ISSUER") OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) EXCEPT (A) TO THE
ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER
THE SECURITIES ACT THAT IS PURCHASING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE
ISSUER'S AND THE
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TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO
CLAUSE (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRUSTEE.
Upon original issuance thereof and until such time as is no longer
required under the applicable requirements of the Internal Revenue Code of
1986, as amended, the Notes shall bear the following legend:
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR
PURPOSES OF SECTIONS 1271 ET. SEQ. OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED. THE ISSUE DATE OF THIS NOTE IS OCTOBER 22, 1998. FOR
INFORMATION REGARDING THE ISSUE PRICE, AMOUNT OF OID PER $1,000 OF
PRINCIPAL AMOUNT AND YIELD TO MATURITY FOR PURPOSES OF THE OID RULES,
PLEASE CONTACT THE CHIEF FINANCIAL OFFICER OF THE ISSUER AT 5775
PEACHTREE DUNWOODY ROAD, SUITE C-150, ATLANTA, GA, TELECOPY NO. (404)
705-9929.
2
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(b) Each Warrant shall be substantially in the form attached as Exhibit A
to the Warrant Agreement. Each Warrant shall be dated the date of its
issuance. The Warrants will be exercisable, in the manner provided in the
Warrant Agreement and the Warrants, for a number of shares of Common Stock
as provided in the Warrant Agreement (the "Warrant Shares"). Each Holder of
Shares or Warrant Shares will have certain registration rights and other
rights and obligations with respect to the Shares and the Warrant Shares,
as provided in the Stockholders' Agreement (and the related supplemental
letter from DIMAC Holdings, McCown De Leeuw & Co. IV, L.P. and McCown De
Leeuw & Co. IV Associates, L.P.) in the form attached hereto as Annex D
(such Stockholders' Agreement, as supplemented and modified by such letter,
being referenced herein as the "Stockholders' Agreement"). The terms and
provisions contained in the Notes, the Notes Registration Rights Agreement,
the Stockholders' Agreement, the Warrants and the Warrant Agreement shall
constitute, and are hereby expressly made, a part of this Agreement and, to
the extent applicable, the parties hereto, by their execution and delivery
of this Agreement, expressly agree to such terms and provisions and to be
bound thereby.
1.2 Purchase and Sale of Securities
(a) Purchase and Sale. DIMAC Holdings agrees to sell and, subject to the
terms and conditions set forth herein and in reliance on the
representations and warranties of the Companies contained or incorporated
herein, each of the Purchasers agrees, severally but not jointly, to
purchase the Securities set forth below such Purchaser's name on Schedule
1.1 hereto at the purchase price indicated therein. Based on their
determination of the relative fair market values of the Notes, the Shares
and the Warrants, DIMAC Holdings and the Purchasers hereby agree to treat,
for Federal income and all other tax purposes, (i) the Notes as having an
aggregate issue price equal to $29,000,000 (taking into account any amounts
payable by DIMAC Holdings to the Purchasers at closing as an adjustment to
the issue price under applicable Treasury regulations) and (ii) the Shares
as having an aggregate issue price equal to $2,000,000, (iii) the Warrants
as having an aggregate issue price equal to $1,000,000. Unless otherwise
required by applicable law, DIMAC Holdings and the Purchasers shall not
take any position contrary to such treatment for any Federal income or
other tax purposes.
(b) Closing. The purchase and sale of the Securities shall take place at a
closing (the "Closing") at the offices of White & Case LLP, 1155 Avenue of
the Americas, New York, New York 10036, at 10:00 a.m. on October 22, 1998,
or such other business day as may be agreed upon by the Purchasers, DIMAC
Operating and DIMAC Holdings (the "Closing Date"). At the Closing, DIMAC
Holdings will deliver to each of the Purchasers the Securities to be
purchased by such Purchaser (in such denomination or denominations and
registered in such Purchaser's name or the name of such nominee or nominees
as such Purchaser may request), dated the Closing Date, against payment of
the purchase price therefor by intra-bank or Federal funds bank wire
transfer of same day funds to such bank account which is
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identified on Schedule hereto or such other account as DIMAC Holdings shall
designate at least two Business Days prior to the Closing.
(c) Fees and Expenses. Regardless of whether the Securities are sold, Each
of DIMAC Holdings and DIMAC Operating agrees, jointly and severally, to pay
or reimburse all reasonable expenses relating to this Agreement, including
but not limited to:
(i) each Purchaser's reasonable expenses incurred in connection with
the transactions contemplated by this Agreement, the Indenture, the
Notes, the Notes Registration Rights Agreement, the Warrant Agreement,
the Warrants, the Stockholders' Agreement and the other Documents
including, without limitation, travel and lodging expenses and all
costs incurred in connection with such Purchaser's review of each of
the Companies' business and operations;
(ii) the fees and other charges and expenses of the Purchasers'
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, in connection
herewith and with the other Documents;
(iii) the cost of printing, reproducing and delivering to each
Purchaser's home office or the office of such Purchaser's designee,
insured to such Purchaser's satisfaction, this Agreement, the
Indenture, the Notes, the Notes Registration Rights Agreement, the
Warrant Agreement, the Warrants, the Stockholders' Agreement and the
other Documents;
(iv) the reasonable fees and expenses (including the reasonable fees
and expenses of counsel) in connection with any registration or
qualification of the Securities required in connection with the offer
and sale of the Securities pursuant to this Agreement under the
securities or "blue sky" laws of any jurisdiction requiring such
registration or qualification or in connection with obtaining any
exemptions from such requirements;
(v) all expenses and listing fees in connection with the application
for quotation of the Notes, the Shares and the Warrant Shares in the
Private Offering, Resales, and Trading through Automated Linkages
market of the National Association of Securities Dealers, Inc.;
(vi) all fees and expenses (including fees and expenses of counsel) in
connection with the approval of the Notes, the Shares and the Warrant
Shares by DTC for "book-entry" transfer;
(vii) each Purchaser's expenses (including the reasonable fees and
expenses of counsel) relating to any amendment to, or modification of,
or any waiver or consent or preservation of rights under, this
Agreement or any of the other Documents;
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(viii) all fees charged by rating agencies in connection with the
rating of the Notes;
(ix) all costs, expenses, fees and taxes incident to and in connection
with the issuance and delivery of the Notes, including the reasonable
fees and expenses of the Trustee;
(x) all other expenses, including without limitation reasonable
counsel's fees, accountants' fees incurred by the Companies in
connection with the transactions contemplated by this Agreement and
the other Documents.
DIMAC Operating and DIMAC Holdings, jointly and severally, shall
deliver to each of the Purchasers or to such other persons as such
Purchaser shall direct, concurrently with the Closing, by intra-bank or
Federal funds bank wire transfer of same day funds, payment for any
documented out-of-pocket expenses for which such Purchaser is entitled to
reimbursement pursuant to this Section (c), including, without limitation,
the documented fees and expenses of such Purchaser's counsel.
(d) Other Purchasers. Each Purchaser's obligations hereunder are subject to
the execution and delivery of this Agreement by the other Purchasers listed
on the signature pages hereof. The obligations of each Purchaser shall be
several and not joint, and no Purchaser shall be liable or responsible for
the acts of any other Purchaser under this Agreement.
1.3 Registration of Securities
DIMAC Holdings shall cause to be kept at its principal office (or in the
case of the Notes, at the offices of the Registrar (as defined in the Indenture)
(a) a register for the registration and transfer of the Notes (the "Notes
Register"), (b) a register for the registration and transfer of the Common Stock
(the "Common Stock Register") and (c) a register for the registration and
transfer of the Warrants (the "Warrant Register"). The names and addresses of
the Holders of Notes, the issuance of PIK Notes, the transfer of Notes and the
names and addresses of the transferees of the Notes shall be registered in the
Notes Register. The names and addresses of the Holders of Common Stock, the
transfer of Common Stock and the names and addresses of the transferees of
Common Stock shall be registered in the Common Stock Register. The names and
addresses of the Holders of Warrants, the transfer of Warrants and the names and
addresses of the transferees of Warrants shall be registered in the Warrant
Register.
The Person in whose name any registered Security shall be registered shall
be deemed and treated as the owner and holder thereof for all purposes of this
Agreement, and DIMAC Holdings shall not be affected by any notice to the
contrary, until due presentment of such Security for registration of transfer as
provided in this Section . Payment of or on account of the principal, premium,
if any, and interest on any registered Securities shall be made to or upon the
written order of such registered holder.
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When Securities are presented to DIMAC Holdings with a request to register
the transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations, DIMAC Holdings
shall register the transfer or make the exchange as requested if its reasonable
requirements for such transaction are met.
1.4 Delivery Expenses
If a Holder surrenders any Security to DIMAC Holdings for any reason, DIMAC
Holdings agrees to pay the cost of delivering to such Holder's home office or to
the office of such Holder's designee from DIMAC Holdings, insured to such
Holder's satisfaction, the surrendered Security and each Security issued in
substitution, replacement or exchange for the surrendered Security.
1.5 Issue Taxes
DIMAC Holdings agrees to pay all documentary stamp taxes and other
governmental charges (other than taxes in the nature of income, franchise,
property, estate, inheritance, gift or similar taxes) and governmental fees in
connection with the issuance or delivery by DIMAC Holdings to each Holder of the
Securities and the execution and delivery of the other Documents and any
modification of any of such Securities and Documents and will save such Holder
harmless without limitation as to time against any and all liabilities with
respect to all such taxes and fees. The obligations of DIMAC Holdings under this
Section are in addition to any other obligations of DIMAC Holdings contained
elsewhere in this Agreement and shall survive the payment or prepayment of the
Notes, at maturity, upon redemption or otherwise, the exercise of the Warrants
and the termination of this Agreement and the other Documents.
1.6 Direct Payment
Notwithstanding any provision to the contrary in the Indenture or the
Notes, DIMAC Holdings will pay or cause to be paid all amounts payable with
respect to any Note held by any Holder that is a Purchaser (without any
presentment of such Note and without any notation of such payment being made
thereon) by crediting (before 12:00 Noon, New York time), by Federal funds bank
wire transfer in same day funds to such Holder's account in any bank in the
United States of America as may be designated and specified in writing by such
Holder at least two Business Days prior thereto. Each Purchaser's initial bank
account for this purpose is on Schedule 1.1 hereto. In the event that DIMAC
Holdings elects to make a PIK Interest Payment, then, in addition to making the
wire transfer of the cash portion of the PIK Interest Payment, DIMAC Holdings
shall deliver or cause to be delivered the portion of such PIK Interest Payment
being paid in PIK Notes to each Holder at such Holder's address as it appears in
the Notes Register or at such address as may be designated and specified in
writing by such Holder at least two Business Days prior thereto.
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1.7 Lost, Etc. Securities
If a mutilated Security is surrendered to DIMAC Holdings or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
DIMAC Holdings, to the effect that the Security has been lost, destroyed or
wrongfully taken, DIMAC Holdings shall issue a replacement Security if the
customary requirements relating to replacement securities are reasonably
satisfied. If required by DIMAC Holdings, such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the judgment of DIMAC Holdings
to protect DIMAC Holdings from any loss which it may suffer if a Security is
replaced. If any Purchaser or any other institutional Holder (or nominee
thereof) is the owner of any such lost, stolen or destroyed Security, then the
affidavit of an authorized officer of such owner, setting forth the fact of
loss, theft or destruction and of its ownership of the Security at the time of
such loss, theft or destruction shall be accepted as satisfactory evidence
thereof, and no further indemnity shall be required as a condition to the
execution and delivery of a new Security other than the unsecured written
agreement of such owner reasonably satisfactory to DIMAC Holdings, to indemnify
DIMAC Holdings or at the option of the Purchaser, an indemnity bond in the
amount of the Security remaining outstanding.
Every replacement Security is an obligation of DIMAC Holdings.
1.8 Indemnification
In addition to all other sums due hereunder or provided for in this
Agreement or any of the other Documents and any and all obligations of DIMAC
Holdings or DIMAC Operating to indemnify any Purchaser hereunder or under any of
the other Documents, DIMAC Operating and DIMAC Holdings (each, an "Indemnifying
Party") hereby agree, jointly and severally, without limitation as to time, to
indemnify each Purchaser, each Affiliate of a Purchaser and each director,
officer, employee, counsel, agent or representative of such Purchaser and its
Affiliates (collectively, the "Indemnified Parties") against, and hold it and
them harmless from, to the fullest extent lawful, all losses, claims, damages,
liabilities, costs (including, without limitation, costs of preparation and
attorneys' fees and disbursements) and expenses, including expenses of
investigation (collectively, "Losses"), incurred by it or them and arising out
of or in connection with this Agreement, the Indenture, the Notes, the Notes
Registration Rights Agreement, the Warrant Agreement, the Warrants, the
Stockholders' Agreement and the other Documents or the transactions contemplated
hereby or thereby (or any other document or instrument executed herewith or
pursuant hereto or thereto), regardless of whether the transactions contemplated
by this Agreement are consummated and regardless of whether any Indemnified
Party is a formal party to any proceeding; provided, however, that the
Indemnifying Parties shall not be liable to any Indemnified Party for any Losses
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or review) that such
Losses arose from the gross negligence or willful misconduct of such Indemnified
Party, which (i) is independent of any wrongful act by the Indemnifying Parties,
their Affiliates or any of their respective representatives and (ii) was not
taken by such Indemnified Party in reliance upon any of the representations,
warranties, covenants or promises of any Indemnifying Party herein (including,
without limitation, those incorporated by reference herein) or in the other
Documents, including (without limitation) the certificates delivered by any of
the Companies pursuant hereto or thereto. Each Indemnifying Party
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agrees, jointly and severally, to reimburse any Indemnified Party promptly for
all such Losses as they are incurred by such Indemnified Party (regardless of
whether it is or may be ultimately determined that an Indemnified Party is not
entitled to indemnification hereunder). The obligations of each Indemnifying
Party to each Indemnified Party hereunder shall be separate obligations, and the
Indemnifying Party's liability to any such Indemnified Party hereunder shall not
be extinguished solely because any other Indemnified Party is not entitled to
indemnity hereunder. The obligations of each Indemnifying Party under this
Section shall survive the payment or prepayment of the Notes, at maturity, upon
acceleration, redemption or otherwise, the exercise of the Warrants purchased by
any Purchaser, the redemption or repurchase of any Warrant Shares, any transfer
of the Securities by any Purchaser and the termination of this Agreement, the
Indenture, the Notes, the Notes Registration Rights Agreement, the Warrant
Agreement, the Warrants, the Stockholders' Agreement the Senior Credit
Agreement, the DIMAC Operating Indenture, the DIMAC Operating Notes, the DIMAC
Operating Notes Purchase Agreement and any of the other Documents.
In addition, each Indemnifying Party jointly and severally, shall,
without limitation as to time, indemnify, reimburse, defend, and hold harmless
the Indemnified Parties for, from, and against all Losses asserted against,
resulting to, imposed on, or incurred by any of the Indemnified Parties,
directly or indirectly, in connection with any of the following: (i) the events,
circumstances and conditions relating to environmental matters described in the
Offering Circular; (ii) any pollution or threat to human health or the
environment that is related in any way to the management, use, control,
ownership or operation of the business or property in connection with the
business of the Companies, by the Companies, or any Person for whom any Company
is or may be responsible by law or contract, including, without limitation, all
on-site and off-site activities involving Materials of Environmental Concern,
and that occurred, existed, arises out of conditions or circumstances that
occurred or existed, or was caused, in whole or in part, on or before the
Closing Date, regardless of whether the pollution or threat to human health or
the environment is described in the Offering Circular; (iii) any Environmental
Claim against any Person whose liability for such Environmental Claim any
Company has assumed or retained either contractually or by operation of law,
including but not limited to any pollution or threat to human health or the
environment, or any Federal, state, local or foreign approvals; or (iv) the
breach of any environmental representation or warranty set forth or incorporated
by reference herein.
In case any action, claim or proceeding shall be brought against any
Indemnified Party with respect to which indemnity may be sought against any
Indemnifying Party hereunder, such Indemnified Party shall promptly notify each
Indemnifying Party in writing and such Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
such Indemnified Party and payment of all fees and expenses incurred in
connection with the defense thereof. The failure to so notify such Indemnifying
Party shall not affect any obligation it may have to any Indemnified Party under
this Agreement or otherwise except to the extent that (as finally determined by
a court of competent jurisdiction (which determination is not subject to review
or appeal)) such failure materially and adversely prejudiced such Indemnifying
Party. Each Indemnified Party shall have the right to employ separate counsel in
such action, claim or proceeding and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of each Indemnified
Party unless: (i) such Indemnifying Party has agreed to pay such expenses; or
(ii) such Indemnifying Party has failed promptly to assume the defense and
employ counsel reasonably satisfactory to such
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Indemnified Party; or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include any Indemnified Party and
such Indemnifying Party or an Affiliate of such Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that either (x) there may
be one or more legal defenses available to it which are different from or in
addition to those available to such Indemnifying Party or such Affiliate or (y)
a conflict of interest may exist if such counsel represents such Indemnified
Party and such Indemnifying Party or its Affiliate; provided that, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel in the circumstances described in clause (ii) or (iii)
above, such Indemnifying Party shall not have the right to assume the defense
thereof and such counsel shall be at the expense of the Indemnifying Parties;
provided, however, that such Indemnifying Party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be responsible hereunder for the fees and
expenses of more than one such firm of separate counsel (in addition to any
local counsel), which counsel shall be designated by such Indemnified Party. No
Indemnifying Party shall be liable for any settlement of any such action
effected without its written consent (which shall not be unreasonably withheld).
Each Indemnifying Party agrees, jointly and severally, that it will not, without
the Indemnified Party's prior written consent, consent to entry of any judgment
or settle or compromise any pending or threatened claim, action or proceeding in
respect of which indemnification or contribution may be sought hereunder unless
the foregoing contains an unconditional release, in form and substance
reasonably satisfactory to the Indemnified Parties, of the Indemnified Parties
from all liability and obligation arising therefrom.
If the indemnification provided for in this Section is unavailable
to, or insufficient to hold harmless, any Indemnified Party in respect of any
Losses referred to therein, then each Indemnifying Party shall have an
obligation to contribute to the amount paid or payable by such Persons as a
result of such Losses in such proportion as is appropriate to reflect the
relative fault of each Indemnifying Party, its subsidiaries and Affiliates, on
the one hand, and such Indemnified Party, on the other hand, in connection with
the actions which resulted in such Losses as well as any other relevant
equitable considerations. The amount paid or payable by any such Person as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in this Section , any legal or other fees or expenses
reasonably incurred by such Person in connection with any investigation, lawsuit
or legal or administrative action or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section were determined by pro rata allocation or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who is not
guilty of such fraudulent misrepresentation.
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1.9 Further Actions
During the period from the date hereof to the Closing Date, DIMAC
Operating and DIMAC Holdings each shall (i) take all actions necessary or
appropriate to cause its representations and warranties contained in Section to
be true and correct as of the Closing Date (unless stated to refer to another
date), both before and after giving effect to the transactions contemplated by
this Agreement and the other Documents, as if made on and as of such date, and
(ii) take, or cause to be taken, all action, and do, or cause to be done, all
things necessary, proper or advisable under applicable law and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, obtaining all consents and approvals of all
Persons and removing all injunctive or other impediments or delays, legal or
otherwise, which are necessary to the consummation of the transactions
contemplated by this Agreement and the other Documents.
1.10 Stay, Extension and Usury Laws
DIMAC Holdings covenants and agrees (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, and will use its best efforts to
resist any attempts to claim or take the benefit of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of its obligations under this Agreement
or the Notes; and DIMAC Holdings (to the extent it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Holders, but will suffer and permit the
execution of every such power as though no such law has been enacted.
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1.11 ERISA Notices
Promptly, but in any event within thirty (30) days thereafter, DIMAC
Holdings shall deliver to the Purchasers (or, if no Purchaser continues to be a
Holder, such Person as the Majority Holders shall designate), if and when DIMAC
Holdings or when to the knowledge of DIMAC Holdings, any of its Subsidiaries (i)
gives or is required to give notice to the Pension Benefit Guaranty Corporation
(the "PBGC") of any "reportable event" (as defined in Section 4043 of ERISA)
with respect to any employee pension benefit plan maintained by DIMAC Holdings
or any of its Subsidiaries or any entity which is a member of the same
controlled group as DIMAC Holdings, which "reportable event" would constitute
grounds for a termination of such plan under Title IV of ERISA or the imposition
of a tax under Section 4971 of the Code, or knows that the plan administrator of
any such plan has given or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given or required to be
given to the PBGC, (ii) receives notice of complete or partial withdrawal
liability under Title IV of ERISA or notice that any multiemployer plan to which
DIMAC Holdings or any of its Subsidiaries or any entity which is a member of the
same controlled group as DIMAC Holdings contributes or is obligated to
contribute is in reorganization or has been terminated, a copy of such notice,
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate or appoint a trustee to administer any employee pension benefit plan
maintained by DIMAC Holdings or any of its Subsidiaries or any entity which is a
member of the same controlled group as DIMAC Holdings, a copy of such notice,
(iv) applies for a waiver of the minimum funding standard under Section 412 of
the Code, a copy of such application, (v) gives notice of intent to terminate
any employee pension benefit plan, subject to Title IV of ERISA, maintained by
DIMAC Holdings or any of its Subsidiaries or any entity which is a member of the
same controlled group as DIMAC Holdings under Title IV of ERISA, a copy of such
notice, (vi) fails to make any payment or contribution to any employee pension
benefit plan (or multiemployer plan or in respect of any benefit arrangement) or
makes any amendment to any employee pension benefit plan or benefit arrangement
which would result in the imposition of a lien or the posting of a bond or other
security, a certificate of the Chief Executive Officer of DIMAC Holdings setting
forth details as to such occurrence and action, if any, which DIMAC Holdings or
any of its Subsidiaries is required or proposes to take, (vii) adopts,
establishes, maintains or enters into any obligation to make contributions that
are material with respect to DIMAC Holdings or any of its Subsidiaries to any
new employee benefit plan or multiemployer plan, a certificate of the Chief
Executive Officer of DIMAC Holdings setting forth details as to such obligation,
(viii) modifies in any material respect any existing employee benefit plan
maintained by DIMAC Holdings or any of its Subsidiaries or any entity which is a
member of the same controlled group as DIMAC Holdings (other than any
modification to medical, dental or other employee welfare benefit plans in the
ordinary course of business) so as to materially increase its obligations
thereunder, a certificate of the Chief Executive Officer of DIMAC Holdings
setting forth details as to such modification or (ix) materially increases a
contribution obligation to any multiemployer plan contributed to or required to
be contributed to by DIMAC Holdings or any of its Subsidiaries or any entity
which is a member of the same controlled group as DIMAC Holdings, a certificate
of the Chief Executive Officer of DIMAC Holdings setting forth details as to
such increase.
As used in this Section , the terms "employee pension benefit plan,"
"employee welfare benefit plan," "multiemployer plan" and "employee benefit
plan" shall have the meanings assigned to such
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terms in Section 3 of ERISA and the term "controlled group" shall have the
meaning assigned to such term in Section 414(b) and (c) of the Code.
1.12 Inconsistent Agreements
So long as the Purchasers and their Affiliates shall collectively hold at
least $20,000,000 aggregate principal amount of the Notes, except to the extent
permitted or not otherwise prohibited by the terms of the Indenture, DIMAC
Holdings and DIMAC Operating shall not, and each shall cause each of its
Subsidiaries to not, (i) enter into any agreement or arrangement that is
inconsistent with, or would impair the ability of DIMAC Holdings or any of its
Subsidiaries to fulfill the obligations of DIMAC Holdings or any of its
Subsidiaries under, this Agreement or any of the other Documents, or (ii)
supplement, amend or otherwise modify the terms of any agreement or arrangement
or of their respective Charter Documents, if the effect thereof would be
materially adverse to the Holders. Notwithstanding the foregoing, DIMAC Holdings
and DIMAC Operating shall not be precluded from entering into any amendment,
modification or supplement to or of the Senior Credit Agreement.
1.13 Inspection of Properties and Records
So long as any of the Purchasers or any of their Affiliates shall hold any
of the Notes, DIMAC Holdings shall allow, and each shall cause each of its
Subsidiaries to allow, each Purchaser and each Holder of at least $20,000,000
aggregate principal amount of Notes (or such Persons as any of them may
designate) (individually and collectively, "Inspectors"), subject to appropriate
agreements as to confidentiality, (i) to visit and inspect any of the properties
of DIMAC Holdings or any of its Subsidiaries, (ii) to examine all their books of
account, records, reports and other papers and to make copies and extracts
therefrom, (iii) to discuss their respective affairs, finances and accounts with
their respective officers and employees, and (iv) to discuss the financial
condition of DIMAC Holdings and its Subsidiaries with their independent
accountants upon reasonable notice to DIMAC Holdings of its intention to do so
and so long as DIMAC Holdings shall be given the reasonable opportunity to
participate in such discussions (and by this provision DIMAC Holdings authorizes
said accountants to have such discussions with the Inspectors). All such visits,
examinations and discussions set forth in the preceding sentence shall be upon
prior notice at such reasonable times and as often as may be reasonably
requested. If a Default or an Event of Default shall have occurred and be
continuing, DIMAC Holdings shall pay or reimburse all Inspectors for expenses
which such Inspectors may reasonably incur in connection with any such
visitations or inspections.
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1.14 Board of Directors Observation Rights
So long as any of the Purchasers or any of their Affiliates shall hold any
of the Notes, the Purchasers shall have the right to designate one
representative for all such Purchasers to be present (whether in person or by
telephone) at all meetings of the Boards of Directors (and committees thereof)
of DIMAC Holdings and DIMAC Operating; provided that such representative shall
not be entitled to vote at such meetings. DIMAC Holdings and DIMAC Operating
shall send to each such representative all of the notices, information and other
materials that are distributed to the members of the Boards of Directors of
DIMAC Holdings and DIMAC Operating, respectively, and shall provide each of the
Purchasers and each Holder of at least $20,000,000 aggregate principal amount of
Notes with a notice and agenda of each meeting of the Board of Directors (and
committees thereof) of DIMAC Holdings or DIMAC Operating, respectively, at the
same time as delivered to the members of such Board of Directors; provided,
however, that upon the request of any such representative, DIMAC Holdings or
DIMAC Operating, as the case may be, shall refrain from sending such notices,
information and other materials for so long as such representative shall
request. DIMAC Holdings or DIMAC Operating shall pay or reimburse not more than
one of such representatives for expenses which such representative may
reasonably incur in connection with any such attendance of meetings of the
Boards of Directors of DIMAC Holdings and DIMAC Operating. The Purchasers shall
provide notice to DIMAC Holdings and DIMAC Operating of the identity and address
of, or any change with respect to the identity or address of, their
representative. DIMAC Holdings and DIMAC Operating hereby acknowledge and agree
on behalf of themselves and on behalf of each of their Subsidiaries, that at any
time, the Purchasers may purchase or sell securities issued by DIMAC Holdings,
DIMAC Operating or any of their Subsidiaries, notwithstanding the receipt by the
Purchasers of any confidential or non-public information regarding DIMAC
Holdings, DIMAC Operating, or any of their Subsidiaries.
1.15 Private Placement Number
DIMAC Holdings consents to the filing of copies of this Agreement with
Standard & Poor's Corporation to obtain a private placement number and with the
National Association of Insurance Commissioners.
1.16 Rating of the Notes
DIMAC Holdings shall, upon the request of any Purchaser and in order
to obtain a rating of the Notes, deliver to a securities rating agency
designated by such Purchaser, copies of this Agreement, the other Documents and
any other materials reasonably requested by such Purchaser.
1.17 Financial Statements and Reports
(a) DIMAC Holdings will maintain, and will cause each of its Subsidiaries
to maintain, a system of accounting established and administered in
accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. As long as any Purchaser is a Holder of
any of the Securities, DIMAC Holdings will deliver to such Purchaser the
financial statements and other reports described below:
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(i) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month ending after the
Closing Date, DIMAC Holdings will deliver the consolidated balance
sheets of DIMAC Holdings and its Subsidiaries as at the end of such
month and the related consolidated statements of income and
stockholders' equity and cash flows for such month and in each case
for the period from the beginning of the then current fiscal year
to the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding periods of the
previous fiscal year and the corresponding figures from the
consolidated plan and financial forecast for the current fiscal
year delivered pursuant to subsections (a)(v), (a)(viii) and (b) of
this Section , to the extent prepared on a monthly basis, all in
reasonable detail and certified by the chief financial officer of
DIMAC Holdings that they fairly present in all material respects
the financial condition of DIMAC Holdings and its Subsidiaries as
at the dates indicated and the results of their operations and
their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments; provided,
however, that the financial data provided pursuant to this clause
(i) shall include, without limitation, cost savings amounts for
such month and for the period from the beginning of the then
current fiscal year to the end of such month and on an annualized
basis and the corresponding projected cost savings figures from the
consolidated plan and financial forecast for the current fiscal
year delivered pursuant to subsections (a)(v), (a)(viii) and (b) of
this Section;
(ii) Quarterly Financials. As soon as available and in any event
within forty-five (45) days after the end of each fiscal quarter
(other than the last quarter of any fiscal year), the DIMAC Holdings
shall deliver: (A) the consolidated balance sheet of DIMAC Holdings
and its Subsidiaries as at the end of such fiscal quarter and the
related consolidated statements of income, stockholders' equity and
cash flows of DIMAC Holdings and its Subsidiaries for such fiscal
quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated
plan and financial forecast delivered pursuant to subsections
(a)(v), (a)(viii) and (b) of this Section for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of DIMAC Holdings that
they fairly present in all material respects the financial
condition of DIMAC Holdings and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows
for the periods indicated, (B) a narrative report describing the
operations of DIMAC Holdings and its Subsidiaries in the form
prepared for presentation to senior management for such fiscal
quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, including a
comparison to and discussion of any variances from the
corresponding periods of the previous fiscal year and from the
financial forecast for such fiscal period contained in the forecast
delivered pursuant to subsections (a)(v), (a)(viii) and (b) of this
Section and (C) a schedule of the outstanding Indebtedness for
borrowed money of DIMAC Holdings and its Subsidiaries describing in
reasonable detail each such debt issue or loan outstanding and the
principal amount (excluding original issue discount) and amount of
accrued and unpaid interest with
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respect to each such debt issue or loan;
(iii) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each fiscal year, DIMAC
Holdings will deliver: (A) the consolidated balance sheet of DIMAC
Holdings and its Subsidiaries as at the end of such year and the
related consolidated statements of income, stockholders' equity and
cash flows of DIMAC Holdings and its Subsidiaries for such fiscal
year, setting forth in each case in comparative form the corresponding
figures for the previous fiscal year and the corresponding figures
from the consolidated plan and financial forecast delivered
pursuant to subsection (a)(v) and (b) of this Section for the
fiscal year covered by such financial statements, all in reasonable
detail and certified by the chief financial officer of DIMAC
Holdings that they fairly present in all material respects the
financial condition of DIMAC Holdings and its Subsidiaries as at
the dates indicated and the results of their operations and their
cash flows for the periods indicated, (B) a narrative report
describing the operations of DIMAC Holdings and its Subsidiaries in
the form prepared for presentation to senior management for such
fiscal year, and (C) in the case of such consolidated financial
statements, a report thereon of independent certified public
accountants of recognized national standing selected by DIMAC
Holdings, which report shall be unqualified, shall express no
doubts about the ability of DIMAC Holdings and its Subsidiaries to
continue as a going concern, and shall state that such consolidated
financial statements fairly present in all material respects the
consolidated financial position of DIMAC Holdings and its
Subsidiaries as of the dates indicated and the results of their
operations, stockholders' equity and their cash flows for the
periods indicated in conformity with GAAP applied on a basis
consistent with prior years (except as otherwise disclosed in such
financial statements) and that the examination by such accountants
in connection with such consolidated financial statements has been
made in accordance with United States generally accepted auditing
standards;
(iv) Promptly upon receipt thereof, copies of all reports
submitted to the management of DIMAC Holdings or DIMAC Operating by
independent public accountants, whether in connection with each
annual, interim or special audit of the consolidated financial
statements of DIMAC Holdings made by such accountants or otherwise,
including the management letter submitted by such accountants to
management in connection with their annual audit;
(v) Copies of any financial or other report or notice
delivered to, or received from, (a) any lenders pursuant to
Section 6.1 of the Senior Credit Agreement and (b) the trustee
pursuant to Section 4.02 of the DIMAC Operating Indenture (or
any similar provision contained in any successor agreements) not
otherwise delivered to the Holders pursuant to this Section;
provided, however, that regardless of whether DIMAC Holdings or
DIMAC Operating is required to deliver any financial plan pursuant
to the Senior Credit Agreement or the DIMAC Operating Indenture,
DIMAC Holdings shall deliver to each Holder an annual financial plan
of DIMAC Holdings and its Subsidiaries (including monthly financial
planning data and projected monthly cost
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savings amounts attributable to planned cost savings measures)
on or prior to December 15 of the year preceding the year to which
such plan relates;
(vi) Copies of all material reports, letters and other
correspondence from local, state or Federal regulatory or other
agencies relating to business, licenses or operating contracts of
DIMAC Holdings or any of its Subsidiaries;
(vii) Notice to each Holder of (i) any violation of or
noncompliance with any Environmental Laws that could reasonably be
expected to have a Material Adverse Effect, (ii) any communication
(written or oral) or Environmental Claim, whether from a governmental
authority, citizens group, employee or otherwise, alleging that any
of the Companies is not in compliance with any Environmental law or
asserting liability of any of the Companies for contamination from
or as a result (directly or indirectly) of any Materials of
Environmental Concern, which noncompliance or liability could
reasonably be expected to have a Material Adverse Effect, or (iii)
any releases or threatened releases (including, without limitation,
any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or
dumping, on-site or off-site) of any Materials of Environmental
Concern for which any of the Companies could be held liable, either
in fact or by law, which releases could reasonably be expected to
have a Material Adverse Effect; and
(viii) Copies of such other information and data with respect
to DIMAC Holdings or any of its Subsidiaries as from time to time may
be reasonably requested by any Holder.
(b) Each financial statement delivered pursuant to subsections
(a)(i), (a)(ii) and (a)(iii) of this Section shall be in a form reasonably
acceptable to each Purchaser and, in the case of financial statements
delivered pursuant to subsections (a)(ii) and (a)(iii) of this Section ,
shall be accompanied by a brief narrative description of business and
financial trends and developments material to DIMAC Holdings and its
Subsidiaries and significant transactions that have occurred in the
appropriate period or periods covered thereby.
1.18 Pre-Emptive Rights
(a) Right to Purchase New Equity Securities. DIMAC Holdings hereby
grants to each TCW Entity the right to purchase, its Pro Rata Share of
all New Equity Securities that DIMAC Holdings may, from time to time,
propose to sell and issue after the date hereof at the price and on the
terms on which DIMAC Holdings proposes to sell such New Equity Securities.
The right to purchase New Equity Securities shall be subject to the
following additional provisions of this Section.
(b) Required Notices. In the event DIMAC Holdings proposes to
undertake an issuance of New Equity Securities, it shall give each TCW
Entity written notice, in accordance with the provisions of Section,
of its intention, describing the type of New Equity Securities, the price,
the number of shares and the general terms upon which DIMAC Holdings
proposes to issue the
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same. Each TCW Entity shall have fifteen (15) days from the date of receipt
of any such notice to agree to purchase any or all of such TCW Entity's Pro
Rata Share of such New Equity Securities for the price and upon the general
terms specified in the notice by giving written notice to DIMAC Holdings
and stating therein the quantity of New Equity Securities to be purchased.
(c) DIMAC Holding's Right to Sell. In the event the TCW Entities fail
to exercise the right of first refusal as to all New Equity Securities
offered within said fifteen (15) day period, DIMAC Holdings shall have
ninety (90) days thereafter to sell or enter into an agreement (pursuant
to which the sale of New Equity Securities covered thereby shall be closed,
if at all, within twenty (20) days from the date of said agreement) to sell
all such New Equity Securities respecting which the right to purchase
provided in Section (a) was not exercised, at a price and upon terms no
more favorable to the purchasers thereof than specified in DIMAC
Holdings's notice. In the event DIMAC Holdings has not sold within said
ninety (90) day period or entered into an agreement to sell all such New
Equity Securities within said ninety (90) day period (or sold and issued
all such New Equity Securities in accordance with the foregoing within
twenty (20) days from the date of said agreement), DIMAC Holdings shall
not thereafter issue or sell any New Equity Securities, without first
offering such securities to the TCW Entities in the manner provided above.
(d) Expiration of Right. The rights provided under this Section shall
not apply to a Public Offering Event and shall expire on the effective date
of a registration statement filed with the SEC in connection with a Public
Offering Event (provided, that such right shall be reinstated if such
Public Offering Event is not consummated pursuant to such registration
statement).
(e) Certain Adjustments. In the event of any increase or decrease in
the number of outstanding shares of Common Stock of DIMAC Holdings
resulting from any recapitalization, payment of a Common Stock dividend,
stock split, combination of shares, or any other increase or decrease in
the number of such outstanding shares effected without DIMAC Holdings's
receipt of consideration therefor, any maximum, minimum, or threshold
number of shares of Common Stock referred to herein shall be
proportionately adjusted to reflect such increase or decrease and any
additional securities issued with respect to the Common Stock of DIMAC
Holdings shall become subject to the terms and conditions of this
Agreement. The provisions of this Agreement shall apply to the full extent
set forth herein with respect to any and all shares of capital stock of
DIMAC Holdings or any successor or assign of DIMAC Holdings (whether by
merger, consolidation, sale of assets or otherwise) which may be issued in
respect of, in exchange for, or in substitution for the Shares, the Warrant
Shares or other shares of Common Stock of DIMAC Holdings, by combination,
recapitalization, reclassification, merger, consolidation or otherwise.
In the event of any change in the capitalization of DIMAC Holdings, as a
result of any stock split, stock dividend or stock combination or
otherwise, the provisions of this Section shall be appropriately
adjusted.w
(f) Definitions. As used in this Section , the following terms shall
have the meanings set forth below:
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(i) "Common Stock" shall include all such other securities and shall
include all shares of Common Stock or other securities issuable upon
exercise of the Warrants.
(ii) "New Equity Securities" shall mean any capital stock (including
common stock or preferred stock) of DIMAC Holdings whether now
authorized or not, and rights, options or warrants to purchase capital
stock, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for capital stock;
provided, however, that the term New Equity Securities shall not
include (i) securities issued in connection with the acquisition of
another Person by DIMAC Holdings by merger, purchase of substantially
all of the assets or other reorganization whereby DIMAC Holdings
acquires more than fifty percent (50%) of the voting power or assets
of such Person; (ii) Common Stock (including options to purchase
Common Stock and shares of Common Stock issued upon exercise thereof)
issued to employees or directors of DIMAC Holdings pursuant to plans
or agreements approved by the Board of Directors of DIMAC Holdings;
(iii) securities issued pursuant to any stock dividend, stock split,
combination or other reclassification by DIMAC Holdings of any of its
capital stock; (iv) securities issued upon exercise of the Warrants;
or (v) any securities issued to any Person other than any of the MDC
Entities.
(iii) "Public Offering Event" means the closing of a public offering
of Common Stock pursuant to a registration statement under the
Securities Act (other than a registration statement on Form S-4 or S-8
or any successor form(s)), after which at least twenty-five percent
(25%) of the outstanding shares of Common Stock is publicly held and
such Common Stock is listed or admitted to trading on a national
securities exchange or quoted on the NASDAQ National Market.
(iv) A TCW Entity's "Pro Rata Share" shall be equal to a fraction (i)
the numerator of which is the number of shares of Common Stock held by
such TCW Entity (including those issuable upon exercise of all
outstanding Warrants) on the date of DIMAC Holdings's written notice
pursuant to Section (b); and (ii) the denominator of which is the
number of shares of Common Stock outstanding (on a fully diluted basis
assuming exercise of all outstanding options and Warrants) on such
date.
(v) "TCW Entities" means Trust Company of the West and its Affiliates
and any of the Purchasers and their Affiliates and any Person to whom
any shares of Common Stock or Warrants that were held by any of the
Purchasers, may be transferred in accordance with the terms of the
Stockholders' Agreement.
1.19. Other Covenants
DIMAC Holdings further covenants and agrees:
(a) to not, and will ensure that no affiliate (as defined in Rule 501(b) of
the Securities Act) of DIMAC Holdings will, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined
in the Securities Act) that would be integrated with the sale
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of the Securities in a manner that would require the registration under the
Securities Act of the sale to the Purchasers of the Securities;
(b) for so long as any of the Securities remain outstanding and during any
period in which DIMAC Holding is not subject to Section 13 or 15(d) of the
Exchange Act, to make available to any beneficial owner of Securities and
to any prospective purchaser thereof from such beneficial owner, the
information required by Rule 144A(d)(4) under the Securities Act;
(c) to comply with all of its agreements in the Indenture, the Notes, the
Notes Registration Rights Agreement, the Warrant Agreement, the Warrants,
the Stockholders' Agreement and the other Documents;
(d) to use its best efforts to cause the Notes, the Shares and the Warrant
Shares to be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD and to permit the Notes, the Shares and the
Warrant Shares to be eligible for clearance and settlement through DTC;
(e) To (i) advise the Purchasers promptly after obtaining knowledge (and,
if requested by any of the Purchasers, confirm such advice in writing)
of the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any of the
Notes for offer or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority, (ii) use its commercially reasonable efforts to
prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of any of the Notes under any
state securities or Blue Sky laws, and (iii) if at any time any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of any of the
Notes under any such laws, use its commercially reasonable efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(f) to comply with the representation letter of DIMAC Holdings to DTC
relating to the approval of the Notes by DTC for "book entry" transfer;
(g) for so long as the Notes are outstanding, and regardless of whether
required to do so by the rules and regulations of the SEC, (1) to furnish
to the Trustee and deliver or cause to be delivered to the Holders of the
Notes and the Purchasers (i) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms
10-Q and 10-K if DIMAC Holdings were required to file such Forms, including
for each a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information only, a
report thereon by DIMAC Holdings' independent certified public accountants
and (ii) all reports that would be required to be filed with the SEC on
Form 8-K if DIMAC Holdings were required to file such reports and (2) from
and after the time the Exchange Offer Registration Statement or the Shelf
Registration Statement (or such other registration statement with respect
to the Notes) is filed with the SEC, to file such information with the SEC
so long as the SEC will accept such filings; and
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(h) not to enter into any agreement that would preclude the exercise of the
Warrants for the Warrant Shares, except in accordance with the terms of the
Warrant Agreement and the Warrants.
SECTION 2. CLOSING CONDITIONS
The obligations of each Purchaser to purchase and pay for the Securities to
be delivered to such Purchaser at the Closing shall be subject to the
satisfaction of each of the following conditions on or before the Closing Date:
2.1 Delivery of Documents
DIMAC Holdings shall have delivered to each Purchaser, in form and
substance satisfactory to such Purchaser, the following:
(a) The Notes being purchased by such Purchaser, duly executed by DIMAC
Holdings, in the aggregate principal amount set forth below such
Purchaser's name on Schedule 1.1 hereto, certificates representing the
number of Shares being purchased by such Purchaser as set forth below such
Purchaser's name on Schedule 1.1 hereto and the Warrants being purchased by
such Purchaser, representing the number of Warrants set forth below such
Purchaser's name on Schedule 1.1 hereto.
(b) Duly executed original counterparts of this Agreement, the Indenture,
the Notes, the Notes Registration Rights Agreement, the Warrant Agreement,
the Warrants, the Stockholders' Agreement and the other Documents.
(c) The following legal opinions:
(i) An legal opinion, dated the Closing Date and addressed to the
Purchasers, from White & Case LLP, counsel for DIMAC Holdings and
DIMAC Operating, as to the matters set forth on Annex E.
(ii) A reliance letter from White & Case LLP, counsel for DIMAC
Holdings and DIMAC Operating, authorizing the Purchasers to rely on
each of the legal opinions of such firm rendered in connection with
the Senior Credit Agreement and the DIMAC Operating Notes Purchase
Agreement, together with copies of such opinions.
(iii) A legal opinion, dated the Closing Date and addressed to the
Purchasers, from Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
the Purchasers.
(iv) Such other legal opinions covering matters incidental to the
transactions contemplated by this Agreement and the other Documents as
any Purchaser may reasonably request.
In rendering such opinions described in this subsection (c), each
counsel may rely as to
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factual matters upon certificates or other documents furnished by officers
and directors of the Companies (copies of which shall be delivered to such
Purchaser) and by government officials, and upon such other documents as
such counsel deem appropriate as a basis for their opinion. Such counsel
shall opine, as applicable, as to the Federal laws of the United States,
the General Corporation Law of the State of Delaware, the laws of the
States of New York and the laws of the state or states of incorporation of
the Companies, if other than Delaware or New York.
(d) Resolutions of the Board of Directors of DIMAC Operating, certified by
the Secretary or Assistant Secretary of DIMAC Operating, to be duly adopted
and in full force and effect on such date, authorizing (i) the execution,
delivery and performance of this Agreement and the other Documents to which
DIMAC Operating is a party and the consummation of the transactions
contemplated hereby and thereby and (ii) specific officers of DIMAC
Operating to execute and deliver this Agreement and any other Documents to
which DIMAC Operating is a party.
(e) Resolutions of the Board of Directors of DIMAC Holdings, certified by
the Secretary or Assistant Secretary of DIMAC Holdings, to be duly adopted
and in full force and effect on such date, authorizing (i) the execution,
delivery and performance of this Agreement and the other Documents to which
DIMAC Holdings is a party and the consummation of the transactions
contemplated hereby and thereby, (ii) the issuance of the Notes, the PIK
Notes, the Shares, the Warrants and the Warrant Shares pursuant to this
Agreement and (iii) specific officers of DIMAC Holdings to execute and
deliver this Agreement and any other Documents to which DIMAC Holdings is a
party.
(f) Certificates of the Chief Executive Officer and Chief Financial Officer
of each of DIMAC Holdings and DIMAC Operating, dated the Closing Date,
certifying that (i) all of the conditions set forth in Sections , , , , and
are satisfied on and as of such date and specifying as to each such
condition the satisfaction thereof, (ii) all of the representations and
warranties of DIMAC Operating and DIMAC Holdings, as the case may be,
contained or incorporated by reference herein or in any of the other
Documents are true and correct on and as of such date as though made on and
as of such date (unless stated to relate to another date) and on and as of
the Closing Date as though made on and as of such date (and after giving
effect to the transactions contemplated by this Agreement and the other
Documents), and (iii) as to such other matters as such Purchaser may
reasonably request.
(g) A certificate in form, scope and substance reasonably satisfactory to
the Purchasers, from the Chief Financial Officer of each of DIMAC Holdings
and DIMAC Operating, dated the Closing Date, to the effect that at the
Closing Date,(and after giving effect to the transactions contemplated
hereby (including without limitation, the issuance of the Securities and
the application of the proceeds therefrom)), each of the Companies is
Solvent.
(h) Audited consolidated financial statements of the Companies (as
described in the first sentence of Section (b)) for the fiscal years
ended on December 31, 1997, 1996 and 1995 and unaudited consolidated
financial statements of each of the Companies for the six-month periods
ended June 30, 1998 and 1997, in each case together with a certificate
of the Chief Financial
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Officer of such Company to the effect that they were prepared in accordance
with GAAP and fairly present the consolidated financial position,
stockholders' equity and income of such Company. The audited financial
statements referred to above shall be delivered together with a report
thereon by the applicable Company's independent accountants, which report
shall be unqualified, shall express no doubts about the ability of such
Company and each of its Subsidiaries to continue as a going concern, and
shall state that such consolidated financial statements fairly present the
consolidated financial position of such Company and each of its
Subsidiaries as of the dates indicated and the results of their operations
and their cash flows for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years (except as otherwise
disclosed in such financial statements) and that the examination by such
accountants in connection with such consolidated financial statements has
been made in accordance with United States of America generally accepted
auditing standards.
(i) Governmental certificates, dated the most recent practicable date
prior to the Closing Date, showing that each of the Companies is
organized, existing and in good standing in the jurisdiction of its
incorporation and is qualified as a foreign corporation and in good
standing in all other or transacts business, jurisdictions in which
it has executive offices except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.
(j) Copies of each consent, license and approval required in connection
with the execution, delivery and performance by each of the Companies of
this Agreement and the other Documents and the consummation of the
transactions contemplated hereby and thereby.
(k) Copies of the Charter Documents of each of the Companies, certified as
of a recent date by the Secretaries of State of the relevant state of
incorporation and certified by the Secretary or Assistant Secretary of each
Company, as true and correct as of the Closing Date.
(l) Certificates of the Secretary or an Assistant Secretary of each of the
Companies as to the incumbency and signatures of the officers or
representatives of such Company executing this Agreement, the Indenture,
the Notes, the Notes Registration Rights Agreement, the Warrant Agreement,
the Warrants, the Stockholders' Agreement and the other Documents and any
other certificate or other document to be delivered pursuant hereto or
thereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary.
(m) True and correct copies of the Senior Credit Agreement, the DIMAC
Operating Indenture, the DIMAC Operating Notes Purchase Agreement and all
amendments thereto.
(n) Such additional information and materials as any Purchaser may
reasonably request, including, without limitation, copies of any debt
agreements, security agreements and other contracts to which any of the
Companies is a party.
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2.2 Legal Investment; Purchase Permitted by Applicable Laws
Each Purchaser's acquisition of the Securities (a) shall not be prohibited
by any applicable law or governmental regulation, release, interpretation or
opinion (including, without limitation, Regulations T, U and X of the Board of
Governors of the Federal Reserve System), (b) shall constitute a legal
investment as of the Closing Date under the laws and regulations and orders of
each jurisdiction to which such Purchaser may be subject (without resort to any
"basket" or "leeway" provision), and (c) shall not subject such Purchaser to any
penalty or, in its reasonable judgment, other onerous condition in or pursuant
to any such law, regulation or order; and such Purchaser shall have received
such certificates or other evidence as such Purchaser may reasonably request to
establish compliance with this condition.
2.3 Payment of Fees
DIMAC Holdings shall have delivered to each of the Purchasers or to such
other persons as such Purchaser shall direct on Schedule 1.1 hereto, at the
Closing, by intra-bank or Federal funds bank wire transfer of same day funds,
payment for such Purchaser's fee of such percent of the aggregate purchase price
of the Notes and the Warrants being purchased by such Purchaser as is set forth
on Schedule 1.1 hereto.
2.4 Compliance with Agreements
Each of the Companies shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in this
Agreement, in the Indenture, in the Notes, in the Notes Registration Rights
Agreement, in the Warrant Agreement, in the Warrants, in the Stockholders'
Agreement in the Senior Credit Agreement, in the DIMAC Operating Indenture, in
the DIMAC Operating Notes Purchase Agreement and in any of the other Documents
and in any other document contemplated hereby or thereby, which are required to
be performed or complied with by such Company on or before the Closing Date.
2.5 Completion of Other Transactions
Simultaneously with or prior to the sale to each Purchaser of the
Securities to be purchased by such Purchaser:
(a) Each of the Documents shall have been executed and delivered by each
of the parties thereto (other than such Purchaser) in form and substance
satisfactory to the Purchasers, and such parties shall have consummated the
transactions contemplated thereby in accordance with all applicable laws
(including without limitation, the Securities Act, all applicable state
securities laws and all related rules and regulations under such statutes
and other laws).
(b) Each of the Senior Credit Agreement, the DIMAC Operating Indenture and
the DIMAC Operating Notes Purchase Agreement shall have been executed and
delivered by each of the parties thereto in form and substance satisfactory
to the Purchasers, and such parties shall
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have consummated the transactions contemplated thereby in accordance with
all applicable laws (including without limitation, the Securities Act, all
applicable state securities laws and all related rules and regulations
under such statutes and other laws).
(c) DIMAC Operating shall have received (i) at least $45,000,000 of
additional term loans pursuant to the Senior Credit Agreement and (ii)
gross proceeds of at least $97,233,000 from the issuance and sale by it of
the DIMAC Operating Notes.
(d) DIMAC Holdings shall have received at least $10,000,000 from the
issuance and sale by it of shares of its Common Stock.
(e) All of the indebtedness under the Credit Agreement dated as of June 28,
1996 by and among AmeriComm Direct Marketing and Heller Financial, Inc. and
the other lenders party thereto, as lenders, and Heller Financial, Inc. as
agent, shall have been repaid, and such credit agreement shall have been
permanently terminated.
(f) All of the promissory notes issued under the AmeriComm Direct
Marketing Indenture shall have been repurchased by AmeriComm Direct
Marketing.
(g) All of the other Purchasers listed in the signature pages hereof shall
have consummated their purchase of Securities pursuant to this Agreement.
(h) DIMAC Holdings or any of its Subsidiaries shall have purchased all of
the issued and outstanding AmeriComm Notes from the holders thereof at a
purchase price equal to 106.25% of the aggregate principal amount thereof
plus accrued and unpaid interest thereon to the purchase date.
2.6 Truth of Representations and Warranties
Unless stated to relate to another date, all of the representations
and warranties of each of the Companies contained or incorporated by reference
herein or in any of the other Documents shall be true and correct in all
material respects (except that such phrase "in all material respects" shall be
disregarded to the extent that any such representation and warranty is qualified
by "material," "Material Adverse Effect" or any similar terms or by any phrase
using any of such terms) on and as of the Closing Date, both before and after
giving effect to the other transactions contemplated hereby and by the other
Documents.
2.7 Proceedings Satisfactory
All proceedings taken in connection with the sale of the Securities,
the transactions contemplated hereby, and all documents and papers relating
thereto, shall be reasonably satisfactory to such Purchaser. Such Purchaser and
its counsel shall have received copies of such documents and papers as they may
reasonably request in connection therewith, or as a basis for the Closing
opinions, all in form and substance satisfactory to such Purchaser.
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2.8 Consents and Permits
Each of the Companies shall have received all consents, permits,
approvals and authorizations and sent or made all notices, filings,
registrations and qualifications as may be required pursuant to any law,
statute, regulation or rule (Federal, state, local or foreign) or pursuant to
any other agreement, order or decree to which any of them is a party or to which
any of them is subject, in connection with the transactions to be consummated on
or prior to the Closing Date as contemplated by this Agreement or any of the
other Documents.
2.9 No Material Adverse Effect
Subsequent to December 31, 1997: (A) none of the Companies shall
have suffered any adverse change in its properties, business, operations,
assets, condition (financial or otherwise) or prospects which could reasonably
be expected to result in a Material Adverse Effect; and (B) (i) except as
described in the Offering Circular, there shall not have been any material
change in the capital stock or long-term debt, or material increase in
short-term debt, of any of the Companies and (ii) none of the Companies shall
have incurred any liability or obligation, direct or contingent, that is
material to such Company, is required to be disclosed on a balance sheet in
accordance with GAAP and is not disclosed on the latest balance sheet previously
provided to the Purchasers.
2.10 No Material Judgment or Order
There shall not be on the Closing Date any judgment or order of a
court of competent jurisdiction or any ruling of any agency of the Federal,
state or local government that, in the reasonable judgment of any Purchaser or
its counsel, would prohibit the sale or issuance of the Securities hereunder or
subject DIMAC Holdings to any material penalty if the Securities were to be
issued and sold hereunder.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF DIMAC OPERATING AND DIMAC
HOLDINGS
Each of DIMAC Holdings and DIMAC Operating represents and warrants, jointly
and severally, on the date hereof and as of the Closing, as follows:
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3.1 Authorization; Capitalization
Each of the Companies has taken all actions necessary to authorize it (i)
to execute, deliver and perform all of its obligations under each of the
Documents to which it is a party, and (ii) to consummate the transactions
contemplated thereby. Without limiting the generality of the preceding sentence,
DIMAC Holdings has taken all actions necessary to authorize it to issue and
perform all of its obligations under the Notes, the Shares, the Warrants and the
Warrant Shares. Each of the Documents to which any of the Companies is a party
is a legally valid and binding obligation of such Company, enforceable against
it in accordance with its respective terms, except for (a) the effect thereon of
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and (b) limitations
imposed by equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions thereof and upon the availability of
injunctive relief or other equitable remedies.
As of the date hereof, DIMAC Operating and the entities identified on
Schedule (a) are the only direct or indirect Subsidiaries of DIMAC Holdings. The
total authorized Capital Stock of DIMAC Holdings consists of (a) 2,200,000
shares of Common Stock, of which 1,100,000 shares, were issued and outstanding
as of the date hereof. All outstanding options and other rights to acquire
shares of Capital Stock of DIMAC Holdings are as set forth on Schedule (b). The
total authorized Capital Stock of DIMAC Operating consists of 100 shares of
common stock, all of which were issued and outstanding on the date hereof. DIMAC
Holdings owns 100% of the outstanding Equity Interests or other securities
evidencing equity ownership of DIMAC Operating. Except for 100 shares of common
stock of DIMAC Operating, DIMAC Holdings does not own any Equity Interest in, or
any other securities of, any Person. As of the date hereof, DIMAC Operating does
not own any Equity Interest in, or any other securities of, any Person, other
than the Equity Interests identified on Schedule (a). DIMAC Operating directly
or indirectly owns 100% of the outstanding Equity Interests or other securities
evidencing equity ownership of the entities identified on Schedule (a), in each
case free and clear of any Lien. All of the outstanding Equity Interests of each
of the Companies and their Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation of,
and are not subject to, any preemptive or similar rights.
On the Closing Date, the Securities will be duly authorized and validly
issued, will be fully paid and nonassessable and will not have been issued in
violation of, nor will they be subject to, any preemptive or similar rights.
Except as set forth on Schedule (b), on the Closing Date, there are no
outstanding (i) securities convertible into or exchangeable for any Equity
Interests of any of the Companies, (ii) options, warrants or other rights to
purchase or subscribe to Equity Interests of any of the Companies or securities
convertible into or exchangeable for Equity Interests of any of the Companies,
(iii) contracts, commitments, agreements, understandings, arrangements, calls or
claims of any kind relating to the issuance of any Equity Interests of any of
the Companies, any such convertible or exchangeable securities or any such
options, warrants or rights or (iv) voting trusts, agreements, contracts,
commitments, understandings or arrangements with respect to the voting of any of
the Equity Interests of any of the Companies.
Except for the Notes Registration Rights Agreement and the Stockholders'
Agreement, DIMAC
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Holdings has not entered into an agreement to register its securities under the
Securities Act. Except for this Agreement, DIMAC Holdings has not entered into
any agreement to issue, purchase or sell any of its securities.
There are no securities of DIMAC Holdings registered under the Exchange Act
or listed on a national securities exchange registered under Section 6 of the
Exchange Act or quoted in a United States automated inter-dealer quotation
system.
3.2 No Violation or Conflict; No Default
(a) Neither the execution, delivery or performance of this Agreement, the
Indenture, the Securities, the Notes Registration Rights Agreement, the
Warrant Agreement, the Stockholders' Agreement, the Senior Credit
Agreement, the DIMAC Operating Notes, the DIMAC Operating Indenture, the
DIMAC Operating Notes Purchase Agreement or any of the other Documents by
any of the Companies, nor the compliance with their respective obligations
hereunder or thereunder, nor the consummation of the transactions
contemplated hereby and thereby, nor the issuance, sale or delivery of the
Securities will:
(i) violate any provision of the Charter Documents of any of the
Companies;
(ii) violate any statute, law, rule or regulation or any judgment,
decree, order, regulation or rule of any court or governmental
authority or body to which any of the Companies or any of their
respective properties may be subject;
(iii) permit or cause the acceleration of the maturity of any debt or
obligation of any of the Companies; or
(iv) violate, or be in conflict with, or constitute a default under,
or permit the termination of, or require the consent of any Person
under, or result in the creation or imposition of any Lien (other
than Permitted Liens (as defined in the Indenture)) upon any property
of any of the Companies under, any mortgage, indenture, loan
agreement, note, debenture, agreement for borrowed money or any other
agreement to which any of the Companies is a party or by which any
of the Companies (or their respective properties) may be bound,
other than such violations, conflicts, defaults, terminations and
Liens, or such failures to obtain consents, which could not reasonably
be expected to result in a Material Adverse Effect.
(b) None of the Companies is in default (without giving effect to any
grace or cure period or notice requirement) under any agreement for
borrowed money or under any agreement pursuant to which any of its
securities were sold.
3.3 Use of Proceeds
All of the net proceeds from the sale of the Securities hereunder
will be used to make a capital contribution to DIMAC Operating.
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3.4 No Material Adverse Change; Financial Statements
(a) No Material Adverse Change. Since December 31, 1997, none of the
Companies has suffered any material adverse change in their
properties, business, operations, assets, condition (financial or
otherwise) or prospects which could reasonably be expected to result
in a Material Adverse Effect.
(b) Financial Statements. DIMAC Holdings and DIMAC Operating have
previously provided to you (i) the audited consolidated balance sheet
of DIMAC Marketing and its Subsidiaries as of December 31, 1997 and
the related audited consolidated statements of income, changes in
stockholders' equity and cash flows for the eight-month period ended
August 31, 1997 and the four-month period ended December 31, 1997,
(ii) the audited consolidated balance sheet of DIMAC Marketing and its
Subsidiaries as of December 31, 1996 and the related audited
consolidated statements of income, changes in stockholders' equity and
cash flows for the eleven- month period ended December 31, 1996, (iii)
the audited consolidated balance sheet of DIMAC Marketing and its
Subsidiaries as of December 31, 1995 and the related audited
consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal year ended December 31, 1995, (iv) the
audited consolidated balance sheets of AmeriComm and its Subsidiary as
of December 31, 1997, 1996 and 1995 and the related audited
consolidated statements of income, changes in stockholders' equity and
cash flows for the fiscal years ended December 31, 1997, 1996 and
1995, (v) a consolidated balance sheet for DIMAC Marketing and its
Subsidiaries as of June 26, 1998 and June 30, 1997 and related
statements of income, changes in stockholders' equity and cash flows
for the six-month periods ended June 26, 1998 and June 30, 1997 and
(vi) a consolidated balance sheet for AmeriComm and its Subsidiary as
of June 26, 1998 and June 30, 1997 and related statements of income,
changes in stockholders' equity and cash flows for the six-month
periods ended June 26, 1998 and June 30, 1997. Such financial
statements present fairly the consolidated financial position, results
of operations, stockholders' equity and cash flows of DIMAC Marketing
and AmeriComm at the respective dates or for the respective periods to
which they apply. Except as disclosed therein, such statements and
related notes have been prepared in accordance with GAAP consistently
applied throughout the periods involved. All financial statements
concerning DIMAC Holdings and its Subsidiaries that will hereafter be
furnished by DIMAC Holdings and its Subsidiaries to the Purchasers or
any Holder pursuant to this Agreement will be prepared in accordance
with GAAP consistently applied (except as disclosed therein) and will
present fairly in all material respects the financial condition of the
corporations covered thereby as at the dates thereof and the results
of their operations for the periods then ended.
(c) Pro Forma Balance Sheets. The Pro Forma Balance Sheets were
prepared by DIMAC Holdings in accordance with GAAP, with only such pro
forma adjustments thereto as would be required to present fairly in
all material respects the information contained therein.
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(d) Projections. True and complete copies of (i) projections of the
consolidated revenues, earnings before depreciation, interest and
taxes, operating margins, fixed charges, net income and capital
expenditures of DIMAC Holdings and its Subsidiaries for each of the
fiscal years ending December 31, 1998, 1999, 2000, 2001, 2002, 2003,
2004, 2005 and 2006, prepared by senior management of DIMAC Holdings
assuming the consummation of the transactions contemplated hereby and
the other Documents (the "Projections") and (ii) the assumptions and
supplemental data used in preparing the Projections (collectively, the
"Supplemental Data") have been delivered by DIMAC Holdings to the
Purchasers. The Projections were prepared on the basis of the
Supplemental Data which represent a reasonable basis for such
preparation. The Projections and the Supplemental Data reflect the
best currently available estimates and judgment of DIMAC Holdings's
senior management as to the expected future financial performance of
DIMAC Holdings and its Subsidiaries, provided that it is understood
that there can be no assurances that suitable acquisition candidates
can be found as shown in the acquisition model of the Projections.
3.5 Full Disclosure
Neither this Agreement (including without limitation the
representations and warranties incorporated herein by reference), the financial
statements referred to in Section , any Document, nor any other document,
certificate or written statement furnished by or on behalf of any of the
Companies to any Purchaser in connection with the negotiation and sale of the
Securities, when taken as a whole, contains any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading in light of the
circumstances under which they were made. There is no material fact known to any
of the Companies that has had or could reasonably be expected to have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and written statements furnished to the Purchasers for
use in connection with the transactions contemplated hereby.
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3.6 Third Party Consents
Neither the nature of any of the Companies nor of any of their
businesses or properties, nor any relationship between any of the Companies and
any other Person, nor any circumstance in connection with the offer, issuance,
sale or delivery of the Securities at the Closing nor the performance by any of
the Companies of their other obligations hereunder or under, or the consummation
of the transactions contemplated hereby or by the Indenture, the Securities, the
Notes Registration Rights Agreement, the Warrant Agreement, the Stockholders'
Agreement or any other Document, as the case may be, is such as to require a
consent, approval or authorization of, or notice to, or filing, registration or
qualification with, any governmental authority or other Person on the part of
any of the Companies as a condition to the execution and delivery of this
Agreement, the Securities, the Notes Registration Rights Agreement, the Warrant
Agreement, the Stockholders' Agreement or any of the other Documents or the
offer, issuance, sale or delivery of the Securities at the Closing other than
such consents, approvals, authorizations, notices, filings, registrations or
qualifications which shall have been made or obtained on or prior to the Closing
Date and such filings under Federal and state securities laws which are
permitted to be made after the Closing Date and which DIMAC Holdings hereby
agrees to file within the time period prescribed by applicable law.
3.7 No Violation of Regulations of Board of Governors of Federal Reserve
System
None of the transactions contemplated by this Agreement (including,
without limitation, the use of the proceeds from the sale of the Securities)
will violate or result in a violation of Section 7 of the Exchange Act or any
regulation issued pursuant thereto, including, without limitation, Regulations
T, U and X of the Board of Governors of the Federal Reserve System.
3.8 Private Offering
Assuming the truth and correctness of the representations and
warranties set forth in Section 4, the sale of the Securities hereunder is
exempt from the registration and prospectus delivery requirements of the
Securities Act. In the case of each offer or sale of the Securities, no form of
general solicitation or general advertising was used by any of the Companies or
their respective representatives, including, but not limited to, advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising.
The Purchasers are the sole purchasers of the Securities. No securities
have been issued and sold by any of the Companies within the six-month period
immediately prior to the date hereof. DIMAC Holdings agrees that it will not,
nor will anyone acting on its behalf, offer or sell the Securities, or any
portion of them, if such offer or sale might bring the issuance and sale of the
Securities to any Purchaser hereunder within the provisions of Section 5 of the
Securities Act nor offer any similar securities for issuance or sale to, or
solicit any offer to acquire any of the same from, or otherwise approach or
negotiate with respect thereto with, anyone if the sale of the Securities and
any such securities could be integrated as a single offering for the purposes of
the Securities Act, including
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without limitation Regulation D thereunder.
3.9 Governmental Regulations
DIMAC Holdings is not subject to regulation under the Investment Company
Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as
amended, the Federal Power Act, the Interstate Commerce Act, the Commodity
Exchange Act or to any Federal or state statute or regulation limiting its
ability to consummate the transactions contemplated hereby and by the other
Documents.
3.10 Brokers
None of the Companies has dealt with any broker, finder, commission agent
or other such intermediary in connection with the sale of the Securities and the
transactions contemplated by this Agreement and the other Documents, other than
McCown De Leeuw & Co., and none of the Companies is under any obligation to pay
any broker's or finder's fee or commission or similar payment in connection with
such transactions (other than $9,900,000 paid to MDC Management Company IV,
LLC).
