-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UtdBpewwYI7OuksgO3pyOUjrCD4e0GL+NkRRM43H9Xo2vPgSHeGLS6kQU4L1oncL Q/cRmDW5KLR3G5rvNJKOjw== 0001047469-99-011331.txt : 19990326 0001047469-99-011331.hdr.sgml : 19990326 ACCESSION NUMBER: 0001047469-99-011331 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA INC CENTRAL INDEX KEY: 0000884382 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 133647573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-11106 FILM NUMBER: 99572718 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 5TH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FORMER COMPANY: FORMER CONFORMED NAME: K III COMMUNICATIONS CORP DATE OF NAME CHANGE: 19930328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAZA COMMUNICATIONS INC CENTRAL INDEX KEY: 0000720642 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 953053189 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-08536 FILM NUMBER: 99572954 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 7148512220 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXCELLENCE IN TRAINING CORP CENTRAL INDEX KEY: 0000767247 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752532442 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-02 FILM NUMBER: 99572719 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDUSTRIAL TRAINING SYSTEMS CORP CENTRAL INDEX KEY: 0000801309 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 222070040 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-16385 FILM NUMBER: 99572720 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTELLICHOICE INC CENTRAL INDEX KEY: 0000849427 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 770168905 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-04 FILM NUMBER: 99572721 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BACONS INFORMATION INC CENTRAL INDEX KEY: 0000871784 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 364011543 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-05 FILM NUMBER: 99572722 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA INTERTEC CORP CENTRAL INDEX KEY: 0000884398 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 481071277 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-07 FILM NUMBER: 99572723 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10150 BUSINESS PHONE: 212450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FILMS FOR THE HUMANITIES & SCIENCES INC CENTRAL INDEX KEY: 0000884399 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 131932571 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-05189-08 FILM NUMBER: 99572724 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R E R PUBLISHING CORP CENTRAL INDEX KEY: 0000884401 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 133090623 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-09 FILM NUMBER: 99572725 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERMODAL PUBLISHING COMPANY LTD CENTRAL INDEX KEY: 0000884402 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 132633752 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-10 FILM NUMBER: 99572726 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 212450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WEEKLY READER CORP CENTRAL INDEX KEY: 0000884403 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 133603780 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-11 FILM NUMBER: 99572727 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FUNK & WAGNALLS YEARBOOK CORP CENTRAL INDEX KEY: 0000884405 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 133603787 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-12 FILM NUMBER: 99572728 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HAAS PUBLISHING COMPANIES INC CENTRAL INDEX KEY: 0000925505 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 581858150 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-17 FILM NUMBER: 99572729 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARGUS PUBLISHERS CORP CENTRAL INDEX KEY: 0001011498 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 952219151 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-18 FILM NUMBER: 99572730 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRONICS SOURCE BOOK INC CENTRAL INDEX KEY: 0001011501 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 360645610 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-19 FILM NUMBER: 99572731 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIFETIME LEARNING SYSTEMS INC CENTRAL INDEX KEY: 0001011510 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 133763276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-30 FILM NUMBER: 99572732 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 MAIL ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCMULLEN ARGUS PUBLISHING INC CENTRAL INDEX KEY: 0001011512 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 952663753 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-22 FILM NUMBER: 99572733 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 MAIL ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMBOL OF EXCELLENCE PUBLISHERS INC CENTRAL INDEX KEY: 0001011518 STANDARD INDUSTRIAL CLASSIFICATION: NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING [2711] IRS NUMBER: 630845698 STATE OF INCORPORATION: AL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-24 FILM NUMBER: 99572734 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHANNEL ONE COMMUNICATIONS CORP CENTRAL INDEX KEY: 0001011521 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 133783276 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-25 FILM NUMBER: 99572735 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2124500100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN HEAT VIDEO PRODUCTIONS INC CENTRAL INDEX KEY: 0001035469 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431418177 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-26 FILM NUMBER: 99572736 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANKERS CONSULTING CO CENTRAL INDEX KEY: 0001035471 