Each of DIMAC Holdings and DIMAC Operating agrees, jointly and severally,
to indemnify and hold the Holders harmless from and against any and all actions,
suits, claims, costs, expenses, losses, liabilities and/or obligations in
connection with or relating to any broker's or finder's fees or commission or
similar payment in connection with such transactions, except with respect to
such fees or commissions incurred by any Purchaser for its account, so long as
DIMAC Holdings or DIMAC Operating receives notice of any such action, suit,
claim, etc., reasonably promptly after the Holders become aware thereof;
provided that the failure to give such notice as provided in this sentence shall
not relieve DIMAC Holdings or DIMAC Operating of its obligations under this
sentence except to the extent, and only to the extent, that DIMAC Holdings or
DIMAC Operating is materially prejudiced by such failure to give notice (as
determined by a court of competent jurisdiction in a final nonappealable
judgment).
3.11 Solvency
Immediately prior to and after giving effect to the issuance of the
Securities and the execution, delivery and performance of this Agreement, the
other Documents and any instrument governing Indebtedness of any Company
incurred as of the Closing Date, each of the Companies is Solvent.
3.12 Representations and Warranties
All representations and warranties (and the related schedules) of
each of the Companies contained in the Notes Registration Rights Agreement, the
Warrant Agreement, the Stockholders' Agreement, the Senior Credit Agreement, the
DIMAC Operating Notes Purchase Agreement or the other Documents, each in the
form as in effect on the date hereof without amendment or waiver, shall be
deemed to constitute representations and warranties of DIMAC Operating and DIMAC
Holdings under this Agreement with the same force and effect as the
representations and warranties expressly set forth herein. Such representations
and warranties are true and correct in all material respects (except that such
phrase "in all material respects" shall be disregarded to the extent that any
such representation
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and warranty is qualified by "material," "Material Adverse Effect" or any
similar terms or by any phrase using any of such terms) on the date hereof and
will be true and correct in all material respects (except that such phrase "in
all material respects" shall be disregarded to the extent that any such
representation and warranty is qualified by "material," "Material Adverse
Effect" or any similar terms or by any phrase using any of such terms) as of the
Closing Date as if made at and as of such date, and are hereby incorporated by
reference herein as if made hereby by DIMAC Operating and DIMAC Holdings to the
Purchasers. For purposes of this Section , the definitions contained in the
Notes Registration Rights Agreement, the Senior Credit Agreement, the Warrant
Agreement, the Stockholders' Agreement, the Senior Credit Agreement, the DIMAC
Operating Notes Purchase Agreement and any other Documents (insofar as they
relate to the representations and warranties incorporated herein) are hereby
incorporated by reference herein and made a part hereof.
3.13 Litigation
(a) There is no action, claim, suit, citation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced, or to the knowledge of DIMAC Holdings or
DIMAC Operating, threatened ("Proceedings") against or affecting any of the
Companies or any of their properties or assets, except for such Proceedings
that, if finally determined adversely to any of the Companies, could not
reasonably be expected to have a Material Adverse Effect, and there is no
Proceeding seeking to restrain, enjoin, prevent the consummation of or
otherwise challenge this Agreement or any of the other Documents or the
transactions contemplated hereby or thereby.
(b) None of the Companies is subject to any judgment, order, decree,
rule or regulation of any court, governmental authority or arbitration
board or tribunal that has had a Material Adverse Effect or that could
reasonably be expected to have a Material Adverse Effect.
3.14 Labor Relations
None of the Companies, nor any Person for whom any Company is or may be
responsible by law or contract, is engaged in any unfair labor practice that
could reasonably be expected to have a Material Adverse Effect. There is (a) no
unfair labor practice charge or complaint pending or threatened against any of
the Companies, or any Person for whom any Company is or may be responsible by
law or contract, before the National Labor Relations Board or any corresponding
state, local or foreign agency, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending or
threatened, (b) no strike, labor dispute, slowdown or stoppage pending or
threatened against any of the Companies, or any Person for whom any Company is
or may be responsible by law or contract, and (c) no union representation claim
or question existing with respect to the employees of any of the Companies, or
any Person for whom any Company is or may be responsible by law or contract, and
no union organizing activities taking place. None of the Companies, nor any
Person for whom any Company is or may be responsible by law or contract, is a
party to any collective bargaining agreement.
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Except such as could not, singly or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, none of the Companies nor any
of their Subsidiaries has violated any applicable Federal, state, provincial or
foreign law relating to employment or employment practices or the terms and
conditions of employment, including, without limitation, discrimination in the
hiring, promotion or pay of employees, wages, hours of work, plant closings and
layoffs, collective bargaining, and occupational safety and health, or any
provisions of ERISA or the rules and regulations promulgated thereunder or any
other applicable law (whether foreign or domestic) relating to or governing the
operation or maintenance of any plan or arrangement falling within the
definition of an "employee benefit plan" (as such term is defined in Section 3
of ERISA) or any other employee benefit plan or arrangement.
3.15 Taxes
All material Tax Returns required to be filed by any of the
Companies have been timely filed and such returns are true, complete and correct
in all material respects. All material Taxes due from any of the Companies that
are due and payable have been paid, other than those (i) being contested in good
faith and for which an adequate reserve or accrual has been established in
accordance with GAAP or (ii) those currently payable without penalty or interest
and for which an adequate reserve or accrual has been established in accordance
with GAAP. Neither DIMAC Operating nor DIMAC Holdings knows of any actual or
proposed material additional tax assessments against any of the Companies.
3.16 Environmental Matters
Except as adequately described in the Offering Circular, or as could
not reasonably be expected to have a Material Adverse Effect:
(a) each of the Companies, and any Person for whom any Company is or may
be responsible by law or contract (which such Person is included in the
definition of "Company" for purposes of this Section ), is in full
compliance with all Environmental Laws, which compliance includes, but is
not limited to, (1) compliance with all standards, schedules and timetables
therein, (2) the possession of all permits, licenses, approvals and other
authorizations required under the Environmental Laws or with respect to the
operation of the Companies' or such Person's business, property and assets,
and compliance with the terms and conditions thereof and (3) any Federal,
state, local or foreign approvals required pursuant to any Environmental
Laws that pertain or relate to the transactions contemplated by this
Agreement;
(b) none of the Companies has received any communication (written or
oral), whether from a governmental authority, citizens group, employee or
otherwise, that alleges that any of the Companies is not in full compliance
with any Environmental Law, none of the Companies has any liability under
any Environmental Law, and there are no past or present actions,
activities, circumstances, conditions, events or incidents that may be
expected to prevent or interfere with full compliance with applicable
Environmental Laws in the future;
(c) there is no Environmental Claim pending or threatened against any of
the Companies;
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(d) there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the
release, emission, discharge, presence or disposal of any Material of
Environmental Concern, that could be expected to form the basis of any
Environmental Claim against any of the Companies;
(e) no real property or facility owned, used, operated, leased, managed or
controlled by any of the Companies, or any predecessor in interest, is
listed or proposed for listing on the National Priorities List or the
Comprehensive Environmental Response, Compensation, and Liability
Information System pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or on any other state or local
list established pursuant to any Environmental Law;
(f) there have been no releases (including, without limitation, any past
or present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or
dumping, on-site or off-site) of Materials of Environmental Concern by
any of the Companies, or any predecessor in interest, at, on, under, from
or into any facility or real property owned, operated, leased, managed or
controlled by any of the Companies, and none of the Companies has incurred
or expects to incur liability for contamination at, on, under, from or
into any on-site or off-site locations where any of the Companies have
stored, disposed or arranged for the disposal of Materials of
Environmental Concern;
(g) no underground storage tank or other underground storage receptacle,
or related piping, is located on a facility or property currently owned,
operated, leased, managed or controlled by any of the Companies;
(h) there is no asbestos contained in or forming part of any building,
building component, structure or office space, and no polychlorinated
biphenyls ("PCBs") or PCB-containing items are used or stored at any
property, owned, operated, leased, managed or controlled, whether currently
or in the past (for which such matters the Companies could be liable), by
any of the Companies.
"Environmental Claim" means any claim, action, cause of action,
investigation of which the Companies, including any of their employees, are
aware, or notice (written or oral) by any Person alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (a) the presence, or release into the environment, of any Material of
Environmental Concern at any location, regardless of whether owned or operated
by any of the Companies, or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all Federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, laws
and regulations relating to emissions, discharges, releases or threatened
releases of Materials of
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Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, industrial, toxic or hazardous wastes, substances or constituents,
petroleum and petroleum products (or any by-product or constituent thereof),
asbestos or asbestos-containing materials, or PCBs.
3.17 ERISA
Based upon the Purchasers' representation in Section , the execution and
delivery of this Agreement and the other Documents and the sale of the
Securities to be purchased by the Purchasers will not involve any non-exempt
"prohibited transaction." Except as set forth on Schedule hereto, none of the
Companies or any of their ERISA Affiliates is a "party in interest" or a
"disqualified person" with respect to any "employee benefit plan." No condition
exists or event or transaction has occurred in connection with any "employee
benefit plan" maintained or contributed to by any of the Companies or any of
their ERISA Affiliates (any such plan being herein referred to as a "Company
Plan") that has resulted or is reasonably likely to result in any of the
Companies or any such ERISA Affiliate incurring any liability, fine or penalty
except as could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on Schedule 3.17, no Company Plan is subject to Title IV of
ERISA. There is no liability under Title IV of ERISA, whether actual or
contingent that could reasonably be expected to result in a Material Adverse
Effect. No amounts payable pursuant to any compensation or benefit plan, policy,
scheme or arrangement, or any other contract, arrangement or agreement will, in
connection with the transactions contemplated under this Agreement or the other
Documents, fail to be deductible for Federal income tax purposes by virtue of
Section 280G or 162(m) of the Code. The terms "employee benefit plan" and "party
in interest" shall have the meanings assigned to such terms in Section 3 of
ERISA, the term "disqualified person" shall have the meaning assigned to such
term in Section 4975 of the Code, the term "prohibited transaction" shall have
the meaning assigned to such term in Section 406(a) of ERISA and Section 4975 of
the Code, and the term "ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Companies would be deemed to be a
"single employer" within the meaning of Sections 414(b) and (c) of the Code.
3.18 Intellectual Property
The Companies own or possess adequate licenses or other rights to use all
trademarks, service marks, trade names, copyrights, and know-how necessary to
conduct the business now conducted by them as described in the Offering
Circular, and, none of the Companies has received any notice of infringement of
or conflict with (or knows of such infringement of or conflict with) asserted
rights of others with respect to trademarks, service marks, trade names,
copyrights, or know-how which, individually or in the aggregate, could
reasonably be expected to result in any Material Adverse Effect. The Companies
do not in the conduct of their business as now conducted, infringe or conflict
with any right of any third party, known to any of the Companies, where such
infringement or conflict could reasonably be expected to result in any Material
Adverse Effect.
3.19 Compliance with Laws
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Each of the Companies has obtained and has maintained in good
standing any licenses, permits, consents and authorizations required to be
obtained by it under all laws or regulations relating to its business
(collectively, the "Laws"), the absence of which (individually or in the
aggregate) could reasonably be expected to have a Material Adverse Effect, and
any such licenses, permits, consents and authorizations remain in full force and
effect, except as to any of the foregoing the absence of which (individually or
in the aggregate) could not reasonably be expected to have a Material Adverse
Effect. Each of the Companies is in compliance with the Laws except for such
noncompliance which, singly or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, and there is no pending or, to any
of the Companies' knowledge, threatened, action or proceeding against any of the
Companies under any of the Laws, other than any such actions or proceedings
which, individually or in the aggregate, if adversely determined, could not
reasonably be expected to have a Material Adverse Effect.
3.20 Survival of Representations and Warranties
All of the Companies' representations and warranties hereunder and under
the Senior Credit Agreement, the Notes Registration Rights Agreement, the
Warrant Agreement, the Stockholders' Agreement and the other Documents shall
survive the execution and delivery of the same, any investigation by any
Purchaser and the issuance of the Securities.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF EACH PURCHASER
Each Purchaser (as to itself only) and each Account Manager (as to
the managed accounts of Purchasers) represents and warrants to DIMAC Operating
and DIMAC Holdings that:
4.1 Purchase for Own Account
Such Purchaser or such Account Manager is purchasing the Securities
to be purchased by it solely for its own account (or in the case of Account
Managers, on behalf of managed accounts) and not as nominee or agent for any
other person (other than for such managed accounts, if applicable) and not with
a view to, or for offer or sale in connection with, any distribution thereof
(within the meaning of the Securities Act) that would be in violation of the
securities laws of the United States of America or any state thereof, without
prejudice, however, to its right at all times to sell or otherwise dispose of
all or any part of said Securities pursuant to a registration statement under
the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act, and subject, nevertheless, to the
disposition of its property being at all times within its control.
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4.2 Accredited Investor
Such Purchaser or such Account Manager is knowledgeable,
sophisticated and experienced in business and financial matters; it has
previously invested in securities similar to the Securities and it acknowledges
that the Securities have not been registered under the Securities Act and
understands that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act or such sale is permitted
pursuant to an available exemption from such registration requirement; it (or,
in the case of an Account Manager, the managed account on behalf of which the
Account Manager is acting) is able to bear the economic risk of its investment
in the Securities and is presently able to afford the complete loss of such
investment; it (or, in the case of an Account Manager, the managed account on
behalf of which the Account Manager is acting) is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act; and it has been
afforded access to information about each of the Companies and their financial
condition and business sufficient to enable it to evaluate its investment in the
Securities.
4.3 Authorization
Each Purchaser has taken all actions necessary to authorize it (or,
in the case of an Account Manager, such Account Manager is duly authorized by
the managed account for which it is acting) (i) to execute, deliver and perform
all of its obligations under this Agreement, (ii) to perform all of its
obligations under the Securities and (iii) to consummate the transactions
contemplated hereby and thereby. This Agreement is a legally valid and binding
obligation of each Purchaser enforceable against it in accordance with its
terms, except for (a) the effect thereon of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and (b) limitations imposed by Federal or state
law or equitable principles upon the specific enforceability of any of the
remedies, covenants or other provisions thereof and upon the availability of
injunctive relief or other equitable remedies.
4.4 Securities Restricted
Each Purchaser acknowledges that the Securities have not been
registered under the Securities Act and understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or such sale is permitted pursuant to an available exemption from such
registration requirement.
Each Purchaser acknowledges that no transfer or sale (including,
without limitation, by pledge or hypothecation) of Series A Notes by any
Purchaser which is otherwise permitted hereunder, other than a transfer or sale
to DIMAC Holdings, shall be effective unless such transfer or sale is made in
accordance with the restrictive legend required pursuant to Section 1.1 to be
set forth the Series A Notes. No transfer or sale (including, without
limitation, by pledge or hypothecation) of Shares or Warrants by any Holder
which is otherwise permitted hereunder, other than a transfer or sale to DIMAC
Holdings, shall be effective unless such transfer or sale is made (A) pursuant
to an effective registration statement under the Act and a valid qualification
under applicable state securities or "blue sky" laws or (B) without such
registration or qualification as a result of the availability of an exemption
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therefrom, and, if reasonably requested by DIMAC Holdings, counsel for such
Holder shall have furnished DIMAC Holdings with an opinion, reasonably
satisfactory in form and substance to DIMAC Holdings, to the effect that no such
registration is required because of the availability of an exemption from the
registration requirements of the Securities Act; provided, however, that with
respect to transfers of any of the Securities by Holders to their Affiliates, no
such opinion shall be required. A transfer of any of the Securities made by a
Holder which is a state-sponsored employee benefit plan to a successor trust or
fiduciary pursuant to a statutory reconstitution shall be expressly permitted
and no opinions of counsel shall be required in connection therewith.
4.5 ERISA
Such Purchaser represents that either:
(a) it is not acquiring the Securities for or on behalf of any employee
pension benefit plan or employee welfare benefit plan (as defined in
Section 3 of ERISA) or any "plan" (as defined in Section 4975 of the Code)
(each hereafter a "Plan");
(b) the assets used to acquire the Securities are assets of an insurance
company general account and the purchase of the Securities would be exempt
under the provisions of the Prohibited Transaction Class Exemption ("PTCE")
95-60; or
(c) if it is acquiring the Securities on behalf of a Plan, either directly
or through an investment fund (such as a "bank collective investment fund"
as defined in PTCE 91-38 or an "insurance company pooled separate account"
as defined in PTCE 90-1), then, assuming that the plans listed in Schedule
are the only employee benefit plans (as defined in Section 3 of ERISA) or
Plans with respect to which any of the Companies is a "party in interest"
or "disqualified person" (as such terms are defined in Section 3 of ERISA
and Section 4975 of the Code, respectively), either
(i) no part of the funds to be used to purchase the Securities
constitutes assets allocable to any trust that contains assets of the
employee benefit plans listed in Schedule , or
(ii) an exemption from the prohibited transaction rules applies such
that the use of such funds does not constitute a non-exempt prohibited
transaction in violation of Section 406 of ERISA or Section 4975 of
the Code, which could be subject to a civil penalty assessed pursuant
to Section 502 of ERISA or a tax imposed under Section 4975 of the
Code.
The representations contained in this Section are made in express reliance
on the list of employee benefit plans contained in Schedule .
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SECTION 5. DEFINITIONS
5.1 Definitions
As used in this Agreement, the following terms shall have the
following meanings:
"Account Manager" means each Purchaser, if any, duly authorized to
act as attorney in-fact on behalf of any Person in purchasing, in the name of
and using funds provided by such Person, Securities hereunder.
"Affiliate" means, with respect to any referenced Person, a Person (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such referenced Person, (ii)
which directly or indirectly through one or more intermediaries beneficially
owns or holds 10% or more of the combined voting power of the total Voting
Securities of such referenced Person or (iii) of which 10% or more of the
combined voting power of the total Voting Securities directly or indirectly
through one or more intermediaries is beneficially owned or held by such
referenced Person or a Subsidiary of such referenced Person. When used herein
without reference to any Person, Affiliate means an Affiliate of DIMAC Holdings.
For all purposes of this Agreement, McCown De Leeuw & Co. and its Affiliates
shall be considered an Affiliate of DIMAC Holdings. For purposes of this
definition, "control" when used with respect to any person means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of Voting
Securities, by agreement or otherwise; and the terms "affiliated," "controlling"
and "controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Agreement, Trust Company of the West and its
Affiliates and any other Purchaser and its Affiliates shall not be considered
Affiliates of DIMAC Holdings or any of its Subsidiaries.
"Agreement" means this Securities Purchase Agreement dated as of October
22, 1998 by and among DIMAC Holdings, DIMAC Operating and the Purchasers.
"AmeriComm" means AmeriComm Holdings, Inc., a Delaware corporation,
formerly named DEC International, Inc.
"AmeriComm Direct Marketing" means AmeriComm Direct Marketing, Inc., a
Delaware corporation formerly known as National Fiberstok Corporation.
"AmeriComm Direct Marketing Indenture" means that certain Indenture, dated
as of June 15, 1996, by and between AmeriComm Direct Marketing, Inc. and
Wilmington Trust Company, as Trustee, together with all related documents,
including security documents.
"AmeriComm Notes" means the 12 1/2% Senior Notes due April 24, 2003 of
AmeriComm and the 13% Senior Notes due April 24, 2003 of AmeriComm, in an
aggregate principal amount of $41,858,176.
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"Board of Directors" means, as to any Person, the board of directors of
such Person or any duly authorized committee thereof.
"Business Day" means any day which is not a Legal Holiday.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including without
limitation all common stock and preferred stock.
"Charter Documents" means the articles of incorporation or certificate of
incorporation and bylaws (or any similar organizational documents), as amended
or restated (or both) to date, of any of the Companies, as applicable.
"Closing" has the meaning given to such term in Section 1.2(b).
"Closing Date" has the meaning given to such term in Section 1.2(b).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute or law thereto.
"Common Stock" has the meaning given to such term in Section 1.1(a).
"Common Stock Register" has the meaning given to such term in Section 1.3.
"Companies" means, collectively, DIMAC Holdings, DIMAC Operating and each
of their Subsidiaries.
"Default" has the meaning given to such term in the Indenture. "DIMAC
Holdings" means DIMAC Holdings, Inc., a Delaware corporation.
"DIMAC Marketing" means DIMAC Marketing Corporation, a Delaware
corporation.
"DIMAC Operating" means DIMAC Corporation, a Delaware corporation.
"DIMAC Operating Indenture" means that certain Indenture, dated as of
October 15, 1998, by and between DIMAC Operating and Wilmington Trust Company,
as Trustee, together with all related documents, including security documents.
"DIMAC Operating Notes" means the 12 1/2% Senior Subordinated Notes due
2008 of DIMAC Operating, issued pursuant to the DIMAC Operating Indenture.
"DIMAC Operating Notes Purchase Agreement" means the Purchase Agreement
dated as of October 16, 1998 by and among DIMAC Operating and Credit Suisse
First Boston, First Union Capital Markets and Warburg Dillon Read LLC, relating
to the purchase and sale of the DIMAC Operating Notes.
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"Documents" means this Agreement, the Securities, the Notes Registration
Rights Agreement, the Indenture, the Warrant Agreement and the Stockholders'
Agreement, collectively, or each of such documents singularly, and any documents
or instruments contemplated by or executed in connection with any of them or any
of the transactions contemplated hereby or thereby.
"DTC" means The Depository Trust Company.
"Environmental Claim" has the meaning given to such term in Section 3.16.
"Environmental Laws" has the meaning given to such term in Section 3.16.
"Equity Interest" means (i) with respect to a corporation, any and all
Capital Stock or warrants, options or other rights to acquire Capital Stock (but
excluding any debt security which is convertible into, or exchangeable or
exercisable for, Capital Stock) and (ii) with respect to a partnership, limited
liability company or similar Person, any and all units, interests, rights to
purchase, warrants, options or other equivalents of, or other ownership
interests in any such Person.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute or law thereto.
"Event of Default" has the meaning given to such term the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, from
time to time, and any successor statute or law thereto.
"Exchange Offer Registration Statement" has the meaning given to such term
in Section 1.1(a).
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such on the Closing Date by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial conditions, and the
results of operations, stockholders' equity and cash flows, of DIMAC Holdings
and its consolidated Subsidiaries.
"Holder" or "Holders" means each Purchaser (so long as it holds any
Securities) and any other holder of any of the Securities.
"Indebtedness" has the meaning given to such term in the Indenture.
"Indemnified Parties" has the meaning given to such term in Section 1.8.
"Indemnifying Parties" has the meaning given to such term in Section 1.8.
"Indenture" has the meaning given to such term in Section 1.1(a).
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"Inspectors" has the meaning given to such term in Section 1.13.
"Laws" has the meaning given to such term in Section 3.19.
"Legal Holiday" means a Saturday, Sunday or day on which banks and trust
companies in the principal place of business of DIMAC Holdings or in New York
are not required to be open.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or adverse
claim affecting title or resulting in a charge against real or personal
property, or security interest of any kind (including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Losses" has the meaning given to such term in Section 1.8.
"Majority Holders" means, at any time, the Holder or Holders of at least a
majority in aggregate principal amount of the then outstanding Notes.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of the Companies taken as a whole or (b) a material adverse effect on
the ability of DIMAC Holdings or DIMAC Operating to perform its obligations
under this Agreement or of any Purchaser or Holder to enforce or collect any of
the obligations hereunder. In determining whether any individual event could
reasonably be expected to result in a Material Adverse Effect, notwithstanding
that such event does not of itself have such effect, a Material Adverse Effect
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events could reasonably be expected to result in a Material
Adverse Effect.
"Materials of Environmental Concern" has the meaning given to such term in
Section 3.16.
"MDC Entities" means, collectively, McCown De Leeuw & Co. IV, LP, McCown,
De Leeuw & Co. IV Associates, LP and Delta Fund LLC and any of their respective
Affiliates.
"Notes" has the meaning given to such term in Section 1.1(a).
"Notes Register" has the meaning given to such term in Section 1.3.
"Notes Registration Rights Agreement" has the meaning given to such term in
Section 1.1(a).
"Offering Circular" means the Confidential Offering Circular, dated October
16, 1998, of DIMAC Operating relating to, among other things, the DIMAC
Operating Notes. "PBGC" has the meaning given to such term in Section 1.11.
"PCBs" has the meaning given to such term in Section 3.16.
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"Person" means an individual, partnership, corporation, limited liability
company, trust or unincorporated organization or a government or agency or
political subdivision thereof.
"PIK Interest Payment" means the payment of all or a portion of a payment
of interest on the Notes by the issuance of additional Notes in accordance with
the provisions of Section 1 of the Notes.
"PIK Note" means any Note issued by DIMAC Holdings in order to make a PIK
Interest Payment.
"Plan" has the meaning given to such term in Section 4.5(a).
"Pro Forma Balance Sheets" means the unaudited consolidated balance sheets
of DIMAC Holdings and its Subsidiaries as of June 30, 1998 giving effect to this
Agreement, the Warrant Agreement, the Stockholders' Agreement, the DIMAC
Operating Notes, the refinancing described in the Offering Circular, the Senior
Credit Agreement, the other Documents and the transactions contemplated hereby
and thereby, previously delivered to the Purchasers.
"Proceedings" has the meaning given to such term in Section 3.13.
"PTCE" has the meaning given to such term in Section 4.5.
"Purchasers" means the purchasers on the signature pages hereto.
"Registered Exchange Offer" has the meaning given to such term in Section
1.1(a).
"Rule 144" means Rule 144 as promulgated by the SEC under the Securities
Act, as amended from time to time, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the SEC under the Securities
Act, as amended from time to time, and any successor rule or regulation thereto.
"SEC" means the Securities and Exchange Commission and any successor
thereto.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, and any successor statute or law thereto.
"Security" or "Securities" has the meaning given to such term in
Section 1.1.
"Senior Credit Agreement" means that certain Amended and Restated Credit
Agreement dated as of October 22, 1998 by and among DIMAC Operating, DIMAC
Holdings, the financial institutions listed on the signature pages thereof,
Credit Suisse First Boston, as administrative agent and arranger, UBS AG,
Stamford Branch, as syndication agent and First Union National Bank, as
documentation agent, as, unless the context in which such term is used requires
otherwise, amended, replaced, refinanced, modified or supplemented from time to
time, and all related documents, including guaranties and security documents,
as, unless the context in which such term is used requires otherwise,
43
<PAGE>
amended, replaced, refinanced, modified or supplemented from time to time.
"Series A Notes" has the meaning given to such term in Section 1.1(a).
"Series B Notes" has the meaning given to such term in Section 1.1(a).
"Shares" has the meaning given to such term in Section 1.1(a).
"Shelf Registration Statement" has the meaning given to such term in
Section 1.1(a).
"Solvent" means, with respect to any Person on a particular date, that on
such date, (a) the fair saleable value of the assets of such Person exceeds its
probable liability on its debts as they become absolute and mature; (b) all of
such Person's assets, at a fair valuation, exceed the sum of such Person's
debts; (c) such Person is able to pay its debts or liabilities as such debts and
liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's assets would constitute an unreasonably small capital.
"Stockholders' Agreement" has the meaning given to such term in Section
1.1(b).
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is, at the date of determination, directly or indirectly,
owned by such Person, by one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person or (ii) a partnership in
which such Person or a Subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but, in the
case of a limited partner, only if such Person or its Subsidiary is entitled to
receive more than 50% of the assets of such partnership upon its dissolution, or
(iii) any limited liability company or any other Person (other than a
corporation or a partnership) in which such Person, a Subsidiary of such Person
or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination, has (a) at least a majority ownership
interest or (b) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"Taxes" means all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"Tax Returns" means all Federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns and
any amended Tax Return relating to Taxes.
"Trustee" has the meaning given to such term in Section 1.1(a).
"Voting Securities" means any class of Equity Interests of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power ("Voting Power") under ordinary circumstances to vote for
the election of directors, managers, trustees or general partners of such Person
(regardless of whether at the time any other class or classes will have or might
have voting power by reason of the happening of any contingency).
44
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"Warrants" has the meaning given to such term in Section 1.1(a).
"Warrant Agreement" has the meaning given to such term in Section 1.1(a).
"Warrant Register" has the meaning given to such term in Section 1.3.
"Warrant Shares" has the meaning given to such term in Section 1.1(b).
5.2 Rules of Construction
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words in the plural
include the singular;
(d) provisions apply to successive events and transactions;
(e) "herein," "hereof," "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Section
or other subdivision; and.
(f) any reference to a "Section," "Annex" or "Schedule" refers to a
Section of, an Annex to, or a Schedule to this Agreement,
respectively.
SECTION 6. MISCELLANEOUS
6.1 Amendments and Waivers
This Agreement may be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may be given, provided that
the same are in writing and signed by each of the parties hereto.
6.2 Notices
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail, telex, telecopier,
or overnight air courier guaranteeing next day delivery:
(a) if to any Purchaser at such Purchaser's address or telecopy number set
forth on Schedule 1.1 hereto, with a copy to Skadden, Arps, Slate, Meagher
& Flom LLP, 300 S. Grand Avenue, Suite 3400, Los Angeles, California 90071,
Telecopy No. (213) 687-5600, Attention: Rod A. Guerra, Jr., Esq.; and
45
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(b) if to DIMAC Holdings or DIMAC Operating, to DIMAC Holdings, Inc., 5775
Peachtree Dunwoody Road, Suite C-150, Atlanta, GA, Telecopy No. (404)
705-9929, Attention: Chief Financial Officer, with a copy to McCown De
Leeuw & Co., 101 E. 52nd Street, New York, New York, Telecopy No. (212)
355-6283, Attention: James Wu, with a copy to White & Case LLP, 1155 Avenue
of the Americas, New York, New York 10036, Telecopy No. (212) 354-8113,
Attention: Frank L. Schiff, 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
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the addresses to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
6.3 Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
6.4 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.
6.5 Headings
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
46
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6.6 Governing Law; Submission to Jurisdiction
THIS AGREEMENT AND ALL ISSUES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL PRACTICE LAWS AND RULES 327(b). TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, EACH OF DIMAC
HOLDINGS AND DIMAC OPERATING HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND THE NOTES, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF DIMAC HOLDINGS AND DIMAC OPERATING IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION THAT
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PURCHASER OR ANY HOLDER OF A
NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEEDING AGAINST DIMAC HOLDINGS OR DIMAC OPERATING IN
ANY OTHER JURISDICTION.
6.7 Entire Agreement
This Agreement, together with the Securities, the Indenture, the Notes
Registration Rights Agreement, the Warrant Agreement, the Stockholders'
Agreement and the other Documents, 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 and therein. This Agreement, together with
the Securities, the Indenture, the Notes Registration Rights Agreement, the
Warrant Agreement, the Stockholders' Agreement and the other Documents
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
6.8 Severability
In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired or affected, it being
intended that each Purchaser's rights and privileges shall be enforceable to the
fullest extent permitted by law.
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6.9 Further Assurances
DIMAC Holdings and DIMAC Operating shall, and shall cause each of
their Subsidiaries to, at its cost and expense, upon request of any Purchaser or
Holder, duly execute and deliver, or cause to be duly executed and delivered, to
such Purchaser or Holder such further instruments and do or cause to be done
such further acts as may be necessary or proper in the reasonable opinion of
such Purchaser or Holder to carry out more effectually the provisions and
purposes of this Agreement and the other Documents.
6.10 Disclosure of Financial Information
Each Holder is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of DIMAC Holdings and each of its Subsidiaries which may be
furnished to it hereunder or otherwise, to any other Holder, any court,
governmental body having jurisdiction over such Holder, to the National
Association of Insurance Commissioners or similar organizations, as may be
required or appropriate in response to any summons or subpoena in connection
with any litigation, to the extent necessary to comply with any law, order,
regulation or ruling applicable to such Holder, to any rating agency, in order
to protect its investment hereunder, or to any Person which shall, or shall have
any right or obligation to, succeed to all or any part of such Holder's interest
in any of the Securities and this Agreement or to any actual or prospective
purchaser or assignee thereof.
[Signature pages follow]
48
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
set forth below as of the date first written above.
DIMAC HOLDINGS, INC.
By: /s/ Martin R. Lewis
----------------------------
Name: Martin R. Lewis
--------------------------
Title: Chief Executive Officer
-------------------------
DIMAC CORPORATION
By: /s/ Martin R. Lewis
----------------------------
Name: Martin R. Lewis
--------------------------
Title: Chief Executive Officer
-------------------------
<PAGE>
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT PARTNERS, L.P.
By: TCW/CRESCENT MEZZANINE, L.L.C.,
its general partner or managing owner
By: /s/ Jean-Marc Chapus
------------------------------
Name: Jean-Marc Chapus
----------------------------
Title: Managing Director
---------------------------
By: /s/ John C. Rocchio
------------------------------
Name: John C. Rocchio
----------------------------
Title: Managing Director
---------------------------
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISORS (BERMUDA), LIMITED,
as General Partner
By: /s/ Jean-Marc Chapus
------------------------------
Name: Jean-Marc Chapus
----------------------------
Title: Managing Director
---------------------------
By: TCW INVESTMENT MANAGEMENT
COMPANY, as Investment Advisor
By: /s/ John C. Rocchio
------------------------------
Name: John C. Rocchio
----------------------------
Title: Managing Director
---------------------------
<PAGE>
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW INVESTMENT MANAGEMENT
COMPANY, its investment advisor
By: /s/ Jean-Marc Chapus
-------------------------------
Name: Jean-Marc Chapus
-----------------------------
Title: Managing Director
----------------------------
By: /s/ John C. Rocchio
-------------------------------
Name: John C. Rocchio
-----------------------------
Title: Managing Director
----------------------------
<PAGE>
Annex A
DIMAC HOLDINGS, INC.
WARRANT AGREEMENT
This Warrant Agreement dated as of October 22, 1998 (this "Agreement") is
entered into by and among DIMAC Holdings, Inc., a Delaware corporation ("DIMAC
Holdings"), and the purchasers party hereto (each, a "Purchaser" and
collectively, the "Purchasers"). All capitalized terms used but not defined
herein shall have the respective meanings ascribed to such terms in the
Securities Purchase Agreement (as hereinafter defined).
WHEREAS, pursuant to a Securities Purchase Agreement dated as of the date
hereof (the "Securities Purchase Agreement") by and among DIMAC Holdings, DIMAC
Corporation, a Delaware corporation, and the Purchasers, DIMAC Holdings proposes
to issue to the Purchasers certain Warrants, as hereinafter described (the
"Warrants"), to purchase an aggregate of 28,205 shares (subject to adjustment)
of Common Stock (the "Common Stock"), $0.001 par value, of DIMAC Holdings (the
shares of Common Stock and other securities issuable upon exercise of the
Warrants being referred to herein as the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
Section 1. Warrant Certificates. DIMAC Holdings will issue and deliver a
certificate or certificates evidencing the Warrants (the "Warrant Certificates")
pursuant to the terms of the Securities Purchase Agreement. Such Warrant
Certificates shall be substantially in the form set forth as Exhibit A attached
hereto. Warrant Certificates shall be dated the date of issuance by DIMAC
Holdings.
Section 2. Execution of Warrant Certificates. Warrant Certificates shall
be signed on behalf of DIMAC Holdings by its Chairman of the Board, Chief
Executive Officer, President or a Vice President. Each such signature upon
the Warrant Certificates may be in the form of a facsimile signature of the
present or any future Chairman of the Board, Chief Executive Officer,
President or Vice President, and may be imprinted or otherwise reproduced on
the Warrant Certificates and for that purpose DIMAC Holdings may adopt and
use the facsimile signature of any person who shall have been Chairman of the
Board, Chief Executive Officer, President or Vice President, notwithstanding
the fact that at the time the Warrant Certificates shall be delivered or
disposed of he shall have ceased to hold such office. Each Warrant
Certificate shall also be signed on behalf of DIMAC Holdings by a manual or
facsimile signature of its Secretary or an Assistant Secretary.
Section 3. Registration. DIMAC Holdings shall number and register the
Warrant Certificates and the Warrant Shares in registers (the "Warrant Register"
and the "Warrant Shares Register," respectively) as they are issued. DIMAC
Holdings may deem and treat the registered holder(s) from time to time of the
Warrant Certificates (the "Holders") as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Warrants shall be registered initially in such name or names as
the Purchasers shall designate.
Section 4. Restrictions on Transfer; Registration of Transfers. Prior to any
proposed transfer of the Warrants or the Warrant Shares, unless such transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), the transferring Holder will, if
requested by DIMAC Holdings, deliver to DIMAC Holdings an opinion of counsel,
reasonably satisfactory in form and substance to DIMAC Holdings, to the effect
that the Warrants or Warrant Shares, as applicable, may be sold or otherwise
transferred without registration
A-1
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under the Securities Act; provided, however, that with respect to transfers by a
Holder to its Affiliate or Affiliates, no such opinion shall be required. A
transfer made by a Holder which is a state-sponsored employee benefit plan to a
successor trust or fiduciary pursuant to a statutory reconstitution shall be
expressly permitted and no opinions of counsel shall be required in connection
therewith. Upon original issuance thereof, and until such time as the same shall
have been registered under the Securities Act or sold pursuant to Rule 144
promulgated thereunder (or any similar rule or regulation), each Warrant
Certificate shall bear the legend included on the first page of Exhibit A,
unless in the opinion of such counsel, such legend is no longer required by the
Securities Act or by the Stockholders Agreement, as applicable.
Subject to the conditions to transfer contained in the Stockholders
Agreement, DIMAC Holdings shall from time to time register the transfer of any
outstanding Warrant Certificates in the Warrant Register to be maintained by
DIMAC Holdings upon surrender thereof accompanied by a written instrument or
instruments of transfer in form reasonably satisfactory to DIMAC Holdings, duly
executed by the registered Holder or Holders thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee Holder(s) and the surrendered Warrant Certificate shall be canceled
and disposed of by DIMAC Holdings. Any attempted transfer in violation of the
Stockholders Agreement shall be null and void ab initio.
Notwithstanding any contrary provision of Section 5 of the Securities
Purchase Agreement, so long as any Warrants remain outstanding and so long as
DIMAC Holdings shall not have registered any of its securities pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, or filed a
registration statement pursuant to the requirements of the Securities Act, upon
written request, DIMAC Holdings will deliver to each Holder the financial
statements, reports and compliance certificates specified by Sections 5.2 and
5.3 of the Securities Purchase Agreement, regardless of whether any Notes (as
defined in the Securities Purchase Agreement) remain unpaid and outstanding.
Section 5. Warrants; Exercise of Warrants.
(a) Subject to the terms of this Agreement, each Holder shall have the
right, which may be exercised commencing on the date of issuance of the
Warrants and until 5:00 p.m., New York time, on October 22, 2009 (the
"Expiration Date"), to receive from DIMAC Holdings the number of fully paid
and nonassessable Warrant Shares (and such other consideration) which the
Holder may at the time be entitled to receive on exercise of such Warrants
and payment of the Exercise Price then in effect for such Warrant Shares.
Each Warrant not exercised prior to 5:00 p.m., New York time, on the
Expiration Date shall become void and all rights thereunder and all rights
in respect thereof under this Agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants,
except as otherwise expressly provided herein.
(b) In the event that Holders would have any obligation to sell their
Warrant Shares under the terms of the Stockholders Agreement if they were
holders of Common Stock, the Warrants shall be deemed exercised and the
Holders shall sell their Warrant Shares as required by the terms of the
Stockholders Agreement. If a Holder shall fail to comply with the terms of
this Agreement or the Stockholders Agreement in connection with the
surrender of Warrants or the sale of Warrant Shares as contemplated by the
Stockholders Agreement such Holder shall receive only the consideration
(without interest) which such Holder would have received had such Holder
complied with such terms and the Warrants shall cease to have any other
rights.
A-2
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(c) The price at which each Warrant shall be exercisable (the "Exercise
Price") shall initially be $0.01 per share, subject to adjustment pursuant
to the terms hereof.
(d) A Warrant may be exercised upon surrender to DIMAC Holdings at its
office designated for such purpose (as provided for in Section hereof) of
the Warrant Certificate or Certificates to be exercised with the form of
election to purchase attached thereto duly filled in and signed, and upon
payment to DIMAC Holdings of the Exercise Price for the number of Warrant
Shares in respect of which such Warrants are then exercised. Payment of the
aggregate Exercise Price shall be made in cash or by certified or official
bank check payable to the order of DIMAC Holdings.
(e) Subject to the provisions of Section hereof, upon such surrender of
Warrant Certificates and payment of the Exercise Price, DIMAC Holdings
shall issue and cause to be delivered, as promptly as practicable, to or
upon the written order of the Holder and in such name or names as such
Holder may designate a certificate or certificates for the number of full
Warrant Shares issuable upon the exercise of such Warrants (and such other
consideration as may be deliverable upon exercise of such Warrants)
together with cash for fractional Warrant Shares as provided in Section
hereof. The certificate or certificates for such Warrant Shares shall be
deemed to have been issued and the person so named therein shall be deemed
to have become a holder of record of such Warrant Shares as of the date of
the surrender of such Warrants and payment of the Exercise Price,
irrespective of the date of delivery of such certificate or certificates
for Warrant Shares. DIMAC Holdings shall register the Warrant Shares in the
Warrant Shares Register, as provided in Section hereof, and shall from time
to time register the transfer of any outstanding Warrant Shares in the
Warrant Shares Register.
(f) Subject to the subsection (b) of this Section , each Warrant shall be
exercisable, at the election of the Holder thereof, either in full or from
time to time in part and, in the event that a Warrant Certificate is
exercised in respect of fewer than all of the Warrant Shares issuable on
such exercise at any time prior to the date of expiration of the Warrants,
a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions of this Section and of
Section hereof.
(g) All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by DIMAC Holdings. DIMAC Holdings shall keep
copies of this Agreement and any notices given or received hereunder
available for inspection by the Holders during normal business hours at its
office.
(h) In addition to and without limiting the rights of the Holder under the
terms hereof, at a Holder's option, a Warrant Certificate may be exercised
by being exchanged in whole or in part at any time or from time to time
prior to the Expiration Date for a number of shares of Common Stock having
an aggregate Specified Value (as defined in subsection (g) of Section
hereof) on the date of such exercise equal to the difference between (x)
the Specified Value of the number of Warrant Shares in respect of which
such Warrant Certificate is then exercised and (y) the aggregate Exercise
Price for such shares in effect at such time. The following equation
illustrates how many Warrant Shares would then be issued upon exercise
pursuant to this subsection:
X = {(SV)(N) - (PSP)(N)} OVER {SV}
A-3
<PAGE>
where:
SV = Specified Value per Warrant Share at date of exercise.
PSP = Per share Exercise Price at date of exercise.
N = Number of Warrant Shares in respect of which the Warrant
Certificate is being exercised by exchange.
X = Number of Warrant Shares issued upon exercise by exchange.
Upon any such exercise, the number of Warrant Shares purchasable upon
exercise of such Warrant Certificate shall be reduced by the number of
Warrant Shares so exchanged and, if a balance of purchasable Warrant Shares
remain after such exercise, DIMAC Holdings shall execute and deliver to the
holder hereof a new Warrant for such balance of Warrant Shares.
No payment of any cash or other consideration to DIMAC Holdings shall
be required from the Holder of a Warrant in connection with any exercise of
thereof by exchange pursuant to this subsection. Such exchange shall be
effective upon the date of receipt by DIMAC Holdings of the original
Warrant surrendered for cancellation and a written request from the Holder
thereof that the exchange pursuant to this subsection be made, or at such
later date as may be specified in such request. No fractional shares
arising out of the above formula for determining the number of Warrant
Shares issuable in such exchange shall be issued, and DIMAC Holdings shall
in lieu thereof make payment to the Holder of cash in the amount of such
fraction multiplied by the Specified Value of a Warrant Share on the date
of the exchange.
Section 6. Payment of Taxes. DIMAC Holdings will pay all documentary stamp
taxes and other governmental charges (excluding all foreign, federal or state
income, franchise, property, estate, inheritance, gift or similar taxes) in
connection with the issuance or delivery of the Warrants hereunder, as well as
all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. DIMAC
Holdings shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by DIMAC Holdings, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
DIMAC Holdings the amount of any such tax, or it is established to the
reasonable satisfaction of DIMAC Holdings that any such tax has been paid.
Section 7. Mutilated or Missing Warrant Certificates. If a mutilated Warrant
Certificate is surrendered to DIMAC Holdings, or if the Holder of a Warrant
Certificate claims and submits an affidavit or other evidence satisfactory to
DIMAC Holdings to the effect that the Warrant Certificate has been lost,
destroyed or wrongfully taken, DIMAC Holdings shall issue a replacement Warrant
Certificate. If required by DIMAC Holdings such Holder must provide an indemnity
bond, or other form of indemnity, sufficient in the judgment of DIMAC Holdings
to protect DIMAC Holdings from any loss which it may suffer if a Warrant
Certificate is replaced. If any Purchaser or any other institutional Holder (or
nominee thereof) is the owner of any such lost, stolen or destroyed Warrant
Certificate, then the affidavit of an authorized officer of such owner, setting
forth the fact of loss, theft or destruction and of its ownership of the Warrant
Certificate at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Warrant Certificate other than
the unsecured written agreement of such owner to indemnify DIMAC Holdings or, at
the option of such Purchaser or other institutional Holder, an indemnity bond in
the amount of the Specified Value of
A-4
<PAGE>
the Warrant Shares for which such Warrant Certificate was exercisable.
Section 8. Reservation of Warrant Shares. DIMAC Holdings shall at all times
reserve and keep available, free from preemptive rights (except as otherwise
provided herein), out of the aggregate of its authorized but unissued Common
Stock or its authorized and issued Common Stock held in its treasury, for the
purpose of enabling it to satisfy any obligation to issue Warrant Shares upon
exercise of Warrants, the maximum number of shares of Common Stock which may
then be deliverable upon the exercise of all outstanding Warrants, but such
shares of Common Stock shall be subject to the terms and conditions of the
Stockholders Agreement.
DIMAC Holdings or, if appointed, the transfer agent for the Common Stock
and each transfer agent for any shares of DIMAC Holdings' capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. DIMAC Holdings shall
keep a copy of this Agreement on file with any such Transfer Agent. DIMAC
Holdings will supply any such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available all other
consideration that may be deliverable upon exercise of the Warrants. DIMAC
Holdings will furnish any such Transfer Agent a copy of all notices of
adjustments and certificates related thereto, transmitted to each Holder
pursuant to Section hereof.
Before taking any action which would cause an adjustment pursuant to
Section hereof to reduce the Exercise Price below the then par value (if any) of
the Warrant Shares, DIMAC Holdings shall take any corporate action which may, in
the opinion of its counsel, be necessary in order that DIMAC Holdings may
validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
DIMAC Holdings covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights (except as may be granted by this
Agreement) and free, subject to Section hereof, from all taxes, liens, charges
and security interests with respect to the issue thereof, but such Warrant
Shares shall be subject to the terms and conditions of the Stockholders
Agreement.
Section 9. Adjustment of Exercise Price and Warrant Number. The number of
shares of Common Stock issuable upon the exercise of each Warrant (the "Warrant
Number") is initially one. The Warrant Number is subject to adjustment from time
to time upon the occurrence of the events enumerated in, or as otherwise
provided in, this Section .
(a) Adjustment for Change in Capital Stock. If DIMAC Holdings:
(i) pays a dividend or makes a distribution on its Common Stock in
shares of its Common Stock;
(ii) subdivides or reclassifies its outstanding shares of Common Stock
into a greater number of shares;
(iii) combines or reclassifies its outstanding shares of Common Stock
into a smaller number of shares;
(iv) makes a distribution on Common Stock in shares of its capital
stock other
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than Common Stock; or
(v) issues by reclassification of its Common Stock any shares of its
capital stock (other than reclassifications arising solely as a result
of a change in the par value or no par value of the Common Stock);
then the Warrant Number in effect immediately prior to such action shall be
proportionately adjusted so that the Holder of any Warrant thereafter
exercised may receive the aggregate number and kind of shares of capital
stock of DIMAC Holdings which it would have owned immediately following
such action if such Warrant had been exercised immediately prior to such
action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or
reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in
an adjustment under subsection (b) or (c) of this Section , no further
adjustment shall be made under this subsection (a).
DIMAC Holdings shall not issue shares of Common Stock as a dividend or
distribution on any class of capital stock other than Common Stock, unless
the Holders also receive such dividend or distribution on a ratable basis
or the appropriate adjustment to the Warrant Number is made under this
Section .
(b) Adjustment for Rights Issue. If DIMAC Holdings distributes (and
receives no consideration therefor) any rights, options or warrants
(whether or not immediately exercisable) to all holders of any class of its
Common Stock entitling them to purchase shares of Common Stock at a price
per share less than the Specified Value per share on the record date
relating to such distribution, the Warrant Number shall be adjusted in
accordance with the following formula:
W'=~W `TIMES` {O `+` N} OVER {O `+ `{{N `TIMES` P} OVER M}}
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
for any such distribution.
O = the number of shares of Common Stock outstanding on the
record date for any such distribution.
N = the number of additional shares of Common Stock issuable
upon exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Specified Value per share of Common Stock on the record
date for any such distribution.
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The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after
the record date for the determination of stockholders entitled to receive
the rights, options or warrants. If at the end of the period during which
such rights, options or warrants are exercisable, not all rights, options
or warrants shall have been exercised, the adjusted Warrant Number shall be
immediately readjusted to what it would have been if "N" in the above
formula had been the number of shares actually issued.
(c) Adjustment for Other Distributions. If DIMAC Holdings distributes to
all holders of any class of its Common Stock (i) any evidences of
indebtedness of DIMAC Holdings or any of its subsidiaries, (ii) any assets
of DIMAC Holdings or any of its subsidiaries, or (iii) any rights, options
or warrants to acquire any of the foregoing or to acquire any other
securities of DIMAC Holdings, the Warrant Number shall be adjusted in
accordance with the following formula:
W'=~W `TIMES` {M OVER {M`-`F}}
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the record date
mentioned below.
M = the Specified Value per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date mentioned below of
the shares, the indebtedness, assets, rights, options or
warrants distributable to the holder of one share of Common
Stock.
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
distribution. If an adjustment is made pursuant to this subsection (c) as a
result of the issuance of rights, options or warrants and at the end of the
period during which any such rights, options or warrants are exercisable,
not all such rights, options or warrants shall have been exercised, the
adjusted Warrant Number shall be immediately readjusted as if "F" in the
above formula was the fair market value on the record date of the
indebtedness or assets actually distributed upon exercise of such rights,
options or warrants divided by the number of shares of Common Stock
outstanding on the record date.
This subsection does not apply to any transaction described in
subsection (a) of this Section or to rights, options or warrants referred
to in subsection (b) of this Section .
(d) Adjustment for Common Stock Issue. If DIMAC Holdings issues shares of
Common Stock for a consideration per share less than the Specified Value
per share on the date DIMAC Holdings fixes the offering price of such
additional shares, the Warrant Number shall be adjusted in accordance with
the following formula:
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W'=~W `TIMES` {A OVER {O `+ `{P OVER M}}}
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock.
P = the aggregate consideration received for the issuance of
such additional shares of Common Stock.
M = the Specified Value per share of Common Stock on the date of
issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common
Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to any of the transactions
described in subsection (a) of this Section or the issuances described
below:
(i) The issuance of Common Stock upon the conversion, exercise or
exchange of any Convertible Securities (as defined below), including
the Warrants, outstanding on the date hereof or for which an
adjustment has been made pursuant to this Section ; or
(ii) (A) The grant of rights to purchase shares of Common Stock
representing, in the aggregate (taking into account all such grants
since October 22, 1998), up to 5% of the outstanding shares of Common
Stock, and the issuance of such shares of Common Stock upon exercise
of such rights, to directors or members of management of DIMAC
Holdings and its subsidiaries pursuant to management incentive plans,
stock option and stock purchase plans or agreements adopted by the
board of directors of DIMAC Holdings and (B) following the acquisition
by DIMAC Holdings of any of the rights or shares referred to in clause
(A) the reissuance of any such acquired rights and the issuance of
shares of Common Stock upon exercise thereof.
(e) Adjustment for Convertible Securities Issue. If DIMAC Holdings issues
any options, warrants or other securities convertible into or exchangeable
or exercisable for Common Stock ("Convertible Securities") (other than
securities issued in transactions described in subsection (b) or (c) of
this Section ) for a consideration per share of Common Stock initially
deliverable upon conversion, exchange or exercise of such securities less
than the Specified Value per share on the date of issuance of such
securities, the Warrant Number shall be adjusted in accordance with the
following formula:
W'=~W `TIMES` {O `+` D} OVER {O `+ `{P OVER M}}
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where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to any such issuance.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the sum of the aggregate consideration received for the
issuance of such securities and the aggregate minimum
consideration receivable by DIMAC Holdings for issuance of
Common Stock upon conversion or in exchange for, or upon
exercise of, such securities.
M = the Specified Value per share of Common Stock on the date
of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable
upon conversion or in exchange for or upon exercise of such
securities at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when the conversion,
exchange or exercise rights of such securities have expired or been
terminated, then the adjusted Warrant Number shall promptly be readjusted
to the adjusted Warrant Number which would then be in effect had the
adjustment upon the issuance of such securities been made on the basis of
the actual number of shares of Common Stock issued upon conversion,
exchange or exercise of such securities. If the aggregate minimum
consideration receivable by DIMAC Holdings for issuance of Common Stock
upon conversion or in exchange for, or upon exercise of, such securities
shall be increased by virtue of provisions therein contained or upon the
arrival of a specified date or the happening of a specified event, then the
Warrant Number shall promptly be readjusted to the Warrant Number which
would then be in effect had the adjustment upon the issuance of such
securities been made on the basis of such increased minimum consideration.
This subsection (e) does not apply to the issuance of the Warrants or
to any of the transactions described in paragraph (b) of this Section or
excluded from the provisions of paragraph (d) of this Section .
(f) Adjustment for Tender Offer. If DIMAC Holdings or any subsidiary of
DIMAC Holdings consummates a tender offer for any Common Stock and
purchases shares pursuant to such tender offer for an aggregate
consideration having a fair market value (as determined reasonably and in
good faith by the board of directors of DIMAC Holdings and described in a
board resolution) as of the last time (the "Expiration Time") that tenders
may be made pursuant to such tender offer (as it shall have been amended)
that, together with (i) the aggregate of the cash plus the fair market
value (as determined reasonably and in good faith by the board of directors
of DIMAC Holdings and described in a board resolution) of the consideration
paid in respect of any other tender offer by DIMAC Holdings or any
subsidiaries of DIMAC Holdings for any Common Stock consummated within the
12 months
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preceding the Expiration Time and in respect of which no adjustment
pursuant to this subsection (f) has been made previously and (ii) the
aggregate amount of any distributions to all holders of Common Stock made
exclusively in cash within 12 months preceding the Expiration Time exceeds
5.0% of the product of the Specified Value per share immediately prior to
the Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time, the Warrant Number
shall be adjusted in accordance with the following formula:
W'=~W `TIMES` {M `TIMES` (O `-` N)} OVER {(M `TIMES`O)`-F}
where:
W' = the adjusted Warrant Number.
W = the Warrant Number immediately prior to the Expiration Time.
M = the Specified Value per share of Common Stock immediately
prior to the Expiration Time.
O = the number of shares of Common Stock outstanding (including
any tendered shares) at the Expiration Time.
F = the fair market value of the aggregate consideration paid
for all shares of Common Stock purchased pursuant to the
tender offer.
N = the number of shares of Common Stock accepted for payment
in such tender offer.
If the number of shares accepted for payment in such tender offer or
the aggregate consideration payable therefor have not been finally
determined by the opening of business on the day following the Expiration
Time, the adjustment required by this subsection (f) shall, pending such
final determination, be made based upon the preliminary announced results
of such tender offer, and, after such final determination shall have been
made, the adjustment required by this subsection (f) shall be based upon
the number of shares accepted for payment in such tender offer and the
aggregate consideration payable therefor as so finally determined.
(g) "Specified Value" per share of Common Stock or of any other security
(herein collectively referred to as a "Security") at any date shall be:
(i) if the Security is not registered under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (1) the value of the
Security determined in good faith by the board of directors of DIMAC
Holdings and certified in a board resolution, based on the most
recently completed arm's-length transaction between DIMAC Holdings and
a person other than an Affiliate of DIMAC Holdings in which such
determination is necessary and the closing of which occurs on such
date or shall
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have occurred within the six months preceding such date, (2) if no
such transaction shall have occurred on such date or within such
six-month period, the value of the Security most recently determined
as of a date within the six months preceding such date by an
Independent Financial Expert or (3) if neither clause (1) nor (2) is
applicable, the value of the Security as mutually agreed by DIMAC
Holdings and Holders of at least a majority of the Warrants
outstanding; provided, however, that if DIMAC Holdings and such
Holders are unable to mutually agree upon such value, DIMAC Holdings
shall select an Independent Financial Expert who shall determine the
value of such Security;
(ii) if the Security is registered under the Exchange Act, the average
of the daily market prices for each business day during the period
commencing 10 business days before such date and ending on the date
one day prior to such date or, if the Security has been registered
under the Exchange Act for less than 30 consecutive business days
before such date, then the average of the daily market prices (as
hereinafter defined) for all of the business days before such date for
which daily market prices are available. If the market price is not
determinable for at least 15 business days in such period, the
Specified Value of the Security shall be determined as if the Security
was not registered under the Exchange Act; or
(iii) if the Security is registered under the Exchange Act and is
being sold in a firm commitment underwritten public offering
registered under the Securities Act, the public offering price of
such Security set forth on the cover page of the prospectus relating
to such offering.
The "market price" for any Security on each business day means: (A) if
such Security is listed or admitted to trading on any securities exchange,
the closing price, regular way, on such day on the principal exchange on
which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day or (B) if such
Security is not then listed or admitted to trading on any securities
exchange, the last reported sale price on such day, or if there is no such
last reported sale price on such day, the average of the closing bid and
the asked prices on such day, as reported by a reputable quotation source
designated by DIMAC Holdings. If there are no such prices on a business
day, then the market price shall not be determinable for such business day.
In the case of Common Stock, if more than one class of Common Stock is
outstanding, the "Specified Value" shall be the highest of the Specified
Values per share of such classes of Common Stock.
"Independent Financial Expert" shall mean a nationally recognized
investment banking firm selected by DIMAC Holdings (i) that does not (and
whose directors, officers, employees and Affiliates do not) have a direct
or indirect financial interest in DIMAC Holdings or any of its Affiliates,
(ii) that has not been, and, at the time it is called upon to serve as an
Independent Financial Expert under this Agreement is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or
officer of DIMAC Holdings, (iii) that has not been retained by DIMAC
Holdings or any of its Affiliates for any purpose, other than to perform an
equity valuation, within the preceding twelve months, and (iv) that, in the
reasonable judgment of the board of directors of DIMAC Holdings, is
otherwise qualified to serve as an independent financial advisor. Any such
person may receive customary compensation and indemnification by DIMAC
Holdings for opinions or services it provides as an Independent Financial
Expert.
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(h) Consideration Received. For purposes of any computation respecting
consideration received pursuant to subsections (d) and (e) of this
Section , the following shall apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash (without any
deduction being made for any commissions, discounts or other expenses
incurred by DIMAC Holdings for any underwriting of the issue or
otherwise in connection therewith);
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof
(irrespective of the accounting treatment thereof) as determined in
good faith by the board of directors of DIMAC Holdings; and
(3) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares
of Common Stock, the aggregate consideration received therefor shall
be deemed to be the consideration received by DIMAC Holdings for the
issuance of such securities plus the additional minimum consideration,
if any, to be received by DIMAC Holdings upon the conversion, exchange
or exercise thereof (the consideration in each case to be determined
in the same manner as provided in clauses (1) and (2) of this
subsection).
(i) When De Minimis Adjustment May Be Deferred. No adjustment in the
Warrant Number need be made unless the adjustment would require an increase
or decrease of at least 0.5% in the Warrant Number. Any adjustment that is
not made shall be carried forward and taken into account in any subsequent
adjustment, provided that no such adjustment shall be deferred beyond the
date on which a Warrant is exercised.
All calculations under this Section shall be made to the nearest
1/100th of a share.
(j) Adjustment to Exercise Price. Upon each adjustment to the Warrant
Number pursuant to this Section , the Exercise Price shall be adjusted so
that it is equal to the Exercise Price in effect immediately prior to such
adjustment multiplied by a fraction, the numerator of which is the Warrant
Number in effect immediately prior to such adjustment, and the denominator
of which is the Warrant Number in effect immediately after such adjustment.
(k) When No Adjustment Required. If an adjustment is made upon the
establishment of a record date for a distribution subject to subsection
(a), (b) or (c) of this Section and such distribution is subsequently
cancelled, the Warrant Number and Exercise Price then in effect shall be
readjusted, effective as of the date when the board of directors of DIMAC
Holdings determines to cancel such distribution, to that which would have
been in effect if such record date had not been fixed.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants
are exercisable. Interest will not accrue on the cash.
(l) Notice of Adjustment. Whenever the Warrant Number or Exercise Price is
adjusted,
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DIMAC Holdings shall provide the notices required by Section hereof.
(m) Voluntary Reduction. DIMAC Holdings from time to time may reduce the
Exercise Price by any amount for any period of time (including, without
limitation, permanently) if the period is at least 20 days and if the
reduction is irrevocable during the period.
Whenever the Exercise Price is reduced, DIMAC Holdings shall mail to
the Holders a notice of the reduction. DIMAC Holdings shall mail the notice
at least 15 days before the date the reduced Exercise Price takes effect.
The notice shall state the reduced Exercise Price and the period it will be
in effect.
A reduction of the Exercise Price under this subsection (m) (other
than a permanent reduction) does not change or adjust the Exercise Price
otherwise in effect for purposes of subsections (a), (b), (c), (d), (e), or
(f) of this Section .
(n) Reorganizations. In case of any capital reorganization, other than in
the cases referred to in subsections (a), (b), (c), (d), (e) or (f) of this
Section , or the consolidation or merger of DIMAC Holdings with or into
another corporation (other than a merger or consolidation in which DIMAC
Holdings is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock into shares of
other stock or other securities or property), or the sale of the property
of DIMAC Holdings as an entirety or substantially as an entirety
(collectively, such actions being hereinafter referred to as
"Reorganizations"), there shall thereafter be deliverable upon exercise of
any Warrant (in lieu of the number of shares of Common Stock theretofore
deliverable) the number of shares of stock or other securities or property
to which a holder of the number of shares of Common Stock that would
otherwise have been deliverable upon the exercise of such Warrant would
have been entitled upon such Reorganization if such Warrant had been
exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the
board of directors of DIMAC Holdings, whose determination shall be
described in a duly adopted resolution certified by DIMAC Holdings'
Secretary or Assistant Secretary, shall be made in the application of the
provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be
applicable, as nearly as possible, in relation to any shares or other
property thereafter deliverable upon exercise of Warrants.
DIMAC Holdings shall not effect any such Reorganization unless prior
to or simultaneously with the consummation thereof the successor
corporation (if other than DIMAC Holdings) resulting from such
Reorganization or the corporation purchasing or leasing such assets or
other appropriate corporation or entity shall expressly assume, by a
supplemental Warrant Agreement or other acknowledgment executed and
delivered to the Holder(s), the obligation to deliver to each such Holder
such shares of stock, securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase, and all
other obligations and liabilities under this Agreement.
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<PAGE>
(o) Form of Warrants. Irrespective of any adjustments in the Exercise
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants theretofore or thereafter issued may continue to express
the same price and number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
(p) Other Dilutive Events. In case any event shall occur as to which the
provisions of this Section are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights
represented by the Warrants in accordance with the essential intent and
principles of such sections, then, in each such case, DIMAC Holdings shall
make a good faith adjustment to the Exercise Price and Warrant Number into
which each Warrant is exercisable in accordance with the intent of this
Section and, upon the written request of the Holders of a majority of the
Warrants, shall appoint a firm of independent certified public accountants
of recognized national standing (which may be the regular auditors of DIMAC
Holdings), which shall give their opinion upon the adjustment, if any, on a
basis consistent with the essential intent and principles established in
this Section , necessary to preserve, without dilution, the purchase rights
represented by these Warrants. Upon receipt of such opinion, DIMAC Holdings
shall promptly mail a copy thereof to the Holder of each Warrant and shall
make the adjustments described therein.
(q) Miscellaneous. For purpose of this Section the term "shares of Common
Stock" shall mean (i) shares of any class of stock designated as Common
Stock of DIMAC Holdings as of the date of this Agreement, (ii) shares of
any other class of stock resulting from successive changes or
reclassification of such shares consisting solely of changes in par value,
or from par value to no par value, or from no par value to par value and
(iii) shares of Common Stock of DIMAC Holdings or options, warrants or
rights to purchase Common Stock of DIMAC Holdings or securities convertible
into or exchangeable for shares of Common Stock of DIMAC Holdings
outstanding on the date hereof and shares of Common Stock of DIMAC Holdings
issued upon exercise, conversion or exchange of such securities. In the
event that at any time, as a result of an adjustment made pursuant to this
Section , the Holders of Warrants shall become entitled to purchase any
securities of DIMAC Holdings other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained
in subsections (a) through (p) of this Section , inclusive, and the
provisions of Sections , , and hereof with respect to the Warrant Shares or
the Common Stock shall apply on like terms to any such other securities.
Section 10. Fractional Interests. DIMAC Holdings shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section ,
be issuable on the exercise of any Warrants (or specified portion thereof),
DIMAC Holdings shall, pay an amount in cash equal to the fair market value of
the Warrant Share so issuable (as determined in good faith by the board of
directors of DIMAC Holdings), multiplied by such fraction.
Section 11. Notices to Holders. Upon any adjustment pursuant to Section
hereof, DIMAC Holdings shall promptly thereafter (i) cause to be filed with
DIMAC Holdings a certificate of an officer of DIMAC Holdings setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which
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such calculations are based, and (ii) cause to be given to each of the Holders
at its address appearing on the Warrant Register written notice of such
adjustments. Where appropriate, such notice may be given in advance and included
as a part of the notice required to be mailed under the other provisions of this
Section.
In case:
(a) DIMAC Holdings shall authorize the issuance to all holders of shares
of Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants;
(b) DIMAC Holdings shall authorize the distribution to all holders of
shares of Common Stock of assets, including cash, evidences of its
indebtedness, or other securities;
(c) of any consolidation or merger to which DIMAC Holdings is a party and
for which approval of any stockholders of DIMAC Holdings is required, or of
the conveyance or transfer of the properties and assets of DIMAC Holdings
substantially as an entirety, or of any reclassification or change of
Common Stock issuable upon exercise of the Warrants (other than a change in
par value, or from par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or a tender offer
or exchange offer for shares of Common Stock;
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of DIMAC Holdings;
(e) DIMAC Holdings proposes to take any action that would require an
adjustment to the Warrant Number or the Exercise Price pursuant to Section
hereof; or
(f) DIMAC Holdings proposes to take any action that would give rise to the
Holders' preemptive rights as specified in the Stockholders Agreement or
elsewhere.
then DIMAC Holdings shall cause to be given to each of the Holders at its
address appearing on the Warrant Register, at least 20 days prior to the
applicable record date hereinafter specified, or the date of the event in the
case of events for which there is no record date, in accordance with the
provisions of Section hereof, a written notice stating (i) the date as of which
the holders of record of shares of Common Stock to be entitled to receive any
such rights, options, warrants or distribution are to be determined, or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of Common Stock, or (iii) the date on which any such consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding up is expected
to become effective or consummated, and the date as of which it is expected that
holders of record of shares of Common Stock shall be entitled to exchange such
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up. The failure to give the notice required by this
Section or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up, or the vote upon any action.
Nothing contained in this Agreement or in any Warrant Certificate shall be
construed as conferring upon the Holders (prior to the exercise of such
Warrants) the right to vote or to consent or to receive notice as stockholder in
respect of the meetings of stockholders or the election of members of the board
of directors of DIMAC Holdings or any other matter, or any rights whatsoever
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as stockholders of DIMAC Holdings; provided, however, that nothing in the
foregoing provision is intended to detract from any rights explicitly granted to
any Holder hereunder.
Section 12. Notices to DIMAC Holdings and Holders. All notices and other
communications provided for or permitted hereunder shall be made by
hand-delivery, first-class mail, telex, telecopier, or overnight air courier
guaranteeing next day delivery:
(a) if to Purchasers, TCW/Crescent Mezzanine, L.L.C., 11100 Santa Monica
Boulevard, Suite 2000, Los Angeles, CA 90025, Telecopy No.: 310-235-5967,
Attention: John C. Rocchio, with a copy to Skadden, Arps, Slate, Meagher &
Flom, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Telecopy number (213) 687-5600, Attention: Rodrigo A. Guerra, Jr., Esq.;
and
(b) if to DIMAC Holdings, 5775 Peachtree Dunwoody Road, Suite C150,
Atlanta, GA 30342, Telecopy No. 404-705-9929, Attention: Chief Financial
Officer, with a copy to McCown De Leeuw & Co., 65 E. 55th Street., New
York, New York 10022, Telecopy No. (212) 355-6283, Attention: James L. Wu,
with a copy to White & Case LLP, 1155 Avenue of the Americas, New York, New
York 10036, Telecopy No. (212) 354-8113, Attention: Frank L. Schiff, 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 (so long as a
fax copy is sent and receipt acknowledged within two business days after
mailing); when answered back if telexed; when receipt acknowledged, if
telecopied; and the next business day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery. The parties may
change the addresses to which notices are to be given by giving five days' prior
written notice of such change in accordance herewith.
Section 13. Certain Supplements and Amendments. DIMAC Holdings may from time
to time supplement or amend this Agreement without the approval of any Holders
in order to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any other provision
herein, or to make any other provisions in regard to matters or questions
arising hereunder which DIMAC Holdings may deem necessary or desirable; provided
that any such supplement or amendment shall not in any way adversely affect the
interests of the Holders.
Section 14. Successors. All the covenants and provisions of this Agreement by
or for the benefit of DIMAC Holdings shall bind and inure to the benefit of its
respective successors and assigns hereunder.
Section 15. Termination. This Agreement shall terminate if all Warrants have
been exercised pursuant to this Agreement.
Section 16. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT AND
ALL ISSUES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW); PROVIDED THAT DETERMINATIONS RELATING TO CORPORATE LAW SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, DIMAC HOLDINGS
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
A-16
<PAGE>
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
WARRANTS, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. DIMAC
HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN
AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER OF A
WARRANT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST DIMAC HOLDINGS IN ANY OTHER
JURISDICTION.
Section 17. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than DIMAC Holdings and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of DIMAC Holdings and
the Holders.
Section 18. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 19. Amendments and Waivers. Subject to Section hereof, DIMAC
Holdings agrees it will not solicit, request or negotiate for or with respect
to any proposed waiver or amendment of any of the provisions of this
Agreement or any Warrant unless each Holder (irrespective of the amount of
Warrants then owned by it) shall substantially concurrently be informed
thereof by DIMAC Holdings and shall be afforded the opportunity of
considering the same and shall be supplied by DIMAC Holdings with sufficient
information (including any offer of remuneration) to enable it to make an
informed decision with respect thereto which information shall be the same as
that supplied to each other Holder. DIMAC Holdings will not directly or
indirectly, pay or cause to be paid any remuneration whether by way of
supplement or additional interest fee or otherwise, to any Holder as
consideration for or as an inducement to the entering into by any Holder of
any waiver or amendment of any of the terms and provisions of this Agreement
or any Warrant unless such remunerations is concurrently paid on the same
terms, ratably to each Holder whether or not such Holder signs such waiver or
consent, provided that the foregoing is not intended to preclude the adoption
of any amendment or the giving of any waiver by the Holders of a majority of
the Warrants to the extent permitted by the other provisions of this Section.
A-17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
DIMAC HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
----------------------------------
A-18
<PAGE>
Purchasers:
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT PARTNERS, L.P.
By: TCW/CRESCENT MEZZANINE, L.L.C.,
its general partner or managing owner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Initial Bank Account and Wire Instructions:
- -------------------------------------------
Bank of New York
700 South Flower Street
2nd Floor
Los Angeles, CA 90017
ABA: 021-000-018
BNF: IOC 565
BBI: A/C#355-744
Account Name: Mezzanine Master Wire Account
Attention: Yolanda Pena (213) 630-6437
Address for Notices:
- --------------------
TCW/Crescent Mezzanine, LLC
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attn: John C. Rocchio
Telecopy No.: (310) 235-596
A-19
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISORS (BERMUDA), LIMITED,
as General Partner
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
By: TCW INVESTMENT MANAGEMENT COMPANY,
as Investment Advisor
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Initial Bank Account and Wire Instructions:
- -------------------------------------------
Bank of New York
700 South Flower Street
2nd Floor
Los Angeles, CA 90017
ABA: 021-000-018
BNF: IOC 565
BBI: A/C#355-744
Account Name: Mezzanine Master Wire Account
Attention: Yolanda Pena (213) 630-6437
Address for Notices:
- --------------------
TCW/Crescent Mezzanine, LLC
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attn: John C. Rocchio
Telecopy No.: (310) 235-5967
A-20
<PAGE>
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW INVESTMENT MANAGEMENT COMPANY,
its investment advisor
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
Initial Bank Account and Wire Instructions:
- -------------------------------------------
Bank of New York
700 South Flower Street
2nd Floor
Los Angeles, CA 90017
ABA: 021-000-018
BNF: IOC 565
BBI: A/C#355-744
Account Name: Mezzanine Master Wire Account
Attention: Yolanda Pena (213) 630-6437
Address for Notices:
- --------------------
TCW/Crescent Mezzanine, LLC
11100 Santa Monica Boulevard
Suite 2000
Los Angeles, CA 90025
Attn: John C. Rocchio
Telecopy No.: (310) 235-5967
A-21
<PAGE>
EXHIBIT A [Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON OCTOBER
22, 1998, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED EXCEPT IN CONJUNCTION WITH AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR IN
COMPLIANCE WITH RULE 144 OR PURSUANT TO ANOTHER EXEMPTION THEREFROM. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT AGREEMENT,
THE STOCKHOLDERS AGREEMENT (AS DEFINED BELOW) AND A SECURITIES PURCHASE
AGREEMENT, EACH DATED AS OF OCTOBER 22, 1998, AMONG THE ISSUER OF SUCH
SECURITIES ("DIMAC HOLDINGS"), THE PURCHASERS REFERRED TO THEREIN AND THE OTHER
PARTIES THERETO. THE TRANSFER OF THIS CERTIFICATE IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SUCH AGREEMENTS AND DIMAC HOLDINGS RESERVES THE RIGHT TO REFUSE THE
TRANSFER OF THIS CERTIFICATE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH AGREEMENTS WILL BE FURNISHED WITHOUT
CHARGE BY DIMAC HOLDINGS TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SHARES ISSUABLE UPON EXERCISE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE PREFERENCES, POWERS, QUALIFICATIONS AND RIGHTS OF
EACH CLASS AND SERIES AS SET FORTH IN DIMAC HOLDINGS' CERTIFICATE OF
INCORPORATION. DIMAC HOLDINGS WILL FURNISH A COPY OF THE CERTIFICATE OF
INCORPORATION TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST.
No. _____ ______ Warrants
Warrant Certificate
DIMAC HOLDINGS, INC.
This Warrant Certificate certifies that ___________________________, or
registered assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above to purchase Common Stock, $0.001 par value (the
"Common Stock"), of DIMAC Holdings, Inc., a Delaware corporation ("DIMAC
Holdings"). Each Warrant entitles the holder upon exercise to receive from DIMAC
Holdings one fully paid and nonassessable share of Common Stock (a "Warrant
Share"), at the initial exercise price (the "Exercise Price") of $.01, payable
in lawful money of the United States of America, upon surrender of this Warrant
Certificate and payment of the Exercise Price at the office of DIMAC Holdings
designated for such purpose, but only subject to the conditions set forth herein
and in the Warrant Agreement referred to hereinafter. The Exercise Price and
number of Warrant Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events, as set forth in the Warrant
Agreement. Each Warrant is exercisable at any time prior to 5:00 p.m., New York
time, on October 22, 2209.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued or to be issued pursuant to a
Warrant Agreement dated as of October 22, 1998 (the "Warrant Agreement"), duly
executed and delivered by DIMAC Holdings, which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of DIMAC Holdings and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants. A copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to DIMAC Holdings. Capitalized terms used and not
defined herein shall have the meaning ascribed thereto in the Warrant Agreement.
The holder hereof may exercise the Warrants evidenced hereby under and
pursuant to the terms and conditions of the Warrant Agreement by surrendering
this Warrant Certificate, with the form of election to purchase
A-22
<PAGE>
set forth hereon (and by this reference made a part hereof) properly completed
and executed, and, to the extent the Warrants are not being exchanged pursuant
to the Warrant exchange provisions of Section 5 of the Warrant Agreement,
together with payment of the Exercise Price in cash or by certified or bank
check at the office of DIMAC Holdings designated for such purpose. In the event
that upon any exercise of Warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued by DIMAC Holdings to the holder hereof or its registered
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
The Warrant Agreement provides that upon the occurrence of certain events
the number of Warrant Shares issuable upon exercise of a Warrant and the
Exercise Price set forth on the face hereof may, subject to certain conditions,
be adjusted.
The holder hereof will have certain registration rights and other rights
and obligations with respect to the Warrant Shares as provided in the Amended
and Restated Stockholders Agreement dated as of October 22, 1998 by and among
DIMAC Holdings and the persons party thereto, as supplemented and modified
pursuant to the letter dated October 22, 1998 from DIMAC Holdings, McCown De
Leeuw & Co. IV, L.P. and McCown De Leeuw & Co. IV Associates, L.P. to the
Purchasers (such Amended and Restated Stockholders Agreement as so supplemented
and modified, being referred to herein as the "Stockholders Agreement"). Copies
of the Stockholders Agreement may be obtained by the holder hereof upon written
request to DIMAC Holdings.
Warrant Certificates, when surrendered at the office of DIMAC Holdings by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of DIMAC Holdings a new Warrant Certificate or Warrant Certificates of
like tenor and evidencing in the aggregate a like number of Warrants shall be
issued to the transferee(s) in exchange for this Warrant Certificate, subject to
the limitations provided in the Warrant Agreement, without charge except for any
tax or other governmental charge imposed in connection therewith.
DIMAC Holdings may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and DIMAC Holdings shall not be affected by any notice to the
contrary. Neither the Warrants nor this Warrant Certificate entitles any holder
hereof to any rights of a stockholder of DIMAC Holdings.
IN WITNESS WHEREOF, DIMAC Holdings has caused this Warrant Certificate to
be signed by its Chairman of the Board, Chief Executive Officer, President or
Vice President and by its Secretary or Assistant Secretary.
Dated: October 22, 1998
DIMAC HOLDINGS, INC.
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
By:
----------------------------------
Name:
----------------------------------
Title:
----------------------------------
A-23
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to:
(Check Applicable Box)
- receive shares of Common Stock and herewith tenders
--------------
payment for such shares to the order of DIMAC Holdings, Inc. in the
amount of $ in accordance with the terms hereof.
------------
- exchange Warrants for shares of Common Stock and herewith tenders
Warrants to purchase shares of Common Stock as payment
---------------
for such number of shares of Common Stock as determined in accordance
with the Warrant exchange procedures of Section 5 of the Warrant
Agreement.
The undersigned requests that a certificate for such shares be registered
in the name of , whose address is
-----------------------------------
and that such shares be delivered to
- -------------------------------
, whose address is
- ----------------------------
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
, whose address is ,
- ---------------------------- -------------------------------
and that such Warrant Certificate be delivered to ,
----------------------------
whose address is
Signature(s):
------------------------
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date:
--------------------
A-24
<PAGE>
FORM OF ASSIGNMENT
(To be signed only upon assignment of Warrant Certificate)
FOR VALUE RECEIVED, hereby sells, assigns and
----------------------------
transfers unto whose address is
----------------------------
and whose social security number or other
- ---------------------------------
identifying number is , the within Warrant Certificate,
-------------------------
together with all right, title and interest therein and to the Warrants
represented thereby, and does hereby irrevocably constitute and appoint
, attorney, to transfer said Warrant Certificate on
- ----------------------------
the books of the within-named corporation, with full power of substitution in
the premises.
Signature(s):
------------------------
NOTE: The above signature(s) must correspond with
the name written upon the face of this
Warrant Certificate in every particular,
without alteration or enlargement or any
change whatever. If this Warrant is held of
record by two or more joint owners, all such
owners must sign.
Date:
--------------------
A-25
<PAGE>
Annex B
DIMAC Holdings, Inc.
as issuer
151/2% Senior Notes due October 22, 2009
______________________________________________
INDENTURE
Dated as of October 22, 1998
______________________________________________
Wilmington Trust Company,
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Indenture
Act Section Section
- --------------- ---------
310(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
310(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
310(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
310(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
310(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
310(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
311(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
311(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
312(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
312(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
313(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
313(b)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
313(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
313(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3; 4.4
314(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
314(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4
314(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
314(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5
314(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
315(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5
315(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
315(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
315(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a)(last sentence). . . . . . . . . . . . . . . . . . . . . . . . . 2.9
316(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
316(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
316(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
316(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2
316(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
317(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
317(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
317(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
318(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N/A
318(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . .1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . .1
Section 1.2 Other Definitions. . . . . . . . . . . . . . . . . . . . 12
Section 1.3 Incorporation by Reference of Trust Indenture Act. . . . 13
Section 1.4 Rules of Construction. . . . . . . . . . . . . . . . . . 13
ARTICLE II THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.1 Form and Dating. . . . . . . . . . . . . . . . . . . . . 14
Section 2.2 Execution and Authentication . . . . . . . . . . . . . . 14
Section 2.3 Registrar, Paying Agent and Depository . . . . . . . . . 15
Section 2.4 Paying Agent to Hold Money in Trust. . . . . . . . . . . 16
Section 2.5 Holder Lists . . . . . . . . . . . . . . . . . . . . . . 16
Section 2.6 Transfer and Exchange. . . . . . . . . . . . . . . . . . 16
Section 2.7 Replacement Notes. . . . . . . . . . . . . . . . . . . . 19
Section 2.8 Outstanding Notes. . . . . . . . . . . . . . . . . . . . 19
Section 2.9 Treasury Notes . . . . . . . . . . . . . . . . . . . . . 20
Section 2.10 Temporary Notes. . . . . . . . . . . . . . . . . . . . . 20
Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . 21
Section 2.13 Legends. . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2.14 Deposit of Moneys. . . . . . . . . . . . . . . . . . . . 22
ARTICLE III REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.1 Notices to Trustee . . . . . . . . . . . . . . . . . . . 22
Section 3.2 Selection of Notes to Be Redeemed. . . . . . . . . . . . 22
Section 3.3 Notice of Redemption . . . . . . . . . . . . . . . . . . 22
Section 3.4 Effect of Notice of Redemption.. . . . . . . . . . . . . 23
Section 3.5 Deposit of Redemption Price. . . . . . . . . . . . . . . 23
Section 3.6 Notes Redeemed in Part.. . . . . . . . . . . . . . . . . 24
Section 3.7 Optional Redemption. . . . . . . . . . . . . . . . . . . 24
ARTICLE IV COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.1 Payment of Notes.. . . . . . . . . . . . . . . . . . . . 24
Section 4.2 Maintenance of Office or Agency. . . . . . . . . . . . . 24
Section 4.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4 Compliance Certificate . . . . . . . . . . . . . . . . . 26
Section 4.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.6 Stay, Extension and Usury Laws . . . . . . . . . . . . . 27
Section 4.7 Limitation on Restricted Payments. . . . . . . . . . . . 27
Section 4.8 Limitation on Restrictions on Dividends
from Restricted Subsidiaries . . . . . . . . . . . . . . 28
Section 4.9 Limitation on Additional Indebtedness and
Issuance of Disqualified Capital Stock . . . . . . . . . 29
Section 4.10 Limitation on Asset Sales. . . . . . . . . . . . . . . . 29
Section 4.11 Limitation on Transactions With Affiliates . . . . . . . 31
Section 4.12 Limitation on Liens. . . . . . . . . . . . . . . . . . . 32
Section 4.13 Corporate Existence. . . . . . . . . . . . . . . . . . . 32
Section 4.14 Repurchase Upon a Change of Control. . . . . . . . . . . 32
Section 4.15 Maintenance of Properties. . . . . . . . . . . . . . . . 34
Section 4.16 Maintenance of Insurance . . . . . . . . . . . . . . . . 34
-i-
<PAGE>
Section 4.17 Investment Company Act . . . . . . . . . . . . . . . . . 34
Section 4.18 Ownership of Subsidiaries. . . . . . . . . . . . . . . . 34
Section 4.19 Limitation on Business . . . . . . . . . . . . . . . . . 34
Section 4.20 Employee Plans . . . . . . . . . . . . . . . . . . . . . 35
Section 4.21 Compliance with Laws; Maintenance of Licenses. . . . . . 35
Section 4.22 Available Cash . . . . . . . . . . . . . . . . . . . . . 35
Section 4.23 Fiscal Years . . . . . . . . . . . . . . . . . . . . . . 35
Section 4.24 Limitation on Acquisitions . . . . . . . . . . . . . . . 35
Section 4.25 Limitation on Capital Expenditures . . . . . . . . . . . 36
Section 4.26 Inspection of Properties and Records.. . . . . . . . . . 36
ARTICLE V SUCCESSORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.1 When DIMAC Holdings May Merge, etc.. . . . . . . . . . . 36
Section 5.2 Successor Substituted. . . . . . . . . . . . . . . . . . 37
ARTICLE VI DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . 37
Section 6.1 Events of Default. . . . . . . . . . . . . . . . . . . . 37
Section 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . 39
Section 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . 40
Section 6.4 Waiver of Past Defaults. . . . . . . . . . . . . . . . . 40
Section 6.5 Control by Majority. . . . . . . . . . . . . . . . . . . 40
Section 6.6 Limitation on Suits. . . . . . . . . . . . . . . . . . . 40
Section 6.7 Rights of Holders to Receive Payment . . . . . . . . . . 41
Section 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . . 41
Section 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . . 41
Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . . 42
Section 6.12 Premium on Acceleration. . . . . . . . . . . . . . . . . 42
ARTICLE VII TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 7.1 Duties of Trustee. . . . . . . . . . . . . . . . . . . . 43
Section 7.2 Rights of Trustee. . . . . . . . . . . . . . . . . . . . 44
Section 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . 44
Section 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . 44
Section 7.5 Notice of Defaults . . . . . . . . . . . . . . . . . . . 45
Section 7.6 Reports by Trustee to Holders. . . . . . . . . . . . . . 45
Section 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . 45
Section 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . 46
Section 7.9 Successor Trustee by Merger, etc.. . . . . . . . . . . . 47
Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . . 47
Section 7.11 Preferential Collection of Claims Against DIMAC
Holdings . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE . . . . . . 47
Section 8.1 Discharge; Option to Effect Legal or Covenant
Defeasance . . . . . . . . . . . . . . . . . . . . . . . 47
Section 8.2 Legal Defeasance and Discharge . . . . . . . . . . . . . 47
Section 8.3 Covenant Defeasance. . . . . . . . . . . . . . . . . . . 48
Section 8.4 Conditions to Legal or Covenant Defeasance . . . . . . . 48
Section 8.5 Deposits to be Held in Trust; Other Miscellaneous
Provisions.. . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.6 Repayment to DIMAC Holdings. . . . . . . . . . . . . . . 50
Section 8.7 Reinstatement. . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE IX AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9.1 Without Consent of Holders . . . . . . . . . . . . . . . 50
Section 9.2 With Consent of Holders. . . . . . . . . . . . . . . . . 51
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Section 9.3 Compliance with Trust Indenture Act. . . . . . . . . . . 52
Section 9.4 Revocation and Effect of Consents. . . . . . . . . . . . 52
Section 9.5 Notation on or Exchange of Notes . . . . . . . . . . . . 52
Section 9.6 Trustee to Sign Amendments, etc. . . . . . . . . . . . . 53
ARTICLE X MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.1 Trust Indenture Act Controls . . . . . . . . . . . . . . 53
Section 10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 10.3 Communication by Holders with Other Holders. . . . . . . 54
Section 10.4 Certificate and Opinion as to Conditions Precedent . . . 54
Section 10.5 Statements Required in Certificate or Opinion. . . . . . 54
Section 10.6 Rules by Trustee and Agents. . . . . . . . . . . . . . . 55
Section 10.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . 55
Section 10.8 No Recourse Against Others . . . . . . . . . . . . . . . 55
Section 10.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . 55
Section 10.10 No Adverse Interpretation of Other Agreements. . . . . . 56
Section 10.11 Successors . . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.12 Severability . . . . . . . . . . . . . . . . . . . . . . 56
Section 10.13 Counterpart Originals. . . . . . . . . . . . . . . . . . 56
Section 10.14 Table of Contents, Headings, etc.. . . . . . . . . . . . 56
EXHIBIT A - Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B - Certificate to Be Delivered upon Exchange or Registration of
Transfer of Notes. . . . . . . . . . . . . . . . . . . . . . . . B-1
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This Indenture, dated as of October 22, 1998, is entered into by and
between DIMAC Holdings, Inc., a Delaware corporation ("DIMAC Holdings"), and
Wilmington Trust Company, a Delaware banking corporation, as trustee (the
"TRUSTEE").
DIMAC Holdings and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders (as defined below) of
DIMAC Holdings's 151/2% Senior Notes due October 22, 2009.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person or any of its
Restricted Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary of DIMAC Holdings or any of its Restricted Subsidiaries or assumed in
connection with the acquisition by DIMAC Holdings or any of its Restricted
Subsidiaries of assets from such Person, which Indebtedness was not incurred in
connection with or in anticipation of such acquisition.
"ACQUISITION" means the acquisition (including by way of a merger or
consolidation or in a series of related transactions) of all or substantially
all of the assets or property of another Person or of Voting Securities of such
Person representing a majority (more than 50%) of the aggregate Voting Power of
the outstanding Voting Securities of such Person by purchase in cash, exchange
of property or securities, or by any other method.
"ADVISORY SERVICES AGREEMENT" means the Advisory Services Agreement dated
as of June 26, 1998 by and between DIMAC Operating and MDC Management Company
IV, LLC, as in effect on the date thereof.
"AFFILIATE" means, with respect to any referenced Person, a Person (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such referenced Person, (ii)
which directly or indirectly through one or more intermediaries beneficially
owns or holds 5% or more of the combined voting power of the total Voting
Securities of such referenced Person or (iii) of which 5% or more of the
combined voting power of the total Voting Securities directly or indirectly
through one or more intermediaries is beneficially owned or held by such
referenced Person or a Subsidiary of such referenced Person. When used herein
without reference to any Person, Affiliate means an Affiliate of DIMAC Holdings.
For all purposes of this Indenture, McCown De Leeuw & Co., Inc. and its
Affiliates shall be considered an Affiliate of DIMAC Holdings. For purposes of
this definition, "control" when used with respect to any person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of Voting Securities, by agreement or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing. Notwithstanding the foregoing, for purposes of this Indenture, Trust
Company of the West and its Affiliates and any other Initial Purchaser and its
Affiliates shall not be considered Affiliates of DIMAC Holdings or any of its
Subsidiaries.
"AGENT" means any Registrar, Paying Agent or co-registrar.
"ASSET ACQUISITION" means (a) an Investment by DIMAC Holdings or any of its
Subsidiaries in any other Person pursuant to which such Person shall become a
Subsidiary of DIMAC Holdings, or shall be merged with or into DIMAC Holdings or
any of its Subsidiaries, or (b) the acquisition by DIMAC Holdings or any of its
Subsidiaries of the assets of any Person (other than a Subsidiary of DIMAC
Holdings) which
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constitute all or substantially all of the assets of such Person or comprise any
division or line of business of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
"ASSET SALE" means any sale, lease, transfer, issuance or other disposition
(or series of related sales, leases, transfers, issuances or dispositions that
are part of a common plan) of shares of Capital Stock of a Restricted Subsidiary
(other than directors' qualifying shares), property or other assets (each
referred to for the purposes of this definition as a "disposition") by DIMAC
Holdings or any Restricted Subsidiary (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to DIMAC Holdings or by DIMAC Holdings or a Restricted
Subsidiary to a Wholly Owned Subsidiary, (ii) a disposition of inventory or
Temporary Cash Investments in the ordinary course of business, (iii) a
disposition of obsolete equipment or equipment that is no longer useful in the
conduct of the business of DIMAC Holdings or the applicable Restricted
Subsidiary and that is disposed of in each case in the ordinary course of
business, (iv) the sale of other assets so long as the fair market value of the
assets disposed of pursuant to this clause (iv) does not exceed $1,000,000 in
the aggregate in any fiscal year and $5,000,000 in the aggregate prior to the
maturity date of the Notes, (v) for the purposes of Section 4.10 only, a
disposition subject to the covenant described under Section 4.7 and (vi) the
disposition of all or substantially all of the assets of DIMAC Holdings in the
manner permitted pursuant to the provisions described under Section 5.1, or any
disposition that constitutes a Change of Control pursuant to this Indenture.
"BANKRUPTCY LAW" means title 11, U.S. Code, or any similar Federal, state
or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors or any duly constituted
committee thereof of any corporation or of a corporate general partner of a
partnership and any similar body empowered to direct the affairs of any other
entity.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL EXPENDITURES" means, without duplication, for any Person for any
period, the aggregate of all expenditures including deposits (whether paid in
cash or property or accrued as liabilities and including the aggregate amount of
all principal payments due for the entire term of all Capital Leases that are
required to be capitalized on the balance sheet) made by such Person that, in
conformity with GAAP, are required to be included in the property, plant,
equipment, or similar fixed asset account.
"CAPITAL LEASE" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"CAPITAL STOCK" means any and all shares, interests, participations or
other equivalents (however designated) of corporate stock, including without
limitation all common stock and preferred stock.
"CAPITALIZED LEASE OBLIGATION" means, with respect to any Person for any
period, any obligation of such Person to pay rent or other amounts under a
Capital Lease; the amount of such obligation shall be the capitalized amount
thereof determined in accordance with GAAP.
"CASH EQUIVALENTS" means (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (b)
marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Corporation ("S&P") or Moody's
Investors Service, Inc. ("MOODY'S"); (c) commercial paper maturing no
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more than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-2 from S&P or at least P-2 from
Moody's; (d) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or any United States branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $250,000,000;
(e) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (a) above entered into
with any bank meeting the qualifications specified in clause (d) above; and (f)
investments in money market funds which invest substantially all their assets in
securities of the types described in clauses (a) through (e) of this definition.
"CHANGE OF CONTROL" means:
(i) prior to the first Qualified Public Equity Offering of the
DIMAC Holdings or DIMAC Operating, as the case may be, the Permitted
Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or indirectly, of majority Voting
Power of the Voting Securities of DIMAC Holdings and DIMAC Operating,
whether as a result of issuance of securities of DIMAC Holdings or DIMAC
Operating, as the case may be, any merger, consolidation, liquidation or
dissolution of DIMAC Holdings or DIMAC Operating, as the case may be, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (i) and clause (ii) below, the
Permitted Holders will be deemed to beneficially own any Voting Securities
of a Person (the "specified corporation") held by any other Person (the
"parent corporation") so long as the Permitted Holders beneficially own (as
so defined), directly or indirectly, a majority of the Voting Power of the
Voting Securities of the parent corporation);
(ii) following the first Qualified Public Equity Offering of
DIMAC Holdings or DIMAC Operating, as the case may be, any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than one or more Permitted Holders, is or becomes the beneficial owner (as
defined in clause (i) above, 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), directly or indirectly, of more than 35% of the total
Voting Power of the Voting Securities of DIMAC Holdings or DIMAC Operating,
as the case may be; PROVIDED, HOWEVER, that the Permitted Holders
beneficially own (as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the total Voting Power of the
Voting Securities of DIMAC Holdings or DIMAC Operating, as the case may be,
than such other person and do not have the right or ability by Voting
Power, contract or otherwise to elect or designate for election a majority
of the Board of Directors of DIMAC Holdings or DIMAC Operating, as the case
may be (for purposes of this clause (ii), such other person shall be deemed
to beneficially own any Voting Securities of a specified corporation held
by a parent corporation, if such other person "beneficially owns" (as
defined in this clause (ii)), directly or indirectly, more than 35% of the
Voting Power of the Voting Securities of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the Voting
Power of the Voting Securities of such parent corporation and do not have
the right or ability by Voting Power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of such parent
corporation);
(iii) individuals who on the Initial Issue Date constituted the
Board of Directors of DIMAC Holdings or the Board of Directors of DIMAC
Operating (together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of DIMAC
Holdings or DIMAC Operating, as the case may be, was approved by a vote of
a majority of the members of the Board of Directors of DIMAC Holdings or
DIMAC Operating, as the case may be, then still in office who were either
members of such Board of Directors on the Initial Issue Date or whose
election or nomination for election was previously so approved) cease for
any reason
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to constitute a majority of the Board of Directors of DIMAC Holdings or
DIMAC Operating, as the case may be, then in office;
(iv) the merger or consolidation of DIMAC Holdings or DIMAC
Operating with or into another Person or the merger of another Person with
or into DIMAC Holdings or DIMAC Operating, or the sale of all or
substantially all the assets of DIMAC Holdings or DIMAC Operating to
another Person (other than a Person that is controlled by the Permitted
Holders), and, in the case of any such merger or consolidation, the
securities of DIMAC Holdings or DIMAC Operating that are outstanding
immediately prior to such transaction and which represent 100% of the
aggregate Voting Power of the Voting Securities of DIMAC Holdings or DIMAC
Operating, as the case may be, are changed into or exchanged for cash,
securities or property, unless pursuant to such transaction such securities
are changed into or exchanged for, in addition to any other consideration,
securities of the surviving corporation that represent immediately after
such transaction, at least a majority of the aggregate Voting Power of the
Voting Securities of the surviving corporation;
(v) any transaction, as the result of which DIMAC Holdings owns
(or has the exclusive power to vote with respect to), directly or
indirectly, less than 100% of the Capital Stock of DIMAC Operating; or
(vi) at any time after the Initial Issue Date, DIMAC Operating
(or any successor in interest) no longer continues, for Federal income tax
purposes, to be a member of the affiliated group of corporations that
includes DIMAC Holdings as the parent corporation of such affiliated group.
"CHARTER DOCUMENTS" of any Person means the articles of incorporation or
certificate of incorporation and bylaws (or any similar organizational
documents), as amended or restated (or both) to date, of such Person.
"COMMISSION" means the United States Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Exchange Act, the Securities
Act or the TIA, as the case may be, then the body performing such duties at such
time.
"CONSOLIDATED" or "CONSOLIDATED," when used with reference to any
accounting term, means the amount described by such accounting term, determined
on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"CONSOLIDATED NET WORTH" with respect to any Person, means, as at any date
of determination, the sum of (i) the consolidated equity of the common
stockholders of such referent Person and its consolidated Restricted
Subsidiaries determined in accordance with GAAP plus (ii) the respective amounts
reported on such referent Person's most recent balance sheet with respect to any
series of preferred stock (other than Disqualified Capital Stock) that by its
terms is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
referent Person upon issuance of such preferred stock, PROVIDED that the
consolidated net worth of any Person shall exclude the effect of any non-cash
charges relating to the acceleration of stock options or similar securities of
such referent Person or another Person with which such referent Person is merged
or consolidated.
"CORPORATE TRUST OFFICE" shall be at the address of the Trustee specified
in Section 10.2 or such other address as the Trustee may specify by notice to
DIMAC Holdings.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
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"DEFAULT" means any event that is, or after notice or the passage of time
or both would be, an Event of Default.
"DEPOSITORY" means the Person specified in Section 2.3 as the Depository
with respect to the Notes issuable in global form, until a successor shall have
been appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depository" shall mean or include such successor.
"DIMAC HOLDINGS" means DIMAC Holdings, Inc., a Delaware corporation.
"DIMAC OPERATING" means DIMAC Corporation, a Delaware corporation.
"DIMAC OPERATING INDENTURE" means that certain Indenture, dated as of
October 22, 1998, by and between DIMAC Operating and Wilmington Trust Company,
as Trustee, together with all related documents, including security documents,
as such Indenture and such related documents are in effect on the Initial Issue
Date, without regard to any subsequent amendments, supplements or other
modifications thereto.
"DIMAC OPERATING NOTES" means the 121/2% Senior Subordinated Notes due 2008
of DIMAC Operating, issued pursuant to the DIMAC Operating Indenture.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the sole option of the holder thereof, in whole or in part, on or prior to
the maturity date of the Notes.
"DTC" means The Depository Trust Company.
"EQUITY INVESTORS" means the holders of Capital Stock of DIMAC Holdings on
the Initial Issue Date, other than any such holders who, at any time, are
employees of DIMAC Holdings or any of its Subsidiaries.
"EQUITY INTEREST" means (i) with respect to a corporation, any and all
Capital Stock or warrants, options or other rights to acquire Capital Stock (but
excluding any debt security which is convertible into, or exchangeable or
exercisable for, Capital Stock) and (ii) with respect to a partnership, limited
liability company or similar Person, any and all units, interests, rights to
purchase, warrants, options or other equivalents of, or other ownership
interests in any such Person.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute or law thereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer that may be made by DIMAC Holdings
pursuant to the Registration Rights Agreement to exchange Series B Notes for
Series A Notes.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
and in the rules and regulations of the Commission.
"GAAP" means gaap as in effect on the Initial Issue Date.
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"GUARANTY" means, with respect to any Person, any contract, agreement or
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness of any other Person (the "primary obligor")
in any manner, whether directly or indirectly, including without limitation:
(a) agreements to purchase such Indebtedness or any property
constituting security therefor;
(b) agreements to advance or supply funds (i) for the purchase
or payment of such Indebtedness, or (ii) to maintain working capital,
equity capital or other balance sheet conditions;
(c) agreements to purchase property, securities or services
primarily for the purpose of assuring the holder of such Indebtedness of
the ability of the primary obligor to make payment of the Indebtedness;
(d) letters or agreements commonly known as "comfort" or
"keepwell" letters or agreements; or
(e) any other agreements to assure the holder of the
Indebtedness of the primary obligor against loss in respect thereof;
PROVIDED, HOWEVER, that "guaranty" shall not include (i) the endorsement by a
Person in the ordinary course of business of negotiable instruments or documents
for deposit or collection, or (ii) indemnities given by DIMAC Holdings or its
Subsidiaries in brokerage, management and other agreements in the ordinary
course of business substantially consistent with past practices.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (a) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (b) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"HOLDER" means the Person in whose name a Note is registered in the
register of the Notes.
"INDEBTEDNESS" means, with respect to any Person, the aggregate amount of,
without duplication, the following:
(a) all obligations for borrowed money;
(b) all obligations evidenced by bonds, debentures, notes or
other similar instruments;
(c) all obligations to pay the deferred purchase price of
property or services (except Trade Payables, accrued commissions and other
similar accrued current liabilities in respect of such obligations, in any
case, not overdue, arising in the ordinary course of business);
(d) all Capitalized Lease Obligations;
(e) all obligations or liabilities of others secured by a lien
on any asset owned by such Person or Persons regardless of whether such
obligation or liability is assumed;
(f) all obligations of such Person or Persons, contingent or
otherwise, in respect of any letters of credit or bankers' acceptances;
(g) all Hedging Obligations; and
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(h) all guaranties.
"INDENTURE" means this Indenture as amended or supplemented from time to
time.
"INITIAL ISSUE DATE" means the date upon which the Series A Notes are first
issued.
"INITIAL PURCHASERS" has the meaning given to the term "Purchasers" in the
Securities Purchase Agreement.
"INTEREST SWAP OBLIGATIONS" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any Person, any direct, indirect or
beneficial investment by such Person, whether by means of share purchase, loan,
advance, extension of credit (other than accounts receivable and trade credits
arising in the ordinary course of business), capital contribution or otherwise,
in or to any other Person, the guaranty by such Person of any Indebtedness of
any other Person or the subordination of any claim against any other Person to
other Indebtedness of such other Person.
"ISSUER ORDER" means a written request or order signed in the name of DIMAC
Holdings by its Chairman of the Board, President, Chief Executive Officer or
Senior or Executive Vice President, and by its Chairman of the Board, President,
Chief Executive Officer, Senior or Executive Vice President Treasurer,
Secretary or an Assistant Treasurer or an Assistant Secretary and delivered to
the Trustee.
"LEGAL HOLIDAY" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, Wilmington, Delaware or at a place of
payment are authorized by law, regulation or executive order to remain closed.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, regardless of whether filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" has the meaning given to such term in the Registration
Rights Agreement.
"MATERIAL ADVERSE EFFECT" means (a) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of DIMAC Holdings and its Restricted Subsidiaries taken as a whole or
(b) a material adverse effect on the ability of DIMAC Holdings to perform its
obligations under this Indenture or of any Holder of the Notes to enforce or
collect any of the obligations hereunder or under the Notes. In determining
whether any individual event could reasonably be expected to result in a
Material Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events could
reasonably be expected to result in a Material Adverse Effect.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting interest) received by
DIMAC Holdings or any of its Restricted Subsidiaries from such Asset Sale, net
of (a) reasonable
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out-of-pocket expenses and fees relating to such Asset Sale (including, without
limitation, legal, accounting and investment banking fees and sales
commissions), (b) taxes paid or payable after taking into account any reduction
in consolidated tax liability due to available tax credits or deductions and any
tax sharing arrangements, (c) repayment of Indebtedness that is required to be
repaid in connection with such Asset Sale and (d) appropriate amounts to be
provided by DIMAC Holdings or any of its Restricted Subsidiaries, as the case
may be, as a reserve, in accordance with GAAP, against any post closing
adjustments or liabilities associated with such Asset Sale and retained by DIMAC
Holdings or any of its Restricted Subsidiaries, as the case may be, after such
Asset Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Sale.
"NOTES" means, collectively, the Series A Notes and the Series B Notes.
"OBLIGATION" means any principal, premium, interest, penalty, fee,
indemnification, reimbursement, damage and other obligation and liability
payable under the documentation governing any liability.
"OFFICER" means the Chairman of the Board, the President, the Chief
Financial Officer, the Chief Operating Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary, any Assistant Secretary or Senior Vice
President of DIMAC Holdings.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of DIMAC
Holdings by two Officers of DIMAC Holdings, one of whom must be the Chairman of
the Board, President, Chief Executive Officer, Chief Financial Officer,
Treasurer, Controller or a Senior or Executive Vice President of DIMAC Holdings.
"OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably
acceptable to the Trustee. Such counsel may be an employee of or counsel to
DIMAC Holdings, any Subsidiary of DIMAC Holdings or the Trustee.
"PERMITTED HOLDER" means the Equity Investors and their respective
Affiliates.
"PERMITTED LIENS" means with respect to any Person:
(i) Liens incurred or deposits made by such Person under worker's
compensation laws, unemployment insurance laws or similar legislation, or
Liens incurred or good faith deposits made in connection with bids,
tenders, contracts (other than for the payment of Indebtedness) or leases
to which such Person is a party, or Liens incurred or deposits made to
secure public or statutory obligations of such Person or deposits of cash
or United States government bonds made to secure the performance of
statutory obligations, surety, stay, customs and appeal bonds to which such
Person is a party, or deposits made as security for contested taxes or
import duties or for the payment of rent, in each case in the ordinary
course of business;
(ii) Liens imposed by law, such as carriers, warehousemen's,
materialmen's and mechanics' Liens or Liens arising out of judgments or
awards against such Person with respect to which such Person shall then be
prosecuting appeal or other proceedings for review; PROVIDED that, in each
case, such appeal or other proceeding is being made in good faith and with
respect to which reserves or other appropriate provisions are being made in
accordance with GAAP;
(iii) Liens securing the payment of Taxes which are not yet subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings, with respect to which reserves or other
appropriate provisions are being maintained in accordance with GAAP;
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(iv) Liens in favor of issuers of surety bonds or letters of credit
issued pursuant to the request of and for the account of such Person in the
ordinary course of its business;
(v) minor survey exceptions, encumbrances, easements or reservations
of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or
other restrictions as to the use of real properties or Liens incidental to
the conduct of the business of such Person or to the ownership of its
properties which were not incurred in connection with Indebtedness or other
extensions of credit and which do not in the aggregate materially adversely
affect the value of said properties or materially impair their use in the
operation of the business of such Person; and
(v) Liens on shares of Capital Stock of DIMAC Operating or on assets
of DIMAC Operating or any of its Restricted Subsidiaries, in any such case,
securing Indebtedness that was permitted under the terms of this Indenture
to be incurred under the Senior Credit Agreement.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof, or any other entity.
"PIK INTEREST PAYMENT" means the payment of all or a portion of a payment
of interest on the Notes by the issuance of additional Notes in accordance with
the provisions of Section 1 of the Notes.
"PIK NOTE" means any Note issued by DIMAC Holdings in order to make a PIK
Interest Payment.
"PLAN OF LIQUIDATION" means, with respect to any Person, a plan that
provides for, contemplates or the effectuation of which is preceded or
accompanied by (regardless of whether substantially contemporaneously, in phases
or otherwise) (i) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of such person otherwise than as an entirety or
substantially as an entirety and (ii) the distribution of all or substantially
all of the proceeds of such sale, lease, conveyance or other disposition and all
or substantially all of the remaining assets of such person to holders of
Capital Stock of such person.
"PREFERRED STOCK" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"PRO FORMA" means, with respect to any calculation made or required to be
made pursuant to the terms of this Agreement, a calculation reflecting events
that are directly attributable to a specific transaction, are factually
supportable and are expected to have a continuing effect, in each case as
determined on a basis consistent with the procedures outlined in Article 11 of
Regulation S-X of the Securities Act and as interpreted by the Staff of the
Securities and Exchange Commission prior to December 1996 which would include
cost savings resulting from headcount reductions, closure of facilities and
similar restructuring charges.
"PRODUCTIVE ASSETS" means assets or properties used in the same type of
business engaged in by DIMAC Operating and its Restricted Subsidiaries
immediately prior to the date hereof or in a business reasonably related
thereto.
"PUBLIC EQUITY OFFERING" of any Person, means a sale by such Person of
Equity Interests of such Person in an underwritten (firm commitment) public
offering registered under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
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"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Capital Stock.
"QUALIFIED PUBLIC EQUITY OFFERING" of any Person, means a Public Equity
Offering of such Person resulting in the listing of such Equity Interest on a
nationally recognized stock exchange or the NASDAQ National Market System,
pursuant to which such Person receives net proceeds of at least $30,000,000.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement,
dated as of the Initial Issue Date, by and among DIMAC Holdings and the Initial
Purchasers as such agreement may be amended, modified or supplemented from time
to time.
"RELATED BUSINESS" means the business engaged in by DIMAC Operating and its
Subsidiaries on the Initial Issue Date and such other business activities which
are incidental or related thereto.
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee located at the
Corporate Trust Office (or any successor group of the Trustee) or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the designated officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of his knowledge of and familiarity with the particular
subject.
"RESTRICTED SECURITIES" means Notes that bear or are required to bear the
legends set forth in Exhibit A hereto.
"RESTRICTED SUBSIDIARY" means DIMAC Operating and any other Subsidiary of
DIMAC Holdings that is not an Unrestricted Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act, as such Rule may be
amended from time to time, or under any similar rule or regulation hereafter
adopted by the Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of October 22, 1998 by and among DIMAC Holdings, DIMAC Operating and
the purchasers named on the signature pages thereof.
"SENIOR CREDIT AGREEMENT" means that certain Amended and Restated Credit
Agreement dated as of October 22, 1998 by and among DIMAC Operating, DIMAC
Holdings, the financial institutions listed on the signature pages thereof,
Credit Suisse First Boston, as administrative agent and arranger, UBS AG,
Stamford Branch, as syndication agent and First Union National Bank, as
documentation agent, as, unless the context in which such term is used requires
otherwise, amended, replaced, refinanced, modified or supplemented from time to
time, and all related documents, including guaranties and security documents,
as, unless the context in which such term is used requires otherwise, amended,
replaced, refinanced, modified or supplemented from time to time.
"SERIES A NOTES" means DIMAC Holdings's 15 1/2% Series A Senior Notes due
October 22, 2009, as authenticated and issued under this Indenture.
"SERIES B NOTES" means DIMAC Holdings's 15 1/2% Series B Senior Notes due
October 22, 2009, as authenticated and issued under this Indenture.
"STOCKHOLDERS' AGREEMENT" means the Amended and Restated Stockholders
Agreement dated as of October 22, 1998 by and among DIMAC Holdings and the
stockholders listed on the signature pages thereof, as in effect on the Initial
Issue Date and as supplemented and modified pursuant to the letter dated October
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22, 1998 from DIMAC Holdings, McCown De Leeuw & Co. IV, L.P. and McCown De Leeuw
& Co. IV Associates, L.P. to the Initial Purchasers.
"SUBSIDIARY" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is, at the date of determination, directly or indirectly,
owned by such Person, by one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person or (ii) a partnership in
which such Person or a Subsidiary of such Person is, at the date of
determination, a general or limited partner of such partnership, but, in the
case of a limited partner, only if such Person or its Subsidiary is entitled to
receive more than 50% of the assets of such partnership upon its dissolution, or
(iii) any limited liability company or any other Person (other than a
corporation or a partnership) in which such Person, a Subsidiary of such Person
or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination, has (a) at least a majority ownership
interest or (b) the power to elect or direct the election of a majority of the
directors or other governing body of such Person.
"TAXES" means all Federal, state, local and foreign taxes, and other
assessments of a similar nature (whether imposed directly or through
withholding), including any interest, additions to tax, or penalties applicable
thereto.
"TAX RETURNS" means all Federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns and
any amended Tax Return relating to Taxes.
"TAX SHARING AGREEMENT" means the existing agreement among DIMAC Operating
and DIMAC Holdings and any other tax allocation agreement among DIMAC Operating,
any of its Subsidiaries or any direct or indirect stockholder of DIMAC Operating
with respect to consolidated or combined tax returns including DIMAC Operating
or any of its Subsidiaries.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital, surplus and undivided profits
aggregating in excess of $250,000,000 (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clause
(i) above entered into with a bank meeting the qualifications described in
clause (ii) above, (iv) Investments in commercial paper, maturing not more than
180 days after the date of acquisition, issued by a corporation (other than an
Affiliate of DIMAC Holdings) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "A-1" (or higher) according to Moody's Investors Service, Inc. or "P-1" (or
higher) according to Standard and Poor's Ratings Group.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb), as amended, as in effect on the date hereof until such time as
this Indenture is qualified under the TIA, and thereafter as in effect on the
date on which this Indenture is qualified under the TIA, unless the context
requires reference thereto as in effect from time to time.
"TRADE PAYABLES" means, with respect to any Person, accounts payable and
other similar accrued current liabilities in respect of obligations or
indebtedness to trade creditors created, assumed or guaranteed
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by such Person or any of its Subsidiaries in the ordinary course of business in
connection with the obtaining of property or services.
"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 SUBSIDIARY" means (i) any Subsidiary (other than DIMAC
Operating) of DIMAC Holdings that at the time of determination shall be
designated an Unrestricted Subsidiary by the Board of Directors of DIMAC
Holdings in the manner provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors of DIMAC Holdings may designate any
Subsidiary of DIMAC Holdings (including any newly acquired or new formed
Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on
any property of, DIMAC Holdings or any Restricted Subsidiary of DIMAC Holdings
that is not a Subsidiary of the Subsidiary to be so designated; PROVIDED,
HOWEVER, that either (A) the Subsidiary to be so designated has total assets of
$1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such
designation would be permitted under Section 4.7. The Board of Directors of
DIMAC Holdings may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) DIMAC Operating could incur $1.00 of additional Indebtedness
under paragraph (b) of Section 4.9 and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
of DIMAC Holdings shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of the United States
of America, or any agency or instrumentality thereof for the payment of which
the full faith and credit of the United States of America is pledged.
"VOTING SECURITIES" means any class of Equity Interests of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power ("VOTING POWER") under ordinary circumstances to vote for
the election of directors, managers, trustees or general partners of such Person
(regardless of whether at the time any other class or classes will have or might
have voting power by reason of the happening of any contingency).
"WARRANT AGREEMENT" means the Warrant Agreement dated as of October 22,
1998 by and among DIMAC Holdings and the Initial Purchasers.
"WHOLLY-OWNED SUBSIDIARY" means, with respect to any Person, at any time, a
Restricted Subsidiary of such Person, all of the Equity Interests of which
(except director's qualifying shares) are at the time owned directly or
indirectly by such Person.
Section 1.2 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined
Term in Section
---- ----------
<S> <C>
"AFFILIATE TRANSACTION. . . . . . . . . . . . . . . . . . . 4.11
"ASSET SALE DATE. . . . . . . . . . . . . . . . . . . . . . 4.10
"ASSET SALE OFFER . . . . . . . . . . . . . . . . . . . . . 4.10
"ASSET SALE OFFER PRICE . . . . . . . . . . . . . . . . . . 4.10
"CHANGE OF CONTROL OFFER. . . . . . . . . . . . . . . . . . 4.14
"CHANGE OF CONTROL PAYMENT. . . . . . . . . . . . . . . . . 4.14
</TABLE>
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<TABLE>
<S> <C>
"CHANGE OF CONTROL PAYMENT DATE . . . . . . . . . . . . . . 4.14
"COVENANT DEFEASANCE. . . . . . . . . . . . . . . . . . . . 8.3
"DEFINITIVE NOTES . . . . . . . . . . . . . . . . . . . . . 2.1
"EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 6.1
"EXCESS NET CASH PROCEEDS . . . . . . . . . . . . . . . . . 4.10
"GLOBAL NOTES . . . . . . . . . . . . . . . . . . . . . . . 2.1
"LEGAL DEFEASANCE . . . . . . . . . . . . . . . . . . . . . 8.2
"PAYING AGENT . . . . . . . . . . . . . . . . . . . . . . . 2.3
"PURCHASE AMOUNT. . . . . . . . . . . . . . . . . . . . . . 4.10
"REGISTRAR. . . . . . . . . . . . . . . . . . . . . . . . . 2.3
"RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . . 4.7
</TABLE>
Section 1.3 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 DIMAC Holdings 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 Commission rule under the TIA
have the meanings so assigned to them.
Section 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
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(e) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or
other subdivision, and the terms "Article," "Section," "Exhibit" and
"Schedule," unless otherwise specified or indicated by the context in which
used, mean the corresponding Article or Section of, or the corresponding
Exhibit or Schedule to, this Indenture; and
(f) references to agreements and other instruments include
subsequent amendments, supplements and waivers to such agreements or
instruments but only to the extent not prohibited by this Indenture.
(g) provisions apply to successive events and transactions.
ARTICLE II
THE NOTES
Section 2.1 FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which DIMAC Holdings is subject or usage. Each Note shall be
dated the date of its authentication. The Notes shall be issued in
denominations of $1,000 and integral multiples thereof; PROVIDED, HOWEVER, that
PIK Notes may be issued in any denomination.
The Notes will be issued (i) in global form (the "GLOBAL NOTES"),
substantially in the form of Exhibit A attached hereto (including the text
referred to in footnotes 1 and 2 thereto) and (ii) under certain circumstances,
in definitive form (the "DEFINITIVE NOTES"), substantially in the form of
Exhibit A attached hereto (excluding the text referred to in footnotes 1 and 2
thereto). Each Global Note shall represent the aggregate amount of outstanding
Notes from time to time endorsed thereon; PROVIDED, 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, in accordance with instructions given by the Holder thereof, as
required by Section 2.6.
Section 2.2 EXECUTION AND AUTHENTICATION.
The Notes shall be executed on behalf of DIMAC Holdings, by manual or
facsimile signature, by its Chairman of the Board, its President or one of its
Vice Presidents and attested by another Officer by manual or facsimile
signature. If an Officer whose signature is on a Note no longer holds that
office at the time the 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 of the Trustee shall be conclusive evidence that the
Note has been authenticated under this Indenture. The form of Trustee's
certificate of authentication to be borne by the Notes shall be substantially as
set forth in Exhibit A attached hereto.
The Trustee shall authenticate Notes for original issue up to $30,000,000
aggregate principal amount. In addition, the Trustee shall authenticate PIK
Notes from time upon an Issuer Order. The aggregate principal amount of Notes
outstanding at any time may not exceed $30,000,000 plus the aggregate principal
amount of PIK Notes issued pursuant to Section 1 of the Notes, except as
provided in Section 2.7.
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The Trustee may appoint an authenticating agent acceptable to DIMAC
Holdings to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authenticating by the Trustee
includes authenticating by such agent. An authenticating agent has the same
rights as an Agent to deal with DIMAC Holdings or an Affiliate of DIMAC
Holdings.
Unless otherwise required by applicable law, DIMAC Holdings, the Trustee
and any agent of DIMAC Holdings or the Trustee shall treat the Person in whose
name any Note is registered as the owner of such Note for the purpose of
receiving payment of principal of and (subject to the provisions of this
Indenture and the Notes with respect to record dates) interest on such Note and
for all other purposes whatsoever, regardless of whether such Note is overdue,
and neither DIMAC Holdings, the Trustee nor any agent of DIMAC Holdings or the
Trustee shall be affected by notice to the contrary.
Section 2.3 REGISTRAR, PAYING AGENT AND DEPOSITORY.
DIMAC Holdings shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and (ii) an
office or agency where Notes may be presented for payment ("PAYING AGENT").
DIMAC Holdings initially appoints the Trustee as Registrar and Paying Agent.
The Registrar shall keep a register of the Notes and of their transfer and
exchange. DIMAC Holdings 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. DIMAC Holdings
may change any Paying Agent or Registrar without notice to any Holder. DIMAC
Holdings shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. If DIMAC Holdings fails to appoint or maintain another
entity as Registrar or Paying Agent, the Trustee shall act as such. DIMAC
Holdings or any of its Subsidiaries may act as Paying Agent or Registrar, except
that for purposes of Articles III and VIII and Sections 4.1, 4.10 and 4.14,
neither DIMAC Holdings nor any of its Subsidiaries shall act as Paying Agent.
The Paying Agent shall comply with all withholding tax, information
reporting and backup withholding tax requirements under the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
Regulations issued thereunder in respect of any payment on, or in respect of, a
Note (including, without limitation, the collection of Internal Revenue Service
("IRS") Forms 1001, 4224, W-8 or W-9 (or any successor form), as the case may
be, and the filing of IRS Forms 1042 and 1042-S with respect thereto).
DIMAC Holdings shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent.
To the extent DIMAC Holdings makes such payments directly to the Holders of
the Notes, DIMAC Holdings shall simultaneously notify the Trustee thereof in
writing.
The Paying Agent shall comply with all applicable backup withholding tax
and information reporting requirements under U.S. Internal Revenue Code of 1986,
as amended, and the Treasury regulations issued thereunder in respect of any
payment on, or in respect of, a Note.
DIMAC Holdings initially appoints DTC to act as Depository with respect to
the Global Notes. The Trustee shall act as custodian for the Depository with
respect to the Global Notes.
Section 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.
DIMAC Holdings shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying
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Agent for the payment of principal, premium, if any, or interest on the Notes
and shall notify the Trustee in writing of any default by DIMAC Holdings in
making any such payment. While any such default continues, the Trustee may
require a Paying Agent (if other than DIMAC Holdings or a Subsidiary thereof) to
pay all money held by it to the Trustee and account for such disbursed money.
DIMAC Holdings at any time may require a Paying Agent to pay all money held by
it to the Trustee and account for such disbursed money. Upon payment over to
the Trustee, the Paying Agent (if other than DIMAC Holdings or a Subsidiary of
DIMAC Holdings) shall have no further liability for the money delivered to the
Trustee. If DIMAC Holdings or a Subsidiary of DIMAC Holdings acts as Paying
Agent (subject to Section 2.3), it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent.
Section 2.5 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, DIMAC Holdings 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,
including the aggregate principal amount of Notes held by each such Holder, and
DIMAC Holdings shall otherwise comply with TIA Section 312(a).
Section 2.6 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES. When Definitive
Notes are presented by a Holder to the Registrar with a request (1) to
register the transfer of the Definitive Notes or (2) to exchange such
Definitive Notes for an equal principal amount of Definitive Notes of other
authorized denominations, the Registrar shall register the transfer or make
the exchange as requested if its requirements for such transactions are
met; PROVIDED, that the Definitive Notes so presented (A) have been duly
endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by his
attorney, duly authorized in writing; and (B) in the case of a Restricted
Security, such request shall be accompanied by the following additional
documents:
(i) if such Restricted Security is being delivered to the
Registrar by a Holder for registration in the name of such Holder,
without transfer, a certification to that effect (in substantially the
form of Exhibit B attached hereto); or
(ii) if such Restricted Security is being transferred to a
QIB in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B attached hereto);
or
(iii) if such Restricted Security is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B attached hereto) and an opinion of counsel
reasonably acceptable to DIMAC Holdings and the Registrar to the
effect that such transfer is in compliance with the Securities Act.
(b) TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL INTEREST IN A
GLOBAL NOTE. A Definitive Note may be exchanged for a beneficial interest
in a Global Note only upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Trustee, together with:
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(i) written instructions directing the Trustee to make an
endorsement on the appropriate Global Note to reflect an increase in
the aggregate principal amount of the Notes represented by such Global
Note, and
(ii) if such Definitive Note is a Restricted Security, a
certification (in substantially the form of Exhibit B attached hereto)
and, if applicable, a legal opinion, in each case similar to that
required pursuant to clauses (i), (ii) or (iii) of Section 2.6(a), as
applicable;
in which case the Trustee shall cancel such Definitive Note and cause the
aggregate principal amount of Notes represented by the appropriate Global
Note to be increased accordingly. If no Global Note is then outstanding,
DIMAC Holdings shall issue and the Trustee shall authenticate a new Global
Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture and the procedures
of the Depository therefor, which shall include restrictions on transfer
comparable to those set forth herein to the extent required by the
Securities Act.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL NOTE FOR A
DEFINITIVE NOTE. Upon receipt by the Trustee of written transfer
instructions (or such other form of instructions as is customary for the
Depository), from the Depository (or its nominee) on behalf of any Person
having a beneficial interest in a Global Note, the Trustee shall, in
accordance with the standing instructions and procedures existing between
the Depository and the Trustee, cause the aggregate principal amount of
Global Notes to be reduced accordingly and, following such reduction, DIMAC
Holdings shall execute and the Trustee shall authenticate and deliver to
the transferee a Definitive Note in the appropriate principal amount;
PROVIDED, that in the case of a Restricted Security, such instructions
shall be accompanied by the following additional documents:
(i) if such beneficial interest is being transferred to the
Person designated by the Depository as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit B
attached hereto); or
(ii) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect (in substantially the form of Exhibit B attached hereto);
or
(iii) if such beneficial interest is being transferred in
reliance on another exemption from the registration requirements of
the Securities Act, a certification to that effect (in substantially
the form of Exhibit B attached hereto) and an opinion of counsel
reasonably acceptable to DIMAC Holdings and to the Registrar to the
effect that such transfer is in compliance with the Securities Act.
Definitive Notes issued in exchange for a beneficial interest in a Global
Note shall be registered in such names and in such authorized denominations
as the Depository shall instruct the Trustee.
(e) TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any
other provision of this Indenture, the Global Note may not be transferred
as a whole except by the Depository to a nominee of the Depository or by a
nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor
Depository or a nominee of such successor Depository; PROVIDED, that if:
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(i) the Depository notifies DIMAC Holdings that the
Depository is unwilling or unable to continue as Depository and a
successor Depository is not appointed by DIMAC Holdings within 90 days
after delivery of such notice; or
(ii) DIMAC Holdings, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of Definitive
Notes under this Indenture,
then DIMAC Holdings shall execute and the Trustee shall authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
aggregate principal amount of the Global Note in exchange for such Global
Note.
(f) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such
time as all beneficial interests in the Global Note have either been
exchanged for Definitive Notes, redeemed, repurchased or cancelled, the
Global Note shall be returned to (or retained by) and cancelled by the
Trustee. At any time prior to such cancellation, if any beneficial
interest in the Global Note is exchanged for Definitive Notes, redeemed,
repurchased or cancelled, the aggregate 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 to reflect
such reduction.
(g) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES. To
permit registrations of transfers and exchanges, DIMAC Holdings shall
execute and the Trustee shall authenticate Definitive Notes and Global
Notes at the Registrar's request. All Definitive Notes and Global Notes
issued upon any registration of transfer or exchange of Definitive Notes or
Global Notes shall be legal, valid and binding obligations of DIMAC
Holdings, 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.
No service charge shall be made to a Holder for any registration of
transfer or exchange, but DIMAC Holdings 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 (without transfer to another
person) pursuant to Sections 2.10, 3.7, 4.10, 4.14 and 9.5).
DIMAC Holdings shall not be required to (i) issue, register the
transfer of or exchange Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption
under Section 3.2 and ending at the close of business on the day of
selection; or (ii) register the transfer of or exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part; or (iii) register the transfer of or
exchange a Note between a record date and the next succeeding interest
payment date.
Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and DIMAC Holdings may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for all purposes, and neither the Trustee, any Agent nor DIMAC
Holdings shall be affected by notice to the contrary.
Any Holder of a Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interests in such Global Note may be
effected only through a book-entry system maintained by the Depository (or
its agent), and that ownership of a beneficial interest in such Global Note
shall be required to be reflected in a book entry.
(h) EXCHANGE OF SERIES A NOTES FOR SERIES B NOTES. The Series A
Notes may be exchanged for Series B Notes pursuant to the terms of the
Exchange Offer. The Trustee and Registrar shall make the exchange as
follows:
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DIMAC Holdings shall present the Trustee with an Officers' Certificate
certifying the following:
(i) upon issuance of the Series B Notes, the transactions
contemplated by the Exchange Offer have been consummated; and
(ii) the principal amount of Series A Notes properly
tendered in the Exchange Offer that are represented by a Global Note
and the principal amount of Series A Notes properly tendered in the
Exchange Offer that are represented by Definitive Notes; the name of
each Holder of such Definitive Notes; the principal amount properly
tendered in the Exchange Offer by each such Holder; and the name and
address to which Definitive Notes for Series B Notes shall be
registered and sent for each such Holder.
The Trustee, upon receipt of (i) such Officers' Certificate, (ii) an
Opinion of Counsel (x) to the effect that the Series B Notes have been
registered under Section 5 of the Securities Act and this Indenture has
been qualified under the TIA and (y) with respect to the matters set forth
in Section 5(p) of the Registration Rights Agreement and (iii) an Issuer
Order, shall authenticate (A) a Global Note for Series B Notes in aggregate
principal amount equal to the aggregate principal amount of Series A Notes
represented by a Global Note indicated in such Officers' Certificate as
having been properly tendered and (B) Definitive Notes representing Series
B Notes registered in the names of, and in the principal amounts indicated
in such Officers' Certificate.
The Trustee shall make available for delivery such Definitive Notes
for Series B Notes to the Holders thereof as indicated in such Officers'
Certificate.
Section 2.7 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or DIMAC Holdings and
the Trustee receive evidence to their satisfaction of the destruction, loss or
theft of any Note, DIMAC Holdings shall issue and the Trustee shall authenticate
a replacement Note if the Trustee's requirements for replacements of Notes are
met. If required by the Trustee or DIMAC Holdings, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Trustee and
DIMAC Holdings to protect DIMAC Holdings, the Trustee, any Agent or any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. DIMAC Holdings or the Trustee may charge for its expenses in
replacing a Note.
Every replacement Note is an obligation of DIMAC Holdings and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.8 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 2.8 as not outstanding.
If a Note is replaced pursuant to Section 2.7, the replaced Note 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 4.1,
it ceases to be outstanding and interest on it ceases to accrue.
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Subject to Section 2.9, a Note does not cease to be outstanding because
DIMAC Holdings or an Affiliate of DIMAC Holdings holds the Note.
If on a redemption date or the date of maturity of a Note, the Paying Agent
holds cash, U.S. Government Obligations, or a combination thereof, sufficient to
pay all of the principal, premium, if any, and interest due on the Notes payable
on that date, then on and after that date, such Notes shall cease to be
outstanding, and interest on such Notes shall cease to accrue.
Section 2.9 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 DIMAC
Holdings or any Affiliate of DIMAC Holdings shall be considered as though not
outstanding, except that for purposes of determining whether the Trustee shall
be protected in relying on any such direction, waiver or consent, only Notes
that a Responsible Officer of the Trustee knows to be so owned shall be
considered as not outstanding.
Section 2.10 TEMPORARY NOTES.
Pending the preparation of Definitive Notes, DIMAC Holdings may execute,
and upon an Issuer Order the Trustee shall authenticate and deliver, temporary
Notes that are printed, lithographed, typewritten, mimeographed or otherwise
reproduced, in any authorized denomination, substantially of the tenor of the
Definitive Notes in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the officers
executing such Notes may determine, as conclusively evidenced by their execution
of such Notes.
If temporary Notes are issued, DIMAC Holdings shall cause Definitive Notes
to be prepared without unreasonable delay. The Definitive Notes shall be
printed, lithographed or engraved, or provided by any combination thereof, or in
any other manner permitted by the rules and regulations of any principal
national securities exchange, if any, on which the Notes are listed, all as
determined by the Officers executing such Definitive Notes. After the
preparation of Definitive Notes, the temporary Notes shall be exchangeable for
Definitive Notes upon surrender of the temporary Notes at the office or agency
maintained by DIMAC Holdings for such purpose pursuant to Section 4.2, without
charge to the Holder. Upon surrender for cancellation of any one or more
temporary Notes, DIMAC Holdings shall execute, and the Trustee shall
authenticate and make available for delivery, in exchange therefor the same
aggregate principal amount of Definitive Notes of authorized denominations.
Until so exchanged, the temporary Notes shall in all respects be entitled to the
same benefits under this Indenture as Definitive Notes.
Section 2.11 CANCELLATION.
DIMAC Holdings 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 and
not previously received by the Trustee. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall retain or destroy cancelled Notes in
accordance with its normal practices (subject to the record retention
requirement of the Exchange Act) unless DIMAC Holdings directs them to be
returned to it. DIMAC Holdings may not issue new Notes to replace Notes that
have been redeemed or paid or that have been delivered to the Trustee for
cancellation. All such Notes shall be cancelled by the Trustee and returned to
DIMAC Holdings pursuant to a written order signed by one Officer of DIMAC
Holdings.
Section 2.12 DEFAULTED INTEREST.
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If DIMAC Holdings 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, which date shall be at the earliest practicable
date but in all events at least ten Business Days prior to the payment date, in
each case at the rate provided in the Notes and in Section 4.1. DIMAC Holdings
shall, with the consent of the Trustee, fix or cause to be fixed each such
special record date and payment date. At least 30 days before the special
record date, DIMAC Holdings (or the Trustee, in the name of and at the expense
of DIMAC Holdings, upon 15 days written notice to the Trustee) shall mail to the
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.
Section 2.13 LEGENDS.
(a) Except as permitted by subsections (b) or (c) of this
Section 2.13, each Note shall bear legends relating to restrictions on
transfer pursuant to the securities laws in substantially the form set
forth on Exhibit A attached hereto.
(b) Upon any sale or transfer of a Restricted Security
(including any Restricted Security represented by a Global Note) pursuant
to Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(i) in the case of any Restricted Security that is a
Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Restricted Security for a Definitive Note that does not
bear the legends required by subsection (a) above; and
(ii) in the case of any Restricted Security represented by
a Global Note, such Restricted Security shall not be required to bear
the legends required by subsection (a) above, but shall continue to be
subject to the provisions of Section 2.6(c); PROVIDED, that with
respect to any request for an exchange of a Restricted Security that
is represented by a Global Note for a Definitive Note that does not
bear the legends required by subsection (a) above, which request is
made in reliance upon Rule 144, the Holder thereof shall certify in
writing to the Registrar that such request is being made pursuant to
Rule 144.
(c) DIMAC Holdings shall issue and the Trustee shall
authenticate Series B Notes in exchange for Series A Notes accepted for
exchange in the Exchange Offer. The Series B Notes shall not bear the
legends required by subsection (a) above unless the Holder of such Series A
Notes is either:
(i) a broker-dealer who purchased such Series A Notes
directly from DIMAC Holdings to resell pursuant to Rule 144A or any
other available exemption under the Securities Act,
(ii) a Person participating in the distribution of the
Series A Notes, or
(iii) a Person who is an affiliate (as defined in Rule
144A) of DIMAC Holdings.
(d) DIMAC Holdings will cause each Note to bear on its face a
legend that satisfies the requirements of U.S. Treasury Regulations Section
1.1275-3(b) stating that such Note was issued with original issue discount
("OID") and detailing (i) the issue price, (ii) the amount of OID per
$1,000 of principal amount, (iii) the issue date and (iv) the yield to
maturity, or, alternatively, detailing the name and either the address or
telephone number of a representative of DIMAC
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Holdings who will, beginning no later than ten days after the issue date,
be able to promptly supply the appropriate information in response to a
Holder's request.
Section 2.14 DEPOSIT OF MONEYS.
Subject to Section 3.5, prior to 10:00 a.m. New York City time on each date
on which the principal of, premium, if any, and interest on the Notes are due,
DIMAC Holdings shall deposit with the Trustee or Paying Agent in immediately
available funds money sufficient to make cash payments, if any, due on such date
in a timely manner which permits the Trustee or such Paying Agent to remit
payment to the Holders on such date.
ARTICLE III
REDEMPTION
Section 3.1 NOTICES TO TRUSTEE.
If DIMAC Holdings elects to redeem Notes pursuant to Section 3.7, it shall
furnish to the Trustee, at least 30 days but not more than 60 days before a
redemption date, an Officers' Certificate setting forth (i) the paragraph of the
Notes and/or the section 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 3.2 SELECTION OF NOTES TO BE REDEEMED.
If less than all the Notes are to be redeemed pursuant to Section 3.7, the
Trustee shall select the Notes to be redeemed 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, PRO RATA, by lot or by
such method as the Trustee deems to be fair and reasonable.
The Trustee shall promptly notify DIMAC Holdings 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 whole multiples of $1,000.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, DIMAC
Holdings shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed at such Holder's registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part only, the portion of
the principal amount of such Note to be redeemed and that, after the
redemption date, upon cancellation of the original Note, a new Note or
Notes in principal amount equal to the unredeemed portion shall be issued;
(d) the name and address of the Paying Agent;
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(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless DIMAC Holdings defaults in making such
redemption payment, interest on Notes or portions of Notes called for
redemption ceases to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or the section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(h) the CUSIP number of the Notes to be redeemed.
At DIMAC Holdings's request, the Trustee shall give the notice of
redemption in the name of DIMAC Holdings and at DIMAC Holdings's expense;
PROVIDED that DIMAC Holdings shall deliver to the Trustee, at least 45 days
(unless a shorter period is acceptable to the Trustee) prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption has been mailed to the Holders in accordance with
Section 3.3, Notes called for redemption become due and payable on the
redemption date at the redemption price. At any time prior to the mailing of a
notice of redemption to the Holders pursuant to Section 3.3, DIMAC Holdings may
withdraw, revoke or rescind any notice of redemption delivered to the Trustee
without any continuing obligation to redeem the Notes as contemplated by such
notice of redemption.
Section 3.5 DEPOSIT OF REDEMPTION PRICE.
At or before 12:00 p.m. New York City time immediately prior to the
redemption date, DIMAC Holdings shall deposit with the Trustee (to the extent
not already held by the Trustee) or with the Paying Agent money in 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
return to DIMAC Holdings any money deposited with the Trustee or the Paying
Agent by DIMAC Holdings in excess of the amounts necessary to pay the redemption
price of, and accrued interest on, all Notes to be redeemed.
Interest on the Notes to be redeemed shall cease to accrue on the
applicable redemption date, regardless of whether such Notes are presented for
payment, if DIMAC Holdings makes or deposits the redemption payment in
accordance with this Section 3.5. If any Note called for redemption shall not
be paid upon surrender for redemption because of the failure of DIMAC Holdings
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.
Section 3.6 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, DIMAC Holdings shall
issue and the Trustee shall authenticate for the Holder at the expense of DIMAC
Holdings a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
Section 3.7 OPTIONAL REDEMPTION.
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(a) If, on or before October 22, 2002, there is a Qualified
Public Equity Offering of DIMAC Holdings, DIMAC Holdings may, within thirty
(30) days of the consummation of such Qualified Public Equity Offering,
redeem all or any of the Notes, in whole or in part, at a redemption price
equal to 107.75% of the aggregate principal amount of Notes being redeemed
plus accrued and unpaid interest thereon to the redemption date.
(b) Except as provided in Section 3.7(a), the Notes are not
redeemable at DIMAC Holdings's option prior to October 22, 2002.
Thereafter, DIMAC Holdings may redeem the Notes, or a portion thereof, in
accordance with the terms and conditions provided herein and in the Notes.
ARTICLE IV
COVENANTS
Section 4.1 PAYMENT OF NOTES.
DIMAC Holdings shall pay the principal and premium, if any, of, 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, other than DIMAC Holdings or a Subsidiary of DIMAC
Holdings, holds on or before that date money deposited by DIMAC Holdings in
immediately available funds (or PIK Notes, in the case of a PIK Interest
Payment) and designated for and sufficient to pay all principal, premium, if
any, and interest then due. Such Paying Agent shall return to DIMAC Holdings,
no later than three Business Days following the date of payment, any money that
exceeds such amount of principal, premium, if any, and interest then due and
payable on the Notes. DIMAC Holdings shall pay any and all amounts, including,
without limitation, Liquidated Damages, if any, on the dates and in the manner
required under the Registration Rights Agreement.
To the extent lawful, DIMAC Holdings shall pay interest (including interest
accruing after the commencement of any proceeding under any Bankruptcy Law) on
all due and unpaid amounts outstanding under the Notes (including overdue
installments of principal or interest) at a rate equal to 161/2% per annum,
compounded quarterly. PIK Notes issued pursuant to Section 1 of the Notes shall
not constitute due and unpaid amounts outstanding under the Notes.
Section 4.2 MAINTENANCE OF OFFICE OR AGENCY.
DIMAC Holdings shall maintain an office or agency (which may be an office
of the Trustee, Registrar or co-registrar) in the Borough of Manhattan, the City
of New York, where Notes may be surrendered for registration of transfer or
exchange and where notices and demands to or upon DIMAC Holdings in respect of
the Notes and this Indenture may be served. DIMAC Holdings 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 DIMAC Holdings 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 Corporate Trust Office of the Trustee.
DIMAC Holdings 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, that no such designation or rescission shall in any manner relieve
DIMAC Holdings of its obligation to maintain an office or agency for such
purposes. DIMAC Holdings 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.
DIMAC Holdings hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of DIMAC Holdings in accordance with Section 2.3.
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Section 4.3 REPORTS.
(a) DIMAC Holdings shall file with the Trustee copies of the
reports, information and other documents (or copies of such portions of any
of the foregoing as the Commission may by rules and regulations prescribe)
that DIMAC Holdings is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act, within 15 days after filing such
reports, information and other documents with the Commission. If DIMAC
Holdings is not subject to the requirements of Section 13 or 15(d) of the
Exchange Act, DIMAC Holdings shall file with the Trustee all such reports,
information and other documents as it would be required to file if it were
subject to the requirements of Section 13 or 15(d) of the Exchange Act,
within the period applicable to such report, information or other document
pursuant to the Exchange Act. From and after the time DIMAC Holdings files
a registration statement with the Commission with respect to the Notes,
DIMAC Holdings shall file such information with the Commission; PROVIDED,
that DIMAC Holdings shall not be in default of the provisions of this
Section 4.3 for any failure to file reports with the Commission solely by
refusal by the Commission to accept the same for filing. DIMAC Holdings
shall deliver (or cause the Trustee to deliver) copies of all reports,
information and documents required to be filed with the Trustee pursuant to
this Section 4.3 to the Holders at their addresses appearing in the
register of Notes maintained by the Registrar. DIMAC Holdings shall also
comply with the provisions of TIA Section 314(a).
(b) If DIMAC Holdings is required to furnish annual, quarterly
or current reports to its stockholders pursuant to the Exchange Act, DIMAC
Holdings shall cause any annual, quarterly, current or other financial
report furnished by it generally to its stockholders to be filed with the
Trustee and mailed to the Holders by DIMAC Holdings at their addresses
appearing in the register of Notes maintained by the Registrar within 15
days after such reports are furnished to stockholders. If DIMAC Holdings
is not required to furnish annual, quarterly or current reports to its
stockholders pursuant to the Exchange Act, DIMAC Holdings shall cause the
financial statements of DIMAC Holdings and its consolidated Subsidiaries,
including any notes thereto (and, with respect to annual reports, an
auditors' report by an accounting firm of established national reputation),
and a "Management's Discussion and Analysis of Financial Condition and
Results of Operations," comparable to that which would have been required
to appear in annual or quarterly reports filed under Section 13 or 15(d) of
the Exchange Act to be so filed with the Trustee and mailed to the Holders
by DIMAC Holdings promptly, but in any event, within 105 days after the end
of each of the fiscal years of DIMAC Holdings and within 60 days after the
end of each of the first three quarters of each such fiscal year.
(c) So long as is required for an offer or sale of the Notes to
qualify for an exemption under Rule 144A, DIMAC Holdings shall, upon
request, provide the information required by clause (d)(4) thereunder to
each Holder and to each beneficial owner and prospective purchaser of Notes
identified by any Holder of Restricted Securities.
Section 4.4 COMPLIANCE CERTIFICATE.
(a) DIMAC Holdings shall deliver to the Trustee, within
forty-five (45) days after the end of each fiscal quarter and within ninety
(90) days after the end of each fiscal year, an Officers' Certificate
(provided that one of the signatories to such Officers' Certificate shall
be DIMAC Holdings's principal executive officer, principal financial
officer or principal accounting officer) stating that a review of the
activities of DIMAC Holdings and its Subsidiaries during the preceding
fiscal quarter or fiscal year, as the case may be, has been made under the
supervision of the signing Officers with a view to determine whether each
has kept, observed, performed and fulfilled its obligations under this
Indenture and the Notes, and further stating, as to each such Officer
signing
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such certificate, that to his knowledge, each of DIMAC Holdings and its
Subsidiaries has 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
hereof or thereof (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he may
have knowledge and what action each is taking or proposes to take with
respect thereto) and that to his knowledge, no event has occurred and
remains in existence by reason of which payments of interest, principal or
premium on the Notes are prohibited or if such event has occurred, a
description of the event. The Officers' Certificate shall set forth all
financial calculations for such fiscal quarter or fiscal year necessary to
demonstrate compliance with the covenants contained in this Section IV.
(b) The year-end financial statements delivered pursuant to
Section 4.3 shall be accompanied by a written statement of the independent
public accountants of DIMAC Holdings (which shall be a firm of established
national reputation reasonably satisfactory to the Trustee) that in making
the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that
either DIMAC Holdings or any of its Subsidiaries has violated any
provisions of this Indenture 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) So long as any of the Notes are outstanding, DIMAC Holdings
shall deliver to the Trustee forthwith upon any Officer becoming aware of
(i) any Default or Event of Default or (ii) any event of default under any
mortgage, indenture or instrument referred to in Section 6.1(a)(v), an
Officers' Certificate specifying such Default, Event of Default or other
event of default and what action DIMAC Holdings is taking or proposes to
take with respect thereto.
Section 4.5 TAXES.
DIMAC Holdings shall, and shall cause each of its Subsidiaries to, (a) file
timely all material Tax Returns required to be filed by DIMAC Holdings and each
of its Subsidiaries, respectively and (b) pay or discharge or cause to be paid
or discharged, before the same shall become delinquent, (i) all material Taxes
levied or imposed upon DIMAC Holdings and each of its Subsidiaries or upon the
income, profits or property of DIMAC Holdings and each of its Subsidiaries and
(ii) all lawful material claims, whether for labor, materials, supplies,
services or anything else, which, if unpaid, would or may by law become a Lien,
upon the property of DIMAC Holdings or any of its Subsidiaries; PROVIDED,
HOWEVER, that none of DIMAC Holdings and its Subsidiaries shall be required to
pay or discharge or cause to be paid or discharged any such Tax, the
applicability or validity of which is being contested in good faith by
appropriate proceedings which will prevent the forfeiture or sale of any
property of DIMAC Holdings or any of its Subsidiaries and for which disputed
amounts reserves have been established in accordance with GAAP, in an amount
which DIMAC Holdings believes in good faith is adequate.
Section 4.6 STAY, EXTENSION AND USURY LAWS.
DIMAC Holdings 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, usury or other law,
wherever enacted, now or at any time hereafter in force, that would prohibit or
forgive the payment of all or any portion of the principal of or interest on the
Notes, or that may affect the covenants or the performance of this Indenture,
and DIMAC Holdings (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.
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Section 4.7 LIMITATION ON RESTRICTED PAYMENTS.
(a) DIMAC Holdings shall not,
(i) declare or pay any dividends, either in cash or
property, on, or make any distribution to the holders (as such) in
respect of, any class of Equity Interest in DIMAC Holdings (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Capital Stock) of DIMAC Holdings);
(ii) except as provided in clause (iv) below, purchase,
repurchase, redeem or otherwise acquire or retire for value any Equity
Interests of DIMAC Holdings or any of its Subsidiaries or any other
Affiliate of DIMAC Holdings; PROVIDED that, during any one fiscal
year, as long as no Default or Event of Default has occurred and is
continuing, DIMAC Holdings may purchase Equity Interests in DIMAC
Holdings beneficially owned by directors, officers and employees of
DIMAC Holdings or any of its Subsidiaries pursuant to the terms of
employment contracts or employee benefit plans of DIMAC Holdings or
any of its Subsidiaries in an aggregate amount that, when added to all
amounts expended by any Restricted Subsidiaries of DIMAC Holdings to
purchase, repurchase, redeem or otherwise acquire or retire for value
any Equity Interests of DIMAC Holdings or any of its Subsidiaries or
any other Affiliate of DIMAC Holdings, does not exceed $2,500,000;
PROVIDED, FURTHER, that the aggregate amount expended by DIMAC
Holdings and its Restricted Subsidiaries on or after the Initial Issue
Date to so purchase Equity Interests in DIMAC Holdings beneficially
owned by directors, officers and employees of DIMAC Holdings or any of
its Subsidiaries, shall not exceed $10,000,000.
(iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness of DIMAC Holdings (other
than the Notes); or
(iv) make any Investment other than (A) any guarantee of
Indebtedness by DIMAC Holdings permitted pursuant to the provisions of
Section 4.9(a), (B) any Investment of cash by DIMAC Holdings in a
Wholly-Owned Subsidiary of DIMAC Holdings solely to fund an
Acquisition made by DIMAC Operating or any of its Subsidiaries, which
Acquisition is not prohibited pursuant to the provisions of Section
4.24(b), (C) any Investments in Cash Equivalents and (D) an Investment
in DIMAC Operating on the Initial Issue Date of up to $40,000,000 in
connection with refinancing transactions occurring on such date and
any further Investment in DIMAC Operating after the Initial Issue Date
but only to the extent that the amount of such Investment shall have
been received through the issuance of new Equity Interests (other than
Disqualified Capital Stock) of DIMAC Holdings or a new capital
contribution to DIMAC Holdings from its stockholders.
(b) DIMAC Holdings shall cause each of its Restricted
Subsidiaries to not fail to comply with the provisions of Section 4.04 of
the DIMAC Operating Indenture (as in effect on the Initial Issue Date). In
addition, and without limiting the foregoing provisions of this Section
4.7(b), DIMAC Holdings shall cause DIMAC Operating and each of its
Restricted Subsidiaries to not purchase, repurchase, redeem or otherwise
acquire or retire for value any Equity Interests of DIMAC Holdings or any
of its Subsidiaries or any other Affiliate of DIMAC Holdings; PROVIDED
that, during any one fiscal year, as long as no Default or Event of Default
has occurred and is continuing, DIMAC Operating may purchase Equity
Interests in DIMAC Holdings beneficially owned by directors, officers and
employees of DIMAC Holdings or any of its Subsidiaries pursuant to the
terms of employment contracts or employee benefit plans of DIMAC Holdings
or any of its Subsidiaries in an aggregate amount that, when added to all
amounts expended by any Restricted
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Subsidiaries of DIMAC Holdings to purchase, repurchase, redeem or otherwise
acquire or retire for value any Equity Interests of DIMAC Holdings or any
of its Subsidiaries or any other Affiliate of DIMAC Holdings, does not
exceed $2,500,000; PROVIDED, FURTHER, that the aggregate amount expended by
DIMAC Holdings and its Restricted Subsidiaries on or after the Initial
Issue Date to so purchase Equity Interests in DIMAC Holdings beneficially
owned by directors, officers and employees of DIMAC Holdings or any of its
Subsidiaries, shall not exceed $10,000,000.
Not later than the date on which DIMAC Holdings or any of its
Restricted Subsidiaries takes any action expressly permitted pursuant to
this Section 4.7 or Section 4.04 of the DIMAC Operating Indenture (as in
effect on the Initial Issue Date), DIMAC Holdings shall deliver to the
Trustee an Officers' Certificate stating that such action is permitted and
setting forth the basis upon which the calculations required by this
Section 4.7 or Section 4.04 of the DIMAC Operating Indenture were computed,
which calculations may be based upon DIMAC Holdings's latest available
financial statements.
Section 4.8 LIMITATION ON RESTRICTIONS ON DIVIDENDS FROM RESTRICTED
SUBSIDIARIES.
DIMAC Holdings shall not, and shall cause each of its Restricted
Subsidiaries to not, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of DIMAC Holdings to (a) pay dividends or
make any other distributions on its Capital Stock or any other interest or
participation in, or measured by, its profits owned by, or pay any Indebtedness
owed to, DIMAC Holdings or DIMAC Operating, (b) make loans or advances to DIMAC
Holdings or DIMAC Operating, (c) transfer any of its properties or assets to
DIMAC Holdings or DIMAC Operating, except for (i) any restrictions existing
under or contemplated by this Indenture, the DIMAC Operating Indenture (as in
effect on the Initial Issue Date) and the Senior Credit Agreement (as in effect
on the Initial Issue Date); (ii) any restrictions, with respect to a Restricted
Subsidiary of DIMAC Holdings that is not a Restricted Subsidiary of DIMAC
Holdings on the date hereof, in existence at the time such Person becomes a
Restricted Subsidiary of DIMAC Holdings (so long as such restrictions are not
created in anticipation of such Person becoming a Restricted Subsidiary of DIMAC
Holdings); (iii) with respect to clause (c) above only, any restrictions
existing under Capitalized Lease Obligations or other Indebtedness secured by
Permitted Liens (PROVIDED that, in each case, such prohibition shall only relate
to the assets which are subject to such Capitalized Lease Obligations or which
secure such Indebtedness and the proceeds therefrom); (iv) any restrictions
existing under any new agreement evidencing Indebtedness or any agreement that
refinances or replaces the agreements containing the restrictions in the
foregoing clauses (i), (ii) and (iii); PROVIDED, that the terms and conditions
of any such restrictions are no more restrictive than those under or pursuant to
the agreements containing the restrictions referenced in the foregoing clauses
(i), (ii) or (iii); or (v) any encumbrance or restriction permitted pursuant to
Section 4.05 of the DIMAC Operating Indenture (as in effect on the Initial Issue
Date).
Section 4.9 LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED CAPITAL STOCK.
(a) DIMAC Holdings shall not, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to (collectively, "INCUR") any Indebtedness (other than
PIK Notes) or issue any Disqualified Capital Stock; PROVIDED that DIMAC
Holdings may guarantee Indebtedness of any of its Restricted Subsidiaries
to the extent that the incurrence of such Indebtedness by such Restricted
Subsidiary or such guarantee by DIMAC Holdings (without duplication) does
not violate the provisions of Section 4.9(b) at the time of such
incurrence.
(b) DIMAC Holdings shall cause each of its Restricted
Subsidiaries (including without limitation, upon the creation or
acquisition of such Restricted Subsidiary) to not fail to comply with the
provisions of Section 4.03 of the DIMAC Operating Indenture (as in effect
on the Initial Issue
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Date); PROVIDED, HOWEVER, that for purposes of this Section 4.9(b), the
Consolidated Coverage Ratio test described in Section 4.03(a) of the DIMAC
Operating Indenture shall be deemed to be 1.90 to 1.00.
Section 4.10 LIMITATION ON ASSET SALES.
(a) DIMAC Holdings shall not make any Asset Sale. In addition,
DIMAC Holdings shall cause each of its Restricted Subsidiaries to not, make
any Asset Sale, unless no Default or Event of Default exists and is
continuing or is created by such Asset Sale and:
(i) such Restricted Subsidiary receives consideration at
the time of such Asset Sale at least equal to the fair market value of
such assets (as determined in good faith by the Board of Directors of
DIMAC Holdings and evidenced by a resolution set forth in an Officers'
Certificate, including as to the value of all noncash consideration);
(ii) at least 80% of the consideration therefor received
by such Restricted Subsidiary shall be in the form of cash or Cash
Equivalents; PROVIDED, HOWEVER, that for the purposes of this
subsection (a)(ii), the following are deemed to be cash: (x) any
liabilities of such Restricted Subsidiary (as shown on the most recent
balance sheet or in the notes thereto of such Restricted Subsidiary)
that are assumed by the transferee in connection with the Asset Sale
(other than liabilities that are incurred in connection with or in
anticipation of such Asset Sale); and (y) securities received by such
Restricted Subsidiary from such transferee that are immediately
converted into cash at the face amount or fair market value thereof by
such Restricted Subsidiary; and
(iii) the Net Cash Proceeds of such Asset Sale shall be
applied within 360 days of the consummation of such Asset Sale: (x) to
prepay, purchase, defease or otherwise retire any Indebtedness of
DIMAC Operating or its Restricted Subsidiaries (including without
limitation, the DIMAC Operating Notes and any Indebtedness under the
Senior Credit Agreement), in each case, with a permanent reduction in
amounts available to be borrowed or the Indebtedness that may be
incurred under the instrument evidencing such Indebtedness and/or (y)
to reinvest in Productive Assets. Any Net Cash Proceeds from any
Asset Sale consummated by any Restricted Subsidiary that are not
applied or reinvested as provided in this subsection (a)(iii) of this
Section 4.10 shall constitute excess proceeds ("EXCESS NET CASH
PROCEEDS") and shall be held in cash or Cash Equivalents.
(b) When the aggregate amount of Excess Net Cash Proceeds
exceeds $5,000,000, DIMAC Holdings shall promptly make an offer (the "ASSET
SALE OFFER") to all Holders of the Notes to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Net Cash Proceeds,
at an offer price in cash in an amount (the "ASSET SALE OFFER PRICE") equal
to 100% of the principal amount of such Notes, plus accrued and unpaid
interest thereon to the Asset Sale Date.
If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Net Cash Proceeds, DIMAC Holdings
shall select the Notes to be purchased on a pro rata basis, in such manner
as complies with applicable legal requirements, if any. Upon completion of
such Asset Sale Offer, the amount of Excess Net Cash Proceeds shall be
reset at zero.
Simultaneously with the making of such Asset Sale Offer, DIMAC
Holdings shall provide the Trustee and the Holders with an Officers'
Certificate setting forth the Asset Sale Offer Price, the Asset Sale Date
and the calculations used in determining the amount of Excess Net Cash
Proceeds to be applied to the repurchase of the Notes.
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If the date on which the Asset Sale Offer closes (the "ASSET SALE
DATE") is on or after an interest payment record date and on or before the
related interest payment date, any accrued interest will be paid to the
person in whose name a Note is registered at the close of business on such
record date, and no additional interest will be payable to holders who
tender Notes pursuant to the Asset Sale Offer.
Each Asset Sale Offer shall be conducted in compliance with all
applicable laws, including without limitation, Regulation 14E of 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 Section 4.10,
DIMAC Holdings shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 4.10 by virtue thereof. Except as provided in the DIMAC
Operating Indenture (as in effect on the Initial Issue Date) or the Senior
Credit Agreement (as in effect on the Initial Issue Date) or as permitted
pursuant to Section 4.8, DIMAC Holdings shall not, and shall not permit any
of its Restricted Subsidiaries to, create or suffer to exist or become
effective any restriction that would impair the ability of DIMAC Holdings
to make an Asset Sale Offer upon an Asset Sale or, if such Asset Sale Offer
is made, to pay for the Notes tendered for purchase.
(c) Notice of any Asset Sale Offer shall be mailed by DIMAC
Holdings to the Trustee and each Holder at its last registered address.
The Asset Sale Offer shall remain open from the time of mailing until
twenty (20) Business Days thereafter, and no longer, unless a longer period
is required by law. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The notice, which shall govern the terms of the Asset
Sale Offer, shall state:
(i) that the Asset Sale Offer is being made pursuant to
this Section 4.10 and that Notes will be accepted for payment either
(A) in whole or (B) in part in integral multiples of $1,000;
(ii) the Asset Sale Offer Price and the Asset Sale Date;
(iii) that any Note not tendered will continue to accrue
interest;
(iv) that any Note accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest from and after the
Asset Sale Date (so long as DIMAC Holdings does not default in its
obligation to promptly pay the Asset Sale Offer Price);
(v) that Holders electing to have a Note purchased pursuant
to the Asset Sale Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, at the address specified in the notice prior to
the close of business on the Business Day preceding the Asset Sale
Date;
(vi) that Holders will be entitled to withdraw their
election on the terms and subject to the conditions set forth in the
notice;
(vii) that Holders whose Notes are purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; PROVIDED, HOWEVER, that any portion
of a Note repurchased by DIMAC Holdings and any new Note issued to the
Holder in respect of the unpurchased portion thereof shall be in the
principal amount of $1,000 or an integral multiple thereof.
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(d) On the Asset Sale Date, DIMAC Holdings shall (i) accept for
payment the Notes or portions thereof (or an allocable amount thereof)
tendered pursuant to the Asset Sale Offer, (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted and (iii) deliver to the Trustee the Notes so accepted,
together with an Officers' Certificate stating that the Notes or portions
thereof (or an allocable amount thereof) tendered to DIMAC Holdings are
accepted for payment. The Paying Agent shall promptly mail to each Holder
of Notes so accepted payment in an amount equal to the purchase price of
such Notes, and the Trustee shall promptly authenticate and mail to such
Holders new Notes equal in principal amount to any unpurchased portion of
the Notes surrendered. After payment to the Holders of the purchase price
of all Notes or portions thereof so accepted, the Paying Agent shall
deliver promptly to DIMAC Holdings the balance, if any, of any money so
deposited by DIMAC Holdings with the Paying Agent remaining after such
payment to the Holders.
DIMAC Holdings shall make a public announcement of the results of the
Asset Sale Offer as soon as practicable after the Excess Proceeds Payment
Date. For the purposes of this Section 4.10, the Trustee shall act as the
Paying Agent.
Notwithstanding any of the foregoing provisions of this Section 4.10
to the contrary, DIMAC Holdings shall not be required to comply with the
provisions of this Section 4.10 to the extent and only to the extent that
such compliance would be prohibited by the terms of the DIMAC Operating
Indenture, as amended, replaced, refinanced, modified or supplemented from
time to time, or the Senior Credit Agreement.
Section 4.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) DIMAC Holdings shall not, and shall cause each of its
Restricted Subsidiaries to not, directly or indirectly, enter into or
permit to exist any transaction or series of related transactions that are
similar or part of a common plan (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of their respective Affiliates
(each an "AFFILIATE TRANSACTION"), unless (i) the terms of such Affiliate
Transaction are no less favorable to DIMAC Holdings or the applicable
Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a
Person who is not such an Affiliate, (ii) in the event such Affiliate
Transaction involves an aggregate amount in excess of $1,000,000, the terms
of such Affiliate Transaction have been approved by a majority of the
members of the Board of Directors of DIMAC Holdings and by a majority of
the disinterested members of such Board of Directors, if any (and such
majority or majorities, as the case may be, determines pursuant to a
resolution of such Board of Directors that such Affiliate Transaction
satisfies the criterion in clause (i) of this paragraph (a)); and (iii) in
the event such Affiliate Transaction involves an aggregate amount in excess
of $5,000,000, DIMAC Holdings has received a written opinion from an
independent investment banking firm of nationally recognized standing that
such Affiliate Transaction is fair to DIMAC Holdings or such Restricted
Subsidiary, as the case may be, from a financial point of view.
(b) The provisions of paragraph (a) of this Section 4.11 will
not prohibit (i) any Restricted Payment (as defined in the DIMAC Operating
Indenture as in effect on the Initial Issue Date) permitted to be paid
pursuant to Section 4.7 (and in the case of Permitted Investments (as
defined in the DIMAC Operating Indenture as in effect on the Initial Issue
Date), only those described in clauses (v), (vi) and (ix) of the definition
of Permitted Investments (as set forth in the DIMAC Operating Indenture as
in effect on the Initial Issue Date)), (ii) the performance of the
obligations of DIMAC Holdings or any of its Restricted Subsidiaries under
any employment contract, collective bargaining agreement, employee benefit
plan, related trust agreement or any other similar arrangement heretofore
or hereafter entered into in the ordinary course of business, (iii) payment
of
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compensation to, and indemnity provided on behalf of, employees, officers,
directors or consultants (excluding under the Advisory Services Agreement)
in the ordinary course of business, (iv) maintenance in the ordinary course
of business of benefit programs or arrangements for employees, officers or
directors, including vacation plans, health and life insurance plans,
deferred compensation plans, and retirement or savings plans and similar
plans, (v) any transaction between DIMAC Holdings or any of its
Wholly-Owned Subsidiaries, (vi) the payment of fees and expenses under the
Advisory Services Agreement as in effect on the Initial Issue Date or
(vii) payments by DIMAC Operating and any of its Restricted Subsidiaries
pursuant to the Tax Sharing Agreement (viii) the issuance or sale of any
Capital Stock (other than Disqualified Capital Stock) of DIMAC Operating.
Section 4.12 LIMITATION ON LIENS.
DIMAC Holdings shall not create or suffer to exist any Liens other than
Permitted Liens upon any assets of DIMAC Holdings (including without limitation,
any shares of Capital Stock of DIMAC Operating).
Section 4.13 CORPORATE EXISTENCE.
Subject to Article V, DIMAC Holdings shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Restricted Subsidiaries, in accordance with their respective organizational
documents (as the same may be amended from time to time) and (ii) its (and its
Restricted Subsidiaries') rights (charter and statutory), licenses and
franchises; PROVIDED, that DIMAC Holdings shall not be required to preserve any
such right, license or franchise, or the corporate, partnership or other
existence of any Restricted Subsidiary, if the Board of Directors of DIMAC
Holdings on behalf of DIMAC Holdings shall determine in good faith that the
preservation thereof is no longer desirable in the conduct of the business of
DIMAC Holdings and its Restricted Subsidiaries taken as a whole and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.14 REPURCHASE UPON A CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, DIMAC Holdings
shall notify the Trustee in writing thereof and shall make an offer to
purchase all of the Notes then outstanding as described below (the "Change
of Control Offer") at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the
date of repurchase (the "Change of Control Payment").
(b) The Change of Control Offer shall be made in compliance with
all applicable laws, including without limitation, Regulation 14E of 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 Section 4.14,
DIMAC Holdings shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under
this Section 4.14 by virtue thereof.
(c) Within 30 days following any Change of Control, DIMAC
Holdings shall commence the Change of Control Offer by mailing to the
Trustee and each Holder a notice, which shall govern the terms of the
Change of Control Offer, and shall state that:
(i) the Change of Control Offer is being made pursuant to
this Section 4.14 and that all Notes tendered will be accepted for
payment;
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(ii) the purchase price and the purchase date, which shall
be a Business Day no earlier than 30 days nor later than 60 days from
the date such notice is mailed (the "Change of Control Payment Date");
(iii) that any Note not tendered for payment pursuant to
the Change of Control Offer shall continue to accrue interest in
accordance with the terms thereof;
(iv) that, unless DIMAC Holdings defaults in the payment of
the Change of Control Payment, all Notes accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest on the
Change of Control Payment Date;
(v) that any Holder electing to have Notes purchased
pursuant to a Change of Control Offer shall be required to surrender
such Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes completed, to the Paying Agent
at the address specified in the notice prior to the close of business
on the third Business Day preceding the Change of Control Payment
Date;
(vi) that any Holder shall be entitled to withdraw such
election if the Paying Agent receives, not later than the close of
business on the second Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes
such Holder delivered for purchase, and a statement that such Holder
is withdrawing his election to have such Notes purchased;
(vii) that a Holder whose Notes are being purchased only
in part shall be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased
portion must be equal to $1,000 in principal amount or an integral
multiple thereof;
(viii) the instructions that Holders must follow in order
to tender their Notes; and
(ix) the circumstances and relevant facts regarding such
Change of Control.
(d) On the Change of Control Payment Date, DIMAC Holdings shall,
to the extent lawful, (i) accept for payment the Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of
all Notes or portions thereof so tendered and not withdrawn, and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating that the Notes or portions
thereof tendered to DIMAC Holdings are accepted for payment. The Paying
Agent shall promptly mail to each Holder of Notes so accepted payment in an
amount equal to the purchase price for such Notes, and the Trustee shall
authenticate and mail to each Holder a new Note equal in principal amount
to any unpurchased portion of the Notes surrendered, if any, PROVIDED, that
each such new Note will be in principal amount of $1,000 or an integral
multiple thereof.
(e) DIMAC Holdings shall make a public announcement of the
results of the Change of Control Offer on or as soon as practicable after
the Change of Control Payment Date. For the purposes of this Section 4.14,
the Trustee shall act as the Paying Agent.
(f) DIMAC Holdings shall not be required to make a Change of
Control Offer upon a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with
the requirements set forth in this Section 4.14 and purchases all Notes
validly tendered and not withdrawn under such Change of Control Offer.
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Section 4.15 MAINTENANCE OF PROPERTIES.
DIMAC Holdings shall, and shall cause each of its Restricted Subsidiaries
to maintain its properties and assets in normal working order and condition as
on the date of this Indenture (reasonable wear and tear excepted) and make all
necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, as shall be reasonably necessary for the proper conduct of
the business of DIMAC Holdings and its Restricted Subsidiaries taken as a whole;
PROVIDED, that nothing herein shall prevent DIMAC Holdings or any of its
Restricted Subsidiaries from discontinuing any maintenance of any such
properties if DIMAC Holdings determines that such discontinuance is desirable in
the conduct of the business of DIMAC Holdings and its Restricted Subsidiaries
taken as a whole.
Section 4.16 MAINTENANCE OF INSURANCE.
DIMAC Holdings shall, and shall cause each of its Restricted Subsidiaries
to, maintain liability, casualty and other insurance with a reputable insurer or
insurers in such amounts and against such risks as is carried by responsible
companies engaged in similar businesses and owning similar assets.
Section 4.17 INVESTMENT COMPANY ACT.
DIMAC Holdings shall not, and shall cause each of its Subsidiaries to not,
become an investment company subject to registration under the Investment
Company Act of 1940, as amended.
Section 4.18 OWNERSHIP OF SUBSIDIARIES.
DIMAC Holdings shall at all times own, directly or indirectly, 100% of the
Equity Interests of DIMAC Operating.
Section 4.19 LIMITATION ON BUSINESS.
DIMAC Holdings shall not conduct or operate any business, perform any
obligations, incur any Indebtedness (other than as permitted under Section
4.9(a)) or hold any assets; PROVIDED, HOWEVER, that DIMAC Holdings may own 100%
of the Equity Interests of DIMAC Operating, may hold cash or Cash Equivalents,
may perform its obligations pursuant to the Securities Purchase Agreement, this
Indenture, the Notes, the Registration Rights Agreement, the Warrant Agreement
and the Stockholders' Agreement, may issue new shares of common stock, may pay
its Taxes and may maintain its corporate existence. DIMAC Holdings shall cause
each of its Restricted Subsidiaries to not engage in any business other than a
Related Business.
Section 4.20 EMPLOYEE PLANS.
DIMAC Holdings shall not, and shall cause each of its Subsidiaries to not,
directly or indirectly, (i) terminate any employee pension benefit plan subject
to Title IV of ERISA if as a result of such termination DIMAC Holdings and its
Subsidiaries, collectively, would incur a liability with respect to such plan in
excess of $5,000,000 in the aggregate, or (ii) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any multiemployer
plan if as a result of such withdrawal (within the meaning of Section 4201 of
ERISA), DIMAC Holdings and its Subsidiaries, collectively, would incur a
liability with respect to such plan in excess of $5,000,000 in the aggregate.
As used in this Section 4.20, the terms "employee pension benefit plan" and
"multiemployer plan" shall have the meanings assigned to such terms in Section 3
of ERISA.
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Section 4.21 COMPLIANCE WITH LAWS; MAINTENANCE OF LICENSES.
DIMAC Holdings shall, and shall cause each of its Subsidiaries to, comply
with all statutes, ordinances, governmental rules and regulations, judgments,
orders and decrees (including all Environmental Laws) to which any of them is
subject, and maintain, obtain and keep in effect all licenses, permits,
franchises and other governmental authorizations necessary to the ownership or
operation of their respective properties or the conduct of their respective
businesses, except to the extent that the failure to so comply or maintain,
obtain and keep in effect could not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 4.22 AVAILABLE CASH.
DIMAC Holdings shall not expend any cash, except for (i) the payment of the
principal of (and premium, if any, on) the Notes, installments of interest on
the Notes and any other amount required by the terms hereof or of the Notes to
be paid in respect of the Notes, whether upon redemption, repurchase or
otherwise, (ii) the payment of Taxes in compliance with the provisions of
Section 4.5, (iii) Capital Expenditures in compliance with the provisions of
Section 4.25, (iv) the payment of fees and expenses relating to filing of a
registration statement with respect to the Notes pursuant to the Registration
Rights Agreement and complying with the provisions of Section 4.3, (v) the
payment of expenses incurred in the ordinary course of business, not to exceed
an aggregate of $500,000 in any one fiscal year and (vi) the making of any
payments expressly permitted pursuant to Section 4.7(a).
Section 4.23 FISCAL YEARS.
At all times, DIMAC Holdings shall maintain, and shall cause each of its
Restricted Subsidiaries to maintain, its fiscal year ending on December 31st.
Section 4.24 LIMITATION ON ACQUISITIONS.
(a) DIMAC Holdings shall not make any Acquisition.
(b) DIMAC Holdings shall cause each of its Restricted
Subsidiaries to not make an Acquisition, unless:
(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, the consummation of such Acquisition; and
(ii) the Acquisition (A) is effected by way of (1) merger
or consolidation of DIMAC Operating or any of its Restricted
Subsidiaries so long as all of the Capital Stock of such other Person
is acquired, (2) acquisition by DIMAC Operating or any of its
Restricted Subsidiaries of assets or property that constitute all or
substantially all of a business operating unit of another Person, or
(3) acquisition by DIMAC Operating or any of its Restricted
Subsidiaries of all of the Capital Stock in such other Person and (B)
relates only to acquisitions of Productive Assets and is approved by
the Board of Directors of the acquired Person (if applicable).
Section 4.25 LIMITATION ON CAPITAL EXPENDITURES.
DIMAC Holdings shall not make or incur Capital Expenditures in any fiscal
year in an aggregate amount in excess of $250,000.
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Section 4.26 INSPECTION OF PROPERTIES AND RECORDS.
DIMAC Holdings shall allow, and shall cause each of its Subsidiaries to
allow, each Initial Purchaser and each Holder of at least $20,000,000 aggregate
principal amount of Notes (or such Persons as any of them may designate)
(individually and collectively, "INSPECTORS"), subject to appropriate agreements
as to confidentiality, (i) to visit and inspect any of the properties of DIMAC
Holdings or any of its Subsidiaries, (ii) to examine all their books of account,
records, reports and other papers and to make copies and extracts therefrom,
(iii) to discuss their respective affairs, finances and accounts with their
respective officers and employees, and (iv) to discuss the financial condition
of DIMAC Holdings and its Subsidiaries with their independent accountants upon
reasonable notice to DIMAC Holdings of its intention to do so and so long as
DIMAC Holdings shall be given the reasonable opportunity to participate in such
discussions (and by this provision DIMAC Holdings authorizes said accountants to
have such discussions with the Inspectors). All such visits, examinations and
discussions set forth in the preceding sentence shall be upon prior notice at
such reasonable times and as often as may be reasonably requested. If a Default
of an Event of Default shall have occurred and be continuing, DIMAC Holdings
shall pay or reimburse all Inspectors for expenses which such Inspectors may
reasonably incur in connection with any such visitations or inspections.
ARTICLE V
SUCCESSORS
Section 5.1 WHEN DIMAC HOLDINGS MAY MERGE, ETC.
DIMAC Holdings shall not consolidate or merge with or into (regardless of
whether DIMAC Holdings is the surviving corporation), or transfer all or
substantially all of its properties or assets (determined on a consolidated
basis for DIMAC Holdings and its Subsidiaries) in one or more related
transactions to, any other Person unless:
(a) DIMAC Holdings is the surviving Person or the Person formed
by or surviving any such consolidation or merger (if other than DIMAC
Holdings) or to which such transfer has been made is a corporation
organized and existing under the laws of the United States, any state
thereof or the District of Columbia,
(b) the Person formed by or surviving any such consolidation or
merger (if other than DIMAC Holdings) or the Person to which such transfer
has been made assumes all the Obligations of DIMAC Holdings, pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee,
under the Notes, this Indenture and the Registration Rights Agreement,
(c) immediately after giving effect to such transaction on a PRO
FORMA basis, no Default or Event of Default exists or would occur and
(d) immediately after giving effect to such transaction on a PRO
FORMA basis, the Consolidated Net Worth of such surviving entity must be
equal to or greater than that of DIMAC Holdings immediately prior to giving
effect to such transaction.
DIMAC Holdings shall deliver to the Trustee prior to the consummation of
any proposed transaction an Officers' Certificate to the foregoing effect, an
Opinion of Counsel, stating that all conditions precedent to the proposed
transaction provided for in this Indenture have been complied with, and a
written statement from a firm of independent public accountants of established
national reputation reasonably satisfactory to the Trustee stating that the
proposed transaction complies with clause (d) of this Section 5.1.
For purposes of this Section 5.1, the transfer of all or substantially all
of the properties and assets of one or more Restricted Subsidiaries of DIMAC
Holdings, which properties and assets, if held by DIMAC
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Holdings instead of such Restricted Subsidiaries, would constitute all or
substantially all of the properties and assets of DIMAC Holdings on a
consolidated basis, shall be deemed to be the transfer of all or substantially
all of the properties and assets of DIMAC Holdings.
Section 5.2 SUCCESSOR SUBSTITUTED.
In the event of any transaction (other than a lease) contemplated by
Section 5.1 in which DIMAC Holdings is not the surviving Person, the successor
formed by such consolidation or into or with which DIMAC Holdings is merged or
to which such transfer is made, or formed by such reorganization, as the case
may be, shall succeed to, and be substituted for, and may exercise every right
and power of, DIMAC Holdings and DIMAC Holdings shall be discharged from its
Obligations under this Indenture, the Notes and the Registration Rights
Agreement, with the same effect as if such successor Person had been named as
DIMAC Holdings herein or therein.
Section 5.3 PLAN OF LIQUIDATION.
DIMAC Holdings shall not in a single transaction or through a series of
related transactions, adopt a Plan of Liquidation.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 EVENTS OF DEFAULT.
(a) "EVENT OF DEFAULT" occurs if:
(i) DIMAC Holdings defaults in the payment of interest on
any Note or any other amount payable hereunder when the same becomes
due and payable and the Default continues for a period of five (5)
days (it being understood that the issuance of PIK Notes in accordance
with the provisions of Section 1 of the Notes shall not constitute any
Event of Default under this clause (i));
(ii) DIMAC Holdings defaults in the payment of the principal
of or premium, if any, on any Note when the same becomes due and
payable at maturity, upon redemption or otherwise (including, without
limitation, the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or an Asset Sale Offer);
(iii) DIMAC Holdings defaults in the performance of or
breaches the provisions of Sections 4.7, 4.8, 4.9, 4.10, 4.11, 4.12,
4.14, 4.18, 4.20, 4.22, 4.23, 4.24, 4.25, 4.26, or Article V or the
provisions of Section 1.14 of the Securities Purchase Agreement;
(iv) if (i) DIMAC Holdings or DIMAC Operating fails to
comply with any of its other agreements or covenants in, or provisions
of, the Notes or this Indenture or with any of its agreements or
covenants in the Securities Purchase Agreement and (ii) the Default
continues for 30 days after written notice thereof has been given to
DIMAC Holdings by the Trustee or to DIMAC Holdings and the Trustee by
the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes, such notice to state that it is a "Notice of
Default;"
(v) if (i) DIMAC Holdings or any of its Restricted
Subsidiaries defaults in the payment of principal or interest payments
under the DIMAC Operating Notes or the DIMAC Operating Indenture or
the Senior Credit Agreement, regardless of the principal amount of
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the Indebtedness outstanding thereunder, (ii) DIMAC Holdings or any of
its Restricted Subsidiaries defaults in the payment of principal or
interest payments under any loan agreement, note, mortgage, indenture
or instrument (including without limitation the DIMAC Operating
Indenture and the Senior Credit Agreement) under which there may be
issued or by which there may be secured or evidenced any other
Indebtedness of DIMAC Holdings or any of its Restricted Subsidiaries
for borrowed money (or the payment of which is guaranteed by DIMAC
Holdings or any of its Restricted Subsidiaries), whether such
indebtedness or guarantee now exists or shall be created hereafter,
and the principal amount of such indebtedness, together with the
principal amount of any other such indebtedness for which there is a
default in the payment of interest, premium, if any, or principal,
aggregates $3,000,000 or more or (iii) an event of default occurs
under any loan agreement, note, mortgage, indenture or instrument
which shall represent a default in payment upon final maturity or
otherwise results in the acceleration of such indebtedness prior to
its expressed maturity and the principal amount of such indebtedness,
together with the principal amount of any other such indebtedness with
respect to which there has been a default in payment upon final
maturity or the maturity of which has been so accelerated and has not
been paid, aggregates $3,000,000 or more;
(vi) a final judgment or final judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against DIMAC Holdings, DIMAC Operating or any Subsidiary of DIMAC
Holdings or DIMAC Operating and such remains undischarged for a period
(during which execution shall not be effectively stayed) of thirty
(30) days, PROVIDED that the aggregate of all such judgments (which
are not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) exceeds
$3,000,000;
(vii) repudiation by DIMAC Holdings of its obligations
under this Indenture or the Notes, or the unenforceability of this
Indenture or the Notes against DIMAC Holdings for any reason;
(viii) the filing by DIMAC Holdings or any of its
Subsidiaries (any such Person, a "DEBTOR") of a petition commencing a
voluntary case under Section 301 of Title 11 of the United States
Code, or the commencement by a Debtor of a case or proceeding under
any other Bankruptcy Law seeking the adjustment, restructuring, or
discharge of the debts of such Debtor, or the liquidation of such
Debtor, including without limitation the making by a Debtor of an
assignment for the benefit of creditors; or the taking of any
corporate action by a Debtor in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing;
(ix) the filing against a Debtor of a petition commencing
an involuntary case under Section 303 of Title 11 of the United States
Code, with respect to which case (a) such Debtor consents or fails to
timely object to the entry of, or fails to seek the stay and dismissal
of, an order of relief, (b) an order for relief is entered and is
pending and unstayed on the 60th day after the filing of the petition
commencing such case, or if stayed, such stay is subsequently lifted
so that such order for relief is given full force and effect, or (c)
no order for relief is entered, but the court in which such petition
was filed has not entered an order dismissing such petition by the
60th day after the filing thereof; or the commencement under any other
Bankruptcy Law of a case or proceeding against a Debtor seeking the
adjustment, restructuring, or discharge of the debts of such Debtor,
or the liquidation of such Debtor, which case or proceeding is pending
without having been dismissed on the 60th day after the commencement
thereof; or
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(x) the entry by a court of competent jurisdiction of a
judgment, decree or order appointing a receiver, liquidator, trustee,
custodian or assignee of a Debtor or of the property of a Debtor, or
directing the winding up or liquidation of the affairs or property of
a Debtor, and (a) such Debtor consents or fails to timely object to
the entry of, or fails to seek the stay and dismissal of, such
judgment, decree, or order, or (b) such judgment, decree or order is
in full force and effect and is not stayed on the 60th day after the
entry thereof, or, if stayed, such stay is thereafter lifted so that
such judgment, decree or order is given full force and effect.
(b) DIMAC Holdings shall, upon becoming aware that a Default or
Event of Default has occurred, deliver to the Trustee a statement
specifying such Default or Event of Default and what action DIMAC Holdings
is taking or proposes to take with respect thereto.
Section 6.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in clause
(viii), (ix) or (x) of Section 6.1(a)) occurs and is continuing, the Trustee by
written notice to DIMAC Holdings, or the Holders of at least 25% in principal
amount of the then outstanding Notes by written notice to DIMAC Holdings and the
Trustee, may declare the unpaid principal of and any accrued interest on all the
Notes to be due and payable. Upon such declaration the principal and interest
shall be due and payable immediately. If an Event of Default specified in
clause (viii), (ix) or (x) of Section 6.1(a) occurs, all outstanding Notes shall
IPSO FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. At any time after a
declaration of acceleration, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the Notes outstanding, by written notice to DIMAC
Holdings and the Trustee, may rescind and annul such declaration and its
consequences if (a) DIMAC Holdings has paid or deposited with the Trustee a sum
sufficient to pay (i) all sums paid or advanced by the Trustee and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, (ii) all overdue interest (including any interest
accrued subsequent to an Event of Default specified in clause (viii), (ix) or
(x) of Section 6.1(a)) on all Notes, (iii) the principal of and premium, if any,
on any Notes that have become due otherwise than by such declaration or
occurrence of acceleration and interest thereon at the rate borne by the Notes,
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; (b) all Events of Default,
other than the non-payment of principal of and interest on the Notes that have
become due solely by such declaration or occurrence of acceleration, have been
cured or waived; and (c) the rescission would not conflict with any judgment,
order or decree of any court of competent jurisdiction.
Section 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy (under this Indenture or otherwise) to collect the payment of
principal or interest on the Notes to enforce the performance of any provision
of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Section 6.4 WAIVER OF PAST DEFAULTS.
Holders of a majority of the aggregate principal amount of the then
outstanding Notes by written notice to the Trustee may on behalf of the Holders
of all of the Notes (a) waive any existing Default or Event
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of Default and its consequences under this Indenture except a continuing Default
or Event of Default in the payment of the principal of, or interest on, any Note
or a Default or an Event of 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, and/or (b) rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal or
interest that has become due solely because of the acceleration) have been cured
or waived. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
Section 6.5 CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding Notes
may 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
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Holders, or that may involve the Trustee in personal
liability.
Section 6.6 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder 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 or Holders 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 30 days
after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 30-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
Section 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal and interest on the Note, on or
after the respective due dates expressed in the Note, 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 the Holder.
Section 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(a)(i) or 6.1(a)(ii) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against DIMAC Holdings for the whole amount
of principal and interest remaining unpaid on the Notes and interest on overdue
principal (and premium, if any) and, to the extent lawful, interest or overdue
interest and such further amount
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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 6.9 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 allowed in any judicial proceedings relative to DIMAC Holdings, 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 7.7. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.7 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 of the Notes 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 thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it shall pay
out the money in the following order:
FIRST: to the Trustee, its agents and attorneys for amounts due under
Section 7.7, 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 for amounts due and unpaid on the Notes for
principal and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for principal
and interest, respectively;
THIRD: without duplication, to Holders for any other Obligations
owing to the Holders under the Notes, this Indenture or the Registration
Rights Agreement; and
FOURTH: to DIMAC Holdings or to such party as a court of competent
jurisdiction shall direct.
The Trustee, upon written notice to DIMAC Holdings, may fix a record date
and payment date for any payment to Holders.
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
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assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.6, or a suit
by Holders of more than 10% in principal amount of the then outstanding Notes.
Section 6.12 PREMIUM ON ACCELERATION.
In the event of an acceleration of the Notes upon an Event of Default
occurring by reason of any willful action (or deliberate inaction) taken (or not
taken) by or on behalf of DIMAC Holdings with the intention of avoiding payment
of the premium that DIMAC Holdings would have had to pay if DIMAC Holdings had
elected to redeem the Notes and such acceleration is not rescinded or annulled,
the Holders shall be entitled to receive, in addition to any other payments to
which they may be entitled, a premium equal to the percentages of principal set
forth below if the declaration date of the acceleration occurs during the twelve
month period commencing on October 22 of the year set forth below:
<TABLE>
<CAPTION>
Year % of Principal Amount
---- ---------------------
<S> <C>
1998 115.500
1999 113.950
2000 112.400
2001 110.850
2002 109.300
2003 107.750
2004 106.200
2005 104.650
2006 103.100
2007 101.550
2008 100.000
</TABLE>
ARTICLE VII
TRUSTEE
Section 7.1 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 their exercise as a
prudent person would exercise or use under the circumstances in the conduct
of his or her 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.
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(ii) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether they conform to the
requirements of this Indenture (but need not confirm 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 paragraph does not limit the effect of paragraph
(d) of this Section 7.1.
(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.
(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 6.5.
(d) Regardless of whether therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b), (c) and (e) of this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee may
refuse to perform any duty or exercise any right or power unless it
receives 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 DIMAC
Holdings. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
Section 7.2 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting 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 Officers' 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 Officers' Certificate or Opinion of Counsel.
The Trustee may consult with counsel of its selection and the 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 agents and shall not be
responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within
its rights or powers conferred upon it by this Indenture.
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(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from DIMAC Holdings shall be
sufficient if signed by an Officer of DIMAC Holdings, on behalf of DIMAC
Holdings.
(f) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of DIMAC Holdings's covenants in
Article IV. 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 6.1(a)(i), 6.1(a)(ii) and 4.1, or (ii) any
Default or Event of Default of which the Trustee shall have received
written notification or a Responsible Officer of the Trustee shall have
obtained actual knowledge.
Section 7.3 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 DIMAC Holdings or an Affiliate of
DIMAC Holdings with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
Section 7.4 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 DIMAC Holdings's use of the proceeds from the Notes or any money
paid to DIMAC Holdings or upon DIMAC Holdings's direction under any provision
hereof, 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 7.5 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if the
Trustee has actual knowledge thereof (within the meaning of Section 7.2(f)), the
Trustee shall mail to the Holders 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 the 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
Responsible Officers in good faith determines that withholding the notice is in
the interest of the Holders of the Notes.
Section 7.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, the Trustee shall mail to the Holders 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). The Trustee shall also transmit by mail
all reports as required by TIA Section 313(c).
Commencing at the time this Indenture is qualified under the TIA, a copy of
each report at the time of its mailing to the Holders shall be filed with the
Commission and each stock exchange on which the Notes are listed. DIMAC
Holdings shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
Section 7.7 COMPENSATION AND INDEMNITY.
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DIMAC Holdings shall pay to the Trustee from time to time such compensation
as shall be agreed to in writing by DIMAC Holdings and the Trustee 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. DIMAC Holdings 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, except such disbursements, advances and expenses as may be attributable
to its negligence or bad faith.
DIMAC Holdings shall indemnify the Trustee and any predecessor against any
and all losses, liabilities, damages, claims or expenses incurred by the Trustee
without negligence or bad faith on its part 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 DIMAC Holdings and
defending itself against any claim (regardless of whether asserted by DIMAC
Holdings 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 as set
forth below. The Trustee shall notify DIMAC Holdings promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify DIMAC Holdings
shall not relieve DIMAC Holdings of its obligations hereunder. DIMAC Holdings
shall defend the claim and the Trustee shall cooperate in the defense. In the
event that a conflict of interest or conflicting defenses would arise in
connection with the representation of DIMAC Holdings and the Trustee by the same
counsel, the Trustee may have separate counsel and DIMAC Holdings shall pay the
reasonable fees and expenses of such counsel. DIMAC Holdings need not pay for
any settlement made without its consent, which consent shall not be unreasonably
withheld.
The obligations of DIMAC Holdings under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture.
DIMAC Holdings need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through its own negligence or bad faith.
To secure DIMAC Holdings's payment obligations in this Section 7.7, 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 of (and
premium, if any) 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 6.1(a)(viii), (ix) or (x) occurs, the expenses and
the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of this
Indenture.
Section 7.8 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 7.8 and upon DIMAC Holdings's receipt of
notice from the successor Trustee of such appointment.
The Trustee may resign at any time and be discharged from the trust hereby
created by so notifying DIMAC Holdings. The Holders of a majority in principal
amount of the then outstanding Notes may remove the Trustee by so notifying the
Trustee and DIMAC Holdings. DIMAC Holdings may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
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(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, DIMAC Holdings shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by DIMAC Holdings.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, DIMAC Holdings or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee after written request by any Holder who has been a Holder
for at least six months fails to comply with Section 7.10, such Holder 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 DIMAC Holdings. 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 the
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, PROVIDED that all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7. Notwithstanding replacement of the Trustee pursuant to this Section 7.8,
DIMAC Holdings's obligations under Section 7.7 shall continue for the benefit of
the retiring Trustee, and DIMAC Holdings shall pay to any such replaced or
removed Trustee all amounts owed under Section 7.7 upon such replacement or
removal.
Section 7.9 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 or
banking association, 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 shall (a) be a
corporation organized and doing business under the laws of the United States of
America or of any state thereof or of the District of Columbia authorized under
such laws to exercise corporate trustee power, (b) be subject to supervision or
examination by Federal or state or the District of Columbia authority, and (c)
have a combined capital and surplus of at least $100,000,000 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 Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is subject to
TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operations of TIA Section 310(b)(1) any indenture or indentures under which
other securities, or certificates of interest or participation in other
securities, of DIMAC Holdings are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met.
Section 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST DIMAC HOLDINGS.
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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.
The provisions of TIA Section 311 shall apply to DIMAC Holdings, as obligor on
the Notes.
ARTICLE VIII
DISCHARGE; LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.1 DISCHARGE; OPTION TO EFFECT LEGAL OR COVENANT DEFEASANCE.
This Indenture shall cease to be of further effect (except that DIMAC
Holdings's obligations under Section 7.7 and the Trustee's and the Paying
Agent's obligations under Sections 8.6 and 8.7 shall survive) when all
outstanding Notes theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Notes that have been replaced or paid) to
the Trustee for cancellation and DIMAC Holdings has paid all sums payable
hereunder. In addition, DIMAC Holdings may elect at any time to have Section
8.2 or Section 8.3, at DIMAC Holdings's option, of this Indenture applied to all
outstanding Notes upon compliance with the conditions set forth below in this
Article VIII.
Section 8.2 LEGAL DEFEASANCE AND DISCHARGE.
Upon DIMAC Holdings's exercise under Section 8.1 of the option applicable
to this Section 8.2, except as set forth below, DIMAC Holdings shall be deemed
to have been discharged from its obligations with respect to all outstanding
Notes on the date the conditions set forth below are satisfied (hereinafter,
"Legal Defeasance"). Following such Legal Defeasance, (a) DIMAC Holdings shall
be deemed to have paid and discharged the entire indebtedness outstanding
hereunder, and this Indenture shall cease to be of further effect as to all
outstanding Notes, and (b) DIMAC Holdings shall be deemed to have satisfied all
other of its obligations under the Notes and this Indenture (and the Trustee, on
demand of and at the expense of DIMAC Holdings, shall execute proper instruments
acknowledging the same), except for the following which shall survive until
otherwise terminated or discharged hereunder:
(a) the 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 described in
Section 8.5;
(b) DIMAC Holdings's obligations under Sections 2.4, 2.6, 2.7,
2.10, 4.2, 8.5, 8.6 and 8.7; and
(c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and DIMAC Holdings's obligations in connection therewith.
Section 8.3 COVENANT DEFEASANCE.
Upon DIMAC Holdings's exercise under Section 8.1 of the option applicable
to this Section 8.3, DIMAC Holdings shall be released from its obligations under
the covenants contained in Sections 4.3, 4.4, 4.7, 4.8, 4.9, 4.10, 4.11, 4.12,
4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26 and
Article V on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. Following such Covenant Defeasance, (a) DIMAC
Holdings need not comply with, and shall not have any liability in respect of,
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such
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covenant to any other provision herein or in any other document, but, except as
specified above, the remainder of this Indenture and the Notes shall be
unaffected thereby, and (b) Sections 6.1(a)(iii) through 6.1(a)(vii) shall not
constitute Events of Default with respect to the Notes.
Section 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.2 or 8.3 to the outstanding Notes:
(a) DIMAC Holdings shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to comply with the provisions
of this Article VIII applicable to it), in trust, for the benefit of the
Holders, cash, 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 (and Liquidated Damages, if any) on such
outstanding 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;
(b) in the case of Legal Defeasance, DIMAC Holdings shall have
delivered to the Trustee an Opinion of Counsel confirming that (i) DIMAC
Holdings has received from, or there has been published by, the Internal
Revenue Service a ruling or (ii) since the date of this Indenture, there
has been a change in the applicable Federal income tax law, in either case
to the effect that, and based thereon such opinion of counsel shall confirm
that, the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such 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, DIMAC Holdings shall
have delivered to the Trustee an Opinion of Counsel confirming that the
Holders will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(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 will not result
in a breach or violation of, or constitute a default under any material
agreement or instrument to which DIMAC Holdings or any of its Subsidiaries
is a party or by which DIMAC Holdings or any of its Subsidiaries is bound;
(f) DIMAC Holdings shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by DIMAC
Holdings with the intent of preferring the Holders over the other creditors
of DIMAC Holdings with the intent of defeating, hindering, delaying or
defrauding other creditors of DIMAC Holdings; and
(g) DIMAC Holdings 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, (a) through (f) and, in the case of the Opinion of Counsel,
clauses (a) (with respect to the validity and perfection of the security
interest), (b), (c) and (e) of this Section 8.4, have been complied with.
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(h) In the event all or any portion of the Notes are to be
redeemed through such irrevocable trust, DIMAC Holdings must make
arrangements satisfactory to the Trustee, at the time of such deposit, for
the giving of notice of such redemption or redemptions by the Trustee in
the name and at the expense of DIMAC Holdings.
Section 8.5 DEPOSITS TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS.
Subject to Section 8.6, all cash and U.S. Government Obligations (including
the proceeds thereof) deposited with the Trustee (or other qualifying trustee,
collectively for purposes of this Section 8.5, the "Paying Agent") pursuant to
Section 8.4 in respect of the outstanding Notes shall be held in trust and
applied by the Paying Agent, in accordance with the provisions of such Notes and
this Indenture, to the payment, either directly or through any other 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
(and Liquidated Damages, if any).
DIMAC Holdings shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 8.4 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of outstanding Notes.
Section 8.6 REPAYMENT TO DIMAC HOLDINGS.
(a) The Trustee or the Paying Agent shall deliver or pay to
DIMAC Holdings from time to time upon the request of DIMAC Holdings any
cash or U.S. Government Obligations held by it as provided in Section 8.4
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 8.4(a)), are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
(b) Any cash and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee or any Paying Agent, or then
held by DIMAC Holdings, in trust for the payment of the principal of,
premium, if any, or interest (and Liquidated Damages, if any) on any Note
and remaining unclaimed for two years after such principal, and premium, if
any, or interest has become due and payable shall be paid to DIMAC Holdings
on its request; and the Holder of such Note shall thereafter look only to
DIMAC Holdings for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any such repayment, shall at the expense of DIMAC Holdings
cause to be published once, in the NEW YORK TIMES and 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 DIMAC Holdings.
Section 8.7 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash or U.S.
Government Obligations in accordance with Section 8.2 or 8.3, as the case may
be, of this Indenture by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, or if any event occurs at any time in the period ending on the 91st
day after the date of deposit pursuant to Section 8.2 or 8.3 which event would
constitute an Event of Default under Section 6.1(a)(viii), (ix) or (x) had Legal
Defeasance or Covenant Defeasance, as the case may be, not occurred, then DIMAC
Holdings's
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obligations under this Indenture and the Notes shall be revived and reinstated
as though no deposit had occurred pursuant to Section 8.2 or 8.3 until such time
as the Trustee or Paying Agent is permitted to apply such money in accordance
with Section 8.2 or 8.3, as the case may be; PROVIDED, HOWEVER, that, if DIMAC
Holdings makes any payment of principal of, premium, if any, or interest (and
Liquidated Damages, if any) on any Note following the reinstatement of its
obligations, DIMAC Holdings shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the cash or U.S. Government Obligations
held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS
Section 9.1 WITHOUT CONSENT OF HOLDERS.
(a) DIMAC Holdings and the Trustee may amend or supplement this
Indenture and the Notes without the consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(iii) to comply with Article V;
(iv) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
adversely affect the legal rights hereunder or thereunder of any
Holder; or
(v) to comply with requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the
TIA.
Upon the request of DIMAC Holdings, accompanied by a resolution of the
Board of Directors of DIMAC Holdings authorizing the execution of any such
supplemental indenture or amendment, and upon receipt by the Trustee of the
documents described in Section 9.6 required or requested by the Trustee, the
Trustee shall join with DIMAC Holdings in the execution of any supplemental
indenture or amendment authorized or permitted by the terms of this Indenture
and shall make any further appropriate agreements and stipulations which may be
therein contained, but the Trustee shall not be obligated to enter into such
supplemental indenture or amendment that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.2 WITH CONSENT OF HOLDERS.
(a) Subject to Sections 6.4 and 6.7, DIMAC Holdings and the
Trustee, as applicable, may amend, or waive any provision of, this
Indenture or the Notes, with the written consent of the Holders of at least
a majority of the principal amount of the then outstanding Notes (including
consents obtained in connection with a tender offer or exchange offer for
Notes).
(b) Upon the request of DIMAC Holdings, accompanied by a
resolution of the Board of Directors of DIMAC Holdings authorizing the
execution of any such supplemental indenture or amendment, and upon filing
with the Trustee of evidence satisfactory to the Trustee of the consent of
the Holders as aforesaid, and upon receipt by the Trustee of the documents
described in Section 9.6, the Trustee shall join with DIMAC Holdings in the
execution of such supplemental indenture or amendment unless such
supplemental indenture or amendment affects the Trustee's own rights,
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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 supplemental indenture.
(c) It shall not be necessary for the consent of the Holders
under this Section 9.2 to approve the particular form of any proposed
supplemental indenture or amendment, but it shall be sufficient if such
consent approves the substance thereof.
(d) After a supplemental indenture or amendment under this
Section 9.2 becomes effective, DIMAC Holdings shall mail to the Holders of
each Note affected thereby a notice briefly describing the amendment or
waiver. Any failure of DIMAC Holdings to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture, amendment or waiver.
(e) Notwithstanding any other provision hereof, without the
consent of each Holder affected, an amendment or waiver under this Section
9.2 may not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(iii) reduce the principal of, or the premium (including,
without limitation, redemption premium) on, or change the fixed
maturity of any Note or alter the provisions with respect to payment
on redemption of the Notes or the price at which DIMAC Holdings shall
offer to purchase such Notes pursuant to Section 4.10 or 4.14;
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on, or redemption payment
with respect to, any Note (other than a Default in the payment of an
amount due as a result of an acceleration if the Holder rescinds such
acceleration pursuant to Section 6.2);
(v) make any Note payable in money other than that stated
in the Notes;
(vi) make any change in Section 6.4 or 6.7 or in this
Section 9.2 with respect to the requirement for the consent of any
affected Holder; or
(vii) make any change adversely affecting the contractual
ranking of the Obligations of DIMAC Holdings under the Notes, this
Indenture and the Registration Rights Agreement.
Section 9.3 COMPLIANCE WITH TRUST INDENTURE ACT.
If, at the time of an amendment to this Indenture or the Notes, this
Indenture shall be qualified under the TIA, every amendment to this Indenture or
the Notes shall be set forth in a supplemental indenture that complies with the
TIA as then in effect.
Section 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until a supplemental indenture, an amendment or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder and
every subsequent Holder of a Note or portion of
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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. A supplemental indenture,
amendment or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
DIMAC Holdings may, but shall not be obligated to, fix a record date for
determining which Holders must consent to such supplemental indenture, amendment
or waiver. If DIMAC Holdings fixes a record date, the record date shall be
fixed at (i) the later of 30 days prior to the first solicitation of such
consent or the date of the most recent list of Holders furnished to the Trustee
prior to such solicitation pursuant to Section 2.5, or (ii) such other date as
DIMAC Holdings shall designate.
Section 9.5 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about a supplemental
indenture, amendment or waiver on any Note thereafter authenticated. DIMAC
Holdings in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment or waiver.
Section 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture authorized
pursuant to this Article IX if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplemental indenture, the Trustee shall be entitled to receive,
if requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 7.1, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it shall be valid and binding upon DIMAC
Holdings in accordance with its terms. DIMAC Holdings may not sign an amendment
or supplemental indenture until the Board of Directors of DIMAC Holdings
approves it.
ARTICLE X
MISCELLANEOUS
Section 10.1 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 10.2 NOTICES.
Any notice or communication by DIMAC Holdings 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' addresses:
If to DIMAC Holdings:
DIMAC Holdings, Inc.
5775 Peachtree Dunwoody Road, Suite C-150
Atlanta, Georgia 30342
Attention: Chief Financial Officer
Telecopier No.: (404) 705-9929
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If to the Trustee:
Wilmington Trust Company
1100 North Market Street
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
DIMAC Holdings 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; upon receipt, if deposited in the mail, postage prepaid; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
All notices and communications to the Trustee shall be deemed to have been duly
given only if actually received by the Trustee.
Any notice or communication to a Holder shall be mailed by first-class
mail, to his address shown on the register kept by the Registrar. 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 communication is mailed in the manner provided above within the
time prescribed, it is duly given, regardless of whether the addressee receives
it.
If DIMAC Holdings mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
Section 10.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. DIMAC Holdings,
the Trustee, the Registrar and any other person shall have the protection of TIA
Section 312(c).
Section 10.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by DIMAC Holdings to the Trustee to take
any action under this Indenture, DIMAC Holdings shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 10.5) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been complied with.
Section 10.5 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 include:
B-53
<PAGE>
(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 has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to regardless of whether such covenant or condition
has been complied with; and
(d) a statement as to regardless of whether, in the opinion of
such Person, such condition or covenant has been complied with,
PROVIDED that with respect to matters of fact, an Opinion of Counsel may rely
upon an Officers' Certificate or a certificate of a public official.
Section 10.6 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 10.7 LEGAL HOLIDAYS.
If a payment date is a Legal Holiday at a place of payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
Section 10.8 NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator, stockholder or controlling
person of DIMAC Holdings, as such, shall have any liability for any obligations
of DIMAC Holdings under the Notes, this Indenture or the Registration Rights
Agreement or for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release shall be part of the
consideration for the issuance of the Notes. Notwithstanding the foregoing,
nothing in this provision shall be construed as a waiver or release of any
claims under the Federal securities laws.
Section 10.9 GOVERNING LAW.
THIS INDENTURE SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW. DIMAC HOLDINGS HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. DIMAC HOLDINGS IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING
B-54
<PAGE>
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. DIMAC
HOLDINGS IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO DIMAC HOLDINGS AT ITS ADDRESS
SET FORTH HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST DIMAC HOLDINGS IN ANY OTHER JURISDICTION.
Section 10.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of DIMAC Holdings or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
Section 10.11 SUCCESSORS.
All agreements of DIMAC Holdings in this Indenture and the Notes shall bind
their respective successors. All agreements of the Trustee in this Indenture
shall bind its successor.
Section 10.12 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 10.13 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 10.14 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 hereof and shall in no way modify or
restrict any of the terms or provisions hereof.
(SIGNATURE PAGES FOLLOW.)
B-55
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Indenture as of the date first written above.
DIMAC HOLDINGS, INC.
By: /s/
----------------------------------
Name:
Title:
Attest:
-----------------------
Name:
Title:
TRUSTEE:
WILMINGTON TRUST COMPANY,
as Trustee
By:
------------------------------------
Name:
Title:
B-56
<PAGE>
EXHIBIT A
(Face of Security)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITORY") TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO DIMAC HOLDINGS 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 DEPOSITORY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DEPOSITORY), 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 HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH NOTE, PRIOR TO THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD THAT MAY HEREAFTER BE PROVIDED UNDER RULE 144(K) AS PERMITTING
RESALES BY NON-AFFILIATES OF RESTRICTED SECURITIES WITHOUT RESTRICTION) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH DIMAC
HOLDINGS OR ANY AFFILIATE OF DIMAC HOLDINGS WAS THE OWNER OF THIS NOTE (OR ANY
PREDECESSOR OF SUCH NOTE) ONLY (A) TO DIMAC HOLDINGS, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS PURCHASING THE NOTE FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO DIMAC HOLDINGS'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER,
SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF
AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM, AND IN EACH OF THE FOREGOING CASES, A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THIS NOTE IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO
THE TRUSTEE.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR PURPOSES OF
SECTIONS 1271 ET. SEQ. OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THE
ISSUE DATE OF THIS NOTE IS OCTOBER 22, 1998. FOR INFORMATION REGARDING THE
ISSUE PRICE, AMOUNT OF OID PER $1,000 OF PRINCIPAL AMOUNT AND YIELD TO MATURITY
FOR PURPOSES OF THE OID RULES, PLEASE CONTACT THE CHIEF FINANCIAL OFFICER OF THE
ISSUER AT 5775 PEACHTREE DUNWOODY ROAD, SUITE C-150, ATLANTA, GA, TELECOPY NO.
(404) 705-9929.
DIMAC HOLDINGS, INC.
151/2% Senior Note due October 22, 2009
No. $ __________________
CUSIP NO.
DIMAC Holdings, Inc., a Delaware corporation ("DIMAC Holdings"), as
obligor, for value received promises to pay to __________________ or registered
assigns, the principal sum of ___________________ Dollars on October 22, 2009.
Interest Payment Dates: March 31, June 30, September 30 and December 31 and
on the maturity date.
Record Dates: March 15, June 15, September 15 and December 15 (regardless
of whether a Business Day).
Reference is hereby made to the further provisions hereof set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.
IN WITNESS WHEREOF, DIMAC Holdings has caused this 151/2% Senior Note due
October 22, 2009 to be signed manually or by facsimile by its duly authorized
officers.
DIMAC HOLDINGS, INC.
Dated:
Attest: By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Trustee's Certificate of Authentication:
This is one of the 151/2% Senior Notes due October 22, 2009 referred to in the
within-mentioned Indenture.
WILMINGTON TRUST COMPANY, as Trustee
By:
--------------------------
AUTHORIZED SIGNATORY
______________________________
(1) This paragraph should be included only if the Note is issued in global
form.
B-57
<PAGE>
(Back of Security)
DIMAC HOLDINGS, INC.
151/2% Senior Note due October 22, 2009
1. INTEREST. DIMAC Holdings, Inc., a Delaware corporation ("DIMAC
HOLDINGS"), promises to pay interest in cash on the principal amount of this
151/2% Senior Note due October 22, 2009 (this "Note") at 151/2% per annum from
October 22, 1998 until maturity. DIMAC Holdings will pay interest on this Note
quarterly on March 31, June 30, September 30 and December 31 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"INTEREST PAYMENT DATE") to the registered Holder of hereof at the close of
business on the March 15, June 15, September 15 or December 15, next preceding
the Interest Payment Date, even if this Note is cancelled after such record date
and on or before such Interest Payment Date; PROVIDED, that the first Interest
Payment Date shall be December 31, 1998. Notwithstanding the foregoing, with
respect to any installment of interest on this Note due on an Interest Payment
Date that occurs on or prior to September 30, 2003, in lieu of paying all of
such installment of interest in cash, DIMAC Holdings may pay all of such
installment (or a portion thereof) by issuing to each such Holder of record an
additional Note in an aggregate principal amount equal to the amount of interest
due to such Holder on the applicable Interest Payment Date and not paid in cash.
Interest on this Note will accrue from the most recent date on which interest
has been paid or, if no interest has been paid, from the date of issuance
hereof. DIMAC Holdings shall pay interest (including post-petition interest in
any proceeding under Bankruptcy Law) on all due and unpaid amounts outstanding
under the Notes (including overdue installments of principal, premium, if any,
or interest), from time to time on demand at a rate equal to 161/2% per annum,
compounded quarterly, to the extent lawful. PIK Notes issued in accordance with
the terms hereof shall not constitute unpaid amounts hereunder. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Holder hereof must surrender this Note to a
Paying Agent to collect principal payments. Except as provided in Section 1
hereof, DIMAC Holdings shall pay principal and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. This Note is payable, as to principal and interest, at the
offices of a Paying Agent. DIMAC Holdings, however, may pay interest by mailing
a check and/or an additional Note on or before the applicable due date to the
Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, the Trustee shall act as
Paying Agent and Registrar. DIMAC Holdings may change any Paying Agent,
Registrar or co-registrar without notice to any Holder. Subject to certain
exceptions, DIMAC Holdings or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. DIMAC Holdings has issued this Note under an Indenture
dated as of October 22, 1998 (the "INDENTURE") between DIMAC Holdings 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 (the
"TIA") (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture until such time as the Indenture is qualified under the TIA and
thereafter as in effect on the date the Indenture is so qualified. The Notes
are subject to all such terms, and the Holder hereof is referred to the
Indenture and such Act for a statement of such terms. The terms of the
Indenture shall govern any inconsistencies between the Indenture and the Notes.
Terms not otherwise defined herein shall have the meanings assigned in the
Indenture. The Notes are general senior obligations of DIMAC Holdings. The
Notes are limited to $30,000,000 in aggregate principal amount plus the
aggregate principal amount of any additional Notes issued in accordance with
Section 1 hereof in lieu of a portion of any cash interest payments.
5. REDEMPTION.
(a) The Notes are not redeemable at DIMAC Holdings's option prior to
October 22, 2002. DIMAC Holdings may redeem all or any of the Notes, in whole
or in part, at any time on or after October 22, 2002, at a redemption price
equal to the percentages of the principal amount thereof set forth below, plus
accrued and unpaid interest to the redemption date, if redeemed during the
12-month period beginning October 22 of the years indicated below.
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2002 109.300%
2003 107.750%
2004 106.200%
2005 104.650%
2006 103.10%
</TABLE>
B-58
<PAGE>
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2007 101.550%
2008 100.0%
</TABLE>
(b) If, on or before October 22, 2002, there is a Qualified Public Equity
Offering of DIMAC Holdings, DIMAC Holdings may, within thirty (30) days of the
consummation of such Qualified Public Equity Offering, redeem all or any of the
Notes, in whole or in part, at a redemption price equal to 107.75% of the
aggregate principal amount of Notes being redeemed plus accrued and unpaid
interest thereon to the redemption date.
(c) There shall be no mandatory redemption of the Notes.
6. NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least
thirty (30) days but not more than sixty (60) days before a Redemption Date by
first class mail to each Holder whose Notes are to be redeemed at such Holder's
registered address; PROVIDED, HOWEVER, that notice of redemption pursuant to
Section 5(b) hereof shall be mailed within ten (10) days after the consummation
of the Qualified Public Equity Offering referenced therein. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. If, on or prior to the Redemption Date, DIMAC Holdings deposits in a
segregated account or otherwise sets aside funds sufficient to pay the
Redemption Price of the Notes called for redemption, then, on and after the
Redemption Date, interest ceases to accrue on Notes or portions thereof called
for redemption, unless DIMAC Holdings defaults in paying the redemption price.
7. OFFERS TO REPURCHASE. Following the occurrence of any Change of
Control, DIMAC Holdings will be required to offer to purchase all outstanding
Notes upon the terms set forth in the Indenture. Following the occurrence of an
Asset Sale, DIMAC Holdings will be required to apply the Excess Net Cash
Proceeds therefrom to an offer to purchase outstanding Notes upon the terms set
forth in the Indenture.
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
DIMAC Holdings may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar and DIMAC Holdings need not exchange
or register the transfer (i) of any Note or portion of a Note selected for
redemption or (ii) of any Notes for a period of 15 days before a selection of
Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
9. PERSONS DEEMED OWNERS. Unless otherwise required by applicable law,
the registered Holder of a Note shall be treated as its owner for all purposes,
subject to the provisions of the Indenture with respect to the record dates for
the payment of interest.
10. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture
or the Notes may be amended with the written consent of the Holders of at least
a majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes), and any
existing Default or Event of Default (except certain payment defaults) may be
waived with the consent of the Holders of a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a tender
offer or exchange offer for Notes). Without the consent of any Holders, the
Indenture and the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for assumption of DIMAC Holdings's
obligations to the Holders in the case of a merger or consolidation, to provide
for uncertificated Notes in addition to or in place of certificated Notes, to
make any change that would provide any additional rights or benefits to the
Holders of the Notes, or that does not adversely affect the legal rights under
the Indenture of any Holder or to comply with requirements of the Commission in
order to effect or maintain the qualification of the Indenture under the TIA.
11. DEFAULTS AND REMEDIES. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare by written notice to DIMAC Holdings and
the Trustee all the Notes to be due and payable immediately, except that in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes become due and payable immediately without
further action or notice. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
DIMAC Holdings must furnish an annual compliance certificate to the Trustee.
B-59
<PAGE>
12. TRUSTEE DEALINGS WITH DIMAC HOLDINGS. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for DIMAC Holdings or its Affiliates, and
may otherwise deal with DIMAC Holdings or its Affiliates, as if it were not the
Trustee.
13. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator, stockholder or controlling person of DIMAC Holdings, as such,
shall have any liability for any obligations of DIMAC Holdings under the Notes,
the Indenture or the Registration Rights Agreement or for any claim based on, in
respect of, or by reason of such obligations or their creation. Each Holder 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. Notwithstanding
the foregoing, nothing in this provision shall be construed as a waiver or
release of any claims under the Federal securities laws.
14. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
15. 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).
16. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, DIMAC Holdings has
caused CUSIP numbers to be printed on the Notes and has directed the Trustee to
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.
17. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATION LAW. TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, DIMAC HOLDINGS HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE NOTES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. DIMAC HOLDINGS
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND
ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
ANY HOLDER OF A NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEEDING AGAINST DIMAC HOLDINGS IN ANY
OTHER JURISDICTION.
[18. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder
of a Note, by his acceptance thereof, acknowledges and agrees to the provisions
of the Registration Rights Agreement, dated as of October 22, 1998, among DIMAC
Holdings and the parties named on the signature page thereof (the "REGISTRATION
RIGHTS AGREEMENT"), including but not limited to the obligations of the Holders
with respect to a registration and the indemnification of DIMAC Holdings and the
Purchasers (as defined therein) to the extent provided therein.](2)
DIMAC Holdings shall 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: DIMAC Holdings, Inc., 5775 Peachtree Dunwoody Road,
Suite C-150, Atlanta, Georgia 30342 Attention: Chief Financial Officer.
_________________________
(2) This paragraph should only be included in the Series A Notes.
B-60
<PAGE>
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 ______________________________ as agent to transfer this
Note on the books of DIMAC Holdings. The agent may substitute another to act
for him.
- --------------------------------------------------------------------------------
Date:
-------------------
Your Signature:
---------------------------------------
(Sign exactly as your name appears on
the face of this Note)
Tax Identification Number:
----------------------------
Signature Guaranty*
_______________
* NOTICE: The signature must be guaranteed by an institution which is
a member of one of the following recognized signature
guarantee programs:
(1) The Securities Transfer Agent Medallian Program
(STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
B-61
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
DIMAC Holdings pursuant to Section 4.10 or Section 4.14 of the Indenture, as the
case may be, state the amount you elect to have purchased (if all, write "ALL"):
$___________________
Date:
--------------
Your Signature:
---------------------------------------
(Sign exactly as your name appears on
the face of this Note)
Signature Guaranty*
_______________
* NOTICE: The signature must be guaranteed by an institution which is
a member of one of the following recognized signature
guarantee programs:
(1) The Securities Transfer Agent Medallian Program
(STAMP);
(2) The New York Stock Exchange Medallian Program (MSP);
(3) The Stock Exchange Medallian Program (SEMP).
B-62
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTES (3)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Global
Amount of decrease in Principal Amount of increase in Principal Note following such decrease
Date of Exchange Amount of this Global Note Amount of this Global Note (or increase)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<CAPTION>
Signature of authorized
officer of Trustee
- -----------------------
<C>
</TABLE>
_______________
(3) This should only be included if the Note is issued in global form.
B-63
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF NOTES
Re: [Series A] [Series B] 151/2% Senior Notes due October 22, 2009 (the
"NOTES") of DIMAC Holdings, Inc.
This Certificate relates to $_________________________ principal amount of
Notes held in */ / book-entry or */ / definitive form by _______________________
(the "TRANSFEROR").
The Transferor, by written order, has requested the Trustee:
/ / to deliver in exchange for its beneficial interest in the Global Note held
by the depository, a Note or Notes in definitive, registered form of
authorized denominations and an aggregate principal amount equal to its
beneficial interest in such Global Note (or the portion thereof indicated
above); or
/ / to exchange or register the transfer of a Note or Notes. In connection
with such request and in respect of each such Note, the Transferor does
hereby certify that Transferor is familiar with the Indenture relating to
the above captioned Notes and, the transfer of this Note does not require
registration under the Securities Act of 1933, as amended (the "SECURITIES
ACT") because such Note:
/ / is being acquired for the Transferor's own account, without transfer;
/ / is being transferred pursuant to an effective registration statement;
/ / is being transferred to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act), in reliance on such Rule 144A;
/ / is being transferred pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act;**
/ / is being transferred pursuant to Rule 144 under the Securities Act;**
or
/ / is being transferred pursuant to another exemption from the
registration requirements of the Securities Act (explain: ____________
_________________________________________________________________).**
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
Date:
------------------------
* Check applicable box.
** If this box is checked, this certificate must be accompanied by an
opinion of counsel to the effect that such transfer is in compliance
with the Securities Act.
B-64
<PAGE>
Annex C
DIMAC HOLDINGS, INC.
$30,000,000 15 1/2% Senior Notes due October 22, 2009
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of October 22, 1998, by and among DIMAC Holdings, Inc., a
Delaware corporation (the "Issuer"), and each of the purchasers listed on the
signature pages hereto (each a "Purchaser," and collectively, the "Purchasers").
This Agreement is made pursuant to the Securities Purchase
Agreement (as defined below), pursuant to which the Issuer is issuing and
selling to the Purchasers $30,000,000 aggregate principal amount of its 15 1/2%
Senior Notes due October 22, 2009, Series A (the "Notes"). As an inducement to
the Purchasers to enter into the Securities Purchase Agreement, the Issuer
agrees with the Purchasers, for the benefit of the holders of the Securities (as
defined below) (including, without limitation, the Purchasers), as follows:
Section 1. Definitions. Capitalized terms used but not defined herein
have the respective meanings given to such terms in the Securities Purchase
Agreement. As used in this Agreement, the following terms shall have the
following meanings:
"Advice" has the meaning given to such term in Section 5 hereof.
"Agreement" means this Registration Rights Agreement.
"Applicable Period" has the meaning given to such term in Section 2(f)
hereof.
"Business Day" means any day other than (i) Saturday or Sunday, or (ii)
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to be closed.
"Demand Date" means the date on which the any Holder provides a written
notice to the Issuer demanding the filing of an Exchange Offer Registration
Statement or a Shelf Registration.
"DIMAC Operating" means DIMAC Corporation, a Delaware corporation.
"Effectiveness Date" means the 180th day following the Demand Date.
"Effectiveness Period" has the meaning given to such term in Section
3(a) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Exchange Offer" has the meaning given to such term in Section 2(a)
hereof.
"Exchange Offer Registration Statement" has the meaning given to such
term in Section 2(a) hereof.
"Exchange Securities" means 15 1/2% Senior Notes due October 22, 2009,
Series B, of the Issuer, identical in all respects to the Notes, except for
references to series, registration rights and restrictive legends.
"Filing Date" means the 90th day following the Demand Date.
C-1
<PAGE>
"Holder" means each holder of Registrable Securities.
"Indemnified Party" has the meaning given to such term in Section 7(c)
hereof.
"Indemnifying Party" has the meaning given to such term in Section 7(c)
hereof.
"Indenture" means the Indenture, dated the date hereof, between the
Issuer and Wilmington Trust Company, a Delaware banking corporation, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time, in accordance with the terms thereof.
"Initial Shelf Registration" has the meaning given to such term in
Section 3(a) hereof.
"Issuer" has the meaning given to such term in the introductory
paragraph hereof.
"Losses" means all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and reasonable attorneys'
fees) and expenses (including, without limitation, costs and expenses incurred
in connection with investigating, preparing, pursuing or defending against any
of the foregoing).
"NASD" means the National Association of Securities Dealers, Inc.
"Notes" has the meaning given to such term in the introductory
paragraph hereof.
"Participating Broker-Dealer" has the meaning given to such term in
Section 2(f) hereof.
"Person" means an individual, trustee, corporation, partnership, joint
stock company, joint venture, trust, unincorporated organization or government
or any agency or political subdivision thereof, union, business association,
firm or other entity.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Securities covered by
such Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Purchasers" has the meaning given to such term in the introductory
paragraph hereof.
"Registrable Securities" means (i) Notes and (ii) Exchange Securities
received in the Exchange Offer that may not be sold without restriction under
federal or state securities law.
"Registration Default" has the meaning given to such term in Section
4(a) hereof.
"Registration Default Date" has the meaning given to such term in
Section 4(a) hereof.
"Registration Statement" means any registration statement of the Issuer
that covers any of the Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
C-2
<PAGE>
"Rule 144" means Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC.
"Rule 144A" means Rule 144A under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
"Rule 415" means Rule 415 under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Notes and the Exchange Securities, collectively.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of October 22, 1998 by and among the Issuer, DIMAC Operating and the
Purchasers, as amended or supplemented from time to time.
"Shelf Notice" has the meaning given to such term in Section 2(h)
hereof.
"Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
"Special Counsel" means counsel chosen by the holders of a majority in
aggregate principal amount of Securities.
"Subsequent Shelf Registration" has the meaning given to such term in
Section 3(b) hereof.
"TIA" means the Trust Indenture Act of 1939, as amended.
"Trustee" means the trustee under the Indenture and, if any, the
trustee under any indenture governing the Exchange Securities.
"Underwritten Registration" or "Underwritten Offering" means a
registration in which securities of the Issuer are sold to an underwriter for
reoffering to the public.
"Weekly Liquidated Damages Amount"means, with respect to any
Registration Default, an amount per week per $1,000 principal amount of
Registrable Securities equal to (i) $0.05 for the first 90-day period
immediately following the applicable Registration Default Date, (ii) $0.10 for
the second 90-day period immediately following the applicable Registration
Default Date, (iii) $0.15 for the third 90-day period immediately following the
applicable Registration Default Date, and (iv) $0.20 thereafter.
Section 2. Exchange Offer.
(a) The Issuer shall (i) prepare and file with the SEC
promptly after the Demand Date, but in no event later than the Filing
Date, a registration statement (the "Exchange Offer Registration
Statement") on an appropriate form under the Securities Act with
respect to a proposed offer (the "Exchange Offer") to the Holders to
issue and deliver to such Holders, in exchange for the Notes, a like
aggregate principal amount of Exchange Securities, (ii) use its
reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective as
C-3
<PAGE>
promptly as practicable after the filing thereof, but in
no event later than the Effectiveness Date, (iii) keep the Exchange
Offer Registration Statement effective until the consummation of the
Exchange Offer pursuant to its terms, and (iv) unless the Exchange
Offer would not be permitted by a policy of the SEC, commence the
Exchange Offer and use its reasonable best efforts to issue, on or
prior to 30 days after the date on which the Exchange Offer
Registration Statement is declared effective, Exchange Securities in
exchange for all Notes tendered prior thereto in the Exchange Offer.
The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate any applicable law or any
applicable interpretation of the staff of the SEC.
(b) The Exchange Securities shall be issued under, and
entitled to the benefits of, the Indenture or a trust indenture that is
identical to the Indenture (other than such changes as are necessary to
comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA).
(c) In connection with the Exchange Offer, the Issuer shall:
(i) mail to each Holder a copy of the Prospectus
forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal that is an
exhibit to the Exchange Offer Registration Statement and any
related documents;
(ii) keep the Exchange Offer open for not less than
30 days after the date notice thereof is mailed to the Holders
(or longer if required by Applicable Law);
(iii) utilize the services of a depository for the
Exchange Offer with an address in the Borough of Manhattan,
The City of New York;
(iv) permit Holders to withdraw tendered Notes at any
time prior to the close of business, New York time, on the
last Business Day on which the Exchange Offer shall remain
open; and
(v) otherwise comply with all laws applicable to the
Exchange Offer.
(d) As soon as practicable after the close of the Exchange
Offer, the Issuer shall:
(i) accept for exchange all Notes validly
tendered and not validly withdrawn
pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all
Notes so accepted for exchange;
and
(iii) cause the Trustee promptly to authenticate and
deliver to each Holder of Notes, Exchange Securities equal in
aggregate principal amount to the Notes of such Holder so
accepted for exchange.
(e) Interest on each Exchange Security will accrue from the
last interest payment date on which interest was paid on the Notes
surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the date of original issue of the Notes. Each Exchange
Security shall bear interest at the rate set forth thereon; provided,
that interest with respect to the period prior to the issuance thereof
shall accrue at the rate or rates borne by the Notes from time to time
during such period.
C-4
<PAGE>
(f) The Issuer shall include within the Prospectus contained
in the Exchange Offer Registration Statement a section entitled "Plan
of Distribution," containing a summary statement of the positions taken
or policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner
(as defined in Rule 13d-3 under the Exchange Act) of Exchange
Securities received by such broker-dealer in the Exchange Offer (a
"Participating Broker-Dealer"). Such "Plan of Distribution" section
shall also allow the use of the Prospectus by all Persons subject to
the prospectus delivery requirements of the Securities Act, including
(without limitation) all Participating Brokers-Dealers, and include a
statement describing the means by which Participating Broker-Dealers
may resell the Exchange Securities. The Issuer shall use its reasonable
best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus to be lawfully
delivered by all Persons subject to the prospectus delivery requirement
of the Securities Act for such period of time as such Persons must
comply with such requirements in order to resell the Exchange
Securities (the "Applicable Period")).
(g) The Issuer may require each Holder participating in the
Exchange Offer to represent to the Issuer that at the time of the
consummation of the Exchange Offer (i) any Exchange Securities received
by such Holder in the Exchange Offer will be acquired in the ordinary
course of its business, (ii) such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the
Exchange Securities within the meaning of the Securities Act or resale
of the Exchange Securities in violation of the Securities Act, (iii) if
such Holder is not a broker-dealer, that it is not engaged in and does
not intend to engage in, the distribution of the Exchange Securities,
(iv) if such Holder is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Notes that were acquired
as a result of market-making or other trading activities, that it will
deliver a prospectus, as required by law, in connection with any resale
of such Exchange Securities and (v) if such Holder is an affiliate of
the Issuer, that it will comply with the registration and prospectus
delivery requirements of the Securities Act applicable to it.
(h) If (i) prior to the consummation of the Exchange Offer,
either the Issuer or the Holders of a majority in aggregate principal
amount of Registrable Securities determines in its or their reasonable
judgment that (A) the Exchange Securities would not, upon receipt, be
tradeable by the Holders thereof without restriction under the
Securities Act and the Exchange Act and without material restrictions
under applicable Blue Sky or state securities laws, or (B) the
interests of the Holders under this Agreement, taken as a whole, would
be materially adversely affected by the consummation of the Exchange
Offer, (ii) applicable interpretations of the staff of the SEC would
not permit the consummation of the Exchange Offer prior to the
Effectiveness Date, (iii) the Exchange Offer is not consummated within
210 days of the Demand Date for any reason or (iv) in the case of any
Holder not permitted to participate in the Exchange Offer or of any
Holder participating in the Exchange Offer that receives Exchange
Securities that may not be sold without restriction under state and
federal securities laws and, in either case contemplated by this clause
(iv), such Holder notifies the Issuer within six months of consummation
of the Exchange Offer, then the Issuer shall promptly deliver to the
Holders (or in the case of any occurrence of the event described in
clause (iv) of this Section 2(h), to any such Holder) and the Trustee
notice thereof (the "Shelf Notice") and shall as promptly as possible
thereafter file an Initial Shelf Registration pursuant to Section 3
hereof.
Section 3. Shelf Registration. If a Shelf Notice is required to be
delivered pursuant to Section 2(h)(i), (ii) or (iii) hereof, then this Section 3
shall apply to all Registrable Securities. Otherwise, upon consummation of the
Exchange Offer in accordance with Section 2 hereof, the provisions of this
Section 3 shall apply solely with respect to (i) Notes held by any Holder
thereof not permitted to participate in the Exchange Offer and (ii) Exchange
Securities that are not freely tradeable as contemplated by Section
C-5
<PAGE>
2(h)(iv) hereof; provided, in each case, that such Holder has notified the
Issuer within six months of the Exchange Offer as required by Section 2(h)(iv)
hereof.
(a) Initial Shelf Registration. The Issuer shall use its
reasonable best efforts to prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to
Rule 415 covering all of the Registrable Securities (the "Initial Shelf
Registration"). If the Issuer has not yet filed an Exchange Offer
Registration Statement, the Issuer shall file with the SEC the Initial
Shelf Registration on or prior to the Filing Date. Otherwise, the
Issuer shall use its reasonable best efforts to file the Initial Shelf
Registration within 20 days of the delivery of the Shelf Notice. The
Initial Shelf Registration shall be on Form S-1 or another appropriate
form permitting registration of such Registrable Securities for resale
by such Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuer
shall (i) not permit any securities other than the Registrable
Securities to be included in any Shelf Registration, and (ii) use its
reasonable best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act as promptly as practicable
after the filing thereof and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date that is
24 months from the Effectiveness Date (subject to extension pursuant to
the last paragraph of Section 5 hereof) (the "Effectiveness Period"),
or such shorter period ending when (i) all Registrable Securities
covered by the Initial Shelf Registration have been sold or (ii) a
Subsequent Shelf Registration covering all of the Registrable
Securities has been declared effective under the Securities Act.
(b) Subsequent Shelf Registrations. If any Shelf Registration
ceases to be effective for any reason at any time during the
Effectiveness Period (other than because of the sale of all of the
Registrable Securities registered thereunder), the Issuer shall use its
reasonable best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within 30
days of such cessation of effectiveness amend the Shelf Registration in
a manner reasonably expected to obtain the withdrawal of the order
suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the
Registrable Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Issuer shall use its
reasonable best efforts to cause the Subsequent Shelf Registration to
be declared effective as soon as practicable after such filing and to
keep such Subsequent Shelf Registration continuously effective for a
period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration,
and any Subsequent Shelf Registration, was previously effective.
Section 4. Liquidated Damages.
(a) The Issuer acknowledges and agrees that the Holders will
suffer damages, and that it would not be feasible to ascertain the
extent of such damages with precision, if the Issuer fails to fulfill
its obligations hereunder. Accordingly, in the event of such failure,
the Issuer agrees to pay liquidated damages to each Holder under the
circumstances and to the extent set forth below:
(i) if neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed
with the SEC on or prior to the Filing Date; or
(ii) if neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared
effective by the SEC on or prior to the Effectiveness Date; or
(iii) if the Issuer has not exchanged Exchange
Securities for all Notes validly tendered and not validly
withdrawn in accordance with the terms of the Exchange Offer
C-6
<PAGE>
within 30 days after the date on which an Exchange Offer
Registration Statement is declared effective by the SEC; or
(iv) if a Shelf Registration is filed and declared
effective by the SEC but thereafter ceases to be effective
during the Effectiveness Period without subsequently being
succeeded by a Subsequent Shelf Registration filed and
declared effective within 30 days;
(each of the foregoing a "Registration Default," and the date on which
the Registration Default occurs being referred to herein as a
"Registration Default Date").
Upon the occurrence of any Registration Default, the Issuer
shall pay, or cause to be paid, in addition to amounts otherwise due
under the Indenture and the Registrable Securities, as liquidated
damages, and not as a penalty, to each Holder for each weekly period
beginning on the Registration Default Date an amount equal to the
Weekly Liquidated Damages Amount per $1,000 principal amount of
Registrable Securities held by such Holder; provided, that such
liquidated damages will, in each case, cease to accrue (subject to the
occurrence of another Registration Default) on the date on which all
Registration Defaults have been cured. A Registration Default under
clause (i) above shall be cured on the date that either the Exchange
Offer Registration Statement or the Initial Shelf Registration is filed
with the SEC; a Registration Default under clause (ii) above shall be
cured on the date that either the Exchange Offer Registration Statement
or the Initial Shelf Registration is declared effective by the SEC; a
Registration Default under clause (iii) above shall be cured on the
earlier of the date (A) the Exchange Offer is consummated with respect
to all Notes validly tendered and not validly withdrawn or (B) the
Issuer delivers a Shelf Notice to the Holders; and a Registration
Default under clause (iv) above shall be cured on the date on which the
Subsequent Shelf Registration is declared effective.
(b) The Issuer shall notify the Trustee within five Business
Days after each Registration Default Date. The Issuer shall pay the
liquidated damages due on the Registrable Securities by either (i)
depositing with the Trustee, in trust, for the benefit of the Holders
thereof, by 12:00 noon, New York City time, on or before the applicable
semi-annual interest payment date for the Registrable Securities,
immediately available funds in sums sufficient to pay the liquidated
damages then due or (ii) issuing PIK Notes in the amount of the
liquidated damages due on the Registrable Securities. The liquidated
damages amount due shall be payable on each interest payment date to
the Holder entitled to receive the interest payment to be made on such
date as set forth in the Indenture.
Section 5. Registration Procedures. In connection with the registration
of any Securities pursuant to Section 2 or Section 3 hereof, the Issuer shall
effect such registrations to permit the sale of such Securities in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Issuer shall:
(a) Prepare and file with the SEC, as soon as practicable
after the Demand Date but in any event on or prior to the Filing Date,
a Registration Statement or Registration Statements as prescribed by
Section 2 or Section 3 hereof, and use its best efforts to cause each
such Registration Statement to become effective and remain effective
as provided herein; provided, that, if (i) such filing is pursuant to
Section 3 hereof or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Securities during the
Applicable Period, before filing any Registration Statement or
Prospectus or any amendments or supplements thereto, the Issuer shall,
if requested, furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their Special
Counsel, each Participating Broker-Dealer, the managing underwriters,
if any, and their counsel, a reasonable
C-7
<PAGE>
opportunity to review and make available for inspection by such Persons
copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to
be filed, such financial and other information and books and records of
the Issuer and its Subsidiaries, and use its reasonable best efforts to
cause the officers, directors and employees of the Issuer and its
Subsidiaries and counsel and independent certified public accountants
of the the Issuer and its Subsidiaries, to respond to such inquiries,
as shall be reasonably necessary, in the opinion of respective counsel
to such Holders, Participating Broker- Dealer and underwriters, to
conduct a reasonable investigation within the meaning of the Securities
Act. The Issuer may require each Holder to agree to keep confidential
any non-public information relating to the Issuer received by such
Holder and not disclose such information (other than to an Affiliate or
prospective purchaser who agrees to respect the confidentiality
provisions of this Section 5(a)) until such information has been made
generally available to the public unless the release of such
information is required by law or necessary to respond to inquiries of
regulatory authorities (including the National Association of Insurance
Commissioners, or similar organizations or their successors). The
Issuer shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must
be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of
the Registrable Securities covered by such Registration Statement,
their Special Counsel, any Participating Broker-Dealer or the managing
underwriters, if any, or their counsel shall reasonably object.
(b) Provide an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and use its
reasonable best efforts to cause the Indenture (or other indenture
relating to the Registrable Securities) to be qualified under the TIA
not later than the effective date of the first Registration Statement;
and in connection therewith, to effect such changes to such indenture
as may be required for such indenture to be so qualified in accordance
with the terms of the TIA; and execute, and use its reasonable best
efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(c) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep such Registration Statement continuously effective
for the time periods required hereby; cause the related Prospectus to
be supplemented by any Prospectus supplement required by Applicable
Law, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and comply
in all material respects with the provisions of the Securities Act and
the Exchange Act applicable thereto with respect to the disposition of
all securities covered by such Registration Statement, as so amended,
or in such Prospectus, as so supplemented, in accordance with the
intended methods of distribution set forth in such Registration
Statement or Prospectus as so amended.
(d) Furnish to such selling Holders and Participating
Broker-Dealers who so request (i) upon the Issuer's receipt, a copy of
the order of the SEC declaring such Registration Statement
and any post-effective amendment thereto effective, (ii) such
reasonable number of copies of such Registration Statement and of each
amendment and supplement thereto (in each case including any documents
incorporated therein by reference and all exhibits), (iii) such
reasonable number of copies of the Prospectus included in such
Registration Statement (including each preliminary Prospectus), and
such reasonable number of copies of the final Prospectus as filed by
the Issuer pursuant to Rule 424(b) under the Securities Act, in
conformity with the requirements of the Securities Act, and (iv) such
other documents (including any amendments required to be filed pursuant
to clause (c) of this Section 5), as any such Person may reasonably
request. The Issuer hereby consents to the use of the Prospectus by
each of the selling Holders of Registrable Securities
C-8
<PAGE>
or each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection
with the offering and sale of the Registrable Securities covered by,
or the sale by Participating Broker-Dealers of the Exchange Securities
pursuant to, such Prospectus and any amendment thereto.
(e) If (A) a Shelf Registration is filed pursuant to Section 3
hereof or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period,
notify the selling Holders of Registrable Securities, their Special
Counsel, each Participating Broker-Dealer and the managing
underwriters, if any, promptly (but in any event within two Business
Days), and confirm such notice in writing, (i) when a Prospectus has
been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective under the
Securities Act, (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any Prospectus or the
initiation of any proceedings for that purpose, (iii) if, at any time
when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the
representations and warranties of the Issuer contained in any agreement
(including any underwriting agreement) contemplated by Section 5(n)
below cease to be true and correct in any material respect, (iv) of the
receipt by the Issuer of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities or the
Exchange Securities to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the contemplation, initiation or
threatening of any proceeding for such purpose, (v) of the happening of
any event that makes any statement made in such Registration Statement
or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires the making of any changes in such Registration Statement,
Prospectus or documents so that it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Issuer's reasonable determination that a
post-effective amendment to a Registration Statement would be
appropriate.
(f) Use its reasonable best efforts to register or qualify,
and, if applicable, to cooperate with the selling Holders of
Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of, Securities to be
included in a Registration Statement for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United
States as any selling Holder, Participating Broker-Dealer or the
managing underwriters reasonably request in writing; and, if Securities
are offered other than through an Underwritten Offering, the Issuer
shall cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(f) at the expense of the Issuer; keep each such registration
or qualification (or exemption therefrom) effective during the period
such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Securities covered by the
applicable Registration Statement, provided, however, that the Issuer
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) to take action
that would subject it to general service of process in any
jurisdiction where it is not so subject or (iii) subject it to
taxation in respect of doing business in any such jurisdiction where
it is not then subject.
(g) Use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of a
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Prospectus or suspending the qualification (or exemption from
qualification) of any of the Securities for sale in any jurisdiction,
and, if any such order is issued, to use its reasonable best efforts
to obtain the withdrawal of any such order at the earliest possible
time.
(h) If (A) a Shelf Registration is filed pursuant to Section 3
hereof or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period, and
if requested by the managing underwriters, if any, or the Holders of a
majority in aggregate principal amount of the Registrable Securities,
(i) promptly incorporate in a Prospectus or post-effective amendment
such information as the managing underwriters, if any, or such Holders
reasonably request to be included therein required to comply with any
Applicable Law and (ii) make all required filings of such Prospectus or
such post-effective amendment as soon as practicable after the Issuer
has received notification of such matters required by Applicable Law to
be incorporated in such Prospectus or post-effective amendment.
(i) If (A) a Shelf Registration is filed pursuant to Section 3
hereof or (B) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer
who seeks to sell Exchange Securities during the Applicable Period,
cooperate with the selling Holders and the managing underwriters, if
any, to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, which certificates
shall not bear any restrictive legends and shall be in a form eligible
for deposit with The Depository Trust Company ("DTC"); and enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or Holders may
request.
(j) If (i) a Shelf Registration is filed pursuant to
Section 3 hereof or (ii) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is
required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Securities
during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 6(e)(v) or 6(e)(vi) above, as promptly as
practicable prepare a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange
Securities to whom such Prospectus will be delivered by a
Participating Broker-Dealer, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(k) Use its reasonable best efforts to cause the Securities
covered by a Registration Statement to be rated with the appropriate
rating agencies, if appropriate, if so requested by the Holders of a
majority in aggregate principal amount of Securities covered by such
Registration Statement or the managing underwriters, if any.
(l) Prior to the effective date of the first Registration
Statement relating to the Securities, (i) provide the applicable
trustee with printed certificates for the Securities in a form eligible
for deposit with DTC and (ii) provide a CUSIP number for each of the
Securities.
(m) Use its reasonable best efforts to cause all Securities
covered by such Registration Statement to be listed on each securities
exchange, if any, on which similar debt securities issued by the Issuer
are then listed.
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(n) If a Shelf Registration is filed pursuant to Section 3
hereof, enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings
of debt securities similar to the Notes) and take all such other
actions in connection therewith (including those reasonably requested
by the managing underwriters, if any, or the Holders of a majority in
aggregate principal amount of the Registrable Securities being sold) in
order to expedite or facilitate the registration or the disposition of
such Registrable Securities, and in such connection, regardless of
whether an underwriting agreement is entered into and regardless of
whether the registration is an Underwritten Registration, (i) make such
representations and warranties to the Holders and the underwriters, if
any, with respect to the business of the Issuer and its subsidiaries,
and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers
to underwriters in underwritten offerings of debt securities similar to
the Notes, and confirm the same if and when reasonably requested; (ii)
obtain opinions of counsel to the Issuer and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, and the Holders of a
majority in aggregate principal amount of the Registrable Securities
being sold), addressed to each selling Holder and each of the
underwriters, if any, covering the matters customarily covered in
opinions requested in underwritten offerings of debt securities similar
to the Notes; (iii) obtain "cold comfort" letters and updates thereof
(which letters and updates (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters) from the
independent certified public accountants of the Issuer (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuer or of any business acquired by the Issuer for
which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each of the
underwriters and each selling Holder, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings of debt
securities similar to the Notes, and such other matters as reasonably
requested by underwriters; and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties of the Issuer and its
subsidiaries made pursuant to clause (i) above and to evidence
compliance with any conditions contained in the underwriting agreement
or other similar agreement entered into by the Issuer.
(o) Comply with all applicable rules and regulations of the
SEC and make generally available to its security holders earnings
statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing on the first
day of the fiscal quarter following each fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Issuer after the effective date of a
Registration Statement, which statements shall cover said 12-month
periods.
(p) Upon consummation of an Exchange Offer, obtain an opinion
of counsel to the Issuer (in form, scope and substance reasonably
satisfactory to the Purchasers), addressed to all Holders participating
in the Exchange Offer to the effect that (i) the Issuer has duly
authorized, executed and delivered the Exchange Securities and the
Indenture and (ii) the Exchange Securities and the Indenture constitute
legal, valid and binding obligations of the Issuer, enforceable against
the Issuer in accordance with their respective terms, except as such
enforcement may be subject to (x) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting
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creditors' rights and remedies generally and (y) general principles of
equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
(q) If an Exchange Offer is to be consummated, upon delivery
of the Registrable Securities by such Holders to the Issuer (or to such
other Person as directed by the Issuer) in exchange for the Exchange
Securities, the Issuer shall mark, or caused to be marked, on such
Registrable Securities that such Registrable Securities are being
cancelled in exchange for the Exchange Securities; in no event shall
such Registrable Securities be marked as paid or otherwise satisfied.
(r) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD.
(s) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Issuer may require each seller of Registrable
Securities or Participating Broker-Dealer as to which any registration
is being effected to furnish to the Issuer such information regarding
such seller or Participating Broker-Dealer and the distribution of such
Registrable Securities or Exchange Securities as the Issuer may, from
time to time, reasonably request in writing. The Issuer may exclude
from such registration the Registrable Securities of any seller or
Exchange Securities of any Participating Broker-Dealer who unreasonably
fails to furnish such information.
Each Holder and each Participating Broker-Dealer
agrees by acquisition of such Registrable Securities or Exchange
Securities of any Participating Broker-Dealer that, upon receipt of
written notice from the Issuer of the happening of any event of the
kind described in Section 5(e)(ii), 5(e)(iv), 5(e)(v) or 5(e)(vi)
hereof, such Holder will forthwith discontinue disposition (in the
jurisdictions specified in a notice of a 5(e)(iv) event, and elsewhere
in a notice of a 5(e)(ii), 5(e)(v) or 5(e)(vi) event) of such
Securities covered by such Registration Statement or Prospectus until
such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(j) hereof, or until it is advised
in writing (the "Advice") by the Issuer that offers or sales in a
particular jurisdiction may be resumed or that the use of the
applicable Prospectus may be resumed, as the case may be, and has
received copies of any amendments or supplements thereto. If the Issuer
shall give such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such
periods from and including the date of the giving of such notice to
and including the date when each seller of such Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(j) hereof
or (y) the Advice.
Section 6. Registration Expenses.
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuer shall be borne by the
Issuer, regardless of whether the Exchange Offer or a Shelf
Registration is filed or becomes effective, including, without
limitation:
(i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required
to be made with the NASD and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of
counsel in connection with Blue Sky qualifications of the
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Registrable Securities or Exchange Securities and
determination of the eligibility of the Registrable Securities
or Exchange Securities for investment under the laws of such
jurisdictions (x) where the Holders are located, in the case
of the Exchange Securities, or (y) as provided in Section 5(f)
hereof, in the case of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during
the Applicable Period);
(ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable
Securities or Exchange Securities in a form eligible for
deposit with DTC and of printing Prospectuses if the printing
of Prospectuses is requested by the managing underwriters, if
any, or, in respect of Registrable Securities or Exchange
Securities to be sold by a Participating Broker-Dealer during
the Applicable Period, by the Holders of a majority in
aggregate principal amount of the Registrable Securities
included in any Registration Statement or of such Exchange
Securities, as the case may be);
(iii) messenger, telephone, duplication, word
processing and delivery expenses incurred by the Issuer in the
performance of its obligations hereunder;
(iv) fees and disbursements of counsel for the
Issuer;
(v) fees and disbursements of all independent
certified public accountants referred to in Section 5(n)(iii)
hereof (including, without limitation, the expenses of any
special audit and "cold comfort" letters required by or
incident to such performance);
(vi) fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in
an offering pursuant to Rule 2720(c) of the NASD Conduct
Rules, but only where the need for such a "qualified
independent underwriter" arises due to a relationship with the
Issuer;
(vii) Securities Act liability insurance, if the
Issuer so desires such insurance;
(viii) fees and expenses of all other Persons
retained by the Issuer; internal expenses of the Issuer
(including, without limitation, all salaries and expenses of
officers and employees of the Issuer performing legal or
accounting duties); and the expense of any annual audit; and
(ix) rating agency fees and the fees and expenses
incurred in connection with the listing of the Securities to
be registered on any securities exchange.
(b) The Issuer shall reimburse the Holders for the reasonable
fees and disbursements of not more than one counsel (in addition to
appropriate local counsel) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be included
in any Registration Statement and other reasonable and necessary
out-of-pocket expenses of the Holders incurred in connection with the
registration of the Registrable Securities. The Issuer shall pay all
documentary, stamp, transfer or other transactional taxes attributable
to the issuance or delivery of the Exchange Securities in exchange for
the Notes.
Section 7. Indemnification.
(a) Indemnification by the Issuer. The Issuer shall, without
limitation as to time, indemnify and hold harmless each Holder and each
Participating Broker-Dealer, each Person who controls each such Holder
(within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act) and the officers, directors, partners,
employees, representatives and
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agents of each such Holder, Participating Broker-Dealer and
controlling person, to the fullest extent lawful, from and against any
and all Losses, as incurred, directly or indirectly caused by, related
to, based upon, arising out of or in connection with any untrue or
alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus, or in any
amendment or supplement thereto, or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except insofar as such Losses are based upon
information relating to such Holder or Participating Broker-Dealer and
furnished in writing to the Issuer by such Holder or Participating
Broker-Dealer expressly for use therein. The Issuer shall also
indemnify underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution,
their officers, directors, agents and employees and each Person who
controls such Persons (within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the
Holders or the Participating Broker-Dealer.
(b) Indemnification by Holder of Registrable Securities. In
connection with any Registration Statement, Prospectus or form of
prospectus, any amendment or supplement thereto, or any preliminary
prospectus in which a Holder is participating, such Holder shall
furnish to the Issuer in writing such information as the Issuer
reasonably requests for use in connection with any Registration
Statement, Prospectus or form of prospectus, any amendment or
supplement thereto, or any preliminary prospectus and shall, without
limitation as to time, indemnify and hold harmless the Issuer, its
directors, officers, agents and employees, each Person, if any, who
controls the Issuer (within the meaning of Section 15 of the Securities
Act and Section 20(a) of the Exchange Act), and the directors,
officers, agents or employees of such controlling persons, to the
fullest extent lawful, from and against all Losses arising out of or
based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading to the extent, but only to the
extent, that such untrue statement or alleged untrue statement of a
material fact or omission or alleged omission of a material fact is
contained in or omitted from any information so furnished in writing by
such Holder to the Issuer expressly for use therein. In no event shall
the liability of any selling Holder be greater in amount than the
dollar amount of the proceeds (net of payment of all expenses)
received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any action or
proceeding (including a governmental investigation) (a "Proceeding")
shall be brought or asserted against any Person entitled to indemnity
hereunder (an "Indemnified Party"), such Indemnified Party shall
promptly notify the party or parties from which such indemnity is
sought (the "Indemnifying Parties") in writing; provided, that the
failure to so notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the
extent (but only to the extent) that it shall be finally determined by
a court of competent jurisdiction (which determination is not subject
to appeal) that the Indemnifying Parties have been prejudiced
materially by such failure.
The Indemnifying Party shall have the right,
exercisable by giving written notice to an Indemnified Party, within 20
Business Days after receipt of written notice from such Indemnified
Party of such Proceeding, to assume, at its expense, the defense of any
such Proceeding, provided, that an Indemnified Party shall have the
right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or parties
unless: (1) the Indemnifying
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Party has agreed to pay such fees and expenses; or (2) the
Indemnifying Party shall have failed promptly to assume the defense of
such Proceeding or shall have failed to employ counsel reasonably
satisfactory to such Indemnified Party; or (3) the named parties to
any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party or any of its
affiliates or controlling persons, and such Indemnified Party shall
have been advised by counsel that there may be one or more defenses
available to such Indemnified Party that are in addition to, or in
conflict with, those defenses available to the Indemnifying Party or
such affiliate or controlling person (in which case, if such
Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying
Parties, the Indemnifying Parties shall not have the right to assume
the defense thereof and the reasonable fees and expenses of such
counsel shall be at the expense of the Indemnifying Party; it being
understood, however, that, the Indemnifying Party shall not, in
connection with any one such Proceeding or separate but substantially
similar or related Proceedings 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
(together with appropriate local counsel) at any time for such
Indemnified Party).
No Indemnifying Party shall be liable for any
settlement of any such Proceeding effected without its written consent,
but if settled with its written consent, or if there be a final
judgment for the plaintiff in any such Proceeding, each Indemnifying
Party jointly and severally agrees, subject to the exceptions and
limitations set forth above, to indemnify and hold harmless each
Indemnified Party from and against any and all Losses by reason of such
settlement or judgment. The Indemnifying Party shall not consent to the
entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to each Indemnified Party of a release, in form and substance
reasonably satisfactory to the Indemnified Party, from all liability in
respect of such Proceeding for which such Indemnified Party would be
entitled to indemnification hereunder (regardless of whether any
Indemnified Party is a party thereto).
(d) Contribution. If the indemnification provided for in this
Section 7 is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which
this Section 7 would otherwise apply by its terms (other than by reason
of exceptions provided in this Section 7), then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall have a joint and several obligation to contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses,
in such proportion as is appropriate to reflect the relative benefits
received by the Indemnifying Party, on the one hand, and such
Indemnified Party, on the other hand, from the offering of the Notes,
or (ii) if the allocation provided by clause (i) above is not permitted
by Applicable Law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Indemnifying Party, on the one hand, and such
Indemnified Party, on the other hand, in connection with the actions,
statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party, on the one hand, and Indemnified Party, on the
other hand, shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by such Indemnifying Party or Indemnified Party,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such statement or omission. The
amount paid or payable by an Indemnified Party as a result of any
Losses shall be deemed to include any legal or other fees or expenses
incurred by such party in connection with any Proceeding, to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in Section 7(a) or 7(b) hereof was
available to such party.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined
by pro rata allocation or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 7(d), an Indemnifying Party that is a selling Holder shall not
be required to contribute, in the aggregate, any amount in excess of
such Holder's Maximum Contribution Amount. A selling Holder's "Maximum
Contribution Amount" shall equal the excess of (i) the aggregate
proceeds received by such Holder pursuant to the sale of such
Registrable Securities over (ii) the aggregate amount of damages that
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 Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this
Section 7 are in addition to any liability that the Indemnifying Parties may
have to the Indemnified Parties.
Section 8. Rule 144 and Rule 144A. The Issuer covenants that it shall
(a) file the reports required to be filed by it (if so required) under the
Securities Act and the Exchange Act in a timely manner and, if at any time any
the Issuer is not required to file such reports, it will, upon the request of
any Holder, make publicly available other information necessary to permit sales
pursuant to Rule 144 and Rule 144A and (b) take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell Registrable Securities without registration under the
Securities Act pursuant to the exemptions provided by Rule 144 and Rule 144A.
Upon the request of any Holder, the Issuer shall deliver to such Holder a
written statement as to whether it has complied with such information and
requirements.
Section 9. Underwritten Registrations. If any of the Registrable
Securities covered by any Shelf Registration are to be sold in an Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Holders of a majority in
aggregate principal amount of such Registrable Securities included in such
offering, subject to the consent of the Issuer (which shall not be withheld or
delayed unreasonably), and Holders participating in such offering shall be
responsible for all underwriting commission and discounts in connection
therewith. No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Registrable Securities on
the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
Section 10. Miscellaneous.
(a) Remedies. In the event of a breach by the Issuer of any of
its obligations under this Agreement, each Holder, in addition to being
entitled to exercise all rights provided herein, in the Indenture or,
in the case of the Purchasers, in the Securities Purchase Agreement, or
granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Issuer
agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agrees that, in the event of any
action for specific performance in respect of such breach, it shall
waive the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Issuer has not entered
into, as of the date hereof, and shall not enter into, after the date
of this Agreement, any agreement with respect to
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any of its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the
provisions hereof.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Issuer has obtained the
written consent of Holders of at least a majority of the then
outstanding aggregate principal amount of Registrable Securities;
provided, that Section 5(a) and Section 7 hereof shall not be amended,
modified or supplemented, and waivers or consents to departures from
this proviso may not be given, unless the Issuer has obtained the
written consent of each Holder affected thereby. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof
with respect to a matter that relates exclusively to the rights of
Holders whose securities are being sold pursuant to a Registration
Statement and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Securities being sold by
such Holders pursuant to such Registration Statement, provided that the
provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the
immediately preceding sentence.
(d) Notices. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by
hand-delivery, certified first-class mail, return receipt requested,
next-day air courier or facsimile:
(i) if to a Holder, at the most current address given
by such Holder to the Issuer in accordance with the provisions
of this Section 10(d), which address initially is, with
respect to each Holder, the address of such Holder maintained
by the Registrar under the Indenture, with a copy to Skadden,
Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los
Angeles, California 90071, telecopy number (213) 687-5600,
Attention: Rod A. Guerra, Esq.; and
(ii) if to the Issuer, to DIMAC Holdings, 5775
Peachtree Dunwoody Road, Suite C-150, Atlanta, Georgia 30342,
Telecopy No. (404) 705-9929, Attention: Chief Financial
Officer, with a copy to McCown De Leeuw & Co., 65 E. 55th
Street, New York, New York 10022, Telecopy No. (212) 355-6283,
Attention: David King, with a copy to White & Case LLP, 1155
Avenue of the Americas, New York, New York 10036, Telecopy No.
(212) 354-8113, Attention: Frank L. Schiff, Esq.
and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 10(d).
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if
mailed; one Business Day after being timely delivered to a next-day air
courier; and when receipt is acknowledged by the addressee, if
telecopied. Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the
Trustee under the Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including, without limitation and without the need for an
express assignment, subsequent Holders.
C-17
<PAGE>
(f) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) Governing Law; Submission to Jurisdiction; etc. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW. THE ISSUER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF
MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS.
THE ISSUER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. THE ISSUER IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO
THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE ISSUER AT ITS ADDRESS SET FORTH
HEREIN, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE ISSUER IN ANY OTHER JURISDICTION.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve
the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid,
illegal, void or unenforceable.
(j) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement, and is 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 by the Issuer in respect of
securities sold pursuant to the Securities Purchase Agreement. This
Agreement supersedes all prior agreements and understandings between
the parties with respect to such subject matter.
C-18
<PAGE>
(k) Attorneys' Fees. In any Proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the
courts, shall be entitled to recover reasonable attorneys' fees in
addition to its costs and expenses and any other available remedy.
(l) Securities Held by the Issuer or its Affiliates. Whenever
the consent or approval of Holders of a specified percentage of
Registrable Securities is required hereunder, Registrable Securities
held by the Issuer or its affiliates (as such term is defined in Rule
405 under the Securities Act) (other than Holders deemed to be such
affiliates solely by reason of their holdings of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the holders of such required percentage.
(Signature Page Follows)
C-19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
Very truly yours,
DIMAC HOLDINGS, INC.
By:
--------------------------
Name:
-------------------------
Title:
------------------------
C-20
<PAGE>
Accepted and Agreed to:
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT PARTNERS, L.P.
By: TCW/CRESCENT MEZZANINE, L.L.C.,
its general partner or managing owner
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW ADVISORS (BERMUDA), LIMITED,
as General Partner
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
By: TCW INVESTMENT MANAGEMENT
COMPANY, as Investment Advisor
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW INVESTMENT MANAGEMENT
COMPANY, its investment advisor
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
By:
--------------------------------
Name:
-----------------------------
Title:
-----------------------------
C-21
<PAGE>
Annex D
================================================================================
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Dated as of October 22, 1998
By and Among
THE MDC ENTITIES,
DIMAC HOLDINGS, INC.,
THE MANAGEMENT STOCKHOLDERS
and
THE NON-MANAGEMENT STOCKHOLDERS
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 CERTAIN DEFINITIONS. . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRANSFER OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 PERMITTED TRANSFERS. . . . . . . . . . . . . . . . . . . . 5
Section 2.3 SALES BY MDC SUBJECT TO TAG-ALONG RIGHTS . . . . . . . . . 6
Section 2.4 GRANT TO MDC OF BRING-ALONG RIGHTS . . . . . . . . . . . . 8
Section 2.5 CALL UPON TERMINATION OF MANAGEMENT STOCKHOLDER'S EMPLOYMENT 9
Section 2.6 REGISTRATION RIGHTS AND RELATED MATTERS. . . . . . . . . . 11
ARTICLE III
BOARD OF DIRECTORS OF THE COMPANY . . . . . . . . . . . . . . . . . . . 15
Section 3.1 BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. . . . . . . . . . . 15
Section 4.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS . . . . 15
ARTICLE V
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.1 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . 17
Section 5.2 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.4 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.5 SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . 18
Section 5.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.7 SUBMISSION TO JURISDICTION . . . . . . . . . . . . . . . . 18
Section 5.8 BENEFITS ONLY TO PARTIES . . . . . . . . . . . . . . . . . 19
Section 5.9 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.10 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.11 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . 20
(i)
<PAGE>
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "AGREEMENT"), dated as of
October 22, 1998, by and among DIMAC Holdings, Inc., a Delaware corporation (the
"COMPANY"), McCown De Leeuw & Co. IV, L.P., a California limited partnership,
Delta Fund LLC, a California limited liability company, and McCown De Leeuw &
Co. IV Associates, L.P., a California limited partnership (each individually, an
"MDC ENTITY", collectively the "MDC ENTITIES" and collectively with their
Related Persons (as defined below), "MDC"), the individuals listed on Schedule A
attached hereto under the heading "MANAGEMENT STOCKHOLDERS" (each individually,
a "MANAGEMENT STOCKHOLDER" and, collectively, the "MANAGEMENT STOCKHOLDERS," it
being understood that any other member of the management of the Company or its
Subsidiaries who becomes a stockholder of the Company through the receipt of
Call Shares (as defined below) shall be a Management Stockholder and each of the
Persons listed on Schedule A hereto under the heading "NON-MANAGEMENT
STOCKHOLDERS" (each, individually a "NON-MANAGEMENT STOCKHOLDER" and,
collectively, the "NON-MANAGEMENT STOCKHOLDERS") (each of the Management
Stockholders, MDC and the Non-Management Stockholders is hereinafter referred to
as a "STOCKHOLDER," it being understood and agreed that any holder of Common
Stock of the Company (including through the exercise of any option or warrant)
during the term of this Agreement shall become a party to this Agreement and
shall be referred to within the term "STOCKHOLDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, MDC, the Management Stockholders and the Non-Management
Stockholders own shares of voting and non-voting common stock, $0.001 par value,
of the Company (the "COMMON STOCK"); and
WHEREAS, the Stockholders each desire to grant to the others certain rights
in connection with the shares of Common Stock now or hereafter owned by them
(collectively, with any shares of Common Stock hereafter issued by the Company
during the term of this Agreement, including pursuant to the exercise of
warrants, the "SHARES") as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:
D-1
<PAGE>
(a) "AFFILIATE" shall mean, with respect to any Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) directly or indirectly
through one or more intermediaries beneficially owning or holding 10% or more of
the combined voting power of the total Voting Securities of such referenced
Person or (iii) of which 10% or more of the combined voting power of the total
Voting Securities directly or indirectly through one or more intermediaries is
beneficially owned or held by such referenced Person or a Subsidiary of such
referenced Person. For all purposes of this Agreement, MDC and its Affiliates
shall be considered an Affiliate of the Company. For purposes of this
definition, "CONTROL" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of Voting Securities, by agreement or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Agreement, none of the TCW Entities nor the Michigan Fund shall
be considered Affiliates of the Company or any of its Subsidiaries.
(b) "BUSINESS DAY" shall mean any day except a Saturday, a Sunday or other
day on which commercial banks are required or authorized to close in New York,
New York.
(c) "CALL SHARES" shall mean shares of the Common Stock received upon the
exercise of class A options granted to employees of the Company (or the
Company's Subsidiaries) pursuant to the Management Equity Incentive Plan.
(d) "GRANT DATE" shall mean (i) with respect to any Vested Stock Option,
the date upon which such Vested Stock Option was granted to the Management
Stockholder and (ii) with respect to any Call Share, the date upon which the
Vested Stock Option in respect of such Call Share was granted to the Management
Stockholder.
(e) "IPO" shall mean an initial public offering of the Common Stock.
(f) "MANAGEMENT EQUITY INCENTIVE PLAN" shall mean the Company's 1998 Stock
Option Plan or like stock incentive plan as amended from time to time.
(g) "NON-MDC STOCKHOLDERS" shall mean all Stockholders other than MDC.
(h) "PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an unincorporated
organization or a government or agency or political subdivision thereof.
(i) "PURCHASERS" has the meaning given to such term in the Securities
Purchase Agreement dated as of October 22, 1998 by and among the Company, DIMAC
Corporation, a Delaware corporation, and the purchasers listed on the signature
pages thereto.
D-2
<PAGE>
(j) "RELATED PERSONS" shall mean with respect to any MDC Entity, any
partnership with the same controlling general partner as such MDC Entity and any
of the partners of such MDC Entity or the general partner of such MDC Entity
which receive Shares upon a distribution to any such partners by any such MDC
Entity.
(k) "SECURITIES ACT" means the Securities Act of 1933, as amended from
time to time, or any similar Federal statute, and the rules and regulations of
the Securities and Exchange Commission promulgated thereunder, all as the same
shall be in effect at the time.
(l) "SUBSIDIARY" shall mean, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of capital stock or other equity interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors or other managing authority thereof is at the time owned or
controlled, directly or indirectly, by such Person and its Subsidiaries.
(m) "TCW ENTITIES" means Trust Company of the West and its Affiliates and
any of the Purchasers and their Affiliates and any Person to whom any shares of
Common Stock or Warrants that were held by any of the Purchasers may be
transferred in accordance with the terms of the Stockholders Agreement.
(n) "TRANSACTION VALUE" means the sum of (a) the cash purchase price
(including any installment payments), (b) the value of any equity securities
issued by the purchaser in connection with such transaction, (c) the face value
of any promissory note or other debt instrument issued by the purchaser in
connection with such transaction and (d) the amount of any liabilities assumed
by the purchaser in connection with such transaction (other than ordinary course
of business trade payables).
(o) "VESTED STOCK OPTIONS" shall mean vested class A stock options for the
Common Stock granted to certain key employees of the Company (or the Company's
Subsidiaries) pursuant to the Management Equity Incentive Plan.
(p) "VOTING SECURITIES" means any class of equity interests of a Person
pursuant to which the holders thereof have, at the time of determination, the
general voting power under ordinary circumstances to vote for the election of
directors, managers, trustees or general partners of such Person (regardless of
whether at the time any other class or classes will have or might have voting
power by reason of the happening of any contingency).
D-3
<PAGE>
ARTICLE II
TRANSFER OF SHARES
Section 2.1 RESTRICTIONS. (a) No Stockholder shall sell, assign, pledge,
or in any manner, transfer any of the Shares or any right or interest therein,
to any Person (each such action, a "TRANSFER") except as permitted by this
Agreement.
(b) From and after the date hereof, all share certificates representing
Shares held by any of the Stockholders shall bear a legend which shall state as
follows:
The shares represented by this certificate are subject to certain
restrictions against transfer set forth in an Amended and Restated
Stockholders Agreement dated as of October 22, 1998, as may be amended from
time to time. A copy of such Stockholders Agreement has been filed in the
registered office of the Company in the State of Delaware, where the same
may be inspected daily during business hours.
(c) In addition to the legend required by Section 2.1(b) above, all share
certificates representing Shares held by any of the Stockholders shall bear a
legend which shall state as follows:
The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the "Securities Act"), and such
shares may not be offered, sold, pledged or otherwise transferred except
(1) pursuant to an exemption from, or in a transaction not subject to, the
registration requirements under the Securities Act or (2) pursuant to an
effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any State of the United
States.
(d) In addition to the legends required by Sections 2.1(b) and (c) above,
all share certificates representing Call Shares shall bear a legend which shall
state as follows:
The shares represented by this certificate are also subject to the
Management Call as described in Section 2.5 of the Stockholders Agreement
referred to above.
Any Call Shares transferred by a Management Stockholder in a Permitted Transfer
described in Section 2.2(a)(i) or (ii) shall remain Call Shares of the
transferee and certificates representing such shares shall bear the legend
required by this Section 2.1(d). Any Call Shares transferred by a Management
Stockholder in a Permitted Transfer described in any other clause of Section 2.2
shall not remain Call Shares of the transferee and certificates representing
such shares shall not bear the legend required by this Section 2.1(d).
(e) Promptly upon execution and delivery of this Agreement, each
Stockholder shall deliver to the Secretary of the Company all certificates then
held by such
D-4
<PAGE>
Stockholder representing Shares which do not have such legends affixed thereto
as are required by Section 2.1 above. The Company shall cause such legends to
be affixed promptly to each of such certificates and such certificates to be
returned promptly to the registered holder thereof. The Company agrees that it
will not cause or permit the Transfer of any Shares to be made on its books
unless the Transfer is permitted by this Agreement and has been made in
accordance with the terms hereof.
(f) No Transfer of Shares permitted or not otherwise prohibited by the
terms and conditions of this Agreement shall be valid unless the transferee
thereof enters into a written agreement, in form and substance reasonably
satisfactory to the Company, to the effect that said assignee agrees to be bound
by all of the terms and conditions set forth in this Agreement, including those
regarding Shares and the purchase options with respect thereto; PROVIDED,
HOWEVER, that the conditions set forth in this Section 2.1 shall not apply to
any sale of Shares pursuant to an effective registration statement under the
Securities Act or, provided such sale is not to an Affiliate of the selling
Stockholder, pursuant to Rule 144 promulgated under the Securities Act.
Section 2.2 PERMITTED TRANSFERS. (a) Notwithstanding anything to the
contrary contained herein, a Stockholder may at any time effect any of the
following Transfers (each a "PERMITTED TRANSFER" and each transferee, a
"PERMITTED TRANSFEREE"):
(i) A Stockholder's Transfer of any or all Shares owned by such
Stockholder following such Stockholder's death by will or intestacy to such
Stockholder's legal representative, heir or legatee.
(ii) A Stockholder's Transfer of any or all Shares owned by such
Stockholder as a gift or gifts during such Stockholder's lifetime to such
Stockholder's spouse, children, step-children, grandchildren, parents or a
trust or other legal entity for the benefit of any Stockholder or any of
the foregoing.
(iii) With respect to the MDC Entities, a Transfer of any or all
Shares owned by them to any of their Related Persons.
(iv) A Transfer by a Stockholder which is made pursuant to Section
2.3 hereof.
(v) A Transfer by a Stockholder which is made pursuant to Section
2.4, 2.5 or 2.6 hereof.
(vi) A Transfer by a Stockholder to the Company.
(vii) A Transfer by MDC to any Person on or before October 31, 1998;
PROVIDED that after giving effect to such Transfer, MDC owns at least 60%
of the issued and outstanding Common Stock.
(viii) Following an IPO, a Transfer by a Stockholder holding Call
Shares as follows: (a) during the period from the date of the IPO until
the first anniversary thereof a number
D-5
<PAGE>
of Call Shares equal to one-third (33.33%) of the aggregate number of Call
Shares and Vested Stock Options held by such Stockholder at the date of the
IPO and (b) during the period from the date of the IPO until the second
anniversary of the IPO, a number of Call Shares equal to two-thirds
(66.67%) of the aggregate number of Call Shares and Vested Stock Options
held by such Stockholder at the date of the IPO.
(ix) The transfer by the State Treasurer of the State of Michigan,
Custodian of the Michigan Public School Employees' Retirement System; State
Employees' Retirement System; Michigan State Police Retirement System; and
Michigan Judges Retirement System (the "MICHIGAN FUND") to any successor or
additional trustee or custodian of the assets of the Michigan Fund as may
be appointed, and qualified under the applicable laws of the State of
Michigan.
(x) With respect to any Stockholder which is an entity, a Transfer
of any or all Shares owned by it to any of its Affiliates so long as such
Affiliate is an entity.
(xi) A Transfer by the TCW Entities to any Person of any Shares
issued to such TCW Entities pursuant to the exercise of warrants.
(b) In any such Transfer referred to above in Section 2.2(a) (other than
events in which this Agreement shall terminate in accordance with the provisions
of Section 5.9 hereof), the Permitted Transferee shall receive and hold such
Shares subject to the provisions of this Agreement as if such Permitted
Transferee were an original signatory hereto and shall be deemed to be a party
to this Agreement.
Section 2.3 SALES BY MDC SUBJECT TO TAG-ALONG RIGHTS. (a) In the event
that MDC proposes to effect a Transfer (other than a Permitted Transfer
described in Section 2.2(a) (iii), (v) or (vii) above) of any of the Common
Stock owned by it (the "MDC STOCK"), then MDC shall promptly give written notice
(the "MDC NOTICE") to the Company and the other Stockholders at least twenty
days prior to the closing of such Transfer. The MDC Notice shall be accompanied
by a copy of any agreement or term sheet relating to the Transfer (if available)
and describe in reasonable detail the proposed Transfer including, without
limitation, the name of, and the number of shares of MDC Stock to be purchased
by, the transferee, the purchase price of each share of MDC Stock to be sold,
any additional consideration, the terms and conditions of payment offered by the
transferee, any other significant terms of such sale and the date such proposed
sale is expected to be consummated (the "TAG-ALONG SALE DATE"), the aggregate
number of Shares of Common Stock held of record by MDC as of the close of
business on the day immediately preceding the date of the MDC Notice, the
Participant's (as defined below) pro-rata portion (as defined below) and
confirmation that the transferee has been informed of the "Tag-Along Rights"
provided for herein and has agreed to purchase shares from any Participant in
accordance with the terms hereof, it being understood that if such proposed
Transfer by MDC is in (i) an IPO or (ii) a public offering pursuant to a
registration statement filed under Section 2.6, the subsequent provisions of
this Section 2.3 shall not apply.
D-6
<PAGE>
(b) Each Stockholder shall have the right, exercisable upon irrevocable
written notice to MDC (the "TAG-ALONG NOTICE") no less than ten days prior to
the proposed Transfer, to participate in such sale of MDC Stock on the same
terms and conditions as set forth in the MDC Notice, including, without
limitation, the making of all representations, warranties, indemnifications
(including participating in any escrow arrangements) and similar agreements on a
ratable basis (based upon the number of Shares participating in such Transfer)
which obligations will be limited to the net proceeds received by such
Stockholder in such sale, and to sell all or any portion of the number of the
Shares owned by it as determined in accordance with the calculation set forth
below. Each Stockholder other than MDC electing to participate in the sale
described in the MDC Notice (each a "PARTICIPANT") shall indicate in its
Tag-Along Notice to MDC the maximum number of its Shares it desires to sell in
such sale (which number may be in excess of the number of shares set forth in
the MDC Notice). Each such Participant shall be entitled to sell a "PRO RATA
PORTION" (as such term is hereinafter defined) of such maximum number. To the
extent one or more of the Stockholders exercise such right of participation in
accordance with the terms and conditions set forth in this Section 2.3, the
number of shares of MDC Stock that MDC may sell in the transaction shall be
correspondingly reduced. For purposes of this Section 2.3, "PRO RATA PORTION"
shall mean for each Participant a fraction the numerator of which is the number
of Shares of MDC Stock proposed to be sold in the MDC Notice and the denominator
of which is the sum of (A) the total number of Shares owned by MDC immediately
prior to the sale proposed in the MDC Notice and (B) the total number of Shares
desired to be sold by all of the Participants electing to participate in the
sale (including any Shares that may be issued pursuant to any warrant or other
right). Not later than five days prior to the date scheduled for such sale, MDC
shall provide notice to each Participant of the "PRO RATA PORTION" of Shares to
be sold by such Participant in such sale.
(c) The Tag-Along Notice given by any Participant shall constitute such
Participant's irrevocable agreement to sell the Shares specified in the
Tag-Along Notice on the terms and conditions applicable to the proposed
Transfer; PROVIDED, HOWEVER, that in the event that there is any material change
in the material terms and conditions of such proposed Transfer applicable to the
Participant (including, but not limited to, any decrease in the purchase price
that occurs other than pursuant to an adjustment mechanism set forth in the
agreement relating to the proposed Transfer) after such Participant gives its
Tag-Along Notice, then, notwithstanding anything herein to the contrary, the
Participant shall have the right to withdraw from participation in the proposed
Transfer with respect to all of its Shares affected thereby. If the transferee
does not consummate the purchase of all of the Shares requested to be included
in the proposed Transfer by any Participant on the same terms and conditions
applicable to MDC (except as otherwise provided herein), then MDC shall not
consummate the proposed Transfer of any of its shares of Common Stock to such
transferee, unless the shares of MDC and the Participants are reduced or limited
PRO RATA in proportion to the respective number of shares of Common Stock
actually sold in any such proposed Transfer and all other terms and conditions
of the proposed Transfer are the same for MDC and the Participant, subject to
the provisos set forth in Section 2.4(b).
(d) If a Tag-Along Notice from any Participant is not received by MDC
prior to the ten day period specified above, MDC shall have the right to
consummate the proposed
D-7
<PAGE>
Transfer without the participation of such Participant, but only on terms and
conditions which are no more favorable in any material respect to MDC (and in
any event, at no greater a purchase price, except as the purchase price may be
adjusted pursuant to the agreement regarding the relevant sale or other
disposition) than as stated in the MDC Notice and only if such proposed Transfer
occurs on a date within ninety (90) days of the Tag-Along Sale Date. If such
proposed Transfer does not occur within such ninety (90) day period, the shares
of Common Stock that were to be subject to such proposed Transfer thereafter
shall continue to be subject to all of the restrictions contained in this
Agreement.
(e) Any Participant shall effect its participation in the sale by
delivering on the date scheduled for such sale to MDC for delivery to the
prospective transferee one or more certificates, in proper form for transfer,
which represent the number of Shares which such Participant is entitled to sell
in accordance with this Section 2.3. Such certificate or certificates that any
Participant delivers to MDC shall be delivered on such date to such transferee
in consummation of the sale of the Shares pursuant to the terms and conditions
specified in the MDC Notice, and MDC shall concurrently therewith remit to each
such Participant that portion of the sale proceeds to which such Participant is
entitled by reason of its participation in such sale. MDC's sale of Shares in
any sale proposed in an MDC Notice shall be effected on substantially the terms
and conditions set forth in such MDC Notice.
(f) The exercise or non-exercise of the rights of the Stockholders
hereunder to participate in one or more sales of Shares made by MDC shall not
adversely affect their rights to participate in subsequent sales of Shares
subject to this Section 2.3.
(g) In no event shall MDC receive special consideration or a control
premium in connection with any sale contemplated by this Section 2.3; PROVIDED,
HOWEVER, that it is understood that MDC shall be entitled to receive a
reasonable transaction fee, not to exceed 2% of Transaction Value, payable upon
the closing of any sale contemplated by this Section 2.3 if MDC provides
services in connection with such sale that would customarily be provided by a
third party financial advisor.
Section 2.4 GRANT TO MDC OF BRING-ALONG RIGHTS. (a) Each time the
stockholders of the Company meet, or act by written consent in lieu of meeting,
for the purpose of approving a "Sale of the Business" (as such term is
hereinafter defined), each Stockholder agrees to vote all of its Shares, and to
sell all of its Shares, as directed by MDC. In order to effect the foregoing
covenant, each Stockholder (other than the Michigan Fund and the TCW Entities)
hereby grants to MDC with respect to all of such Stockholder's Shares an
irrevocable proxy (which is deemed to be coupled with an interest) for the term
of this Agreement with respect to any stockholder vote or action by written
consent to effect the Sale of the Business. As used herein, "SALE OF THE
BUSINESS" shall mean any transaction or series of transactions (whether
structured as a stock sale, merger, consolidation, reorganization, asset sale or
otherwise) negotiated on an arm's-length basis, which results in the sale or
transfer of all or substantially all of the assets or all of the shares of
capital stock of the Company to an unaffiliated bona fide third party in which
all consideration payable to holders of the Common Stock is distributed pro rata
pursuant to share ownership.
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(b) In furtherance of its covenants in Section 2.4(a), each Stockholder
hereby agrees to cooperate fully with MDC and the purchaser in any such Sale of
the Business and, to execute and deliver all documents (including purchase
agreements) and instruments as MDC and the purchaser request to effect such Sale
of the Business, including, without limitation, the making of all
representations, warranties and indemnifications (including participating in any
escrow arrangements) and similar arrangements on a ratable basis (based upon the
number of Shares owned by the Stockholders as if all such Shares and options or
warrants to purchase Shares were converted into Common Stock) which obligations
will be limited to the net proceeds received by such Stockholder in such Sale of
the Business, but excluding employment agreements and covenants not to compete
(the determination of whether or not to enter into any such agreements being in
the sole and absolute discretion of each Stockholder). MDC agrees that upon
such Sale of the Business each Stockholder will receive its PRO RATA share of
the consideration (including consideration for non-competes, consulting
agreements or similar arrangements) paid by the purchaser determined on the
basis of such Stockholder's Share ownership.
(c) Prior to any Sale of the Business, if MDC elects to exercise the
rights afforded under this Section 2.4, MDC shall provide the Stockholders with
written notice (the "DRAG-ALONG NOTICE") not less than ten days prior to the
proposed date of the Sale of the Business. The Drag-Along Notice shall set
forth: (i) the name and address of the third party; (ii) the proposed amount and
form of consideration to be paid per share and the terms and conditions of
payment offered by the third party; (iii) the aggregate number of Shares held of
record by MDC as of the date of the Drag-Along Notice; (iv) the proposed date of
the Sale of the Business; and (v) confirmation that the proposed third party has
agreed to purchase each Stockholder's Shares in accordance with the terms
hereof.
(d) Each Stockholder shall effect its participation in the Sale of the
Business by delivering to MDC on the date of the Sale of the Business for
delivery to the third party one or more certificates, in proper form for
transfer, which represent the number of Shares which such Stockholder is
required to sell in accordance with this Section 2.4. Such certificate or
certificates that any Stockholder delivers to MDC shall be delivered on such
date to such third party in consummation of the Sale of the Business pursuant to
the terms and conditions specified in the Drag Along Notice, and MDC shall
concurrently therewith remit to each Stockholder that portion of the sale
proceeds to which such Stockholder is entitled by reason of its participation in
such Sale of the Business.
(e) In no event shall MDC receive special consideration or a control
premium in connection with a sale contemplated by this Section 2.4; PROVIDED,
HOWEVER, that it is understood that MDC shall be entitled to receive a
reasonable transaction fee, not to exceed 2% of Transaction Value, payable upon
the closing of any such sale contemplated by this Section 2.4 if MDC provides
services in connection with such sale that would customarily be provided by a
third party financial advisor.
Section 2.5 CALL UPON TERMINATION OF MANAGEMENT STOCKHOLDER'S EMPLOYMENT.
(a) If a Management Stockholder's active employment with the Company (and/or,
if applicable, its
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Subsidiaries) is voluntarily or involuntarily terminated for any reason
whatsoever (including, without limitation, termination by the Company and/or its
Subsidiaries with or without cause) at any time on or before the date which is
five years from the Grant Date of any Vested Stock Options or Call Shares, the
Company shall, on the terms and conditions of this Section 2.5, have the right
(the "MANAGEMENT CALL"), at the option of the Company, to purchase, at the Call
Share Repurchase Price or Vested Option Repurchase Price (each as defined
below), as the case may be, determined in accordance with Section 2.5(b) hereof,
all, or any portion, of such Call Shares and/or such Vested Stock Options then
held by such Management Stockholder (including, if applicable, such Shares held
by any Permitted Transferee of such Management Stockholder). Notwithstanding
the foregoing, the Company shall not have such option if (i) the termination of
employment results from the death or permanent disability of the Management
Stockholder or (ii) the termination of employment results from the retirement of
the Management Stockholder from the Company or any of its Subsidiaries at age 65
or over; PROVIDED that, in the case of any such termination resulting from
permanent disability or retirement, the Management Stockholder enters into an
agreement, in form and substance satisfactory to the Company, within 15 days of
the date of such termination, not to compete, directly or indirectly, with the
Company and/or any of its Subsidiaries for a period of five (5) years from the
date of such termination in any geographic area where the Company and/or its
Subsidiaries then or during such five-year period conducts business.
The Company shall have a period of 60 days from the date of such
termination in which to give notice in writing to the Management Stockholder of
the exercise of such option. The closing of the purchase shall take place at
the principal office of the Company on the tenth business day after the giving
of notice of the exercise of the option to purchase. The Call Share Repurchase
Price or the Vested Option Repurchase Price, as the case may be, shall be paid
by delivery to the Management Stockholder holding the Call Shares or Vested
Stock Options (including, if applicable, such Shares held by any Permitted
Transferee of such Management Stockholder) of a check or checks in the
appropriate amount payable to the order of such Management Stockholder or
Permitted Transferee, as the case may be, against delivery of certificates or
other instruments representing the Call Shares or Vested Stock Options, as the
case may be, so purchased, appropriately endorsed by such Management Stockholder
or Permitted Transferee, as the case may be, or his duly authorized
representative. For purposes of this Agreement, a Management Stockholder shall
be deemed to have a "permanent disability" when the Board of Directors of the
Company shall, in good faith, so determine. In connection with such closing,
such Management Stockholder (including, if applicable, such Shares held by any
Permitted Transferee of such Management Stockholder) shall warrant to the
Company good and marketable title to the purchased Call Shares or Vested Stock
Options, as the case may be, free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever except those under
this Agreement.
(b) The offering price for each Call Share (the "CALL SHARE REPURCHASE
PRICE") shall be as follows:
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DATE OF NOTICE OF EXERCISE REPURCHASE PRICE
Grant Date through and including the first 105% multiplied by the
anniversary of the Grant Date exercise price of such
Call Share
From the first anniversary of the Grant (105%)2 multiplied by the
Date through and including the second exercise price of such
anniversary of the Grant Date Call Share
From the second anniversary of the Grant (105%)3 multiplied by the
Date through and including the third exercise price of such
anniversary of the Grant Date Call Share
From the third anniversary of the Grant (105%)4 multiplied by the
Date through and including the fourth exercise price of such
anniversary of the Grant Date Call Share
From the fourth anniversary of the Grant (105%)5 multiplied by the
Date through and including the fifth exercise price of such
anniversary of the Grant Date Call Share
The offering price for each Vested Stock Option (the "VESTED OPTION
REPURCHASE PRICE") shall be an amount equal to the Call Share Repurchase Price
determined pursuant to this Section 2.5(b) as if such Vested Stock Option was
exercised immediately prior to the giving of notice by the Company of the
exercise of the option to purchase LESS the exercise price of such Vested Stock
Option.
Section 2.6 REGISTRATION RIGHTS AND RELATED MATTERS. (a) If the Company
intends (other than in connection with an IPO) to register Shares on Form S-1,
Form S-2 or Form S-3 or any corresponding form applicable at the time under the
Securities Act as then in effect (or any similar statute then in effect), the
Company will give written notice to each Stockholder of its intention to do so,
at least 15 days prior to the time of the filing of any registration statement
or qualification papers, and at the written request of any Stockholder given
within 10 days after receipt of any such notice (which request shall specify the
number of Shares intended to be sold or disposed of by such Stockholder and
shall describe the nature of any proposed sale or other disposition thereof
which may include a distribution over a reasonable period of time), the Company
will use its reasonable best efforts to cause such Shares to be registered or
qualified to the extent required (in the opinion of the Company's counsel) to
permit the sale or other disposition thereof (in accordance with the methods
described by such Stockholder) (such right of each Stockholder to participate in
the proposed offering, a "PIGGY-BACK RIGHT"). The number of Shares that any
Stockholder intends to sell shall be subject to underwriters' cutbacks resulting
from the underwriters' conclusion that the inclusion of all of the Shares
requested to be included in the proposed offering would materially adversely
affect the distribution of Shares in such offering or the market price of Common
Stock if such Common Stock is publicly traded. Such underwriters' cutbacks
shall be made on a pro rata basis by multiplying the number of Shares
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that each Stockholder desires to sell in the proposed offering by a fraction the
numerator of which shall be the number of Stockholders' Shares that the
underwriters deem appropriate to sell in the proposed offering and the
denominator of which shall be the total number of Shares that all of the
Stockholders initially desire to sell in the proposed offering.
(b) Notwithstanding any other provisions hereof, the Company shall ensure
that (i) any registration statement relating to a Stockholder's exercise of its
piggy-back rights complies in all material respects with the Securities Act and
(ii) any such registration statement does not, when it becomes effective,
contain an untrue statement or omission.
(c) All out-of-pocket expenses, disbursements and fees in connection with
any action to be taken under this Section 2.6 shall be borne by the Company,
including the reasonable fees and expenses of one counsel for all participating
Stockholders, provided that the foregoing expenses shall in no event include the
underwriters' discount in connection with an offering.
(d) In the event of any registration under the provisions of this Section
2.6, the Company, to the extent permitted by law, will indemnify any Stockholder
participating in such registration, its respective officers and directors, if
any, and each Person, if any, who controls such Stockholder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act,
against all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in the registration statement or
prospectus (and as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading and will reimburse such Stockholder, its
officers and directors and any Person, if any, who controls such Stockholder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any legal or other expenses reasonably incurred by such
Stockholder, officer, director or Person in connection with investigating or
defending any such losses, claims, damages and liabilities, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission contained in information furnished in writing to the Company by such
Stockholder participating in such registration or by underwriters expressly for
use therein. The obligation of the Company under this Section 2.6 to register
securities for any of the Stockholders shall be subject to the condition that
each such Stockholder and the underwriters involved in the offering shall
furnish to the Company in writing such information as shall be reasonably
requested by the Company for use in connection with the preparation of any such
registration statement or prospectus and, to the extent permitted by law, shall
indemnify the Company, its directors and officers, any other underwriter, the
other Stockholders participating in such registration and each Person, if any,
who controls the Company, any other underwriter or such other Stockholders,
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against all losses, claims, damages and liabilities caused by any
untrue statement or omission contained in information so furnished in writing to
the Company by such Stockholder or such underwriter expressly for use therein;
provided that the liability of any such Stockholder for such losses, claims,
damages and liabilities shall not exceed the net proceeds received by such
Stockholder in any such offering.
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(e) In case any action, claim or proceeding shall be brought against any
Person entitled to indemnification hereunder, such indemnified party shall
promptly notify each indemnifying party in writing, and such indemnifying party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses
incurred in connection with the defense thereof. The failure to so notify such
indemnifying party shall not affect any obligation it may have to any
indemnified party under this Agreement or otherwise except to the extent that
(as finally determined by a court of competent jurisdiction (which determination
is not subject to review or appeal)) such failure materially and adversely
prejudiced such indemnifying party. Each indemnified party shall have the right
to employ separate counsel in such action, claim or proceeding and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of each indemnified party unless (i) such indemnifying party has
agreed to pay such expenses; (ii) such indemnifying party has failed promptly to
assume the defense and employ counsel reasonably satisfactory to such
indemnified party, or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such indemnified party
and such indemnifying party or an affiliate or controlling person of such
indemnifying party, and such indemnified party shall have been advised in
writing by counsel that either (x) there may be one or more legal defenses
available to it which are different from or in addition to those available to
such indemnifying party or such affiliate or controlling person or (y) a
conflict of interest may exist if such counsel represents such indemnified party
and such indemnifying party or its affiliate or controlling person; PROVIDED,
HOWEVER, that such indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be responsible hereunder for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel), which
counsel shall be designated by such indemnified party.
No indemnified party shall be liable for any settlement effected without
its written consent. Each indemnifying party agrees, jointly and severally,
that it will not, without the indemnified party's prior written consent, consent
to entry of any judgment or settle or compromise any pending or threatened
claim, action or proceeding in respect of which indemnification or contribution
may be sought hereunder unless the foregoing contains an unconditional release,
in form and substance reasonably satisfactory to the indemnified parties, of the
indemnified parties from all liability and obligation arising therefrom.
(f) The indemnifying party's liability to any such indemnified party
hereunder shall not be extinguished solely because any other indemnified party
is not entitled to indemnify hereunder.
(g) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party, and will survive the transfer of securities.
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(h) If the indemnification provided for in this Section 2.6 from the
indemnifying party is unavailable, or insufficient to hold harmless, to any
indemnified party hereunder in respect of any losses, claims, damages or
liabilities referred to herein, then the 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 or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party and indemnified parties in connection with the actions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party under this Section 2.6 as a
result of the losses, claims, damages and liabilities referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or legal or administrative
action or proceeding. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 2.6(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to herein. Notwithstanding the
provisions of this subsection (h), a Stockholder shall not be required to
contribute any amount in excess of the amount by which (i) the amount (net of
payment of all expenses) at which the securities that were sold by such
Stockholder and distributed to the public were offered to the public exceeds
(ii) the amount of any damages which such Stockholder has otherwise been
required to pay by reason of such untrue statement or omission.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 2.6 are
in addition to any liability that the indemnifying parties may have to the
indemnified parties.
(i) As expeditiously as possible after the effectiveness of any
registration statement pursuant to this Section 2.6 and prior to such date as
shall be certified to the Company as the date upon which the Transfer
contemplated by such registration statement will be effected by any
participating Stockholder, the Company will deliver in exchange for certificates
representing Shares so registered bearing the legends set forth in Section 2.1,
certificates therefor not bearing such legends as shall be required to effect
such Transfer. In the event that the proposed Transfer is not made as
contemplated by any such participating Stockholder, by acceptance thereof such
Stockholder shall be deemed to have agreed that it will deliver such
certificates not bearing such legends to the Company in exchange for new
certificates bearing the legends set forth in Section 2.1 if the Company shall
request and the Company agrees that it will make such exchange.
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(j) The registration rights provided in this Section 2.6 shall terminate
after an IPO as to any Stockholder which can immediately sell all of its Shares
in a single sale pursuant to Rule 144 under the Securities Act.
(k) Each of the Stockholders agrees that in connection with any public
offering, such Stockholder will not, without the prior written consent of the
Company, directly or indirectly, offer to sell, sell, contract to sell
(including, without limitation, any short sale), grant any option for the sale
of, acquire any option to dispose of, or otherwise dispose of any Shares for a
period of 180 days following the date of the consummation of such public
offering.
(l) So long as the Company shall not have registered any of its securities
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") or filed a registration statement pursuant to the requirements of the
Securities Act, the Company shall, at any time and from time to time, upon the
request of any holder of Shares and upon the request of any Person designated by
such holder as a prospective purchaser of any Shares, furnish in writing to such
holder or such prospective purchaser, as the case may be, a statement as of a
date not earlier than 12 months prior to the date of such request of the nature
of the business of the Company and the products and services it offers and
copies of the most recent balance sheet and profit and loss and retained
earnings statements of the Company, together with similar financial statements
for such part of the two preceding fiscal years as the Company shall have been
in operation, all such financial statements to be audited to the extent audited
statements are reasonably available, and all other information required by Rule
144A under the Securities Act; PROVIDED THAT, in any event the most recent
financial statements so furnished shall include a balance sheet as of a date
less than 16 months prior to the date of such request, statements of profit and
loss and retained earnings for the 12 months preceding the date of such balance
sheet, and, if such balance sheet is not as of a date less than 6 months prior
to the date of such request, additional statements of profit and loss and
retained earnings for the period from the date of such balance sheet to a date
less than 6 months prior to the date of such request. If the Company shall have
registered any of its securities pursuant to the requirements of Section 12 of
the Exchange Act or filed a registration statement pursuant to the requirements
of the Securities Act, the Company shall timely file the reports required to be
filed by it under the Securities Act and the Exchange Act (including but not
limited to the reports under Sections 13 and 15(d) of the Exchange Act referred
to in subparagraph (c) of Rule 144 adopted by the Commission under the
Securities Act) and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, it will,
upon the request of any holder of Shares, make publicly available other
information) and will take such further action as any holder of Shares may
reasonably request, all to the extent required from time to time to enable such
holder to sell Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Shares, the Company will deliver to such holder a
written statement as to whether it has complied with the requirements of this
Section 2.6(h).
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ARTICLE III
BOARD OF DIRECTORS OF THE COMPANY
Section 3.1 BOARD OF DIRECTORS. (a) As long as MDC controls the voting
power (through proxy or otherwise) of at least 50% of the Voting Stock, each
Stockholder agrees to vote all of the Shares held by such Stockholder so as to
elect and maintain a Board, a majority of which members consist of persons
designated by MDC and initially the board should be composed of the following:
David D. De Leeuw, Martin R. Lewis and James L. Wu.
(b) As long as MDC controls the voting power (through proxy or otherwise)
of at least 50% of the Voting Stock, in the event that any director designated
by MDC for any reason ceases to serve as a director during his term of office,
the resulting vacancy on the Board shall be filled by a director designated by
MDC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Section 4.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. (a) Each
Stockholder represents and warrants, severally and not jointly, that: (i) such
Stockholder is acquiring, or has acquired, the shares of Common Stock for
investment for such Stockholder's own account and not with a view to, or for the
resale in connection with, the distribution or other disposition thereof; (ii)
such Stockholder will not, during the term of this Agreement, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any shares of Common Stock except in accordance with this Agreement;
(iii) such Stockholder (A) has either (1) preexisting personal or business
relationships with the Company, or any of its respective officers, directors or
any of its respective Affiliates or (2) such knowledge and experience in
financial and business matters such that such Stockholder is capable of
evaluating the merits and risks relating to the purchase of shares of Common
Stock under this Agreement, or such Stockholder has been advised by a
representative possessing such knowledge and experience who is unaffiliated with
or who is not compensated, directly or indirectly, by the Company or any of its
Affiliates, or (B) is a Trust, the beneficiary of which is a Person meeting the
requirements of (1) and/or (2) of clause (iii)(A) above; (iv) such Stockholder
has been given an opportunity which such Stockholder deems adequate to obtain
information and documents relating to the Company and to ask questions of and
receive answers from representatives of the Company concerning such
Stockholder's investment in the Common Stock of the Company; (v) such
Stockholder's financial condition is such that such Stockholder can afford to
bear the economic risk of holding the Common Stock for an indefinite period of
time; such Stockholder has adequate means of providing for such Stockholder's
current needs and contingencies and has no need for such Stockholder's
investment in the Common Stock to be liquid; and (vi) such Stockholder can
afford to suffer a complete loss of such Stockholder's investment in the Common
Stock.
(b) Each Stockholder further acknowledges that such Stockholder has been
advised by the Company that: (i) the offer and sale of the Common Stock has not
been registered
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under the Securities Act, but is intended to be exempt from registration
pursuant to Section 4(2) of the Securities Act and the rules promulgated
thereunder by the Securities and Exchange Commission, and that the Shares cannot
be sold, pledged, assigned or otherwise disposed of unless the same is
subsequently registered under the Securities Act or an exemption from such
registration is available; (ii) it is anticipated that there will not be any
public market for the Shares in the foreseeable future; (iii) a restrictive
legend in the form set forth in Section 2.1 shall be placed on the certificates
representing the Shares; and (iv) a notation shall be made in the appropriate
records of the Company indicating that the Shares are subject to restrictions on
transfer and if the Company should at some time in the future engage the
services of a stock transfer agent, appropriate stop transfer restrictions will
be issued to such transfer agent with respect to the Shares.
(c) Each Stockholder further represents and warrants that (i) such
Stockholder has full right, power and authority to execute, deliver and perform
this Agreement; (ii) all actions necessary or required to be taken by or on the
part of such Stockholder to execute, deliver and perform this Agreement and to
consummate the transactions contemplated by this Agreement have been duly
authorized and approved by all necessary or required action of such Stockholder
and have been validly taken; and (iii) this Agreement has been duly executed and
delivered by such Stockholder and is a valid and binding agreement of such
Stockholder enforceable in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
ARTICLE V
MISCELLANEOUS
Section 5.1 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior arrangements or understandings (whether written or
oral) with respect thereto.
Section 5.2 CAPTIONS. The Article and Section captions used herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 5.3 COUNTERPARTS. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by the parties hereto and each
such executed counterpart shall be deemed to be an original instrument.
Section 5.4 NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given, made or served, if in writing and
delivered by personal delivery, overnight courier, telecopier or registered or
certified mail, return-receipt requested and postage prepaid addressed as
follows:
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If to the Company, to:
DIMAC Holdings, Inc.
c/o McCown De Leeuw & Co., Inc.
65 East 55th Street
36th Floor
New York, New York 10022
Attention: David De Leeuw
Tel.: (212) 355-5500
Fax: (212) 355-6283
with copies to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Frank L. Schiff, Esq.
Tel.: (212) 819-8752
Fax: (212) 354-8113
If to the MDC Entities, to:
McCown De Leeuw & Co., Inc.
65 East 55th Street
36th Floor
New York, New York 10022
Attention: David De Leeuw
Tel.: (212) 355-5500
Fax: (212) 355-6283
if to any of the Non-Management or Management Stockholders, to the
addresses set forth opposite each of their names on Schedule A attached
hereto,
or to such other address as any such party hereto may, from time to time,
designate in writing to all other parties hereto, and any such communication
shall be deemed to be given, made or served as of the date so delivered or, in
the case of any communication delivered by mail, as of the date so received.
Section 5.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company, the Stockholders and their respective
heirs, devisees, legal representatives, successors, permitted assigns and other
permitted transferees. The rights of a Stockholder under this Agreement may not
be assigned or otherwise conveyed by any Stockholder except in connection with a
Transfer of Shares which is in compliance with this Agreement; PROVIDED,
HOWEVER, the rights of MDC under Sections 2.3, 2.4 and 3.1 are not assignable
other than as a result of a Permitted Transfer described in Section 2.2(a)(iii).
D-18
<PAGE>
Section 5.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO SUCH STATE'S CHOICE OF LAW PROVISIONS.
Section 5.7 SUBMISSION TO JURISDICTION. (a) Each of the parties hereto
(other than the Michigan Fund) hereby irrevocably acknowledges and consents that
any legal action or proceeding brought with respect to any of the obligations
arising under or relating to this Agreement may be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York, as the party bringing such action or proceeding may elect,
and each of the parties hereto (other than the Michigan Fund) hereby irrevocably
submits to and accepts with regard to any such action or proceeding, for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of the aforesaid courts. Subject to Section 5.7(b), the foregoing shall not
limit the rights of any party to serve process in any other manner permitted by
law. The foregoing consents to jurisdiction shall not constitute general
consents to service of process in the State of New York for any purpose except
as provided above and shall not be deemed to confer rights on any Person other
than the respective parties to this Agreement.
(b) Each of the parties hereto (other than the Michigan Fund) hereby
waives any right it may have under the laws of any jurisdiction to commence by
publication any legal action or proceeding with respect to this Agreement. To
the fullest extent permitted by applicable law, each of the parties hereto
(other than the Michigan Fund) hereby irrevocably waives the objection which it
may now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Agreement in any of the courts
referred to in Section 5.7(a) and hereby further irrevocably waives any claim
that any such court is not a convenient forum for any such suit, action or
proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors or assigns), be
enforced in any jurisdiction, to the extent permitted by applicable law.
(d) The parties hereto agree that the remedy at law for any breach of this
Agreement may be inadequate and that should any dispute arise concerning the
sale or disposition of any Shares or the voting thereof or any other similar
matter hereunder, this Agreement shall be enforceable in a court of equity by an
injunction or a decree of specific performance. Such remedies shall, however, be
cumulative and nonexclusive, and shall be in addition to any other remedies
which the parties hereto may have.
Section 5.8 BENEFITS ONLY TO PARTIES. Nothing expressed by or mentioned
in this Agreement is intended or shall be construed to give any Person, other
than the parties hereto and their respective successors or permitted assigns,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision herein contained, this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
D-19
<PAGE>
benefit of the parties hereto and their respective successors and permitted
assigns, and for the benefit of no other Person.
Section 5.9 TERMINATION. This Agreement shall terminate upon the
happening of any one of the following events:
(a) the voluntary or involuntary dissolution of the Company;
(b) the Sale of the Business as provided in Section 2.4; and
(c) the consummation of an IPO, except that (i) the rights of the
Stockholders under Section 2.6 shall survive such termination (ii) the rights of
the Management Stockholders and obligations of MDC under Section 2.3 shall
survive such termination, and (iii) the restrictions under Section 2.1 and
2.2(a)(viii) of this Agreement in respect of Stockholders transferring Call
Shares following an IPO and any rights of the Company to repurchase Call Shares
and/or Vested Stock Options pursuant to Section 2.5 shall survive such
termination for a period of two years following the IPO;
PROVIDED, HOWEVER, the provisions of Section 5.11 shall survive any termination
of this Agreement.
Section 5.10 PUBLICITY. Except as otherwise required by applicable laws
or regulations, none of the parties hereto shall issue or cause to be issued any
press release or make or cause to be made any other public statement in each
case relating to or connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of the Company to
the contents and the manner of presentation and publication thereof.
Section 5.11 CONFIDENTIALITY. Each of the parties hereto hereby agrees
that it shall keep (and shall cause its directors, officers, employees,
representatives and outside advisors and its affiliates to keep) all non-public
information relating to the Company (including any such information received
prior to the date hereof) confidential except information which (i) becomes
known to such Stockholder from a source, other than the Company, its respective
directors, officers, employees, representatives or outside advisors, which
source is not obligated to the Company to keep such information confidential or
(ii) becomes generally available to the public through no breach of this
Agreement by any party hereto. Each of the parties hereto agrees that such
non-public information (a) shall be communicated only to those of its directors,
officers, employees, representatives, outside advisors and affiliates who need
to know such non-public information and (b) will not be used by such party or
its directors, officers, employees, representatives, outside advisors or
affiliates either to compete with the Company or to conduct itself in a manner
inconsistent with the antitrust laws of the United States or any state.
Notwithstanding the foregoing, a party hereto may disclose non-public
information if required to do so by law or a court of competent jurisdiction or
by any governmental agency; PROVIDED, HOWEVER, that prompt notice of such
required disclosure be given to the Company prior to the making of such
disclosure so that the Company may seek a protective order or other appropriate
remedy; PROVIDED FURTHER, that such party shall not be required to give such
disclosure to the Company if such disclosure is required by any regulatory
agency in the ordinary course of
D-20
<PAGE>
business. In the event that such protective order or other remedy is not
obtained, the party hereto required to disclose the non-public information will
disclose only that portion which such party is advised by counsel is legally
required to be disclosed and will request that confidential treatment be
accorded such portion of the non-public information. In addition,
notwithstanding the foregoing, the TCW Entities may disclose any information
regarding the Company to any prospective purchasers of securities of the Company
so long as such prospective purchasers agree to maintain the confidentiality of
such information at least to the extent provided for in this paragraph.
Section 5.12 FEE; EXPENSES. The parties hereto acknowledge that MDC
Management Company IV, LLC, an Affiliate of MDC, or its respective successors or
assigns, (i) have received from the Company or its Subsidiaries an aggregate
transaction fee equal to $9,900,000 and (ii) shall receive an ongoing management
fee, adjusted annually, equal to the greater of $550,000 per annum and 1.06% of
pro forma EBITDA of the Company, for the preceding fiscal year, PROVIDED that in
no event shall such ongoing management fee exceed $1,000,000 in any year, in
each case plus reimbursement for its out-of-pocket expenses.
Section 5.13 AMENDMENTS; WAIVERS. No provision of this Agreement may be
amended, modified or waived without approval of the holders of 66-2/3% of the
then outstanding shares of Common Stock held by Persons party hereto; provided
that no amendment or waiver of a provision of this Agreement which adversely
affects the rights of any of the Non-MDC Stockholders may be made without such
Non-MDC Stockholders' consent with the Non-MDC Stockholders being considered as
a group with the determination by the holders of a majority of the outstanding
Shares and Vested Stock Options held by the Non-MDC Stockholders being binding
on all Non-MDC Stockholders; provided further that no amendment or waiver of a
provision of this Agreement which adversely and disproportionately affects the
rights of any of the Management Stockholders may be made without such Management
Stockholders' consent with the Management Stockholders being considered as a
group with the determination by the holders of a majority of the outstanding
Shares and Vested Stock Options held by the Management Stockholders being
binding on all Management Stockholders; provided further that no amendment of
Sections 2.2(a)(viii) and 2.5 which adversely affects the rights, or
obligations, of any of the Management Stockholders may be made without such
Management Stockholder's consent; provided further that (x) no amendment which
adversely and disproportionately affects the rights of the TCW Entities may be
made without the TCW Entities' consent with the TCW Entities being considered as
a group with the determination by the holders of a majority of the outstanding
Shares held by the TCW Entities being binding on all TCW Entities, and (y) no
amendment of Section 2.3 or 2.6 which adversely affects the rights of the TCW
Entities may be made without the TCW Entities' consent with the TCW Entities
being considered as a group with the determination by the holders of a majority
of the outstanding Shares held by the TCW Entities being binding on all TCW
Entities.
D-21
<PAGE>
Section 5.14 SEVERABILITY. In case any of the provisions contained
herein shall, for any reason, be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision or provisions are not
contained herein.
[SIGNATURE PAGE FOLLOWS]
D-22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
DIMAC HOLDINGS, INC.
By
--------------------------------------
Name:
Title:
MCCOWN DE LEEUW & CO. IV, L.P.,
By: MDC Management Co. IV, LLC,
its General Partner
By
--------------------------------------
Name:
Title:
DELTA FUND LLC
By
--------------------------------------
Name:
Title:
MCCOWN DE LEEUW & CO. IV ASSOCIATES, L.P.
By: MDC Management Co. IV, LLC,
its General Partner
By
--------------------------------------
Name:
Title:
D-23
<PAGE>
TCW/CRESCENT MEZZANINE PARTNERS, L.P.
TCW/CRESCENT MEZZANINE TRUST
TCW/CRESCENT MEZZANINE INVESTMENT
PARTNERS, L.P.
By: TCW/Crescent Mezzanine, L.L.C.,
its general partner or managing owner
By
--------------------------------------
Name:
Title:
By
--------------------------------------
Name:
Title:
D-24
<PAGE>
TCW SHARED OPPORTUNITY FUND II, L.P.
By: TCW Investment Management
Company, its investment advisor
By
--------------------------------------
Name:
Title:
By
--------------------------------------
Name:
Title:
D-25
<PAGE>
TCW LEVERAGED INCOME TRUST, L.P.
By: TCW Advisors (Bermuda), Limited,
as general partner
By
--------------------------------------
Name:
Title:
By: TCW Investment Management
Company, as investment advisor
By
--------------------------------------
Name:
Title:
D-26
<PAGE>
FIRST UNION INVESTORS, INC.
By
--------------------------------------
Name:
Title:
D-27
<PAGE>
DIMAC EQUITY INVESTORS, L.L.C.
By: Merchant GP, Inc., as managing member
By
--------------------------------------
Name:
Title:
D-28
<PAGE>
Form of Supplmental Letter to the
Amended and Restated Stockholders' Agreement
October 22, 1998
The Purchasers referenced in the
Securities Purchase Agreement
dated as of October 22, 1998
among DIMAC Holdings, Inc., DIMAC Corporation
and the purchasers named on the signature pages thereof
Reference is made to that certain Amended and Restated Stockholders
Agreement dated as October 22, 1998 (the "Stockholders Agreement"), by and
among DIMAC Holdings, Inc. (the "Company"), the MDC Entities (as defined
therein) and the other persons parties thereto. Capitalized terms used
herein which are not otherwise defined herein shall have the meanings
assigned therefor in the Stockholders Agreement.
Each of the undersigned hereby agree as follows:
(i) to the extent that in connection with, and by virtue of, any
sale contemplated by Section 2.3 or 2.4 of the Stockholders Agreement, any of
the TCW Entities would have become liable, but for this letter agreement, for
representations, warranties or covenants (other than representations,
warranties and covenants (the "Individual Representations, Warranties and
Covenants") with respect to its own ownership of the Shares to be sold by it
and its ability to convey title thereto free and clear of any liens,
encumbrances or adverse claims, its due organization, its due authorization,
execution and delivery of the definitive purchase agreement (if applicable),
enforceability of such purchase agreement against it and no conflicts of it
with such purchase agreement) which would survive the consummation of any
such sale transaction (other than to the extent such liability is covered by
an escrow arrangement as contemplated by Sections 2.3 and 2.4 of the
Stockholders Agreement), then to the extent of such liability, but only to
such extent, the MDC Entities will accept such liability on behalf of the TCW
Entities in the definitive purchase agreement so that such TCW Entity will be
liable post consummation of the sale transaction only for the Individual
Representations, Warranties and Covenants made by it and for its pro rata
portion of any escrow arrangement as contemplated by Section 2.3 and 2.4 of
the Stockholders Agreement;
(ii) the Company and the MDC Entities shall cause the TCW Entities
to be paid in immediately available funds in connection with any sale
contemplated by Section 2.3 or 2.4 of the Stockholders Agreement; and
(iii) notwithstanding Section 2.6 of the Stockholders Agreement, the
TCW Entities shall be entitled to the piggyback registration rights referred
to in Section 2.6 of the Stockholders Agreement in connection with an IPO in
which any other holder of Shares (including the MDC Entities) is offering to
sell Shares in the IPO.
D-29
<PAGE>
DIMAC HOLDINGS, INC.
By
--------------------------------------
Name:
Title:
McCOWN DE LEEUW & CO. IV, L.P.
By MDC Management Company IV, LLC,
its general partner
By
--------------------------------------
Name:
Title:
McCOWN DE LEEUW & CO. IV ASSOCIATES, L.P.
By MDC Management Company IV, LLC,
its general partner
By
--------------------------------------
Name:
Title:
DELTA FUND LLC
By
--------------------------------------
Name:
Title:
D-30
<PAGE>
Annex E
Opinion of Counsel to DIMAC Holdings and DIMAC Operating
October 22, 1998
To: The Purchasers named on the signature pages of the Securities Purchase
Agreement (as defined below) relating to the Notes (as defined below) and
the Warrants (as defined below) of DIMAC Holdings, Inc.
Ladies and Gentlemen:
We have acted as special counsel for DIMAC Holdings, Inc., a Delaware
corporation ("DIMAC Holdings"), and DIMAC Corporation, a Delaware corporation
("DIMAC Operating"), in connection with the sale to you by DIMAC Holdings of (i)
its 15% Senior Notes due 2009 (the "Notes"), (ii) 20,000 shares (the "Shares")
of its Common Stock, par value $.001 per share (the "Common Stock"), and (iii)
warrants (the "Warrants" and, together with the Notes and the Shares, the
"Securities") to purchase 28,205 shares of Common Stock, pursuant to the
Securities Purchase Agreement dated as of October 22, 1998 (the "Securities
Purchase Agreement") among DIMAC Holdings, DIMAC Operating and the purchasers
named on the signature pages thereof. Capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the Securities
Purchase Agreement.
In so acting, we have examined such certificates of public officials and
certificates of officers of the Companies, and the originals (or copies thereof,
certified to our satisfaction) of such corporate documents and records of the
Companies, and such other documents, records and papers as we have deemed
relevant in order to give the opinions hereinafter set forth. In this
connection, we have assumed the genuineness of signatures, the authenticity of
all documents submitted to us as originals and the conformity to authentic
original documents of all documents submitted to us as certified, conformed,
facsimile or photostatic copies. In addition, we have relied, to the extent that
we deem such reliance proper, upon such certificates of public officials and of
officers of the Companies and on the representations and warranties of the
Companies contained in the Securities Purchase Agreement, with respect to the
accuracy of material factual matters contained therein which were not
independently established.
Based upon the foregoing, it is our opinion that:
1. Each of DIMAC Holdings and DIMAC Operating (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, (b) has all requisite corporate power and authority to own or
operate its properties and to transact the business in which it is engaged and
(c) is qualified or licensed to do business in the states listed on Schedule 1
attached hereto.
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<PAGE>
2. DIMAC Operating has the corporate power and authority and has taken all
actions necessary to authorize it (a) to execute, deliver and perform all of its
obligations under the Securities Purchase Agreement, the Indenture, the Senior
Credit Agreement, the DIMAC Operating Indenture, the DIMAC Operating Notes, the
DIMAC Operating Notes Purchase Agreement and the other Documents delivered at
the Closing to which it is a party and (b) to consummate the transactions
contemplated thereby. Each of the Securities Purchase Agreement, the Indenture,
the Senior Credit Agreement, the DIMAC Operating Indenture, the DIMAC Operating
Notes, the DIMAC Operating Notes Purchase Agreement and the other Documents to
which DIMAC Operating is a party is a valid and binding obligation of DIMAC
Operating, enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting enforcement of creditors' rights generally and
by general principles of equity (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
3. DIMAC Holdings has the corporate power and authority and has taken all
actions necessary to authorize it (a) to execute, deliver and perform all of its
obligations under the Securities Purchase Agreement, the Indenture, the
Securities, the Notes Registration Rights Agreement, the Warrant Agreement, the
Stockholders' Agreement, the Senior Credit Agreement and the other Documents
delivered at the Closing to which it is a party, (b) to issue, sell, deliver and
perform all of its obligations under the Notes and the Warrants, (c) to issue,
sell and deliver the Shares and (d) to consummate the transactions contemplated
by the Securities Purchase Agreement, the Indenture, the Securities, the Notes
Registration Rights Agreement, the Warrant Agreement, the Stockholders'
Agreement, the Senior Credit Agreement and the other Documents delivered at the
Closing to which it is a party. Each of the Securities Purchase Agreement, the
Indenture, the Notes, the Notes Registration Rights Agreement, the Warrant
Agreement, the Warrants, the Stockholders' Agreement, the Senior Credit
Agreement and the other Documents delivered at the Closing to which DIMAC
Holdings is a party is a valid and binding obligation of DIMAC Holdings,
enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting enforcement of creditors' rights generally and
by general principles of equity (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
4. The Series A Notes are in the form contemplated by the Indenture, have
been duly authorized by DIMAC Holdings and, when executed by DIMAC Holdings and
authenticated by the Trustee in the manner provided in the Indenture and
delivered against payment of the purchase price therefor will constitute valid
and binding obligations of DIMAC Holdings, enforceable against DIMAC Holdings in
accordance with their terms and will be entitled to the benefits of the
Indenture, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether the issue of enforceability is considered in a proceeding in equity or
at law). The Series B Notes have been duly authorized by DIMAC Holdings and,
when issued and executed by DIMAC Holdings and authenticated by the Trustee in
the manner provided in the Indenture (assuming the due authorization, execution
and delivery of the Indenture by the Trustee) and delivered in the registered
exchange offer contemplated by the Notes Registration Rights Agreement, will
constitute valid and binding obligations of DIMAC Holdings, enforceable against
DIMAC Holdings in accordance with
E-2
<PAGE>
their terms, and will be entitled to the benefits of the Indenture, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting enforcement of creditors'
rights generally and by general principles of equity (regardless of whether
the issue of enforceability is considered in a proceeding in equity or at
law). DIMAC Holdings has authorized the issuance and delivery of PIK Notes in
an aggregate principal amount sufficient to pay up to all installments of
interest on the Notes that, pursuant to the terms of the Notes, may be paid
by issuing PIK Notes.
5. As of the date hereof, DIMAC Operating and the entities identified on
Schedule 3.1(a) to the Securities Purchase Agreement are the only direct or
indirect Subsidiaries of DIMAC Holdings. The total authorized Capital Stock of
DIMAC Holdings consists of 2,000,000 shares of Common Stock, of which
[____________] shares will be issued and outstanding upon consummation of the
transactions contemplated by the Securities Purchase Agreement. To our
knowledge, all outstanding options and other rights to acquire shares of Capital
Stock of DIMAC Holdings are as set forth on Schedule 3.1(b) to the Securities
Purchase Agreement. The total authorized Capital Stock of DIMAC Operating
consists of 100 shares of common stock, all of which were issued and outstanding
on the date hereof. DIMAC Holdings owns 100% of the outstanding Equity Interests
or other securities evidencing equity ownership of DIMAC Operating, to our
knowledge, free and clear of any Lien. To our knowledge, all of the outstanding
Equity Interests of each of the Companies and their Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and were not
issued in violation of, and are not subject to, any preemptive or similar
rights, other than as set forth in the Securities Purchase Agreement. To our
knowledge, except for the shares of capital stock of DIMAC Operating, DIMAC
Holdings does not directly own any capital stock or any other securities of any
corporation, nor, to our knowledge, does it own any Equity Interest in any firm,
partnership, association or other entity. The 28,205 shares of Common Stock of
DIMAC Holdings issuable upon the exercise of the Warrants have been reserved for
such purpose and, if and when the Warrants are exercised in accordance with
their terms such shares of Common Stock of DIMAC Holdings, upon issuance in
accordance with the terms of the Warrants and the Warrant Agreement, will be
validly issued, fully paid and nonassessable.
6. The Shares have been duly authorized and validly issued, are fully paid
and nonassessable and have not been issued in violation of, and are not subject
to, any preemptive or similar rights. The certificates representing the Shares
comply in all material respect as to form with the sections of the Delaware
General Corporation law applicable to the form of securities.
7. To our knowledge, except as set forth in the Stockholders' Agreement, in
the Warrant Agreement and on Schedule 3.1(b) to the Securities Purchase
Agreement, there are no outstanding (i) securities convertible into or
exchangeable for any Equity Interests of any of the Companies, (ii) options
warrants or other rights to purchase or subscribe to Equity Interests of any of
the Companies or securities convertible into or exchangeable for Equity
Interests of any of the Companies, (iii) contracts, commitments, agreements,
understandings, arrangements, calls or claims of any kind relating to the
issuance of any Equity Interests of any of the Companies, any such convertible
or exchangeable securities or any such options, warrants or rights or (iv)
voting trusts, agreements, contracts, commitments, understandings or
arrangements with respect to the voting of any of the Equity Interests of any of
the Companies.
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<PAGE>
8. To our knowledge, except for the Stockholders' Agreement, DIMAC Holdings
has not entered into an agreement to register any of its capital stock under the
Securities Act. To our knowledge, except for the Notes Registration Rights
Agreement, DIMAC Holdings has not entered into an agreement to register any of
its other securities under the Securities Act. To our knowledge, (i) except for
the Securities Purchase Agreement, DIMAC Holdings has not entered into any
agreement to issue, purchase or sell any of its securities, and (ii) except for
the DIMAC Operating Notes Purchase Agreement, DIMAC Operating has not entered
into any agreement to issue, purchase or sell any of its securities.
9. There are no securities of DIMAC Holdings or DIMAC Operating registered
under the Exchange Act or listed on a national securities exchange registered
under Section 6 of the Exchange Act or quoted in a United States automated
inter-dealer quotation system.
10. Neither the execution, delivery or performance by any of the Companies
of the Securities Purchase Agreement, the Indenture, the Notes, the Warrant
Agreement, the Warrants, the Stockholders' Agreement, the Notes Registration
Rights Agreement, the Senior Credit Agreement, the DIMAC Operating Notes
Indenture, the DIMAC Operating Notes, the DIMAC Operating Notes Purchase
Agreement or any of the other Documents delivered at the Closing by any of the
Companies, nor the compliance with their respective obligations thereunder, nor
the consummation of the transactions contemplated thereby, nor the issuance,
sale or delivery of the Securities or the DIMAC Operating Notes will:
(i) violate any provision of the Charter Documents of any of the
Companies;
(ii) violate any statute, law, rule or regulation or any judgement,
decree, order, regulation or rule of any court or governmental authority or
body, in each case, known to us to be applicable to the Companies or any of
their respective properties;
(iii) permit or cause the acceleration of the maturity of any debt or
obligation of any of the Companies of which we are aware; or
(iv) violate, or be in conflict with, or constitute a default under,
or permit the termination of, or require the consent of, notice to, or
filing, registration or qualification with, any Person under, or result in
the creation or imposition of any Lien (other than Permitted Liens (as
defined in the Indenture)) upon any property of any of the Companies under,
any mortgage, indenture, loan agreement, note, debenture, agreement for
borrowed money or any other agreement of which we are aware to which any of
the Companies is a party or by which any of the Companies (or their
respective properties) may be bound, other than such violations, conflicts,
defaults, terminations and Liens, or such failure to obtain consents, which
would not result in a Material Adverse Effect.
11. None of the transactions contemplated by the Securities Purchase
Agreement (including, without limitation, the use of the proceeds from the sale
of the Securities) will violate or result in a violation of Regulations T, U and
X of the Board of Governors of the Federal Reserve System.
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<PAGE>
12. Assuming the representations and warranties of the Purchasers contained
in Section 4 of the Securities Purchase Agreement are true and correct, the
initial sale of the Securities under the Securities Purchase Agreement is exempt
from the registration and prospectus delivery requirements of the Securities
Act.
13. Neither DIMAC Holdings nor DIMAC Operating is an "investment company"
or a company controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
14. To our knowledge, there is no Proceeding seeking to restrain, enjoin,
prevent the consummation of or otherwise challenge the Securities Purchase
Agreement or any of the other Documents to be delivered at the Closing or the
transactions contemplated thereby.
15. The Indenture is not required to be qualified under the Trust Indenture
Act of 1939, as amended.
In the course of preparation by DIMAC Operating of the Offering Circular,
we have participated in conferences with officers of the Companies,
representatives of the auditors of the Companies, at which conferences the
contents of the Offering Circular and related matters were discussed. We are not
passing upon and do not assume any responsibility for the accuracy, completeness
and fairness of the statements contained the Offering Circular and our judgments
as to materiality are, to the extent we deem appropriate, based in part upon the
view of appropriate officers and other representatives of the Companies. Based
on such participation in the preparation of the Offering Circular, we do not
believe that (a) the Offering Circular (other than the financial statements and
all other financial data included therein or omitted therefrom as to which we
express no opinion or belief), at the date thereof and at the date hereof,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
The opinions expressed herein are limited to questions arising under the
Federal laws of the United States of America, the laws of the State of New York
and the General Corporation Law of the State of Delaware.
We express no opinion as to the enforceability of any indemnification or
contribution provision contemplated by the Securities Purchase Agreement or by
any document referred to therein to the extent the rights to indemnification or
contribution provided for therein are violative of any law, rule or regulation
(including any securities law, rule or regulation) or public policy relating
thereto.
This opinion is given pursuant to Section 2.1(b)(i) of the Securities
Purchase Agreement. This opinion may not be used or relied upon by or published
or communicated to any person or entity other than the addressees hereof for any
purpose whatsoever without our prior written consent in each instance.
Very truly yours,
E-5
<PAGE>
Exhibit 10.7
DIMAC CORPORATION
5775 PEACHTREE DUNWOODY ROAD, SUITE C-150
ATLANTA, GEORGIA 30342
March 31, 1999
MDC Management Company IV, LLC
65 East 55th Street
New York, New York 10022
Reference is made to that certain Advisory Services Agreement (the
"Advisory Services Agreement"), dated as of June 26, 1998, by and between DIMAC
Corporation (formerly DMAC Acquisition Corp.) (the "Company") and MDC Management
Company IV, LLC ("MDC IV").
MDC IV agrees that until the fees payable under the Advisory Services
Agreement are permitted to be made pursuant to that certain Amended and Restated
Credit Agreement (as amended supplemented or otherwise modified from time to
time, the "Credit Agreement"), dated as of October 22, 1998, by and among the
Company, as Borrower, DIMAC Holdings, Inc., as a Guarantor, the Lenders listed
therein, as Lenders, Credit Suisse First Boston, as Administrative Agent and
Arranger, Warburg Dillon Read LLC, as Syndication Agent, and First Union
National Bank, as Documentation Agent, then MDC IV shall not be paid such fees
but rather such fees shall accrue and shall be payable by the Company when
permitted by the Credit Agreement.
<PAGE>
DIMAC CORPORATION
By: /s/ Scott P. Ebert
-------------------------------------
Name: Scott P. Ebert
Title: Vice President and Controller
MDC MANAGMENT COMPANY IV, LLC,
a California limited liability company
By: /s/ George E. McCown
-------------------------------------
Name: George E. McCown
Title: Managing Director
-2-
<PAGE>
Exhibit 10.8
DIMAC HOLDINGS, INC.
1998 STOCK OPTION PLAN
----------------------
1. Purposes. The purposes of the DIMAC Holdings, Inc. 1998 Stock
Option Plan are:
(a) To further the growth, development and success of the Company
and its Subsidiaries by enabling the executive and other employees and
directors of, and consultants to, the Company and its Subsidiaries to acquire
a continuing equity interest in the Company, thereby increasing their
personal interests in such growth, development and success and motivating
such employees, directors and consultants to exert their best efforts on
behalf of the Company and its Subsidiaries; and
(b) To maintain the ability of the Company and its Subsidiaries to
attract and retain employees, directors and consultants of outstanding
ability by offering them an opportunity to acquire a continuing equity
interest in the Company and its Subsidiaries which will reflect the growth,
development and success of the Company and its Subsidiaries.
Toward these objectives, the Committee may grant Options to such employees,
directors and consultants, all pursuant to the terms and conditions of the Plan.
2. Definitions. As used in the Plan, the following capitalized
terms shall have the meanings set forth below:
(a) "Agreement" - a stock option award agreement evidencing an
Option.
(b) "Board" - the Board of Directors of the Company.
(c) "Code" - the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules thereunder and
successor provisions and regulations and rules thereto.
(d) "Committee" - the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Plan.
(e) "Company" - DIMAC Holdings, Inc., a Delaware corporation, or
any successor entity.
(f) "Fair Market Value" of a share of Stock as of a given date
shall be: (i) the mean of the highest and lowest reported sale prices for a
share of Stock, on the principal exchange on which the Stock is then listed
or admitted to trading, for such date, or, if no such prices are reported for
such date, the most recent day for which such prices are available shall be
used; (ii) if the Stock is not then listed or admitted to trading on a stock
exchange, the mean of the closing representative bid and asked prices for the
Stock on such date as reported by Nasdaq National Market (or any successor or
similar quotation system regularly reporting the market
<PAGE>
value of the Stock in the over-the-counter market), or, if no such prices are
reported for such date, the most recent day for which such prices are available
shall be used; or (iii) in the event each of the methods provided for in clauses
(i) and (ii) above shall not be practicable, the fair market value determined by
such other reasonable valuation method as the Committee shall, in its
discretion, select and apply in good faith as of the given date; provided,
however, that for purposes of paragraphs (a) and (g) of Section 6, such fair
market value shall be determined subject to Section 422(c)(7) of the Code.
(g) "ISO" or "Incentive Stock Option" - an option to purchase Stock
granted to an Optionee under the Plan in accordance with the terms and
conditions set forth in Section 6 and which conforms to the applicable
provisions of Section 422 of the Code.
(h) "Notice" - written notice actually received by the Company at
its executive offices on the day of such receipt, if received on or before
1:30 p.m., on a day when the Company's executive offices are open for
business, or, if received after such time, such notice shall be deemed
received on the next such day, which notice may be delivered in person to the
Company's Chief Financial Officer or sent by facsimile to the Company, or
sent by certified or registered mail or overnight courier, prepaid, addressed
to the Company at __________, Attention: Chief Financial Officer.
(i) "Option" - an option to purchase Stock granted to an Optionee
under the Plan in accordance with the terms and conditions set forth in
Section 6. Options may be either ISOs or stock options other than ISOs.
(j) "Optionee"- an individual who is eligible, pursuant to Section
5, and who has been selected, pursuant to Section 3(c), to participate in the
Plan, and who has been granted an Option under the Plan in accordance with
the terms and conditions set forth in Section 6.
(k) "Plan" - this DIMAC Holdings, Inc. 1998 Stock Option Plan.
(l) "Securities Act" - the Securities Act of 1933, as it may be
amended from time to time, including regulations and rules thereunder and
successor provisions and regulations and rules thereto.
(m) "Stock" - the $0.001 par value common stock of the Company.
(n) "Subsidiary" shall mean (i) any present or future corporation
which is or would be a "subsidiary corporation" of the Company as the term is
defined in Section 424(f) of the Code and (ii) for purposes of Options which
are not ISOs, any partnership, limited liability company or unincorporated
entity in which the Company presently or in the future owns, directly or
indirectly, an aggregate profits interest or capital interest of fifty
percent (50%) or more, which the Committee in its discretion determines will
be a "Subsidiary" for purposes of the Plan.
3. Administration of the Plan. (a) The Committee shall have
exclusive authority to operate, manage and administer the Plan in accordance
with its terms and conditions. Notwithstanding the foregoing, in its absolute
discretion, the Board may at any time and from
2
<PAGE>
time to time exercise any and all rights, duties and responsibilities of the
Committee under the Plan, including, but not limited to, establishing
procedures to be followed by the Committee, except with respect to matters
which under any applicable law, regulation or rule, are required to be
determined in the sole discretion of the Committee.
(b) The Committee shall be appointed from time to time by the
Board, and the Committee shall consist of not less than two (2) members of
the Board. Appointment of Committee members shall be effective upon their
acceptance of such appointment. Committee members may be removed by the Board
at any time either with or without cause, and such members may resign at any
time by delivering notice thereof to the Board. Any vacancy on the Committee,
whether due to action of the Board or any other reason, shall be filled by
the Board.
(c) The Committee shall have all authority that may be necessary or
helpful to enable it to discharge its responsibilities with respect to the
Plan. Without limiting the generality of the foregoing sentence or paragraph
(a) of this Section 3, and in addition to the powers otherwise expressly
designated to the Committee in the Plan, the Committee shall have the
exclusive right and discretionary authority to: interpret the Plan and the
Agreements; construe any ambiguous provision of the Plan and/or the
Agreements; determine eligibility for participation in the Plan; decide all
questions concerning eligibility for and the amount of Options granted under
the Plan; select, from time to time, from amongst those eligible, the
employees, directors and consultants to whom Options shall be granted under
the Plan, which selection shall be based upon the recommendation of the
Company's Chief Executive Officer; determine whether an Option shall take the
form of an ISO or Option other than an ISO; determine the number of shares of
Stock to be included in any Option or to which any Option shall otherwise
relate and the periods for which Options will be outstanding; establish,
amend, waive and/or rescind rules and regulations and administrative
guidelines for carrying out the Plan; to the extent permitted under the Plan
and the applicable Agreement, grant waivers of terms, conditions,
restrictions and limitations under the Plan or applicable to any Option; to
the extent permitted under the applicable Agreement, permit the transfer of
an Option or the exercise of an Option by one other than the Optionee who
received the grant of such Option (other than any such a transfer or exercise
which would cause any ISO to fail to qualify as an "incentive stock option"
under Section 422 of the Code); correct any errors, supply any omissions or
reconcile any inconsistencies in the Plan and/or any Agreement or any other
instrument relating to any Option; to the extent permitted by the Plan, amend
or adjust the terms and conditions of any outstanding Option and/or adjust
the number and/or class of shares of Stock subject to any outstanding Option;
in accordance with the terms of the Plan, establish and administer any terms,
conditions, performance goals, performance targets, restrictions, limitations
and other provisions of any Options; at any time and from time to time after
the granting of an Option, specify such additional terms, conditions and
restrictions with respect to any such Option as may be deemed necessary or
appropriate to ensure compliance with any and all applicable laws or rules,
including, but not limited to, terms, restrictions and conditions for
compliance with applicable securities laws, regarding an Optionee's exercise
of Options by tendering shares of Stock or under a "cashless exercise"
program established by the Committee, and methods of withholding or providing
for the payment of required taxes; adopt such procedures and subplans and
grant Options on such terms and conditions as the Committee determines
necessary or appropriate to
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<PAGE>
permit participation in the Plan by individuals otherwise eligible to so
participate who are foreign nationals or employed outside of the United States,
or otherwise to conform to applicable requirements or practices of jurisdictions
outside of the United States; and take any and all such other actions it deems
necessary or advisable for the proper operation and/or administration of the
Plan. The Committee shall have full discretionary authority in all matters
related to the discharge of its responsibilities and the exercise of its
authority under the Plan. Decisions and actions by the Committee with respect to
the Plan and any Agreement shall be final, conclusive and binding on all persons
having or claiming to have any right or interest in or under the Plan and/or any
Agreement.
(d) Each Option shall be evidenced by an Agreement, which shall be
executed by the Company and the Optionee to whom such Option has been
granted, unless the Agreement provides otherwise; however, two or more
Options to a single Optionee may be combined in a single Agreement. An
Agreement shall not be a precondition to the granting of an Option; however,
no person shall have any rights under any Option unless and until the
Optionee to whom the Option shall have been granted (i) shall have executed
and delivered to the Company an Agreement or other instrument evidencing the
Option, unless such Agreement provides otherwise, and (ii) has otherwise
complied with the applicable terms and conditions of the Option. The
Committee shall prescribe the form of all Agreements, and, subject to the
terms and conditions of the Plan, shall determine the content of all
Agreements. Any Agreement may be supplemented or amended in writing from time
to time as approved by the Committee, subject to the last sentence of Section
13; provided that the terms and conditions of any such Agreement as
supplemented or amended are not inconsistent with the provisions of the Plan.
(e) A majority of the members of the entire Committee shall
constitute a quorum and the actions of a majority of the members of the
Committee in attendance at a meeting at which a quorum is present, or actions
by a written instrument signed by all members of the Committee, shall be the
actions of the Committee.
(f) The Committee may consult with counsel who may be counsel to
the Company. The Committee may, with the approval of the Board, employ such
other attorneys or consultants, accountants, appraisers, brokers or other
persons as it deems necessary or appropriate. In accordance with Section 12,
the Committee shall not incur any liability for any action taken in good
faith in reliance upon the advice of such counsel or such other persons.
(g) In serving on the Committee, the members thereof shall be
entitled to indemnification as directors of the Company, and to any
limitation of liability and reimbursement as directors with respect to their
services as members of the Committee.
(h) Except to the extent prohibited by applicable law or the
applicable rules of a stock exchange, the Committee may, in its discretion,
allocate all or any portion of its responsibilities and powers under this
Section 3 to any one or more of its members and/or delegate all or any part
of its responsibilities and powers under this Section 3 to any person or
persons selected by it; provided, however, the Committee may not delegate its
authority to correct errors, omissions or inconsistencies in the Plan. Any
such authority delegated or
4
<PAGE>
allocated by the Committee under this paragraph (h) of Section 3 shall be
exercised in accordance with the terms and conditions of the Plan and any rules,
regulations or administrative guidelines that may from time to time be
established by the Committee, and any such allocation or delegation may be
revoked by the Committee at any time.
4. Shares of Stock Subject to the Plan. (a) The shares of stock
subject to Options granted under the Plan shall be shares of Stock. Such
shares of Stock subject to the Plan may be either authorized and unissued
shares (which will not be subject to preemptive rights) or previously issued
shares acquired by the Company or any Subsidiary. The total number of shares
of Stock that may be delivered pursuant to Options granted under the Plan is
___________; provided that _________ number of shares of Stock that may be
delivered pursuant to Options granted under the Plan are available to be
granted only to executive and other employees, including officers, of the
Company and its Subsidiaries and not to non-employee directors or consultants
of the Company or any Subsidiary.
(b) Notwithstanding any of the foregoing limitations set forth in
this Section 4, the numbers of shares of Stock specified in this Section 4
shall be adjusted as provided in Section 10.
(c) Any shares of Stock subject to an Option which for any reason
expires or is terminated without having been fully exercised may again be
granted pursuant to an Option under the Plan, subject to the limitations of
this Section 4.
(d) Any shares of Stock delivered under the Plan in assumption or
substitution of outstanding stock options, or obligations to grant future
stock options, under plans or arrangements of an entity other than the
Company or a Subsidiary in connection with the Company or a Subsidiary
acquiring such another entity, or an interest in such an entity, or a
transaction otherwise described in Section 6(i), shall not reduce the maximum
number of shares of Stock available for delivery under the Plan.
5. Eligibility. Executive and other employees, including officers,
of the Company and the Subsidiaries, directors (whether or not also
employees) of the Company or any Subsidiary; and consultants to the Company
and the Subsidiaries, shall be eligible to become Optionees and receive
Options in accordance with the terms and conditions of the Plan.
6. Terms and Conditions of Stock Options. All Options to purchase
Stock granted under the Plan shall be either ISOs or Options other than ISOs.
Each Option shall be subject to all the applicable provisions of the Plan,
including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith as the Committee shall determine and
which are set forth in the applicable Agreement. Options need not be uniform
as to all grants and recipients thereof.
(a) The option exercise price per share of shares of Stock subject
to each Option shall be determined by the Committee and stated in the
Agreement; provided, however, that, subject to paragraphs (g)(C) and/or
(i) of this Section 6, if applicable, such
5
<PAGE>
price applicable to any ISO shall not be less than 100% of the Fair Market
Value of a share of Stock at the time that the Option is granted.
(b) Each Option shall be exercisable in whole or in such
installments, at such times and under such conditions, subject to
Section 14, as may be determined by the Committee in its discretion and
stated in the Agreement, and, in any event, over a period of time ending
not later than ten (10) years from the date such Option was granted,
subject to paragraph (g)(C) of this Section 6.
(c) An Option shall not be exercisable with respect to a
fractional share of Stock or the lesser of fifty (50) shares or the
full number of shares of Stock then subject to the Option. No fractional
shares of Stock shall be issued upon the exercise of an Option.
(d) Each Option may be exercised by giving Notice to the Company
specifying the number of shares of Stock to be purchased, which shall
be accompanied by payment in full including applicable taxes, if any,
in accordance with Section 9. Payment shall be in any manner permitted
by applicable law and prescribed by the Committee, in its discretion,
and set forth in the Agreement, including, in the Committee's discretion,
payment in accordance with a "cashless exercise" program established by
the Committee.
(e) No Optionee or other person shall become the beneficial owner
of any shares of Stock subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any such shares
until he or she has exercised his or her Option in accordance with the
provisions of the Plan and the applicable Agreement.
(f) An Option may be exercised only if at all times during the
period beginning with the date of the granting of the Option and ending
on the date of such exercise, the Optionee was an employee, director
or consultant of the Company, a Subsidiary or of another corporation
referred to in Section 422(a)(2) of the Code. Notwithstanding the preceding
sentence, the Committee may determine in its discretion that an Option may
be exercised prior to expiration of such Option following termination of
such continuous employment, directorship or consultancy, whether or not
exercisable at such time, to the extent provided in the applicable
Agreement.
(g) (A) Each Agreement relating to an Option shall state whether
such Option will or will not be treated as an ISO. No ISO shall be granted
unless such Option, when granted, qualifies as an "incentive stock option"
under Section 422 of the Code. No ISO shall be granted to any individual
otherwise eligible to participate in the Plan who is not an employee of
the Company or any of its Subsidiaries on the date of granting of such
Option. Any ISO granted under the Plan shall contain such terms and
conditions, consistent with the Plan, as the Committee may determine to
be necessary to qualify such Option as an "incentive stock option" under
Section 422 of the Code. Any ISO granted under the Plan may be modified
by the Committee to disqualify such Option from treatment as an "incentive
stock option" under Section 422 of the Code.
6
<PAGE>
(B) Notwithstanding any intent to grant ISOs, an Option granted
under the Plan will not be considered an ISO to the extent that it,
together with any other "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to subsection (d) of such
Section) under the Plan or any other "incentive stock option" plans of the
Company and any Subsidiary, are exercisable for the first time by any
Optionee during any calendar year with respect to Stock having an aggregate
Fair Market Value in excess of $100,000 (or such other limit as may be
required by the Code) as of the time the Option with respect to such Stock
is granted. The rule set forth in the preceding sentence shall be applied
by taking Options into account in the order in which they were granted.
(C) No ISO shall be granted to an individual otherwise eligible
to participate in the Plan who owns (within the meaning of Section 424(d)
of the Code), at the time the Option is granted, more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or a Subsidiary. This restriction does not apply if at the time
such ISO is granted the Option exercise price per share of Stock subject to
the Option is at least 110% of the Fair Market Value of a share of Stock on
the date such ISO is granted, and the ISO by its terms is not exercisable
after the expiration of five (5) years from such date of grant.
(h) An Option and any shares of Stock received upon the exercise
of an Option shall be subject to such other transfer and/or ownership
restrictions and/or legending requirements as the Committee may establish
in its discretion and which are specified in the Agreement and may be
referred to on the certificates evidencing such shares of Stock. The
Committee may require an Optionee to give prompt Notice to the Company
concerning any disposition of shares of Stock received upon the exercise of
an ISO within: (i) two (2) years from the date of granting such ISO to such
Optionee or (ii) one (1) year from the transfer of such shares of Stock to
such Optionee or (iii) such other period as the Committee may from time to
time determine. The Committee may direct that an Optionee with respect to
an ISO undertake in the applicable Agreement to give such notice described
in the preceding sentence, at such time and containing such information as
the Committee may prescribe, and/or that the certificates evidencing shares
of Stock acquired by exercise of an ISO refer to such requirement to give
such notice.
(i) In the event that a transaction described in Section 424(a) of the
Code involving the Company or a Subsidiary is consummated, such as the
acquisition of property or stock from an unrelated corporation, individuals
who become eligible to participate in the Plan in connection with such
transaction, as determined by the Committee, may be granted Options in
substitution for stock options granted by another corporation that is a
party to such transaction. If such substitute Options are granted, the
Committee, in its discretion and consistent with Section 424(a) of the
Code, if applicable, and the terms of the Plan, though notwithstanding
paragraph (a) of this Section 6, shall determine the option exercise price
and other terms and conditions of such substitute Options.
7
<PAGE>
7. Transfer, Leave of Absence. For purposes of the Plan, a transfer
of an employee from the Company to a Subsidiary, whether or not incorporated,
or vice versa, or from one Subsidiary to another, and a leave of absence,
duly authorized in writing by the Company or a Subsidiary, shall not be
deemed a termination of employment of the employee.
8. Rights of Employees and Other Persons. (a) No person shall have
any rights or claims under the Plan except in accordance with the provisions
of the Plan and the applicable Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be
deemed to (i) give any employee or director the right to be retained in the
service of the Company or the Subsidiaries nor restrict in any way the right
of the Company or any Subsidiary to terminate any employee's employment or
any director's directorship at any time with or without cause or (ii) confer
on any consultant any right of continued relationship with the Company or the
Subsidiaries, or alter any relationship between them, including any right of
the Company or a Subsidiary to terminate its relationship with such
consultant.
(c) The adoption of the Plan shall not be deemed to give any
employee of the Company or any Subsidiary or any other person any right to be
selected to participate in the Plan or to be granted an Option.
(d) Nothing contained in the Plan or in any Agreement shall be
deemed to give any employee the right to receive any bonus, whether payable
in cash or in Stock, or in any combination thereof, from the Company or any
Subsidiary, nor be construed as limiting in any way the right of the Company
or any Subsidiary to determine, in its sole discretion, whether or not it
shall pay any employee bonuses, and, if so paid, the amount thereof and the
manner of such payment.
9. Tax Withholding Obligations. (a) The Company and/or any
Subsidiary are authorized to take whatever actions are necessary and proper
to satisfy all obligations of Optionees (including, for purposes of this
Section 9, any other person entitled to exercise an Option pursuant to the
Plan or an Agreement) for the payment of all Federal, state, local and
foreign taxes in connection with any Options (including, but not limited to,
actions pursuant to the following paragraph (b) of this Section 9).
(b) Each Optionee shall (and in no event shall Stock be
delivered to such Optionee with respect to an Option until), no later than
the date as of which the value of the Option first becomes includible in the
gross income of the Optionee for income tax purposes, pay to the Company in
cash, or make arrangements satisfactory to the Company, as determined in the
Committee's discretion, regarding payment to the Company of, any taxes of any
kind required by law to be withheld with respect to the Stock subject to such
Option, and the Company and any Subsidiary shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Optionee. Notwithstanding the above, the Committee may,
in its discretion and pursuant to procedures approved by the Committee,
permit the Optionee to (i) elect withholding by the Company of Stock
otherwise deliverable to such Optionee pursuant to such Option (provided,
however, that the amount of any Stock so withheld
8
<PAGE>
shall not exceed the minimum required withholding obligation taking into account
the Optionee's effective tax rate and all applicable Federal, state, local and
foreign taxes) and/or (ii) tender to the Company Stock owned by such Optionee
(or by such Optionee and his or her spouse jointly) and acquired more than six
(6) months prior to such tender in full or partial satisfaction of such tax
obligations.
10. Changes in Capital. (a) Upon changes in the outstanding Stock
by reason of a stock dividend, stock split, reverse stock split, subdivision,
recapitalization, merger, consolidation (whether or not the Company is a
surviving corporation), combination or exchange of shares of Stock,
separation, or reorganization, or in the event of an extraordinary dividend,
"spin-off," liquidation, other substantial distribution of assets of the
Company or acquisition of property or stock or other change in capital of the
Company, or the issuance by the Company of shares of its capital stock
without receipt of full consideration therefor, or rights or securities
exercisable, convertible or exchangeable for shares of such capital stock,
the aggregate number, class and kind of shares of stock available under the
Plan as to which Options may be granted and the number, class and kind of
shares under each outstanding Option and/or the option price per share
applicable to any such Options shall be appropriately adjusted by the
Committee in its discretion to preserve the benefits or potential benefits
intended to be made available under the Plan or with respect to any
outstanding Options.
(b) In the event of (i) a stock sale, merger, consolidation,
combination, reorganization or other transaction (other than through a public
offering of common stock of the Company) resulting in less than fifty percent
(50%) of the combined voting power of the surviving or resulting entity being
owned by the shareholders of the Company immediately prior to such
transaction, (ii) the liquidation or dissolution of the Company or the sale
or other disposition of all or substantially all of the assets or business of
the Company (other than, in the case of either clause (i) or (ii) above, in
connection with any employee benefit plan of the Company or a Subsidiary), or
(iii) a public offering of common stock of the Company pursuant to a
registration statement declared effective under the Securities Act:
(1) In its discretion and on such terms and conditions as it
deems appropriate, the Committee may provide, either by the terms of
the Agreement applicable to any Option or by a resolution adopted
prior to the occurrence of such event, that any outstanding Option
shall be accelerated and become immediately exercisable as to all or a
portion of the shares of Stock covered thereby, notwithstanding anything to
the contrary in the Plan or the Agreement.
(2) In its discretion, and on such terms and conditions as
it deems appropriate, the Committee may provide, either by the terms of
the Agreement applicable to any Option or by resolution adopted prior to
the occurrence of such event, that any outstanding Option shall be
adjusted by substituting for Stock subject to such Option stock or other
securities of the surviving corporation or any successor corporation
to the Company, or a parent or subsidiary thereof, or that may be issuable
by another corporation that is a party to the transaction whether or not
such stock or other securities are publicly traded, in which event the
aggregate exercise price shall remain the same and
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<PAGE>
the amount of shares or other securities subject to the Option shall be the
amount of shares or other securities which could have been purchased on the
closing date or expiration date of such transaction with the proceeds which
would have been received by the Optionee if the Option had been exercised
in full (or with respect to a portion of such Option, as determined by the
Committee, in its discretion) prior to such transaction or expiration date
and the Optionee exchanged all of such shares in the transaction.
(3) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide, either by the terms of the
Agreement applicable to any Option or by resolution adopted prior to the
occurrence of such event, any outstanding Option shall, in each case,
be converted into a right to receive cash following the closing date or
expiration date of the transaction in an amount equal to the highest
value of the consideration to be received in connection with such
transaction for one share of Stock, or, if higher, the highest Fair
Market Value of the Stock during the 30 consecutive business days
immediately prior to the closing date or expiration date of such
transaction, less the per share exercise price of such Option, multiplied
by the number of shares of Stock subject to such Option, or a portion
thereof.
(4) The Committee may, in its discretion, provide that an
Option cannot be exercised after such an event, to the extent that
such Option becomes subject to any acceleration, adjustment or conversion
in accordance with the foregoing paragraphs (1), (2) or (3) of this
subsection 10(b).
(5) In the case of an event set forth in clause (i) or (ii)
above, wherein McCown De Leeuw & Co., Inc. (including its affiliated
entities; collectively, "MDC") achieves a return of at least three (3.0)
times the amount of its total investment in the shares of capital stock of
the Company, before giving effect to the exercise of all Options awardable
under the Plan, and any other then-outstanding management options (it being
understood that any transaction fees and management fees received by MDC
from the Company shall not be considered proceeds to MDC for purposes of
calculating such return on investment), Options with respect to the total
number of shares of Stock then available for grant under Section 4 shall be
immediately granted to any or all then-existing Optionees who are employees
of the Company or a Subsidiary at such time, the allocation of such
immediately granted Options among such Optionees to be determined by the
Committee in its sole discretion. Should neither an event set forth in
clause (i) or (ii) above occur on or before six (6) months prior to ten
(10) years from the date the Plan is approved by the Company's shareholders
in accordance with Section 14(c), and at such time Options with respect to
the total number of shares of Stock subject to the Plan have not
theretofore been granted, then the Committee shall, in good faith,
determine the value of the Company (after consulting with a third-party
financial advisor), and if, based upon such value, assuming an event set
forth in clause (i) or (ii) above were to occur (whether or not any such
event actually occurs), MDC would achieve a return of at least three (3.0)
times the amount of its total investment in the shares of capital stock of
the Company, before giving effect to the exercise of all Options awardable
under the Plan, and any other then-outstanding management options (it being
understood that any transaction fees and
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<PAGE>
management fees received by MDC from the Company shall not be considered
proceeds to MDC for purposes of calculating such return on investment),
Options with respect to the total number of shares of Stock then available
for grant under Section 4 shall be granted, as soon as practicable after
such valuation and measurement of MDC's hypothetical return on investment,
to any or all then-existing Optionees who are employees of the Company or a
Subsidiary at such time, the allocation of such Options among such
Optionees to be determined by the Committee in its sole discretion.
No Optionee shall have any right to prevent the consummation of any of the
foregoing acts affecting the number of shares of Stock available to such
Optionee. Any actions or determinations of the Committee under this Subsection
10(b) need not be uniform as to all outstanding Options, nor treat all Optionees
identically. Notwithstanding the foregoing adjustments, in no event may any
Option be exercised after ten (10) years from the date it was originally
granted, and any changes to ISOs pursuant to this Section 10 shall, unless the
Committee determines otherwise, only be effective to the extent such adjustments
or changes do not cause a "modification" (within the meaning of Section
424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such
ISOs.
11. Miscellaneous Provisions. (a) The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the issuance of shares of
Stock or the payment of cash upon exercise or payment of any Option. Proceeds
from the sale of shares of Stock pursuant to Options granted under the Plan
shall constitute general funds of the Company. The expenses of the Plan shall
be borne by the Company.
(b) Except as otherwise provided in this paragraph (b) of
Section 11 or by the Committee, an Option by its terms shall be personal and
may not be sold, transferred, pledged, assigned, encumbered or otherwise
alienated or hypothecated otherwise than by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of an Optionee
only by him or her. At the Committee's discretion, an Agreement may permit
the exercise of an Optionee's Option (or any portion thereof) after his or
her death by the beneficiary most recently named by such Optionee in a
written designation thereof filed with the Company, or, in lieu of any such
surviving beneficiary, as designated by the Optionee by will or by the laws
of descent and distribution. In the event any Option is exercised by the
executors, administrators, heirs or distributees of the estate of a deceased
Optionee, or such an Optionee's beneficiary, or the transferee of an Option,
in any such case pursuant to the terms and conditions of the Plan and the
applicable Agreement and in accordance with such terms and conditions as may
be specified from time to time by the Committee, the Company shall be under
no obligation to issue Stock thereunder unless and until the Committee is
satisfied that the person or persons exercising such Option is the duly
appointed legal representative of the deceased Optionee's estate or the
proper legatees or distributees thereof or the named beneficiary of such
Optionee, or the valid transferee of such Option, as applicable.
(c) If at any time the Committee shall determine, in its
discretion, that the listing, registration and/or qualification of shares of
Stock upon any securities exchange or
11
<PAGE>
under any state or Federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the sale or purchase of shares of Stock hereunder, no Option may be
exercised in whole or in part unless and until such listing, registration,
qualification, consent and/or approval shall have been effected or obtained, or
otherwise provided for, free of any conditions not acceptable to the Committee.
(d) The Committee may require each person receiving Stock in
connection with any Option under the Plan to represent and agree with the
Company in writing that such person is acquiring the shares of Stock for
investment without a view to the distribution thereof. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares of Stock purchasable or otherwise receivable by
any person under any Option as it deems appropriate. Any such restrictions
shall be set forth in the applicable Agreement, and the certificates
evidencing such shares may include any legend that the Committee deems
appropriate to reflect any such restrictions.
(e) The Committee may, in its discretion, extend one or more
loans to Optionees who are key employees of the Company or a Subsidiary in
connection with the exercise or receipt of an Option granted to any such
employees. The terms and conditions of any such loan shall be set by the
Committee.
(f) By accepting any benefit under the Plan, each Optionee and
each person claiming under or through such Optionee shall be conclusively
deemed to have indicated their acceptance and ratification of, and consent
to, all of the terms and conditions of the Plan and any action taken under
the Plan by the Committee, the Company or the Board, in any case in
accordance with the terms and conditions of the Plan.
(g) Neither the adoption of the Plan nor anything contained
herein shall affect any other compensation or incentive plans or arrangements
of the Company or any Subsidiary, or prevent or limit the right of the
Company or any Subsidiary to establish any other forms of incentives or
compensation for their employees or consultants or directors, or grant or
assume options or other rights otherwise than under the Plan.
(h) The Plan shall be governed by and construed in accordance
with the laws of New York, except as superseded by applicable Federal law.
(i) The words "Section" and "paragraph" shall refer to provisions
of the Plan, unless expressly indicated otherwise.
12. Limits of Liability. (a) Any liability of the Company or a
Subsidiary to any Optionee with respect to any Option shall be based solely
upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the
Committee or the Board, nor any other person participating in any
determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability, in
12
<PAGE>
the absence of bad faith, to any party for any action taken or not taken in
connection with the Plan, except as may expressly be provided by statute.
13. Amendments and Termination. The Board may, at any time and with
or without prior notice, amend, alter, suspend, or terminate the Plan;
provided, however, no such amendment, alteration, suspension, or termination
shall be made which would alter the requirements of paragraph (b)(5) of
Section 10 without the unanimous written consent of then-existing Optionees
referred to in such paragraph, or impair the previously accrued rights of any
holder of an Option theretofore granted without his or her written consent,
or which, without first obtaining approval of the stockholders of the Company
(where such approval is necessary to satisfy (i) any requirements under the
Code relating to ISOs or (ii) any applicable law, regulation or rule), would:
(a) except as is provided in Section 10, increase the maximum
number of shares of Stock which may be sold or awarded under the Plan;
(b) except as is provided in Section 10, decrease the minimum
option exercise price requirements of Section 6(a);
(c) change the class of persons eligible to receive Options under
the Plan; or
(d) extend the duration of the Plan or the period during which Options
may be exercised under Section 6(b).
The Committee may amend the terms of any Option theretofore granted,
including any Agreement, retroactively or prospectively, but no such amendment
shall impair the previous rights of any Optionee without his or her written
consent.
14. Duration. Following the adoption of the Plan by the Board, the
Plan shall become effective as of the date on which it is approved by the
holders of a majority of the Company's outstanding Stock which is present and
voted at a meeting, or by written consent in lieu of a meeting, which
approval must occur within the period ending twelve (12) months after the
date the Plan is adopted by the Board. The Plan shall terminate upon the
earliest to occur of:
(a) the effective date of a resolution adopted by the Board
terminating the Plan, in accordance with Section 13;
(b) the date all shares of Stock subject to the Plan are
delivered pursuant to the Plan's provisions; or
(c) ten (10) years from the date the Plan is approved by the
Company's shareholders.
No Option may be granted under the Plan after the earliest to occur of the
events or dates described in the foregoing paragraphs (a) through (c) of this
Section 14; however, Options theretofore granted may extend beyond such date.
13
<PAGE>
No such termination of the Plan shall affect the previously accrued
rights of any Optionee hereunder and all Options previously granted hereunder
shall continue in force and in operation after the termination of the Plan,
except as they may be otherwise terminated in accordance with the terms of the
Plan or the Agreement.
14
<PAGE>
Exhibit 10.9
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT for the allocation and settlement of
consolidated U.S. federal income tax liability (hereinafter referred to as
the "Agreement") is dated as of October 18, 1998 between DIMAC Holdings,
Inc., a Delaware corporation ("Parent") and DIMAC Corporation, a Delaware
corporation, DIMAC Marketing Corporation, a Delaware corporation, AmeriComm
Holdings, Inc., a Delaware corporation, DIMAC DIRECT, Inc., a Missouri
corporation, The McClure Group Inc., a Missouri corporation, MBS/Multimode
Inc., a Missouri corporation, Wilcox & Associates Inc., a Missouri
corporation, Palm Coast Data Inc., a Missouri corporation and AmeriComm
Direct Marketing, Inc., a Delaware corporation, (each, a "Subsidiary" and
together, the "Subsidiaries").
RECITALS
A. Parent and each Subsidiary are members of an affiliated group
(the "Affiliated Group") as defined in Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
B. The Affiliated Group intends to file consolidated federal income
tax returns.
C. Parent and the Subsidiaries desire to establish a method for (i)
allocating the consolidated federal income tax liability of the Affiliated
Group between the Parent and each Subsidiary and (ii) reimbursing Parent for
payment of such tax liability.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. PAYMENT OF FEDERAL INCOME TAXES OF AFFILIATED GROUP. Parent
shall file all federal income tax returns on behalf of the Affiliated Group
and pay to the Internal Revenue Service (the "IRS") all income taxes of the
Affiliated Group.
2. CONTRIBUTION BY MEMBER FOR TAX LIABILITY. Each Subsidiary shall
compute and pay to Parent, an amount equal to the greater of (a) the federal
income taxes that the Subsidiary would be required to pay with respect to
such taxable year if the Subsidiary had filed a separate federal income tax
return for the current year and all prior taxable years (collectively, the
"Separate Federal Income Tax Liability"), and (b) the product of (i) the
federal income tax liability of the Affiliated Group for such year and (ii) a
fraction, (x) the numerator of which is an amount equal to the Separate
Federal Income Tax Liability of the Subsidiary for such year and (y) the
denominator of which is the aggregate total of the Separate Federal Income
Tax Liability that each member of the Affiliated Group would have incurred
for such year if such corporations had filed separate federal income tax
returns for such year and all prior years.
<PAGE>
3. ESTIMATED TAX PAYMENTS. Each Subsidiary shall compute on the same
basis as set forth in Paragraph 2 its contribution to the estimated federal
income tax installments due for each taxable period, and it shall pay such
amount to Parent on a timely basis. Any amounts paid under this Paragraph 3
shall be credited against the amounts payable by such Subsidiary to Parent
under Paragraph 2.
4. REFUNDS AND DEFICIENCIES. In the event that for any reason there
is an adjustment of the Affiliated Group's federal income tax liability, the
tax liability of each member of the Affiliated Group shall be recomputed in
accordance with the provisions of this Agreement to reflect such adjustment.
Any additional payments (including refunds) required by such adjustment shall
be paid within ten (10) days of the date of a Final Determination with
respect to such redetermination, or as soon as such adjustment can
practicably be calculated, if later, together with interest for the period
and at the rate provided for underpayments in Section 6621 of the Code (or
such successor section). The term "Final Determination" shall mean a closing
agreement with the IRS, a claim for refund which has been allowed, a
deficiency notice with respect to which the period for filing a petition with
the United States Tax Court has expired or a decision of any court of
competent jurisdiction which is not subject to appeal or the time for appeal
of which has expired.
5. STATE AND LOCAL TAXES. If, under the laws of any state (or
subdivision thereof) or foreign country (or subdivision thereof) in which the
Affiliated Group is subject to income tax, Parent and a Subsidiary are
required or permitted to file their income tax returns on a combined or
consolidated basis, then the provisions of Paragraphs 1 through 4 hereof
shall be applicable as if such combined or consolidated income tax returns
were consolidated federal income tax returns.
6. TIME AND FORM OF PAYMENT. Payments pursuant to Paragraphs 2, 3
and 5 hereof shall be made by check no later than seven (7) days prior to the
due date of the Affiliated Group's consolidated federal income tax return for
the taxable year with respect to which a consolidated federal income tax
return is filed on behalf of the Affiliated Group (hereinafter referred to as
the "Taxable Period"), not including extensions. If the due date for such
return is extended, such payments shall be made on an estimated basis and
shall be recalculated no later than seven (7) days prior to the extended due
date for such return, and any difference between such recalculated payments
and such estimated payments shall be paid by check to the party entitled
thereto at the time of such recalculation with interest from such due date at
the rate provided for in Section 6621 of the Code.
7. RESOLUTION OF DISPUTES. Any dispute concerning the calculation
or basis of determination of any payment provided for hereunder shall be
resolved by the independent public accountants for Parent, whose judgment
shall be final, conclusive and binding upon the parties.
8. COOPERATION. Each Subsidiary shall cooperate with Parent in the
filing of any consolidated federal income tax returns for the Affiliated
Group which Parent elects to file by maintaining such books and records and,
within sixty (60) days following the close of every
2
<PAGE>
Taxable Period, providing such information as may be necessary or useful in
the filing of such returns and executing any documents and taking any actions
which Parent may reasonably request in connection therewith. Parent and each
Subsidiary will provide one another such information concerning such returns
and the application of this Agreement as Parent or such Subsidiary may
reasonable request of one another.
9. ADJUDICATIONS. In any audit, conference or other proceeding with
the Internal Revenue Service or in any judicial proceedings concerning the
determination of the federal income tax liabilities of the Affiliated Group,
the Affiliated Group shall be represented by persons selected by Parent. The
settlement and terms of settlement of any issues relating to such proceeding
shall be in the sole discretion of Parent, and each Subsidiary hereby
appoints Parent as its agent for the purpose of proposing and concluding any
such settlement.
10. COUNTERPARTS This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which,
when taken together, shall constitute but one instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representative as of the date first above
written.
DIMAC HOLDINGS, INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
DIMAC CORPORATION
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
DIMAC MARKETING CORPORATION
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
AMERICOMM HOLDINGS, INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
<PAGE>
DIMAC DIRECT, INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
THE MCCLURE GROUP INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
MBS/MULTIMODE INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
WILCOX & ASSOCIATES INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
PALM COAST DATA INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
<PAGE>
AMERICOMM DIRECT MARKETING, INC.
By: /s/ James Wu
-----------------------------
Name: James Wu
Title: Assistant Secretary
<PAGE>
Exhibit 10.10
DIMAC CORPORATION
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT (this "AMENDMENT") dated as of March 26, 1999 to
the AMENDED AND RESTATED CREDIT AGREEMENT (the "CREDIT AGREEMENT") dated as of
October 22, 1998 is entered into by and among DIMAC CORPORATION, a Delaware
corporation (the "COMPANY"), DIMAC HOLDINGS, INC., a Delaware corporation
("HOLDINGS"), THE CREDIT SUPPORT PARTIES listed on the signature pages hereto
(each individually referred to herein as a "CREDIT SUPPORT PARTY" and
collectively as "CREDIT SUPPORT PARTIES"), and THE FINANCIAL INSTITUTIONS party
hereto (each individually referred to herein as a "LENDER" and collectively as
"LENDERS"). Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement and in the amendments
contained in Section 1 hereof.
RECITALS
WHEREAS, the Company has requested that Requisite Lenders agree to
modify certain provisions of the Credit Agreement with respect to the financial
covenants contained therein and certain other provisions of the Credit Agreement
in connection therewith.
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 DEFINITIONS.
A. Subsection 1.1 of the Credit Agreement is hereby amended by amending
the definitions of "Applicable Base Rate Margin," "Applicable Eurodollar Rate
Margin," "Consolidated Adjusted EBITDA," and "Indebtedness," as set forth below:
The definition of "APPLICABLE BASE RATE MARGIN" is hereby
amended by adding the following sentence at the conclusion thereof:
"Notwithstanding the foregoing, on and after the First Amendment to A&R Credit
Agreement Effective Date to and including December 31, 2000, so long as the
Leverage Ratio is greater than or equal to 5.50:1.00, the Applicable Base Rate
Margin shall be increased by .25% per annum in excess of the rate otherwise
applicable pursuant to this definition."
1
<PAGE>
The definition of "APPLICABLE EURODOLLAR RATE MARGIN" is
hereby amended by adding the following sentence at the conclusion thereof:
"Notwithstanding the foregoing, on and after the First Amendment to A&R Credit
Agreement Effective Date to and including December 31, 2000,so long as the
Leverage Ratio is greater than or equal to 5.50:1.00, the Applicable Eurodollar
Rate Margin shall be increased by .25% per annum in excess of the rate otherwise
applicable pursuant to this definition."
The definition of "CONSOLIDATED ADJUSTED EBITDA" is hereby
amended by adding the following language in paragraph (viii) following the term
"SCHEDULE 1.1(i)":
"and SCHEDULE 1.1(ii)"
The definition of "INDEBTEDNESS" is hereby amended by adding
the following sentence at the conclusion thereof:
"Notwithstanding the foregoing, on and after the First Amendment to A&R Credit
Agreement Effective Date to and including December 31, 2000, obligations under
the Permitted Earn Out Agreements listed on SCHEDULE 1.1(ii) annexed hereto,
shall not constitute Indebtedness."
B. Subsection 1.1 of the Credit Agreement is hereby further amended by
adding the following definitions in appropriate alphabetical order:
"FIRST AMENDMENT TO A&R CREDIT AGREEMENT" means that certain
First Amendment to Amended and Restated Credit Agreement dated as of March 26,
1999 by and among Company, Holdings, the Credit Support Parties named therein,
and the Lenders party thereto.
"FIRST AMENDMENT TO A&R CREDIT AGREEMENT EFFECTIVE DATE" means
the date of effectiveness of Section 1 to the First Amendment to A&R Credit
Agreement.
"CASH CONTRIBUTION" means the $15,000,000 cash contribution
made to the Company by Holdings on or before the time of effectiveness of the
First Amendment to A&R Credit Agreement Effective Date.
1.2 AMENDMENTS TO SECTION 2: AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
A. Subsection 2.1A(iii) of the Credit Agreement is hereby amended
by including the following language following the second paragraph of
Section 2.1A(iii):
"Notwithstanding the foregoing, on and after the First Amendment to A&R
Credit Agreement Effective Date, Lenders shall have no obligation to make new
Revolving Loans (and Swing Line Lender shall have no obligation to make Swing
Line Loans) until such time as the
2
<PAGE>
Company is in compliance with the provisions of subsections 7.6A through 7.6E
(whether or not such subsections are otherwise required to be complied with
under the terms of subsection 7.6F).
B. Subsection 2.4B(iii)(c) is hereby amended by adding the following
sentence at the conclusion thereof:
"Notwithstanding the foregoing, such Equity Proceeds shall not be
applied to prepay Loans pursuant to this subsection if such Equity Proceeds are
received in connection with the Cash Contribution."
C. SECTION 2.4B(iii)(F) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(f) PREPAYMENTS AND REDUCTIONS FROM CONSOLIDATED
EXCESS CASH FLOW. In the event that there shall be
Consolidated Excess Cash Flow for any Fiscal Year (commencing
with the Fiscal Year ending December 31, 2000), Company shall,
no later than 100 days after the end of such Fiscal Year,
prepay the Loans (and/or the Revolving Loan Commitments shall
be reduced) in an aggregate amount equal to 50% of such
Consolidated Excess Cash Flow if the Leverage Ratio for such
Fiscal Year exceeds 4.0:1.0; PROVIDED that no prepayments
shall be required pursuant to this Subsection 2.4B(iii)(f)
(and the Revolving Loan Commitments shall not be reduced) if
the Leverage Ratio for such Fiscal year is less than or equal
to 4.0:1.0."
1.3 AMENDMENTS TO SECTION 5: REPRESENTATIONS AND WARRANTIES
A. Subsection 5.4 of the Credit Agreement is hereby amended to read in
its entirety as follows:
"Since the First Amendment to A&R Credit Agreement Effective
Date, no event or change has occurred that has caused or evidences, either in
any case or in the aggregate, a Material Adverse Effect. Since the Closing Date,
neither Company nor any of its Subsidiaries has directly or indirectly declared,
ordered, paid or made, or set apart any sum of property for, any Restricted
Junior Payment or agreed to do so except as permitted by subsection 7.5."
1.4 AMENDMENTS TO SECTION 7: NEGATIVE COVENANTS
A. Subsection 7.3(viii) of the Credit Agreement is hereby amended to
read in its entirety as follows:
(viii) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $5,000,000;
PROVIDED that the aggregate amount of such Investments in any Fiscal Year shall
not exceed $2,500,000; PROVIDED FURTHER that during the period from the First
Amendment to A&R Credit Agreement Effective Date to December 31, 2000, Company
and its Subsidiaries shall not make any such Investments.
3
<PAGE>
B. Subsection 7.6 of the Credit Agreement is hereby amended to add the
following subsection 7.6F:
"F. FIRST AMENDMENT FINANCIAL COVENANTS. Notwithstanding any provisions
of this Agreement to the contrary (other than as provided under subsection
2.1A(iii) with respect to the obligation of Lenders to make Revolving Loans and
Swing Line Lenders to make Swing Line Loans), during the period from the First
Amendment to A&R Credit Agreement Effective Date to December 31, 2000, Company
and its Subsidiaries shall not be required to comply with the financial
covenants set forth in subsection 7.6A through and including subsection 7.6E
(other than as provided under subsection 2.1A(iii) with respect to the
obligation of Lenders to make Revolving Loans and Swing Line Lenders to make
Swing Line Loans), but rather, the Company and its Subsidiaries shall be
required to comply with the following financial covenants:
(i) INTEREST COVERAGE RATIO. Company shall not permit the
Interest Coverage Ratio as of any Fiscal Quarter ending on a date set
forth below to be less than the correlative ratio indicated:
<TABLE>
<CAPTION>
MINIMUM INTEREST
DATE COVERAGE RATIO
------------------ ----------------------
<S> <C>
March 31, 1999 1.29:1.00
June 30, 1999 1.21:1.00
September 30, 1999 1.14:1.00
December 31, 1999 1.17:1.00
March 31, 2000 1.27:1.00
June 30, 2000 1.36:1.00
September 30, 2000 1.45:1.00
December 31, 2000 1.52:1.00
------------------ -----------------------
</TABLE>
(ii) MINIMUM EBITDA. Company shall not permit Consolidated
Adjusted EBITDA for any four Fiscal Quarter period ending on a date set
forth below to be less than the correlative amount indicated:
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
DATE ADJUSTED EBITDA
------------------ ----------------------
<S> <C>
March 31, 1999 $41,364,000
June 30, 1999 $38,871,000
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
MINIMUM CONSOLIDATED
DATE ADJUSTED EBITDA
------------------ ----------------------
<S> <C>
September 30, 1999 $35,495,000
December 31, 1999 $36,666,000
March 31, 2000 $40,143,000
June 30, 2000 $42,981,000
September 30, 2000 $45,795,000
December 31, 2000 $47,969,000
------------------ ----------------------
</TABLE>
(iii) MAXIMUM QUARTERLY CAPITAL EXPENDITURES. Company shall
not and shall not permit any of its Subsidiaries to incur Consolidated
Capital Expenditures during any Fiscal Quarter ending on a date set
forth below in excess of the correlative amount indicated below (each
such amount to be increased by any amount of Consolidated Capital
Expenditures permitted to be incurred during the prior Fiscal Quarter
but not actually incurred):
<TABLE>
<CAPTION>
MAXIMUM CAPITAL
DATE EXPENDITURES
------------------ ----------------------
<S> <C>
March 31, 1999 $6,200,000
June 30, 1999 $5,000,000
September 30, 1999 $2,500,000
December 31, 1999 $1,300,000
March 31, 2000 $3,100,000
June 30, 2000 $3,600,000
September 30, 2000 $3,600,000
December 31, 2000 $3,200,000
------------------ ----------------------
</TABLE>
C. Subsection 7.7(vii) of the Credit Agreement is hereby amended by
adding the following sentence at the conclusion thereof:
"Notwithstanding the foregoing, during the period from the First
Amendment to A&R Credit Agreement Effective Date to and including December 31,
2000, the Company and its Subsidiaries shall not engage in any transaction
otherwise permitted under this subsection 7.7(vii)."
5
<PAGE>
D. Subsection 7.10 to the Credit Agreement is hereby amended by adding
the following sentence at the conclusion thereof:
"Notwithstanding any provision of this Agreement to the contrary, during the
period from the First Amendment to A&R Credit Agreement Effective Date to
December 31, 2000, Company shall not, and shall not permit any of its
Subsidiaries to, pay (but may accrue such amounts until permitted to be paid
under the Management Services Agreement) any management fees (pursuant to the
Management Services Agreement or otherwise) to any MDC Entities or their
Affiliates. Following December 31, 2000, Company is permitted to pay management
fees (pursuant to the Management Services Agreement or otherwise) to MDC
Entities or their Affiliates, if Company is in pro forma compliance with the
original terms of the Credit Agreement."
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "FIRST AMENDMENT
TO A&R CREDIT AGREEMENT EFFECTIVE DATE"):
A. EXECUTION. Loan Parties and Requisite Lenders shall have executed
this Amendment.
B. CASH CONTRIBUTION. Company shall have received the Cash
Contribution in the amount of $15,000,000 in cash on or before the First
Amendment to A&R Credit Agreement Effective Date such Cash Contribution to
be made in form and substance satisfactory to the Administrative Agent.
C. AMENDMENTS TO OTHER AGREEMENTS. Administrative Agent shall have
received executed amendments to the Management Services Agreement amending the
provisions thereof to conform to the requirements of subsection 7.10 of the
Credit Agreement.
D. OPINIONS OF LOAN PARTIES' COUNSEL. Administrative Agent (for
Lenders) shall have received an executed copy of one or more favorable written
opinions of White & Case LLP, counsel to Loan Parties, dated as of the First
Amendment to A&R Credit Agreement Effective Date, as to the enforceability of
this Amendment and such other matters as Administrative Agent and its counsel
shall reasonably request, in form and substance satisfactory to Administrative
Agent and Company hereby requests such counsel to such Loan Parties to deliver
such opinion.
E. FEES. The Administrative Agent shall have received reimbursement or
other payment of all out-of-pocket expenses required to be reimbursed or paid by
the Company hereunder or under any other Loan Document.
F. NECESSARY CONSENTS. Each Loan Party shall have obtained all
material consents necessary or advisable in connection with the execution of
this Amendment.
6
<PAGE>
G. OTHER REQUIREMENTS. Administrative Agent and Lenders shall have
received such other documents and information regarding the Loan Parties as
reasonably requested by the Administrative Agent.
SECTION 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to amend
the Credit Agreement in the manner provided herein, each of the Company and
Holdings represents and warrants to each Lender that the following statements
are true, correct and complete in all material respects:
A. CORPORATE POWER AND AUTHORITY. Each Loan Party has all requisite
corporate power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Amendment (the "AMENDED AGREEMENT") and the other
Loan Documents.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement and the other Loan
Documents have been duly authorized by all necessary corporate action on the
part of each Loan Party.
C. NO CONFLICT. The execution and delivery by each Loan Party of this
Amendment and the performance by each Loan Party of the Amended Agreement and
the other Loan Documents do not and will not (i) violate (A) any provision of
any law, statute, rule or regulation, or of the certificate or articles of
incorporation or partnership agreement, other constitutive documents or by-laws
of Holdings, the Company or any Subsidiary, (B) any applicable order of any
court or any rule, regulation or order of any governmental authority or (C) any
provision of any indenture, certificate of designation for preferred stock,
agreement or other instrument to which Holdings, the Company or any Subsidiary
is a party or by which any of them or any of their property is or may be bound,
(ii) be in conflict with, result in a breach of or constitute (alone or with
notice or lapse of time or both) a default under any such indenture, certificate
of designation for preferred stock, agreement or other instrument, where any
such conflict, violation, breach or default referred to in clause (i) or (ii) of
this Section 3.C., individually or in the aggregate could reasonably be expected
to have a Material Adverse Effect, (iii) result in or require the creation or
imposition of any Lien upon any of the properties or assets of each Loan Party
(other than any Liens created under any of the Loan Documents in favor of
Administrative Agent on behalf of Lenders), or (iv) require any approval of
stockholders or partners or any approval or consent of any Person under any
contractual obligation of each Loan Party, except for such approvals or consents
which will be obtained on or before the First Amendment to A&R Credit Agreement
Effective Date.
D. GOVERNMENTAL CONSENTS. No action, consent or approval of,
registration or filing with or any other action by any governmental authority is
or will be required in connection with the execution and delivery by each Loan
Party of this Amendment and the performance by Company and Holdings of the
Amended Agreement and the other Loan Documents, except for such actions,
7
<PAGE>
consents and approvals the failure to obtain or make which could not reasonably
be expected to result in a Material Adverse Effect or which have been obtained
and are in full force and effect.
E. BINDING OBLIGATION. This Amendment and the Amended Agreement have
been duly executed and delivered by each Loan Party party thereto and each
constitutes a legal, valid and binding obligation of the Loan Parties to the
extent a party thereto enforceable against of the Loan Party in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Amended Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment to A&R Credit Agreement Effective Date
to the same extent as though made on and as of that date, except to the extent
such representations and warranties specifically relate to an earlier date, in
which case they were true, correct and complete in all material respects on and
as of such earlier date.
G. ABSENCE OF DEFAULT. After giving effect to this Amendment, no event
has occurred and is continuing or will result from the consummation of the
transactions contemplated by this Amendment that would constitute an Event of
Default or a Default.
SECTION 4. ACKNOWLEDGMENT AND CONSENT
Each of the Credit Support Parties hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment and
consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Loan Document to
which it is a party or otherwise bound and all Collateral encumbered thereby
will continue to guarantee or secure, as the case may be, to the fullest extent
possible in accordance with the Loan Documents the payment and performance of
all "Obligations" under each of the Loan Documents to which is a party (in each
case as such terms are defined in the applicable Loan Document).
Each of the Credit Support Parties acknowledges and agrees that each of
the Loan Documents to which it is a party or otherwise bound shall continue in
full force and effect and that all of its obligations thereunder shall be valid
and enforceable and shall not be impaired or limited by the execution or
effectiveness of this Amendment. Each Credit Support Party represents and
warrants that all representations and warranties contained in the Amended
Agreement and the Loan Documents to which it is a party or otherwise bound are
true, correct and complete in all material respects on and as of the First
Amendment to A&R Credit Agreement Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties
8
<PAGE>
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each of the Credit Support Parties acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Amendment, it
is not required by the terms of the Credit Agreement or any other Loan Document
to consent to the amendments to the Credit Agreement effected pursuant to this
Amendment and (ii) nothing in the Credit Agreement, this Amendment or any other
Loan Document shall be deemed to require the consent of Credit Support Parties
to any future amendments to the Credit Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
(i) On and after the First Amendment to A&R Credit Agreement
Effective Date, each reference in the Credit Agreement to "this
Agreement," "hereunder,","hereof," "herein," "hereto" or words of like
import referring to the Credit Agreement, and each reference in the
other Loan Documents to the "Credit Agreement," "thereunder," "thereof"
or words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended by this
Amendment.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of any Agent or Lender under, the Credit Agreement or any of
the other Loan Documents.
B. HEADINGS. Section and Subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
C. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGA TIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9
<PAGE>
D. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
DIMAC CORPORATION
By: /s/ Scott P. Ebert
-----------------------------------
Name: Scott P. Ebert
Title: VP/Controller
HOLDINGS: DIMAC HOLDING, INC.
By: /s/ Scott P. Ebert
-----------------------------------
Name: Scott P. Ebert
Title: VP/Controller
CREDIT SUPPORT
PARTIES (FOR THE PURPOSES
OF SECTION 4 ONLY): AMERICOMM HOLDINGS, INC.
By: /s/ Scott P. Ebert
-----------------------------------
Name: Scott P. Ebert
Title: VP/Controller
AMERICOMM DIRECT MARKETING, INC.
By: /s/ Scott P. Ebert
-----------------------------------
Name: Scott P. Ebert
Title: VP/Controller
DIMAC MARKETING CORPORATION
By: /s/ John F. Meneough
-----------------------------------
Name: John F. Meneough
Title: President
S-1
<PAGE>
PALM COAST DATA INC.
By: /s/ John F. Meneough
-----------------------------------
Name: John F. Meneough
Title:
MBS/MULTIMODE INC.
By: /s/ John F. Meneough
-----------------------------------
Name: John F. Meneough
Title:
DIMAC DIRECT, INC.
By: /s/ John F. Meneough
-----------------------------------
Name: John F. Meneough
Title: President
DMW WORLDWIDE, INC.
By: /s/ John F. Meneough
-----------------------------------
Name: John F. Meneough
Title:
LENDERS CREDIT SUISSE FIRST BOSTON
AND AGENTS:
By: /s/ Thomas G. Muoio
-----------------------------------
Name: Thomas G. Muoio
Title: Vice President
By: /s/ William S. Lutkins
-----------------------------------
Name: William S. Lutkins
Title: Vice President
S-2
<PAGE>
WARBURG DILLON READ LLC
By: /s/ Robert Parsons
-----------------------------------
Name: Robert Parsons
Title: Managing Director
By: /s/ Michael Grayer
-----------------------------------
Name: Michael Grayer
Title: Managing Director
FIRST UNION NATIONAL BANK
By: /s/ Jorge Gonzalez
-----------------------------------
Name: Jorge Gonzalez
Title: Senior Vice President
UBS AG, STAMFORD BRANCH
By: /s/ Renata Jacobson
-----------------------------------
Name: Renata Jacobson
Title: Director
By: /s/ Lawrence M. Charleson
-----------------------------------
Name: Lawrence M. Charleson
Title: Executive Director
FLEET BANK, N.A.
By:
-----------------------------------
Name:
Title:
BANKBOSTON, N.A.
By:
-----------------------------------
Name:
Title:
S-3
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ David E. Yewer
-----------------------------------
Name: David E. Yewer
Title: Vice President
By: /s/ Richard P. Buckanavago
-----------------------------------
Name: Richard P. Buckanavago
Title: Vice President
MARINE MIDLAND BANK
By: /s/ Susan L. LeFevre
-----------------------------------
Name: Susan L. LeFevre
Title: Authorized Signatory
FRANKLIN FLOATING RATE TRUST
By:
-----------------------------------
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By: /s/ Sonja R. Jordan
-----------------------------------
Name: Sonja R. Jordan
Title: Vice President
S-4
<PAGE>
MERCANTILE BANK N.A.
By:
-----------------------------------
Name:
Title:
JACKSON NATIONAL LIFE INSURANCE
COMPANY
BY: PPM AMERICA, INC., AS ATTORNEY IN
FACT, ON BEHALF OF JACKSON NA-
TIONAL LIFE INSURANCE COMPANY
By: /s/ Michael DiRe
-----------------------------------
Name: Michael DiRe
Title: Sr. Managing Director
VAN KAMPEN PRIME
RATE INCOME TRUST
By: /s/ Jeffery W. Maillet
-----------------------------------
Name: Jeffery W. Maillet
Title: Senior Vice President
and Director
VAN KAMPEN SENIOR
FLOATING RATE FUND
By: /s/ Jeffery W. Maillet
-----------------------------------
Name: Jeffery W. Maillet
Title: Senior Vice President
and Director
S-5
<PAGE>
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ B. Ross Smead
-----------------------------------
Name: B. Ross Smead
Title: Vice President
STEIN ROE & FARNHAM INCORPORATED, AS
AGENT FOR KEYPORT LIFE INSURANCE COM
PANY
By:
-----------------------------------
Name:
Title:
STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
By:
-----------------------------------
Name:
Title:
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: Indosuez Capital as
Portfolio Advisor
By: /s/ Melissa Marano
-----------------------------------
Name: Melissa Marano
Title: Vice President
S-6
<PAGE>
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital as
Portfolio Advisor
By: /s/ Melissa Marano
-----------------------------------
Name: Melissa Marano
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By:
-----------------------------------
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Scott H. Page
-----------------------------------
Name: Scott H. Page
Title: Vice President
NATIONAL BANK OF CANADA
By: /s/ Theresa White
-----------------------------------
Name: Theresa White
Title: Vice President
By: /s/ Gaston R. Frosina
-----------------------------------
Name: Gaston R. Frosina
Title: Vice President
S-7
<PAGE>
Exhibit 10.11
DIMAC CORPORATION
SECOND AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT (this "AMENDMENT"), dated as of July 23,
1999, to the AMENDED AND RESTATED CREDIT AGREEMENT, dated as of October 22,
1998, as amended by the First Amendment, dated as of March 26, 1999 (as amended,
the "CREDIT AGREEMENT"), is entered into by and among DIMAC CORPORATION, a
Delaware corporation (the "COMPANY"), DIMAC HOLDINGS, INC., a Delaware
corporation ("HOLDINGS"), THE CREDIT SUPPORT PARTIES listed on the signature
pages hereto (each individually referred to herein as a "CREDIT SUPPORT PARTY"
and collectively as "CREDIT SUPPORT PARTIES"), THE FINANCIAL INSTITUTIONS party
hereto, CREDIT SUISSE FIRST BOSTON ("CSFB"), as administrative agent for Lenders
(in such capacity, "ADMINISTRATIVE AGENT"), and as Arranger, WARBURG DILLON READ
LLC, as Syndication Agent, and FIRST UNION NATIONAL BANK, as Documentation
Agent.
RECITALS:
WHEREAS, capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Credit Agreement, as
amended hereby;
WHEREAS, Company, Holdings, the Lenders, Administrative Agent,
Arranger, Syndication Agent and Documentation Agent are parties to the Credit
Agreement, pursuant to which the Lenders have extended certain credit facilities
to Company;
WHEREAS, Company has requested that (i) the aggregate
Revolving Loan Commitments of the Lenders holding Revolving Loan Commitments be
reduced, pro rata, by $28,281,363.31, (ii) the Lenders holding Term Loans
extend, pro rata, additional Term Loans in an aggregate principal amount of
$28,281,363.31, the proceeds of which will be used to provide financing for
working capital and other general corporate purposes of Company and its
Subsidiaries, and (iii) certain other changes be made to the Credit Agreement as
more fully set forth herein;
WHEREAS, the Lenders have agreed to amend the Credit Agreement
to provide for each of the foregoing, which amendment shall become effective
upon satisfaction of the conditions precedent set forth herein; and
WHEREAS, it is the intent of Loan Parties to confirm that all
Obligations of Loan Parties under the other Loan Documents shall continue in
full force and effect and that, from and after the Second Amendment Effective
Date, all references to the "CREDIT AGREEMENT" contained therein shall be deemed
to refer to the Credit Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Holdings, Company,
Lenders and Agents agree that, on the Second Amendment Effective Date, the
Credit Agreement shall be amended as follows:
<PAGE>
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1.
A. SUBSECTION 1.1 of the Credit Agreement is hereby amended by
amending the definitions of "Commitments", "Consolidated Adjusted EBITDA",
"Notes" "Term A Loan Commitment", "Term A Loan Exposure", "Term A Loans", "Term
B Loan Commitment", "Term B Loan Exposure", "Term B Loans", "Term C Loan
Commitment", "Term C Loan Exposure" and "Term C Loans" as set forth below:
"COMMITMENTS" means (i) with respect to the period prior to
the Second Amendment Effective Date, the commitments of Lenders to make Loans as
set forth in subsection 2.1A of this Agreement, and (ii) on and after the Second
Amendment Effective Date, the commitments of Lenders to make Loans as set forth
in subsection 2.1A(v) of this Agreement.
CONSOLIDATED ADJUSTED EBITDA" means, for any period, the sum
(without duplication) of the amounts for such period (as determined for Company
and its Subsidiaries on a consolidated basis and in accordance with subsection
7.6E(ii), if applicable) of (i) Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) provisions for taxes based on income, (iv) total
depreciation expense, (v) total amortization expense, (vi) other non-cash items
reducing Consolidated Net Income, (vii) all one-time cash compensation payments
made in connection with the Acquisition, (viii) those items described on
SCHEDULES 1.1(i) and 1.1(ii) annexed hereto, and (ix) Management Fees to the
extent accrued but not paid, LESS (a) other non-cash items increasing
Consolidated Net Income, (b) to the extent not otherwise deducted in determining
Consolidated Net Income, any payments made under Permitted Earn Out Agreements
entered into on or after the Closing Date and Management Fees paid, and (c) any
payments (net of indemnification) by Company and its Subsidiaries of any
demands, obligations, interest, penalties, suits, judgments, orders,
liabilities, debts, claims, actions, causes of action, costs and expenses
(including legal, consultants' and witness' fees) in connection with the postal
inspection service investigation disclosed on Schedule 5.14 of the DIMAC Acquisi
tion Agreement. With respect to the determination of Consolidated Adjusted
EBITDA for any period prior to the completion of four Fiscal Quarters following
the Closing Date, Consolidated Adjusted EBITDA shall be calculated for certain
Fiscal Quarters in the manner set forth in subsection 7.6E(i).
"NOTES" means one or more of the Term Notes, Revolving Notes
or Swing Line Note or any combination thereof (including any such Notes issued
pursuant to the Second Amendment)
"TERM A LOAN COMMITMENT" means the commitment of a Lender to
make a Term A Loan to Company pursuant to subsections 2.1A(i)(a) and 2.1A(v)(a)
of this Agreement, and "TERM A LOAN COMMITMENTS" means such commitments of all
Lenders in the aggregate.
"TERM A LOANS" means the Term A Loans made pursuant to
subsections 2.1A(i)(a) and 2.1A(v)(a) of this Agreement.
-2-
<PAGE>
"TERM B LOAN COMMITMENT" means the commitment of a Lender to
make a Term B Loan to Company pursuant to subsections 2.1A(i)(b), 2.1A(ii)(a)
and 2.1A(v)(b) of this Agreement, and "TERM B LOAN COMMITMENTS" means such
commitments of all Lenders in the aggregate.
"TERM B LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination the outstanding principal amount of the Term B Loan of
that Lender.
"TERM B LOANS" means the Term B Loans made pursuant to
subsections 2.1A(i)(b), 2.1A(ii)(a) and 2.1A(v)(b) of this Agreement.
"TERM C LOAN COMMITMENT" means the commitment of a Lender to
make a Term C Loan to Company pursuant to subsections 2.1A(i)(c), 2.1A(ii)(b)
and 2.1A(v)(c) of this Agreement, and "TERM C LOAN COMMITMENTS" means such
commitments of all Lenders in the aggregate.
"TERM C LOAN EXPOSURE" means, with respect to any Lender as of
any date of determination the outstanding principal amount of the Term C Loan of
that Lender.
"TERM C LOANS" means the Term C Loans made pursuant to
subsections 2.1A(i)(c), 2.1A(ii)(b) and 2.1A(v)(c) of this Agreement.
B. SUBSECTION 1.1 of the Credit Agreement is hereby further
amended by adding the following definitions in appropriate alphabetical order:
""SECOND AMENDMENT" means that certain Second Amendment, dated
as of July 23, 1999, to this Agreement by and among Company, Holdings, the
Credit Support Parties named therein, the Agents, and the Lenders party thereto.
"SECOND AMENDMENT EFFECTIVE DATE" means the "Second Amendment
Effective Date" as such term is defined in the Second Amendment.
"SECOND AMENDMENT LOANS" means, the Second Amendment Term
Loans and the Revolving Loans made on the Second Amendment Effective Date.
"SECOND AMENDMENT TERM A LOAN COMMITMENT" means the commitment
of a Lender to make a Term A Loan to Company pursuant to subsection 2.1A(v)(a)
of this Agreement, and "SECOND AMENDMENT TERM A LOAN COMMITMENTS" means such
commitments of all Lenders in the aggregate.
"SECOND AMENDMENT TERM A LOANS" means a portion of the Term A
Loans, in an aggregate principal amount not exceeding $7,976,794.78, that may be
borrowed by Company on the Second Amendment Effective Date.
"SECOND AMENDMENT TERM B LOAN COMMITMENT" means the commitment
of a Lender to make a Term B Loan to Company pursuant to subsection 2.1A(v)(b)
of this
-3-
<PAGE>
Agreement, and "SECOND AMENDMENT TERM B LOAN COMMITMENTS" means such commitments
of all Lenders in the aggregate.
"SECOND AMENDMENT TERM B LOANS" means a portion of the Term B
Loans, in an aggregate principal amount not exceeding $11,602,610.59, that may
be borrowed by Company on the Second Amendment Effective Date.
"SECOND AMENDMENT TERM C LOAN COMMITMENT" means the commitment
of a Lender to make a Term C Loan to Company pursuant to subsection 2.1A(v)(c)
of this Agreement, and "SECOND AMENDMENT TERM C LOAN COMMITMENTS" means such
commitments of all Lenders in the aggregate.
"SECOND AMENDMENT TERM C LOANS" means a portion of the Term C
Loans, in an aggregate principal amount not exceeding $8,701,957.94, that may be
borrowed by Company on the Second Amendment Effective Date.
"SECOND AMENDMENT TERM LOANS" means the Second Amendment Term
A Loans, Second Amendment Term B Loans and the Second Amendment Term C Loans,
collectively.
1.2 AMENDMENTS TO SECTION 2.
A. SUBSECTION 2.1A(iii) of the Credit Agreement is hereby
amended by deleting the final paragraph thereof and substituting the following
therefor:
"Notwithstanding the foregoing, x) no more than $1,718,636.69
of Revolving Loans may be made on the Second Amendment Effective Date, and such
Revolving Loans may not be repaid until all other Revolving Loans are repaid and
the Revolving Loan Commitments have been terminated y) after the Second
Amendment Effective Date, Lenders shall have no obligation to make new Revolving
Loans (and Swing Line Lender shall have no obligation to make Swing Line Loans
and Issuing Lender shall have no obligation to issue any Letters of Credit)
until such time as the Company is in compliance with the provisions of
subsection 7.6A through 7.6E (whether or not such subsections are otherwise
required to be complied with under the terms of subsection 7.6F) and z) on and
after the Second Amendment Effective Date, the Revolving Loan Commitments shall
be reduced from $75,000,000 to $46,718,636.69, such reduction to be allocated
among the Revolving Loan Commitments of the Lenders on the basis of their Pro
Rata Shares in the Revolving Loan Commitments."
B. SUBSECTION 2.1A of the Credit Agreement is hereby amended
by adding the following:
(v) SECOND AMENDMENT TERM LOANS.
(a) Each Lender severally agrees to lend to Company on the
Second Amendment Effective Date an aggregate amount not exceeding its Pro Rata
Share of the aggregate amount of the Second Amendment Term A Loan Commitments,
in each case to be used for the purposes identified in subsection 2.5B. The
amount of each Lender's Second
-4-
<PAGE>
Amendment Term A Loan Commitment is set forth opposite its name on SCHEDULE 2.1
annexed to the Second Amendment and the aggregate amount of the Second Amendment
Term A Loan Commitments is $7,976,794.78. Each Lender's Second Amendment Term A
Loan Commitment in respect of the Second Amendment Term A Loans shall expire
immediately and without further action on the Second Amendment Effective Date in
the event the Second Amendment Term A Loans are not made on that date. Amounts
borrowed under this subsection 2.1A(v)(a) and subsequently repaid or prepaid may
not be reborrowed.
(b) Each Lender severally agrees to lend to Company on the
Second Amendment Effective Date an aggregate amount not exceeding its Pro Rata
Share of the aggregate amount of the Second Amendment Term B Loan Commitments,
in each case to be used for the purposes identified in subsection 2.5B. The
amount of each Lender's Second Amendment Term B Loan Commitment is set forth
opposite its name on SCHEDULE 2.1 annexed to the Second Amendment and the
aggregate amount of the Second Amendment Term B Loan Commitments is
$11,602,610.59. Each Lender's Second Amendment Term B Loan Commitment in respect
of the Second Amendment Term B Loans shall expire immediately and without
further action on the Second Amendment Effective Date in the event the Second
Amendment Term B Loans are not made on that date. Amounts borrowed under this
subsection 2.1A(v)(b) and subsequently repaid or prepaid may not be reborrowed.
(c) Each Lender severally agrees to lend to Company on the
Second Amendment Effective Date an aggregate amount not exceeding its Pro Rata
Share of the aggregate amount of the Second Amendment Term C Loan Commitments,
in each case to be used for the purposes identified in subsection 2.5B. The
amount of each Lender's Second Amendment Term C Loan Commitment is set forth
opposite its name on SCHEDULE 2.1 annexed to the Second Amendment and the
aggregate amount of the Second Amendment Term C Loan Commitments is
$8,701,957.94. Each Lender's Second Amendment Term C Loan Commitment in respect
of the Second Amendment Term C Loans shall expire immediately and without
further action on the Second Amendment Effective Date in the event the Second
Amendment Term C Loans are not made on that date. Amounts borrowed under this
subsection 2.1A(v)(c) and subsequently repaid or prepaid may not be reborrowed.
C. Each of SUBSECTIONS 2.4A(i), 2.4A(ii), and 2.4A(iii) of the
Credit Agreement is hereby by amended to read in their entirety as follows:
"(i) SCHEDULED PAYMENTS OF TERM A LOANS. Company shall make
principal payments on the Term A Loans in installments on the dates set forth
below, each such installment to be in an amount equal to the corresponding
percentages set forth below of the principal amount of the Term A Loans (other
than Second Amendment Term A Loans):
<TABLE>
<CAPTION>
=================================== ==================================
DATE SCHEDULED REPAYMENT
OF
TERM A LOANS
=================================== ==================================
<S> <C>
March 31, 2001 4.00%
June 30, 2001 4.00%
September 30, 2001 4.25%
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C>
----------------------------------- ----------------------------------
December 31, 2001 4.25%
----------------------------------- ----------------------------------
March 31, 2002 7.625%
June 30, 2002 7.625%
September 30, 2002 7.625%
December 31, 2002 7.625%
----------------------------------- ----------------------------------
March 31, 2003 8.35%
June 30, 2003 8.35%
September 30, 2003 8.35%
December 31, 2003 8.35%
=================================== ==================================
March 31, 2004 9.60%
June 30, 2004 10.00%
=================================== ==================================
</TABLE>
; PROVIDED that the scheduled installments of principal of
such Term A Loans set forth above shall be reduced in
connection with any voluntary or mandatory prepayments of the
Term A Loans in accordance with subsection 2.4C; and PROVIDED,
FURTHER that such Term A Loans and all other amounts owed
hereunder with respect to the Term A Loans shall be paid in
full no later than June 30, 2004 and the final installment
payable by Company in respect of the Term A Loans on such date
shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Term A Loans.
All Second Amendment Term A Loans shall be paid in full on
June 30, 2004.
(ii) SCHEDULED PAYMENTS OF TERM B LOANS. Company shall make
principal payments on the Term B Loans in installments on the dates set forth
below, each such installment to be in an amount equal to the corresponding
percentages set forth below of the principal amount of the Term B Loans (other
than Second Amendment Term B Loans):
<TABLE>
<CAPTION>
================================== ==================================
DATE SCHEDULED REPAYMENT
OF
TERM B LOANS
================================== ==================================
<S> <C>
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
---------------------------------- ----------------------------------
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
---------------------------------- ----------------------------------
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
---------------------------------- ----------------------------------
March 31, 2004 0.25%
June 30, 2004 0.25%
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C>
September 30, 2004 7.50%
December 31, 2004 7.50%
---------------------------------- ----------------------------------
March 31, 2005 7.50%
June 30, 2005 7.50%
September 30, 2005 16.0%
December 31, 2005 16.0%
---------------------------------- ----------------------------------
March 31, 2006 16.0%
June 30, 2006 18.5%
================================== ==================================
</TABLE>
; PROVIDED that the scheduled installments of principal of
such Term B Loans set forth above shall be reduced in
connection with any voluntary or mandatory prepayments of the
Term B Loans in accordance with Subsection 2.4C; and PROVIDED,
FURTHER that such Term B Loans and all other amounts owed
hereunder with respect to such Term B Loans shall be paid in
full no later than June 30, 2006 and the final installment
payable by Company in respect of the Term B Loans on such date
shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Term B Loans.
All Second Amendment Term B Loans shall be paid in full on
June 30, 2006.
(iii) SCHEDULED PAYMENTS OF TERM C LOANS. Company shall make
principal payments on the Term C Loans in installments on the dates set forth
below, each such installment to be in an amount equal to the corresponding
percentages set forth below of the original principal amount of the Term C Loans
(other than Second Amendment Term C Loans):
<TABLE>
<CAPTION>
========================================= ==============================
SCHEDULED
DATE REPAYMENT
OF
TERM C LOANS
========================================= ==============================
<S> <C>
March 31, 2001 0.25%
June 30, 2001 0.25%
September 30, 2001 0.25%
December 31, 2001 0.25%
----------------------------------------- ------------------------------
March 31, 2002 0.25%
June 30, 2002 0.25%
September 30, 2002 0.25%
December 31, 2002 0.25%
----------------------------------------- ------------------------------
March 31, 2003 0.25%
June 30, 2003 0.25%
September 30, 2003 0.25%
December 31, 2003 0.25%
----------------------------------------- ------------------------------
March 31, 2004 0.25%
June 30, 2004 0.25%
September 30, 2004 0.25%
December 31, 2004 0.25%
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C>
----------------------------------------- ------------------------------
March 31, 2005 0.25%
June 30, 2005 0.25%
September 30, 2005 0.25%
December 31, 2005 0.25%
----------------------------------------- ------------------------------
March 31, 2006 0.25%
June 30, 2006 0.25%
September 30, 2006 46.75%
December 31, 2006 47.75%
========================================= ==============================
</TABLE>
; PROVIDED that the scheduled installments of principal of
such Term C Loans set forth above shall be reduced in
connection with any voluntary or mandatory prepayments of the
Term C Loans in accordance with Subsection 2.4C; and PROVIDED,
FURTHER that such Term C Loans and all other amounts owed
hereunder with respect to such Term C Loans shall be paid in
full no later than December 31, 2006 and the final installment
payable by Company in respect of such Term C Loans on such
date shall be in an amount, if such amount is different from
that specified above, sufficient to repay all amounts owing by
Company under this Agreement with respect to the Term C Loans.
All Second Amendment Term C Loans shall be paid in full on
December 31, 2006."
D. SUBSECTION 2.5B of the Credit Agreement is hereby amended
to read in its entirety as follows:
"B. Phase II Term Loans and Revolving Loans Made On the
Effective Date; Second Amendment Term Loans.
(i) The proceeds of $45,000,000 in aggregate principal amount
of Phase II Term Loans and an aggregate principal amount of Revolving Loans not
to exceed an amount acceptable to Agents made to Company on the Effective Date,
together with the net proceeds from the issuance of equity by Holdings on the
Effective Date, the Senior Subordinated Notes and the Holdings Notes shall be
applied (a) to finance the redemption, repurchase or other repayment of
outstanding Indebtedness with respect to the Existing Senior Notes, the Existing
TCW Notes and the Existing AmeriComm Credit Agreement, and (b) to pay fees,
costs and expenses payable by Holdings and its Subsidiaries on or before the
Effective Date in connection with such refinancing.
(ii) The proceeds of the Second Amendment Term Loans shall be
applied to provide financing for working capital and other general corporate
purposes of Company and its Subsidiaries."
1.3 AMENDMENT FOR SECTION 5: REPRESENTATIONS AND WARRANTIES.
Subsection 5.4 of the Credit Agreement is hereby amended to
read in its entirety as follows:
-8-
<PAGE>
"Since the Second Amendment Effective Date, no event or change
has occurred that has caused or evidences, either in any case or in the
aggregate, a Material Adverse Effect. Since the Closing Date, neither Company
nor any of its Subsidiaries has directly or indirectly declared, ordered, paid
or made, or set apart any sum of property for, any Restricted Junior Payment or
agreed to do so except as permitted by subsection 7.5."
1.4 AMENDMENTS TO SECTION 7: NEGATIVE COVENANTS.
Subsection 7.6F of the Credit Agreement is hereby amended in
its entirety as follows:
"F. SECOND AMENDMENT FINANCIAL COVENANTS. Notwithstanding any
provisions of this Agreement to the contrary (other than as provided under
subsection 2.1A(iii) with respect to the obligation of Lenders to make Revolving
Loans and Swing Line Lenders to make Swing Line Loans and Issuing Lender to
issue Letters of Credit), during the period from the Second Amendment Effective
Date to December 31, 2000, Company and its Subsidiaries shall not be required to
comply with the financial covenants set forth in subsection 7.6A through and
including subsection 7.6E (other than as provided under subsection 2.1A(iii)
with respect to the obligation of Lenders to make Revolving Loans and Swing Line
Lenders to make Swing Line Loans and Issuing Lender to issue Letters of Credit),
but rather, the Company and its Subsidiaries shall be required to comply with
the following financial covenants:
(i) MINIMUM EBITDA. Company shall not permit Consolidated
Adjusted EBITDA for any four Fiscal Quarter period ending on a date set forth
below to be less than the correlative amount indicated:
<TABLE>
<CAPTION>
==================================================
DATE MINIMUM
CONSOLIDATED
ADJUSTED EBITDA
==================================================
<S> <C>
September 30, 1999 $28,000,000
-------------------
December 31, 1999 $29,000,000
-------------------
March 31, 2000 $31,000,000
-------------------
June 30, 2000 $34,000,000
-------------------
September 30, 2000 $34,000,000
-------------------
December 31, 2000 $34,000,000
==================================================
</TABLE>
(ii) MAXIMUM CAPITAL EXPENDITURES. Company shall not and shall
not permit any of its Subsidiaries to incur Consolidated Capital Expenditures,
for either the two Fiscal Quarter period or for the Fiscal Year, in each case,
ending on the dates set forth below in excess of the correlative amount
indicated below (each such amount to be increased by any amount of Consolidated
Capital Expenditures permitted to be incurred during the prior period, but not
actually incurred):
-9-
<PAGE>
<TABLE>
<CAPTION>
==========================================================
DATE MAXIMUM CAPITAL EXPENDITURES
==========================================================
<S> <C>
$5,300,000
Fiscal Year ending
December 31, 2000 $13,000,000
==========================================================
</TABLE>
1.5 AMENDMENT TO SECTION 10: MISCELLANEOUS.
Subsection 10.1C of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Except as otherwise agreed to by Administrative Agent and
Company, no holder of any participation, other than an Affiliate of the Lender
granting such participation, shall be entitled to require such Lender to take or
omit to take any action hereunder except action (i) effecting the extension of
the final maturity of the Loan allocated to such participation, (ii) effecting a
reduction of the principal amount of or affecting the rate of interest payable
on any Loan allocated to such participation, (iii) releasing all or
substantially all of the Collateral, or (iv) releasing all of the Guarantors
from their obligations under the Guaranties, and all amounts payable by Company
hereunder (including, without limitation, amounts payable to such Lender
pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender
had not sold such participation. Company and each Lender hereby acknowledge and
agree that, except as otherwise agreed by all Lenders and any participant,
solely for purposes of subsections 10.4 and 10.5, (a) any participation will
give rise to a direct obligation of Company to the participant and (b) the
participant shall be considered to be a "Lender"."
1.6 AMENDMENTS TO EXHIBITS IV, V, VI AND VII AND SCHEDULE 1.1(ii) TO THE
CREDIT AGREEMENT.
Exhibits IV, V, VI and VII and SCHEDULE 1.1(ii) to the Credit
Agreement are hereby amended by deleting them in their entirety and inserting,
in lieu thereof, Exhibits IV, V, VI and VII and SCHEDULE 1.1(ii) hereto,
respectively.
SECTION 2. CONDITIONS TO EFFECTIVENESS
The effectiveness of the amendments set forth in Section 1
hereof and the several obligations of Lenders to make the Second Amendment Term
Loans and any Revolving Loans to be made on the Second Amendment Effective Date
are, in addition to the conditions precedent specified in SUBSECTION 4.2 of the
Credit Agreement, subject to the prior or concurrent satisfaction of the
following conditions (the date of satisfaction of such conditions being referred
to herein as the "SECOND AMENDMENT EFFECTIVE DATE"):
A. CERTAIN DOCUMENTS. On or before the Second Amendment
Effective Date, each Loan Party shall deliver or cause to be delivered to
Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies, where appropriate, for each Lender and its counsel):
-10-
<PAGE>
(i) Certified copies of its Certificate of Incorporation,
together with a good standing certificate from the Secretary of State of the
State of Delaware, each dated a recent date prior to the Second Amendment
Effective Date;
(ii) resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Amendment, certified
as of the Second Amendment Effective Date by its corporate secretary or an
assistant secretary as being in full force and effect without modification or
amendment;
(iii) signature and incumbency certificates of its officers
executing this Amendment and the other Loan Documents to which it is a party as
of the Second Amendment Effective Date; and
(iv) executed originals of this Amendment and (to the extent
not previously executed and delivered to Lenders) the other Loan Documents to
which it is a party.
B. NOTICE OF BORROWING. Administrative Agent shall have
received before the Second Amendment Effective Date, in accordance with the
provisions of Subsection 2.1B, an originally executed Notice of Borrowing, with
such changes and modifications thereto that are acceptable to Administrative
Agent in order to reflect the borrowing of the Second Amendment Term Loans and
Revolving Loans made as of such date, signed by the chief executive officer or
the chief financial officer of Company or by any executive officer of Company
designated by the resolutions of the Board of Directors referred to above and in
a writing delivered to Administrative Agent.
C. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their
respective counsel shall have received originally executed copies of one or more
favorable written opinions of White & Case LLP, counsel to Loan Parties, dated
as of the Second Amendment Effective Date, in substantially the form of Exhibit
A to this Amendment, and Company hereby requests such counsel for Loan Parties
to deliver such opinions.
D. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS.
Company shall have delivered to Administrative Agent an Officer's Certificate,
in form and substance satisfactory to Administrative Agent, to the effect that
(i) the representations and warranties contained in Section 5 of the Credit
Agreement, as amended hereby, are and will be true, correct and complete in all
material respects on and as of the Second Amendment Effective Date to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and as of
such earlier date, and (ii) Company shall have performed in all material
respects all agreements and satisfied all conditions which this Amendment
provides shall be performed or satisfied by Company on or before the Second
Amendment Effective Date, except as otherwise disclosed to and agreed to in
writing by Administrative Agent.
E. COMPLETION OF PROCEEDINGS. All corporate and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Amendment and the
-11-
<PAGE>
Credit Agreement, as amended hereby, and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
and Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Agent may reasonably request.
F. FEES. The Administrative Agent shall have received
reimbursement or other payment of all out-of-pocket expenses required to be
reimbursed or paid by the Company hereunder or under any other Loan Document.
G. NECESSARY CONSENTS. Each Loan Party shall have obtained all
material consents necessary or advisable in connection with the execution of
this Amendment.
H. LENDERS' CONSENT. Each Lender shall have executed this
Amendment and shall have delivered an original thereof to the Administrative
Agent.
I. CERTAIN COLLATERAL. Company shall have established cash
collateralization arrangements with respect to the proceeds of the Second
Amendment Loans reasonably acceptable to Administrative Agent.
J. OTHER REQUIREMENTS. Administrative Agent and Lenders shall
have received such other documents and information regarding the Loan Parties as
reasonably requested by the Administrative Agent.
Second Amendment Effective Date, the Credit Agreement and Exhibits IV, V, VI,
and VII and SCHEDULE 1.1(ii) thereto shall be amended as set forth in Section 1
hereof and all references in any other Loan Document to the Credit Agreement or
any of Exhibits IV, V, VI or VII or SCHEDULE 1.1(ii) thereto shall be a
reference to such Agreement or such Exhibit or such Schedule, as the case may
be, as amended pursuant to Section 1 hereof. Any Lender that has been issued a
Note prior to the Second Amendment Effective Date may request that Company issue
to such Lender a new Note (in exchange for the corresponding existing Note) in
the form of Exhibit IV, V, VI or VII hereto, as applicable, and, subject to
Section 2.1D of the Credit Agreement, Company shall issue such Note or Notes, as
applicable; PROVIDED, that the issuance of any such Note shall be solely in
substitution for, and not in satisfaction of, the existing Note of such Lender.
SECTION 3. CERTAIN REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, each of the Company
and Holdings represents and warrants to each Lender that the following
statements are true, correct and complete in all material respects:
A. CORPORATE POWER AND AUTHORITY. Each Loan Party has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement, as amended hereby, and the other Loan Documents.
-12-
<PAGE>
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Credit Agreement, as amended hereby,
and the other Loan Documents have been duly authorized by all necessary
corporate action on the part of each Loan Party.
C. NO CONFLICT. The execution and delivery by each Loan Party
of this Amendment and the performance by each Loan Party of the Credit
Agreement, as amended hereby, and the other Loan Documents and the other
transactions consummated on the Second Amendment Effective Date do not and will
not (i) violate (A) any provision of any law, statute, rule or regulation, or of
the certificate or articles of incorporation or partnership agreement, other
constitutive documents or by-laws of Holdings, the Company or any Subsidiary,
(B) any applicable order of any court or any rule, regulation or order of any
governmental authority or (C) any provision of any indenture, certificate of
designation for preferred stock, agreement or other instrument to which
Holdings, the Company or any Subsidiary is a party or by which any of them or
any of their property is or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any such indenture, certificate of designation for preferred
stock, agreement or other instrument, where any such conflict, violation, breach
or default referred to in clause (i) or (ii) of this SUBSECTION 3.C,
individually or in the aggregate could reasonably be expected to have a Material
Adverse Effect, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of each Loan Party (other than any
Liens created under any of the Loan Documents in favor of Administrative Agent
on behalf of Lenders), or (iv) require any approval of stockholders or partners
or any approval or consent of any Person under any contractual obligation of
each Loan Party, except for such approvals or consents which will be obtained on
or before the Second Amendment Effective Date.
D. GOVERNMENTAL CONSENTS. No action, consent or approval of,
registration or filing with or any other action by any governmental authority is
or will be required in connection with the execution and delivery by each Loan
Party of this Amendment and the performance by Company and Holdings of the
Credit Agreement, as amended hereby, and the other Loan Documents, except for
such actions, consents and approvals the failure to obtain or make which could
not reasonably be expected to result in a Material Adverse Effect or which have
been obtained and are in full force and effect.
E. BINDING OBLIGATION. This Amendment and the Credit
Agreement, as amended hereby, have been duly executed and delivered by each Loan
Party thereto and each constitutes a legal, valid and binding obligation of the
Loan Parties to the extent a party thereto enforceable against the Loan Party in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and except as enforceability may be
limited by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 5 of the
Credit Agreement, as amended hereby, are and will be true, correct and complete
in all material respects on and as of
-13-
<PAGE>
the Second Amendment Effective Date to the same extent as though made on and as
of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. After giving effect to this Amendment,
no event has occurred and is continuing or will result from the consummation of
the transactions contemplated by this Amendment that would constitute an Event
of Default or a Potential Event of Default.
SECTION 4. ACKNOWLEDGMENT AND CONSENT
Each of the Credit Support Parties hereby acknowledges that it
has reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Loan Document to
which it is a party or otherwise bound and all Collateral encumbered thereby
will continue to guarantee or secure, as the case may be, in accordance with the
Loan Documents the payment and performance of all "Obligations" under each of
the Loan Documents to which is a party (in each case as such terms are defined
in the applicable Loan Document).
Each of the Credit Support Parties acknowledges and agrees
that each of the Loan Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Credit Agreement, as amended hereby, and the Loan Documents to which it is a
party or otherwise bound are true, correct and complete in all material respects
on and as of the Second Amendment Effective Date to the same extent as though
made on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.
Each of the Credit Support Parties acknowledges and agrees
that (i) notwithstanding the conditions to effectiveness set forth in this
Amendment, it is not required by the terms of the Credit Agreement or any other
Loan Document to consent to the amendments to the Credit Agreement effected
pursuant to this Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require the consent of
Credit Support Parties to any future amendments to the Credit Agreement.
SECTION 5. MISCELLANEOUS
A. Reference to, and Effect on, the Credit Agreement and the
Other Loan Documents.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement," "hereunder,","hereof,"
"herein," "hereto" or words of like import referring to the Credit Agreement,
and each reference in the other Loan Documents to the
-14-
<PAGE>
"Credit Agreement," "thereunder," "thereof" or words of like import referring to
the Credit Agreement shall mean and be a reference to the Credit Agreement as
amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or remedy of any
Agent or Lender under, the Credit Agreement or any of the other Loan Documents.
B. HEADINGS. Section and Subsection headings in this Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
C. Applicable Law. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
D. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[Remainder of page intentionally left blank]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
COMPANY:
DIMAC CORPORATION
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
HOLDINGS:
DIMAC HOLDINGS, INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
CREDIT SUPPORT PARTIES (for the purposes of
Section 4 only):
AMERICOMM HOLDINGS, INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
AMERICOMM DIRECT MARKETING, INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
-16-
<PAGE>
DIMAC MARKETING CORPORATION
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
PALM COAST DATA INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title:
MBS/MULTIMODE INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title:
DIMAC DIRECT, INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title: President
DMW WORLDWIDE, INC.
By:/s/ John F. Meneough
----------------------------------------
Name: John F. Meneough
Title:
-17-
<PAGE>
LENDERS
CREDIT SUISSE FIRST BOSTON
AND AGENTS:
By:/s/ Thomas G. Muoio
----------------------------------------
Name: Thomas G. Muoio
Title: Vice President
By:/s/ W. MATTHEW CARTER
----------------------------------------
Name: W. Matthew Carter
Title: Assistant Vice President
WARBURG DILLON READ LLC
By:/s/ Renata Jacobson
----------------------------------------
Name: Renata Jacobson
Title: Director
By:/s/ Robert Parsons
----------------------------------------
Name: Robert Parsons
Title: Managing Director
FIRST UNION NATIONAL BANK
By:/s/ Jorge A. Gonzalez
----------------------------------------
Name: Jorge A. Gonzalez
Title: Senior Vice President
UBS AG, STAMFORD BRANCH
By:/s/ Wilfred Saint
----------------------------------------
Name: Wilfred Saint
Title: Associate Director,
Loan Portfolio Support, US
-18-
<PAGE>
By:/s/ Dorothy Mckinley
----------------------------------------
Name: Dorothy McKinley
Title: Associate Director,
Loan Portfolio Support, US
FLEET BANK, N.A.
By:/s/ Lawrence E. Jacobs
----------------------------------------
Name: Lawrence E. Jacobs
Title: Vice President
BANKBOSTON, N.A.
By:/s/ Virginia Dennett
----------------------------------------
Name: Virginia Dennett
Title: Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:/s/ David E. Yewer
----------------------------------------
Name: David E. Yewer
Title: Vice President
By:/s/ CLIFFORD L. WELLS
----------------------------------------
Name: Clifford L. Wells
Title: Vice President
HSBC BANK USA
By:/s/ Susan L. Lefevre
----------------------------------------
Name: Susan L. LeFevre
Title: Authorized Signatory
-19-
<PAGE>
FRANKLIN FLOATING RATE TRUST
By:/s/ Chauncey Lufkin
----------------------------------------
Name: Chauncey Lufkin
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By:/s/ Sonja R. Jordan
----------------------------------------
Name: Sonja R. Jordan
Title: Vice President
MERCANTILE BANK N.A.
By:/s/ John H. Phillips
----------------------------------------
Name: John H. Phillips
Title: Vice President
JACKSON NATIONAL LIFE INSURANCE COMPANY
BY: PPM AMERICA, INC., AS ATTORNEY
IN FACT, ON BEHALF OF JACKSON
NA TIONAL LIFE INSURANCE COMPANY
By:/s/ John Walding
----------------------------------------
Name: John Walding
Title: Managing Director
VAN KAMPEN PRIME RATE INCOME TRUST
By:/s/ LISA M. MINCHESKI
----------------------------------------
Name: Lisa M. Mincheski
Title: Vice President
-20-
<PAGE>
VAN KAMPEN SENIOR FLOATING RATE FUND
By:/s/ Lisa M. Mincheski
----------------------------------------
Name: Lisa M. Mincheski
Title: Vice President
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By:/s/ B. Ross Smead
----------------------------------------
Name: B. Ross Smead
Title: Vice President
STEIN ROE & FARNHAM INCORPORATED, as
Agent for KEYPORT LIFE INSURANCE COMPANY
By:/s/ James R. Fellows
----------------------------------------
Name: James R. Fellows
Title: Vice President
STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
By:/s/ James R. Fellows
----------------------------------------
Name: James R. Fellows
Title: Vice President
INDOSUEZ CAPITAL FUNDING IV, L.P.
By: Indosuez Capital as Portfolio Advisor
By:/s/ Melissa Marano
----------------------------------------
Name: Melissa Marano
Title: Vice President
-21-
<PAGE>
INDOSUEZ CAPITAL FUNDING III, LIMITED
By: Indosuez Capital as Portfolio Advisor
By:/s/ Melissa Marano
----------------------------------------
Name: Melissa Marano
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By:/s/ Michael K. Mcshane
----------------------------------------
Name: Michael K. McShane
Title: Senior Vice President
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By:/s/ Scott H. Page
----------------------------------------
Name: Scott H. Page
Title: Vice President
NATIONAL BANK OF CANADA
By:/s/ Theresa White
----------------------------------------
Name: Theresa White
Title: Vice President
By:/s/ Vincent Lima
----------------------------------------
Name: Vincent Lima
Title: Vice President
-22-
<PAGE>
Exhibit A
FORM OF OPINION OF LOAN PARTIES' COUNSEL:
[to be provided]
<PAGE>
Exhibit IV
Page 1
[FORM OF TERM A NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2004
$(1)[1] New York, New York
July 23, 1999
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("COMPANY"), promises to pay to (2)[2] ("PAYEE") or its registered assigns, the
principal amount of [1] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Amended and Restated Credit Agreement dated as of October 22, 1998, as
amended by the First Amendment, dated as of March 26, 1999, and as further
amended by the Second Amendment, dated as of July 23, 1999, and as it may be
further amended, restated, supplemented or otherwise modified (said Amended and
Restated Credit Agreement, as so amended, restated, supplemented or otherwise
modified, being the "CREDIT AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "ADMINISTRATIVE AGENT"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in
consecutive quarterly installments as set forth in the Credit Agreement,
commencing on March 31, 2001 and ending on June 30, 2004. Each such installment
shall be due on the date specified in the Credit Agreement and in an amount
determined in accordance with the provisions thereof; PROVIDED that the last
such installment shall be in an amount sufficient to repay the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest
thereon.
This Note is one of Company's "Term A Notes" in the aggregate
principal amount of $62,976,794.78 and is issued, together with the other Term A
Notes, to amend and restate without interruption or novation, all indebtedness
evidenced by the Term A Notes and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
- --------------------------
(1) Insert aggregate amount of Lender's Term A Loans plus Lender's Second
Amendment Term A Loan Commitment.
(2) Insert name of Lender.
<PAGE>
Exhibit IV
Page 2
complete statement of the terms and conditions under which the Term A Loans
evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same day funds
at the Funding and Payment Office or at such other place as shall be designated
in writing for such purpose in accordance with the terms of the Credit
Agreement. Unless and until an Assignment Agreement effecting the assignment or
transfer of this Note shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii) of the Credit
Agreement, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, HOWEVER, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GEN ERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued and unpaid
interest thereon, may become, or may (or, with respect to certain Events of
Default, shall) be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary
Guaranty and the Holdings Guaranty and is secured pursuant to the Collateral
Documents.
The terms of this Note are subject to amendment only in the
manner provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment
as provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision
of this Note or the Credit Agreement shall alter or impair the obligations of
Company, which are absolute and
<PAGE>
Exhibit IV
Page 3
unconditional, to pay the principal of and interest on this Note at the place,
at the respective times, and in the currency herein prescribed.
Company promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 10.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Company and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
DIMAC CORPORATION
By:
-----------------------------------
Name:
Title:
<PAGE>
Exhibit V
Page 1
[FORM OF TERM B NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2006
$(3)[1] New York, New York
July 23, 1999
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("COMPANY"), promises to pay to (4)[2] ("PAYEE") or its registered assigns, the
principal amount of [1] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Amended and Restated Credit Agreement dated as of October 22, 1998, as
amended by the First Amendment, dated as of March 26, 1999, and as further
amended by the Second Amendment, dated as of July 23, 1999, and as it may be
further amended, restated, supplemented or otherwise modified (said Amended and
Restated Credit Agreement, as so amended, restated, supplemented or otherwise
modified, being the "CREDIT AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "ADMINISTRATIVE AGENT"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in
consecutive quarterly installments as set forth in the Credit Agreement,
commencing on March 31, 2001 and ending on June 30, 2006. Each such installment
shall be due on the date specified in the Credit Agreement and in an amount
determined in accordance with the provisions thereof; PROVIDED that the last
such installment shall be in an amount sufficient to repay the entire unpaid
principal balance of this Note, together with all accrued and unpaid interest
thereon.
This Note is one of Company's "Term B Notes" in the aggregate
principal amount of $91,602,610.59 and is issued, together with the other Term B
Notes, to amend and restate without interruption or novation, all indebtedness
evidenced by the Term B Notes and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
- -----------------------------------
(3) Insert aggregate amount of Lender's Term B Loans plus Lender's Second
Amendment Term B Loan Commitment.
(4) Insert name of Lender.
<PAGE>
Exhibit V
Page 2
complete statement of the terms and conditions under which the Term B Loans
evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same day funds
at the Funding and Payment Office or at such other place as shall be designated
in writing for such purpose in accordance with the terms of the Credit
Agreement. Unless and until an Assignment Agreement effecting the assignment or
transfer of this Note shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii) of the Credit
Agreement, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, HOWEVER, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GEN ERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued and unpaid
interest thereon, may become, or may (or, with respect to certain Events of
Default, shall) be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary
Guaranty and the Holdings Guaranty and is secured pursuant to the Collateral
Documents.
The terms of this Note are subject to amendment only in the
manner provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment
as provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision
of this Note or the Credit Agreement shall alter or impair the obligations of
Company, which are absolute and
<PAGE>
Exhibit V
Page 3
unconditional, to pay the principal of and interest on this Note at the place,
at the respective times, and in the currency herein prescribed.
Company promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 10.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Company and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
DIMAC CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE>
Exhibit VI
Page 1
[FORM OF TERM C NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE DECEMBER 31, 2006
$(5)[1] New York, New York
July 23, 1999
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("COMPANY"), promises to pay to (6)[2] ("PAYEE") or its registered assigns, the
principal amount of [1] ($[1]), in the installments referred to below.
Company also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Amended and Restated Credit Agreement dated as of October 22, 1998, as
amended by the First Amendment, dated as of March 26, 1999, and as further
amended by the Second Amendment, dated as of July 23, 1999, and as it may be
further amended, restated, supplemented or otherwise modified (said Amended and
Restated Credit Agreement, as so amended, restated, supplemented or otherwise
modified, being the "CREDIT AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "ADMINISTRATIVE AGENT"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
Company shall make principal payments on this Note in
consecutive quarterly installments as set forth in the Credit Agreement,
commencing on March 31, 2001 and ending on December 31, 2006. Each such
installment shall be due on the date specified in the Credit Agree ment and in
an amount determined in accordance with the provisions thereof; PROVIDED that
the last such installment shall be in an amount sufficient to repay the entire
unpaid principal balance of this Note, together with all accrued and unpaid
interest thereon.
This Note is one of Company's "Term C Notes" in the aggregate
principal amount of $68,701,957.94 and is issued, together with the other Term C
Notes, to amend and restate without interruption or novation, all indebtedness
evidenced by the Term C Notes and is issued pursuant to and entitled to the
benefits of the Credit Agreement, to which reference is hereby made for a more
complete statement of the terms and conditions under which the Term C Loans
evidenced hereby were made and are to be repaid.
- -------------------------------
(5) Insert aggregate amount of Lender's Term C Loans plus Lender's Second
Amendment Term C Loan Commitment.
(6) Insert name of Lender.
<PAGE>
Exhibit VI
Page 2
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same day funds
at the Funding and Payment Office or at such other place as shall be designated
in writing for such purpose in accordance with the terms of the Credit
Agreement. Unless and until an Assignment Agreement effecting the assignment or
transfer of this Note shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii) of the Credit
Agreement, Company and Administrative Agent shall be entitled to deem and treat
Payee as the owner and holder of this Note and the Loan evidenced hereby. Payee
hereby agrees, by its acceptance hereof, that before disposing of this Note or
any part hereof it will make a notation hereon of all principal payments
previously made hereunder and of the date to which interest hereon has been
paid; PROVIDED, HOWEVER, that the failure to make a notation of any payment made
on this Note shall not limit or otherwise affect the obligations of Company
hereunder with respect to payments of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GEN ERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued and unpaid
interest thereon, may (or, with respect to certain Events of Default, shall)
become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary
Guaranty and the Holdings Guaranty and is secured pursuant to the Collateral
Documents.
The terms of this Note are subject to amendment only in the
manner provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment
as provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision
of this Note or the Credit Agreement shall alter or impair the obligations of
Company, which are absolute and uncondi tional, to pay the principal of and
interest on this Note at the place, at the respective times, and in the currency
herein prescribed.
<PAGE>
Exhibit VI
Page 3
Company promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 10.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Company and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
DIMAC CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE>
Exhibit VI
Page 4
[FORM OF REVOLVING NOTE]
DIMAC CORPORATION
PROMISSORY NOTE DUE JUNE 30, 2004
$(7)[1] New York, New York
July 23, 1999
FOR VALUE RECEIVED, DIMAC CORPORATION, a Delaware corporation
("COMPANY"), promises to pay to (8)[2] ("PAYEE") or its registered assigns,
on or before June 30, 2004, the lesser of (x) ($[1]) and (y) the unpaid
principal amount of all advances made by Payee to Company as Revolving Loans
under the Credit Agreement referred to below.
Company also promises to pay interest on the unpaid principal
amount hereof, from the date hereof until paid in full, at the rates and at the
times which shall be determined in accordance with the provisions of that
certain Amended and Restated Credit Agreement dated as of October 22, 1998, as
amended by the First Amendment, dated as of March 26, 1999, and as further
amended by the Second Amendment, dated as of July 23, 1999, and as it may be
further amended, restated, supplemented or otherwise modified (said Amended and
Restated Credit Agreement, as so amended, restated, supplemented or otherwise
modified, being the "CREDIT AGREEMENT"; the terms defined therein and not
otherwise defined herein being used herein as therein defined), by and among
Company, DIMAC Holdings, Inc., a Delaware corporation, the financial
institutions listed therein as Lenders, Credit Suisse First Boston, as
Administrative Agent (in such capacity, "ADMINISTRATIVE AGENT"), Credit Suisse
First Boston, as Arranger, Warburg Dillon Read LLC, as Syndication Agent and
First Union National Bank, as Documentation Agent.
This Note is one of Company's "Revolving Notes" in the
aggregate principal amount of $46,718,636.69 and is issued, together with the
other Revolving Notes, to amend and restate without interruption or novation,
all indebtedness evidenced by the Revolving Notes and is issued pursuant to and
entitled to the benefits of the Credit Agreement, to which reference is hereby
made for a more complete statement of the terms and conditions under which the
Revolving Loans evidenced hereby were made and are to be repaid.
All payments of principal and interest in respect of this Note
shall be made in lawful money of the United States of America in same day funds
at the Funding and Payment Office or at such other place as shall be designated
in writing for such purpose in accordance with the terms of the Credit
Agreement. Unless and until an Assignment Agreement effecting the assignment or
transfer of this Note shall have been accepted by Administrative Agent and
recorded in the Register
- ----------------------------------
(7) Insert aggregate amount of Lender's reduced Revolving Loan Commitment.
(8) Insert name of Lender.
<PAGE>
Exhibit VI
Page 5
as provided in subsection 10.1B(ii) of the Credit Agreement, Company and
Administrative Agent shall be entitled to deem and treat Payee as the owner and
holder of this Note and the Loans evidenced hereby. Payee hereby agrees, by its
acceptance hereof, that before disposing of this Note or any part hereof it will
make a notation hereon of all principal payments previously made hereunder and
of the date to which interest hereon has been paid; PROVIDED, HOWEVER, that the
failure to make a notation of any payment made on this Note shall not limit or
otherwise affect the obligations of Company hereunder with respect to payments
of principal of or interest on this Note.
Whenever any payment on this Note shall be stated to be due on
a day which is not a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in the
computation of the payment of interest on this Note.
This Note is subject to mandatory prepayment as provided in
subsection 2.4B(iii) of the Credit Agreement and to prepayment at the option of
Company as provided in subsection 2.4B(i) of the Credit Agreement.
THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF COMPANY AND PAYEE
HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT
LIMITATION SECTION 5-1401 OF THE GEN ERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
Upon the occurrence of an Event of Default, the unpaid balance
of the principal amount of this Note, together with all accrued and unpaid
interest thereon, may (or, with respect to certain Events of Default, shall)
become, or may be declared to be, due and payable in the manner, upon the
conditions and with the effect provided in the Credit Agreement.
This Note is entitled to the benefits of the Subsidiary
Guaranty and the Holdings Guaranty and is secured pursuant to the Collateral
Documents.
The terms of this Note are subject to amendment only in the
manner provided in the Credit Agreement.
This Note is subject to restrictions on transfer or assignment
as provided in subsections 10.1 and 10.17 of the Credit Agreement.
No reference herein to the Credit Agreement and no provision
of this Note or the Credit Agreement shall alter or impair the obligations of
Company, which are absolute and uncondi tional, to pay the principal of and
interest on this Note at the place, at the respective times, and in the currency
herein prescribed.
Company promises to pay all costs and expenses, including
reasonable attorneys' fees, all as provided in subsection 10.2 of the Credit
Agreement, incurred in the collection and enforcement of this Note. Company and
any endorsers of this Note hereby consent to renewals and extensions of time at
or after the maturity hereof, without notice, and hereby waive diligence,
<PAGE>
Exhibit VI
Page 6
presentment, protest, demand and notice of every kind and, to the full extent
permitted by law, the right to plead any statute of limitations as a defense to
any demand hereunder.
IN WITNESS WHEREOF, Company has caused this Note to be duly
executed and delivered by its officer thereunto duly authorized as of the date
and at the place first written above.
DIMAC CORPORATION
By:
------------------------------------
Name:
Title:
<PAGE>
Exhibit VI
Page 7
TRANSACTIONS
ON
REVOLVING NOTE
<TABLE>
<CAPTION>
OUTSTANDING
TYPE OF AMOUNT OF PRINCIPAL NOTATION
TYPE OF LOAN MADE AMOUNT OF BALANCE MADE BY
DATE LOAN MADE THIS DATE PRINCIPAL PAID THIS DATE THIS DATE
---- --------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
SCHEDULE 11(II)
SCHEDULE 1.1(ii) to the Existing Credit Agreement is hereby
amended by adding the following language:
"fees and expenses payable to entities for management and
advisory services"
<PAGE>
Schedule 2.1
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
LENDER AMOUNT OF
SECOND
AMENDMENT
LOANS
- --------------------------------------------------------------------------------------------
<S> <C>
REVOLVER:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. $132,202.83
MERCANTILE BANK $132,202.83
NATIONAL BANK OF CANADA/NY $132,202.83
CREDIT SUISSE FIRST BOSTON $145,423.09
BANK OF BOSTON/BOS $171,863.67
FLEET BANK, NA $171,863.67
HSBC BANK USA $171,863.67
FIRST UNION NATIONAL BANK/CHARLOTTE $198,304.23
UBS AG, STAMFORD/STAMFORD $198,304.23
UNION BANK OF CALIFORNIA, NA LA $264,405.64
Total $1,718,636.69
TERM A:
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. $613,599.60
MERCANTILE BANK $613,599.60
NATIONAL BANK OF CANADA/NY $613,599.60
CREDIT SUISSE FIRST BOSTON $674,959.56
BANK OF BOSTON/BOS $797,679.48
FLEET BANK, NA $797,679.48
HSBC BANK USA $797,679.48
FIRST UNION NATIONAL BANK/CHARLOTTE $920,399.40
UBS AG, STAMFORD/STAMFORD $920,399.40
UNION BANK OF CALIFORNIA, NA LA $1,227,199.20
Total $7,976,794.78
</TABLE>
<PAGE>
Schedule 2.1
Page 2
<TABLE>
<CAPTION>
LENDER AMOUNT OF
SECOND
AMENDMENT LOAN
- --------------------------------------------------------------------------------------------
<S> <C>
TERM B:
STEIN ROE FLOATING RATE LLC $82,875.79
FIRST UNION NATIONAL BANK/CHARLOTTE $281,777.69
UBS AG, STAMFORD/STAMFORD $281,777.69
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. $414,378.95
TORONTO DOMINION BANK/HOU $414,378.95
KEYPORT LIFE INSURANCE COMPANY $538,692.63
INDOSUEZ CAPITAL FUNDING III, LIMITED $690,631.58
FRANKLIN FLOATING RATE $704,444.21
PRUDENTIAL INSURANCE CO. OF AMERICA $828,757.90
SENIOR DEBT PORTFOLIO (EATON VANCE) $828,757.90
CREDIT SUISSE FIRST BOSTON $845,333.06
VAN KAMPEN AM. CAP. SR. FLOATING RATE $1,118,823.16
VAN KAMPEN AMERICAN CAP. PR. RT.INC. TR $1,118,823.16
INDOSUEZ CAPITAL FUNDING IV, LP $1,381,263.17
JACKSON NATIONAL LIFE INS. CO./CHI $2,071,894.75
Total $11,602,610.59
TERM C:
STEIN ROE FLOATING RATE LLC $62,156.84
FIRST UNION NATIONAL BANK/CHARLOTTE $211,333.26
UBS AG, STAMFORD/STAMFORD $211,333.26
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC. $310,784.21
TORONTO DOMINION BANK/HOU $310,784.21
KEYPORT LIFE INSURANCE COMPANY $404,019.48
INDOSUEZ CAPITAL FUNDING III, LIMITED $517,973.69
FRANKLIN FLOATING RATE $528,333.16
PRUDENTIAL INSURANCE CO. OF AMERICA $621,568.42
SENIOR DEBT PORTFOLIO (EATON VANCE) $621,568.42
CREDIT SUISSE FIRST BOSTON $633,999.79
VAN KAMPEN AM. CAP. SR. FLOATING RATE $839,117.37
VAN KAMPEN AMERICAN CAP. PR. RT.INC. TR $839,117.37
INDOSUEZ CAPITAL FUNDING IV, LP $1,035,947.37
JACKSON NATIONAL LIFE INS. CO./CHI $1,553,921.06
Total $8,701,957.94
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
AmeriComm Direct Marketing, Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
Three months Six months
Year Ended December 31, ended ended
-------------------------------------------- March 31, June 26,
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Loss before income taxes $ (2,015) $ (1,040) $ (2,211) $ (5,291) $ (3,784) $(10,210)
-------- -------- -------- -------- -------- --------
Fixed charges:
Interest on indebtedness 2,975 3,179 8,138 17,023 4,745 9,677
Portion of rents representative
of interest expense 214 117 275 556 212 424
-------- -------- -------- -------- -------- --------
Total fixed charges 3,189 3,296 8,413 17,579 4,957 10,101
-------- -------- -------- -------- -------- --------
Ratio computation:
Earnings (2,015) (1,040) (2,211) (5,291) (3,784) (10,210)
Fixed charges 3,189 3,296 8,413 17,579 4,957 10,101
-------- -------- -------- -------- -------- --------
Earnings before fixed charges 1,174 2,256 6,202 12,288 1,173 (109)
Fixed charges 3,189 3,296 8,413 17,579 4,957 10,101
-------- -------- -------- -------- -------- --------
Ratio of earnings (deficiency)
to fixed charges (2,015) (1,040) (2,211) (5,291) (3,784) (10,210)
</TABLE>
DIMAC Marketing Corporation, Inc.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Eleven Eight Four Three Six
Year Ended One Month months months months months months
December 31, ended ended ended ended ended ended
------------------ January 31, December 31, August 31, December 31, March 31, June 26,
1994 1995 1996 1996 1997 1997 1998 1998
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before
income taxes $ 3,496 $ 7,689 $ (354) $ 4,288 $(3,128) $ 147 $ 586 $ 204
------- ------- ------- ------- ------- ------- ------- -------
Fixed charges:
Interest on indebtedness 6,069 5,174 532 7,525 6,188 2,248 2,247 4,583
Portion of rents
representative of
interest expense 1,459 2,031 210 2,016 1,336 639 749 1,528
------- ------- ------- ------- ------- ------- ------- -------
Total fixed charges 7,528 7,205 742 9,541 7,524 2,887 2,996 6,111
------- ------- ------- ------- ------- ------- ------- -------
Ratio computation:
Earnings 3,496 7,689 (354) 4,288 (3,128) 147 586 204
Fixed charges 7,528 7,205 742 9,541 7,524 2,887 2,725 5,539
------- ------- ------- ------- ------- ------- ------- -------
Earnings before
fixed charges 11,024 14,894 388 13,829 4,396 3,034 3,311 5,743
Fixed charges 7,528 7,205 742 9,541 7,524 2,887 2,725 5,539
------- ------- ------- ------- ------- ------- ------- -------
Ratio of earnings
(deficiency) to
fixed charges 1.5 2.1 (354) 1.4 (3,128) 1.1 1.2 1.0
</TABLE>
DIMAC Corporation Inc.
Compution of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months
Inception to Ended
December 31, March 31,
1998 1999
------------ ------------
<S> <C> <C>
Income (loss) before income
taxes $ (8,243) $ (12,490)
------------ ------------
Fixed charges:
Interest on indebtness 17,069 8,153
Portion of rents representative
of interest expense 1,352 676
----------- -----------
Total fixed charges: 18,421 8,829
Ratio computation:
Earnings (8,243) (12,490)
Fixed charges 18,421 8,829
----------- -----------
Earnings before fixed charges 10,178 (3,661)
Fixed charges 18,421 8,829
----------- -----------
Ratio of earnings (deficiency)
to fixed charges (8,243) (12,490)
</TABLE>
DIMAC Corporation Inc.
Compution of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
-------------------------------------------------------
Three Months Year Three Months
Ended Ended Ended
March 31, 1998 December 31, 1998 March 31, 1999
----------------- ----------------- --------------
<S> <C> <C> <C>
Loss before income taxes $ (4,099) $ (18,985) $ (27,376)
----------------- ------------- -------------
Fixed charges
Interest on indebtness 8,145 32,931 32,939
Portion of rents representative of interest expense 690 2,731 2,725
----------------- ------------- -------------
Total fixed charges 8,835 35,662 35,664
----------------- ------------- -------------
Ratio computation
Earnings (4,099) (18,985) (27,376)
Fixed charges 8,835 35,662 35,664
----------------- ------------- -------------
Earnings before fixed charges 4,736 16,677 8,288
Fixed charges 8,835 35,662 35,664
----------------- ------------- -------------
Ratio of earnings (deficiency) to fixed charges (4,099) (18,985) (27,376)
</TABLE>
<PAGE>
EXHIBIT 21.1
------------
SUBSIDIARIES OF DIMAC CORPORATION
---------------------------------
DIMAC Marketing Corporation
DIMAC DIRECT, Inc.
Palm Coast Data Inc.
MBS/Multimode Inc.
DMW Worldwide, Inc.
AmeriComm Holdings, Inc.
AmeriComm Direct Marketing, Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated March 30, 1999 (except with respect to the matters discussed in
Notes 1 and 10, as to which the date is August 10, 1999) on the audited
consolidated financial statements of DIMAC Corporation and subsidiaries, our
report dated March 30, 1999 (except with respect to the matters discussed in
Notes 1 and 10, as to which the date is August 10, 1999) on the audited
consolidated financial statements of AmeriComm Holdings, Inc. and subsidiary
and to all references to our Firm included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
August 10, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in this
registration statement of our reports dated July 2, 1998, included herein and
to all references to our Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
St. Louis, Missouri
August 9, 1999
<PAGE>
Exhibit 23.3
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-67185 of DIMAC Corporation of our report dated February 21, 1997, on the
financial statements of AmeriComm Direct Marketing, Inc. as of December 31,
1995 and 1996, and for the years then ended appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Louisville, Kentucky
August 12, 1999
<PAGE>
Exhibit 99.1
Letter of Transmittal
FOR
Tender of 12 1/2% Senior Subordinated Notes Due 2008
IN EXCHANGE FOR
12 1/2% Series B Senior Subordinated Notes Due 2008
DIMAC CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON _________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
DELIVER TO THE EXCHANGE AGENT:
WILMINGTON TRUST COMPANY
BY REGISTERED OR CERTIFIED BY HAND:
MAIL OR BY OVERNIGHT COURIER:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust & c/o Harris Trust Company
Administration Window of New York, as Agent
1100 North Market Street 75 Water Street
Rodney Square North New York, NY 10004
Wilmington, DE 19890-0001
BY FACSIMILE:
Wilmington Trust Company
Corporate Trust Administration
FACSIMILE:
(302) 651-1079
CONFIRM BY TELEPHONE:
(302) 651-8869
Kristin Long
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via a facsimile number other than the one listed
above will not constitute a valid delivery. The instructions accompanying this
Letter of Transmittal should be read carefully before this Letter of Transmittal
is completed.
<PAGE>
The undersigned hereby acknowledges receipt and review of the
Prospectus dated _______ __, 1999 (the "Prospectus") of DIMAC Corporation (the
"Company") and this Letter of Transmittal (the "Letter of Transmittal"), which
together describe the Company's offer (the "Exchange Offer") to exchange its
12 1/2% Series B Senior Subordinated Notes due October 1, 2008 (the "New
Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is a part, for a like principal amount of its issued and
outstanding 12 1/2% Senior Subordinated Notes due October 1, 2008 (the "Old
Notes"). Capitalized terms used but not defined herein have the respective
meaning given to them in the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the latest time and date in which the Exchange Offer is
extended. The Company shall notify the holders of the Old Notes of any extension
by oral or written notice prior to 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by a Holder (as defined) of
Old Notes either if original Old Notes are to be forwarded herewith or if
delivery of Old Notes, if available, is to be made by book-entry transfer to the
account maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in the
Prospectus under the caption "The Exchange Offer-Book-Entry Transfer." Holders
of Old Notes whose Old Notes are not immediately available, or who are unable to
deliver their Old Notes and all other documents required by this Letter of
Transmittal to the Exchange Agent on or prior to the Expiration Date, or who are
unable to complete the procedure for book-entry transfer on a timely basis, must
tender their Old Notes according to the guaranteed delivery procedures set forth
in the Prospectus under the caption "The Exchange Offer-Guaranteed Delivery
Procedures." See Instruction 2. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
The term "Holder" with respect to the Exchange Offer means any person
in whose name Old Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Old Notes must complete
this Letter of Transmittal in its entirety.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates.
If the space below is inadequate, list the registered numbers and principal
amounts on a separate signed schedule and affix the list to this Letter of
Transmittal.
DESCRIPTION OF OLD NOTES TENDERED
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED AGGREGATE PRINCIPAL AMOUNT
REGISTERED HOLDER(S) NUMBERS* PRINCIPAL AMOUNT TENDERED**
EXACTLY AS NAME(S) APPEAR(S) REPRESENTED
ON OLD NOTES BY NOTE(S)
(PLEASE FILL IN, IF BLANK)
<S> <C> <C> <C>
Total...............
</TABLE>
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, any tendering Holder of Old Notes will be
deemed to have tendered the entire aggregate principal amount represented
by such Old Notes. All tenders must be in integral multiples of $1,000.
<PAGE>
- - CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
- - CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (FOR USE BY
ELIGIBLE INSTITUTIONS ONLY):
Name of Tendering Institution:
------
Account Number:
------
Transaction Code Number:
------
- - CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Holder(s) of Old Notes:
------
Date of Execution of Notice of Guaranteed Delivery:
------
Window Ticket Number (if available):
------
Name of Eligible Institution that Guaranteed Delivery:
------
Account Number (if delivered by book-entry transfer):
------
- - CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------
Address:
------
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities that it will deliver a
prospectus in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount of
Old Notes indicated above. Subject to and effective upon the acceptance for
exchange of the principal amount of Old Notes tendered in accordance with this
Letter of Transmittal, the undersigned hereby exchanges, assigns and transfers
to the Company all right, title and interest in and to the Old Notes tendered
for exchange hereby. The undersigned hereby irrevocably constitutes and appoints
the Exchange Agent, the agent and attorney-in-fact of the undersigned (with full
knowledge that the Exchange Agent also acts as the agent of the Company in
connection with the Exchange Offer) with respect to the tendered Old Notes with
full power of substitution to (i) deliver such Old Notes, or transfer ownership
of such Old Notes on the account books maintained by the Book-Entry Transfer
Facility, to the Company and deliver all accompanying evidences of transfer and
authenticity, and (ii) present such Old Notes for transfer on the books of the
Company and receive all benefits and otherwise exercise all rights of beneficial
ownership of such Old Notes, all in accordance with the terms of the Exchange
Offer. The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign and transfer the Old Notes
tendered hereby and to acquire the New Notes issuable upon the exchange of such
tendered Old Notes, and that the Company will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim, when the same are accepted
for exchange by the Company.
The undersigned acknowledge(s) that this Exchange Offer is being made
in reliance upon interpretations contained in no-action letters issued to third
parties by the staff of the Securities and Exchange Commission (the
"Commission") that the New Notes issued in exchange for the Old Notes pursuant
to the Exchange Offer may be offered for resale, resold and otherwise
transferred by Holders thereof (other than any such Holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such Holders' business and such Holders are not engaging
in and do not intend to engage in a distribution of the New Notes and have no
arrangement or understanding with any person to participate in a distribution of
such New Notes. The undersigned hereby further represent(s) to the Company that
(i) the New Notes acquired hereby are being acquired in the ordinary course of
business of the person receiving such New Notes, whether or not the undersigned,
(ii) neither the undersigned nor any such other person has an arrangement or
understanding to participate in the distribution of such New Notes within the
meaning of the Securities Act, (iii) neither the undersigned nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act or, if it is an "affiliate," that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (iv) if the undersigned is not a broker-dealer, neither the
undersigned nor any such other person is engaged in, or intends to engage in,
the distribution of the New Notes, and (v) if the undersigned is a
broker-dealer, that it will receive New Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making activities or
other trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer that is receiving New Notes for its own account in exchange for
Old Notes that were acquired as a result of market-making activities or other
trading activities, the undersigned acknowledges that it or such other person
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that the undersigned or such other person is an
"underwriter" within the meaning of the Securities Act. The undersigned
acknowledges that if the undersigned is participating in the Exchange Offer for
the purpose of distributing the New Notes (i) the undersigned cannot rely on the
position of the staff of the Commission in certain no-action letters and, in the
absence of an exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the New Notes, in which case the registration
statement
<PAGE>
must contain the selling security holder information required by Item 507 or
Item 508, as applicable, of Regulation S-K of the Commission, and (ii) failure
to comply with such requirements in such instance could result in the
undersigned incurring liability under the Securities Act for which the
undersigned is not indemnified by the Company.
If the undersigned or the person receiving the New Notes is an
"affiliate" (as defined in Rule 405 under the Securities Act), the undersigned
represents to the Company that the undersigned understands and acknowledges that
the New Notes may not be offered for resale, resold or otherwise transferred by
the undersigned or such other person without registration under the Securities
Act or an exemption therefrom.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Old Notes
tendered hereby, including the transfer of such Old Notes on the account books
maintained by the Book-Entry Transfer Facility.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted for exchange validly tendered Old Notes when, as and if the Company
gives oral or written notice thereof to the Exchange Agent. Any tendered Old
Notes that are not accepted for exchange pursuant to the Exchange Offer for any
reason will be returned, without expense, to the undersigned at the address
shown below or at a different address as may be indicated herein under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns.
The undersigned acknowledges that the Company's acceptance of properly
tendered Old Notes pursuant to the procedures described under the caption "The
Exchange Offer-Procedures for Tendering" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer.
Unless otherwise indicated under "Special Issuance Instructions,"
please issue the New Notes issued in exchange for the Old Notes accepted for
exchange and return any Old Notes not tendered or not exchanged, in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail or deliver the New Notes issued in exchange
for the Old Notes accepted for exchange and any Old Notes not tendered or not
exchanged (and accompanying documents, as appropriate) to the undersigned at the
address shown below the undersigned's signature(s). In the event that both
"Special Issuance Instructions" and "Special Delivery Instructions" are
completed, please issue the New Notes issued in exchange for the Old Notes
accepted for exchange in the name(s) of, and return any Old Notes not tendered
or not exchanged to, the person(s) so indicated. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Issuance Instructions"
and "Special Delivery Instructions" to transfer any Old Notes from the name of
the registered holder(s) thereof if the Company does not accept for exchange any
of the Old Notes so tendered for exchange.
<PAGE>
SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY (i) if Old Notes in a principal amount not
tendered, or New Notes issued in exchange for Old Notes accepted for exchange,
are to be issued in the name of someone other than the undersigned, or (ii) if
Old Notes tendered by book-entry transfer which are not exchanged are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility.
Issue New Notes and/or Old Notes to:
Name(s):
------
(PLEASE TYPE OR PRINT)
Address:
------
- ------
(INCLUDE ZIP CODE)
- ------
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
(COMPLETE SUBSTITUTE FORM W-9)
- - CREDIT UNEXCHANGED OLD NOTES DELIVERED BY BOOK-ENTRY TRANSFER TO THE
BOOK-ENTRY TRANSFER FACILITY SET FORTH BELOW:
(BOOK-ENTRY TRANSFER FACILITY
ACCOUNT NUMBER, IF APPLICABLE)
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------
Date
------
Date
Area Code and Telephone Number: ______
The above lines must be signed by the registered Holder(s) of Old Notes
as name(s) appear(s) on the Old Notes or on a security position listing, or by
person(s) authorized to become registered Holder(s) by a properly completed bond
power from the registered Holder(s), a copy of which must be transmitted with
this Letter of Transmittal. If Old Notes to which this Letter of Transmittal
relate are held of record by two or more joint Holders, then all such Holders
must sign this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, then such person must
(i) set forth his or her full title below and (ii) unless waived by the Company,
submit evidence satisfactory to the Company of such person's authority to so
act. See Instruction 5 regarding the completion of this Letter of Transmittal,
printed below.
<PAGE>
Name(s):
------
(PLEASE TYPE OR PRINT)
Capacity:
------
Address:
------
(INCLUDE ZIP CODE)
<PAGE>
MEDALLION SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 5)
Certain signatures must be Guaranteed by an Eligible Institution.
Signature(s) Guaranteed by an Eligible Institution:
- ------
(AUTHORIZED SIGNATURE)
- ------
(TITLE)
- ------
(NAME OF FIRM)
- ------
(ADDRESS, INCLUDE ZIP CODE)
- ------
(AREA CODE AND TELEPHONE NUMBER)
Dated: , 19
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 6)
To be completed ONLY if Old Notes in a principal amount not tendered, or New
Notes issued in exchange for Old Notes accepted for exchange, are to be mailed
or delivered to someone other than the undersigned, or to the undersigned at an
address other than that shown below the undersigned's signature.
Mail or deliver New Notes and/or Old Notes to:
Name:
------
(PLEASE TYPE OR PRINT)
Address:
------
- ------
(INCLUDE ZIP CODE)
- ------
<PAGE>
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES OR BOOK-ENTRY
CONFIRMATIONS. All physically delivered Old Notes or any confirmation of a
book-entry transfer to the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes tendered by book-entry transfer (a "Book-Entry
Confirmation"), as well as a properly completed and duly executed copy of this
Letter of Transmittal or facsimile hereof, and any other documents required by
this Letter of Transmittal, must be received by the Exchange Agent at its
address set forth herein prior to 5:00 p.m., New York City time, on the
Expiration Date. The method of delivery of the tendered Old Notes, this Letter
of Transmittal and all other required documents to the Exchange Agent is at the
election and risk of the Holder and, except as otherwise provided below, the
delivery will be deemed made only when actually received or confirmed by the
Exchange Agent. Instead of delivery by mail, it is recommended that the Holder
use an overnight or hand delivery service. In all cases, sufficient time should
be allowed to assure delivery to the Exchange Agent before the Expiration Date.
No Letter of Transmittal or Old Notes should be sent to the Company.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes and (a) whose Old Notes are not immediately available, or (b) who cannot
deliver their Old Notes, this Letter of Transmittal or any other documents
required hereby to the Exchange Agent prior to the Expiration Date or (c) who
are unable to complete the procedure for book-entry transfer on a timely basis,
must tender their Old Notes according to the guaranteed delivery procedures set
forth in the Prospectus. Pursuant to such procedures: (i) such tender must be
made by or through a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or a trust company having an office or correspondent in the
United States (an "Eligible Institution"); (ii) prior to the Expiration Date,
the Exchange Agent must have received from the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
Holder of the Old Notes, the registration number(s) of such Old Notes and the
principal amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three (3) New York Stock Exchange, Inc.
("NYSE") trading days after the Expiration Date, this Letter of Transmittal (or
facsimile hereof) together with the Old Notes (or a Book-Entry Confirmation) in
proper form for transfer will be received by the Exchange Agent; and (iii) the
certificates for all physically tendered shares of Old Notes, in proper form for
transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter are received by the Exchange Agent within
three (3) NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
Any Holder of Old Notes who wishes to tender Old Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery prior to 5:00 p.m., New York
City time, on the Expiration Date. Upon request of the Exchange Agent, a Notice
of Guaranteed Delivery will be sent to Holders who wish to tender their Old
Notes according to the guaranteed delivery procedures set forth above.
See "The Exchange Offer-Guaranteed Delivery Procedures" section of the
Prospectus.
3. TENDER BY HOLDER. Only a Holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial Holder of Old Notes who is not the
registered Holder and who wishes to tender should arrange with the registered
Holder to execute and deliver this Letter of Transmittal on his behalf or must,
prior to completing and executing this Letter of Transmittal and delivering his
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such Holder's name or obtain a properly completed bond power from the
registered Holder.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering Holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of Old Notes
Tendered" above. The entire principal amount of Old Notes
<PAGE>
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes is not
tendered, then Old Notes for the principal amount of Old Notes not tendered and
New Notes issued in exchange for any Old Notes accepted will be sent to the
Holder at his or her registered address, unless a different address is provided
in the appropriate box on this Letter of Transmittal, promptly after the Old
Notes are accepted for exchange.
5. SIGNATURES ON THIS LETTER OF TRANSMITTAL; BOND POWERS AND
ENDORSEMENTS; MEDALLION GUARANTEE OF SIGNATURES. If this Letter of Transmittal
(or facsimile hereof) is signed by the record Holder(s) of the Old Notes
tendered hereby, the signature must correspond with the name(s) as written on
the face of the Old Notes without alteration, enlargement or any change
whatsoever. If this Letter of Transmittal is signed by a participant in the
Book-Entry Transfer Facility, the signature must correspond with the name as it
appears on the security position listing as the Holder of the Old Notes.
If this Letter of Transmittal (or facsimile hereof) is signed by the
registered Holder or Holders of Old Notes listed and tendered hereby and the New
Notes issued in exchange therefor are to be issued (or any untendered principal
amount of Old Notes are to be reissued) to the registered Holder, the said
Holder need not and should not endorse any tendered Old Notes, nor provide a
separate bond power. In any other case, such Holder must either properly endorse
the Old Notes tendered or transmit a properly completed separate bond power with
this Letter of Transmittal, with the signatures on the endorsement or bond power
guaranteed by an Eligible Institution.
If this Letter of Transmittal (or facsimile hereof) is signed by a
person other than the registered Holder or Holders of any Old Notes listed, such
Old Notes must be endorsed or accompanied by appropriate bond powers, in each
case signed as the name of the registered Holder or Holders appears on the Old
Notes.
If this Letter of Transmittal (or facsimile hereof) or any Old Notes or
bond powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, or officers of corporations or others acting in a fiduciary
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
No signature guarantee is required if (i) this Letter of Transmittal is
signed by the registered holder(s) of the Old Notes tendered herewith (or by a
participant in the Book-Entry Transfer Facility whose name appears on a security
position listing as the owner of the tendered Old Notes) and the issuance of New
Notes (and any Old Notes not tendered or not accepted) will be directly to such
registered holder(s) (or, if signed by a participant in the Book-Entry Transfer
Facility, any New Notes or Old Notes not tendered or not accepted are to be
deposited to such participant's account at such Book-Entry Transfer Facility)
and neither the box entitled "Special Delivery Instructions" nor the box
entitled "Special Registration Instructions" has been completed, or (ii) such
Old Notes are tendered for the account of an Eligible Institution. In all other
cases, all signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders
should indicate, in the applicable box or boxes, the name and address (or
account at the Book-Entry Transfer Facility) to which New Notes or substitute
Old Notes for principal amounts not tendered or not accepted for exchange are to
be issued or sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, New Notes or Old Notes for principal amounts not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered Holder of the Old Notes tendered
hereby, or if tendered Old Notes are registered in the name of any person other
than the person signing this Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant
<PAGE>
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered Holder or any other persons) will be payable by the
tendering Holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering Holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 7, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE OLD NOTES LISTED IN THIS LETTER OF
TRANSMITTAL.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Old Notes which are accepted for exchange must provide the Company
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results in
an over-payment of taxes, a refund may be obtained.) Certain holders (including,
among others, all corporations and certain foreign individuals) are not subject
to these backup withholding and reporting requirements. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever
steps are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of tendered Old Notes
will be determined by the Company, in its sole discretion, which determination
will be final and binding. The Company reserves the right to reject any and all
Old Notes not validly tendered or any Old Notes, the Company's acceptance of
which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Old Notes as to any ineligibility of any
holder who seeks to tender Old Notes in the Exchange Offer. The interpretation
of the terms and conditions of the Exchange Offer (includes this Letter of
Transmittal and the instructions hereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as the
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes,
but shall not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive, in whole or part, any of the conditions to the Exchange Offer set forth
in the Prospectus.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Old Notes on transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or for additional copies of the Prospectus or this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover page of this Letter of Transmittal. Holders may
also contact their broker, dealer, commercial bank, trust company or other
nominee for assistance concerning the Exchange Offer.
<PAGE>
14. ACCEPTANCE OF TENDERED OLD NOTES AND ISSUANCE OF NEW NOTES; RETURN
OF OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Old Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered Old
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown above (or credited to the undersigned's account at the
Book-Entry Transfer Facility designated above) or at a different address as may
be indicated under the box entitled "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer-Withdrawal of Tenders."
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE
HEREOF (TOGETHER WITH THE OLD NOTES WHICH MUST BE DELIVERED BY BOOK-ENTRY
TRANSFER OR IN ORIGINAL HARD COPY FORM) OR THE NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION TIME.
(TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5))
PAYER'S NAME: WILMINGTON TRUST COMPANY
<TABLE>
<CAPTION>
SUBSTITUTE OR
FORM W-9 SOCIAL SECURITY NUMBER EMPLOYER
IDENTIFICATION NUMBER
<S> <C>
DEPARTMENT OF THE TREASURY PART I-Taxpayer Identification No.-For all accounts, enter your taxpayer identification number
INTERNAL REVENUE SERVICE in the appropriate box. For most individuals and sole proprietors, this is your
PAYER'S REQUEST FOR social security number. For other entities, it is your Employer Identification Number.
TAXPAYER IDENTIFICATION If you do not have a number, see How to Obtain a TIN in the enclosed Guidelines. Note:
NUMBER If the account is in more than one name, see Employer Identification Number the chart
on page 2 of the enclosed Guidelines to determine what number to enter.
PART II-For Payees Exempt From Backup Withholding (see enclosed Guidelines)
CERTIFICATION-UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and either (a) I have mailed or delivered an application to
receive a taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office or (b) I intend to mail or deliver an application in the
near future. I understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I
provide a number;
(2) I am not subject to backup withholding either because (a) I am exempt from backup
withholding, or (b) 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
(c) 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, correct and complete.
</TABLE>
SIGNATURE DATE
<PAGE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU WITH RESPECT TO THE NEW
NOTES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
Exhibit 99.3
Letter to Brokers
FOR
Tender of 12 1/2% Senior Subordinated Notes Due 2008
IN EXCHANGE FOR
12 1/2% Series B Senior Subordinated Notes Due 2008
DIMAC CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ___________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holders and Depository
Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by DIMAC Corporation (the "Company"), a Delaware corporation, to exchange
its 12 1/2% Series B Senior Subordinated Notes Due 2008 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for a like principal amount of its issued and outstanding
12 1/2% Senior Subordinated Notes Due 2008 (the "Old Notes") upon the terms
and subject to the conditions set forth in the Company's Prospectus, dated
_______ __, 1999, and the related Letter of Transmittal (which together
constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated _______ __, 1999;
2. Letter of Transmittal (together with accompanying Substitute Form
W-9 Guidelines);
3. Notice of Guaranteed Delivery; and
4. Letter which may be sent to your clients for whose account you hold
Old Notes in your name or in the name of your nominee, with space provided for
obtaining such client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not the undersigned, (ii) neither
the undersigned nor any such other person has an arrangement or understanding to
participate in the distribution of such New Notes within the meaning of the
Securities Act, (iii) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act
or, if it is an "affiliate," that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(iv) if the undersigned is not a broker-dealer, neither the undersigned nor any
such other person is engaged in, or intends to engage in, the distribution of
such New Notes, and (v) if the undersigned is a broker-dealer (whether or not it
is also an "affiliate"), that it will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer (whether or not it is also an "affiliate") that is receiving New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, the undersigned
will acknowledge that it or such other person will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes;
<PAGE>
however, by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, the undersigned will not be deemed to admit
that the undersigned or such other person is an "underwriter" within the meaning
of the Securities Act.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Old Notes for you to make the foregoing
representations.
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Old Notes pursuant to the Exchange Offer. The Company
will pay or cause to be paid any transfer taxes payable on the transfer of Old
Notes to it, except as otherwise provided in Instruction 7 of the enclosed
Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
WILMINGTON TRUST COMPANY
<PAGE>
Exhibit 99.4
Letter to Clients
FOR
Tender of 12 1/2% Senior Subordinated Notes Due 2008
IN EXCHANGE FOR
12 1/2% Series B Senior Subordinated Notes Due 2008
DIMAC CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ____________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated _______ __, 1999, of
DIMAC Corporation (the "Company"), a Delaware corporation, and a related Letter
of Transmittal (which together constitute the "Exchange Offer") relating to the
offer by the Company to exchange its 12 1/2% Series B Senior Subordinated Notes
Due 2008 (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), for a like principal amount of its
issued and outstanding 12 1/2% Senior Subordinated Notes Due 2008 (the "Old
Notes"), upon the terms and subject to the conditions set forth in the Exchange
Offer.
The Exchange Offer is not conditioned upon any minimum number of Old
Notes being tendered.
We are the holder of record of Old Notes held by us for your own
account. A tender of such Old Notes can be made only by us as the record holder
and pursuant to your instructions. The Letter of Transmittal is furnished to you
for your information only and cannot be used by you to tender Old Notes held by
us for your account.
We request instructions as to whether you wish to tender any or all of
the Old Notes held by us for your account pursuant to the terms and conditions
of the Exchange Offer. We also request that you confirm that we may on your
behalf make the representations contained in the Letter of Transmittal.
Pursuant to the Letter of Transmittal, each holder of Old Notes will
represent to the Company that (i) the New Notes acquired pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Notes, whether or not the undersigned, (ii) neither
the undersigned nor any such other person has an arrangement or understanding to
participate in the distribution of such New Notes within the meaning of the
Securities Act, (iii) neither the undersigned nor any such other person is an
"affiliate" of the Company within the meaning of Rule 405 of the Securities Act
or, if it is an "affiliate," that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable,
(iv) if the undersigned is not a broker-dealer, neither the undersigned nor any
such other person is engaged in, or intends to engage in, the distribution of
such New Notes, and (v) if the undersigned is a broker-dealer (whether or not it
is also an "affiliate"), that it will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making
activities or other trading activities.
If the undersigned or the person receiving the New Notes is a
broker-dealer (whether or not it is also an "affiliate") that is receiving New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, the undersigned
will acknowledge that it or such other person will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, the undersigned will not be deemed to admit
that the undersigned or such other person is an "underwriter" within the meaning
of the Securities Act.
Very truly yours,
<PAGE>
Exhibit 99.5
Instructions to Registered Holder and/or Book
Entry Transfer Participant from Beneficial Owner
FOR
Tender of 12 1/2% Senior Subordinated Notes Due 2008
IN EXCHANGE FOR
12 1/2% Series B Senior Subordinated Notes Due 2008
DIMAC CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ____________, 1999,
UNLESS EXTENDED (THE "EXPIRATION DATE").
OLD NOTES TENDERED IN THE EXCHANGE OFFER MAY BE WITHDRAWN
AT ANY TIME PRIOR TO THE EXPIRATION DATE.
To Registered Holder and/or Participant
of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
_______ _, 1999 (the "Prospectus") of DIMAC Corporation, a Delaware 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 12 1/2% Series B Senior Subordinated Notes Due 2008 (the
"New Notes") for all of its issued and outstanding 12 1/2% Senior Subordinated
Notes Due 2008 (the "Old Notes"). Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
This will instruct you, the registered holder and/or book-entry
transfer facility 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 12 1/2% 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 OLD NOTES TO BE
TENDERED (IF ANY)): $ ________
/ / 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 New Notes acquired pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the undersigned, (ii) neither the undersigned nor
any such other person has an arrangement or understanding to participate in the
distribution of such New Notes within the meaning of the Securities Act, (iii)
neither the undersigned nor any such other person is an "affiliate" of the
Company within the meaning of Rule 405 of the Securities Act or, if it is an
"affiliate," that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable, (iv) if the
undersigned is not a broker-dealer, neither the undersigned nor any such other
person is engaged in, or intends to engage in, the distribution of such New
Notes, and (v) if the undersigned is a broker-dealer (whether or not it is also
an "affiliate"), that it will receive New Notes for its own account in exchange
for Old Notes that were acquired as a result of market-making activities or
other trading activities.
<PAGE>
If the undersigned or the person receiving the New Notes is a
broker-dealer (whether or not it is also an "affiliate") that is receiving New
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, the undersigned
will acknowledge that it or such other person will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus meeting the
requirements of the Securities Act, the undersigned will not be deemed to admit
that the undersigned or such other person is an "underwriter" within the meaning
of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
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Signature(s):
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Name(s) (please print):
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Address:
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Telephone Number:
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Taxpayer Identification or Social Security Number:
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Date:
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