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 431771756 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-28 FILM NUMBER: 99572737 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IDTN LEASING CORP CENTRAL INDEX KEY: 0001035472 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133414420 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-29 FILM NUMBER: 99572738 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOCKERT JACKSON & ASSOCIATES INC CENTRAL INDEX KEY: 0001035480 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 911395126 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-30 FILM NUMBER: 99572739 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAW ENFORCEMENT TELEVISION NETWORK INC/TX CENTRAL INDEX KEY: 0001035481 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752257839 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-31 FILM NUMBER: 99572740 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL A TRAIN INC CENTRAL INDEX KEY: 0001035483 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752532446 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-32 FILM NUMBER: 99572741 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TI IN ACQUISITION CORP CENTRAL INDEX KEY: 0001035484 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752478738 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-33 FILM NUMBER: 99572742 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTCOTT COMMUNICATIONS MICHIGAN INC CENTRAL INDEX KEY: 0001035485 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 382955660 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-34 FILM NUMBER: 99572743 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTCOTT ECI INC CENTRAL INDEX KEY: 0001035486 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752475419 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-35 FILM NUMBER: 99572744 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GARETH STEVENS INC CENTRAL INDEX KEY: 0001035489 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 391462742 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-38 FILM NUMBER: 99572745 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN EMPIRE PUBLICATIONS INC CENTRAL INDEX KEY: 0001035491 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 953363328 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-40 FILM NUMBER: 99572746 BUSINESS ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: C/O K III COMMUNICATIONS CORP STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA REFERENCE INC CENTRAL INDEX KEY: 0001057170 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133603781 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-41 FILM NUMBER: 99572747 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC CENTRAL INDEX KEY: 0001057176 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521654079 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-42 FILM NUMBER: 99572748 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QWIZ INC CENTRAL INDEX KEY: 0001057179 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 582302364 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-43 FILM NUMBER: 99572749 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA INFORMATION INC CENTRAL INDEX KEY: 0001057181 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133555670 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-44 FILM NUMBER: 99572750 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PICTORIAL INC CENTRAL INDEX KEY: 0001057182 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 351616640 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-45 FILM NUMBER: 99572751 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEMPHIS APARTMENT GUIDE INC CENTRAL INDEX KEY: 0001057184 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 620964956 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-46 FILM NUMBER: 99572752 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LITTLE ROCK APARTMENT GUIDE INC CENTRAL INDEX KEY: 0001057185 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 742298918 STATE OF INCORPORATION: AK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-47 FILM NUMBER: 99572753 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & SCIENCES NETWORK INC CENTRAL INDEX KEY: 0001057186 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-48 FILM NUMBER: 99572754 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUINN COMMUNICATIONS INC CENTRAL INDEX KEY: 0001057189 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 621486552 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-49 FILM NUMBER: 99572755 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GO LO ENTERTAINMENT INC CENTRAL INDEX KEY: 0001057190 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-50 FILM NUMBER: 99572756 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL BUSINESS MEDIA HOLDINGS INC CENTRAL INDEX KEY: 0001057191 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232695951 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-51 FILM NUMBER: 99572757 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVER CONCEPTS MARKETING SERVICES LLC CENTRAL INDEX KEY: 0001057196 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043370389 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-52 FILM NUMBER: 99572758 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL BUSINESS MEDIA INC CENTRAL INDEX KEY: 0001057199 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232695564 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-53 FILM NUMBER: 99572759 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APARTMENT GUIDE OF NASHVILLE INC CENTRAL INDEX KEY: 0001057200 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-54 FILM NUMBER: 99572760 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSK PUBLISHING CO INC/NY CENTRAL INDEX KEY: 0001057206 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133023395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-55 FILM NUMBER: 99572761 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA MAGAZINES INC CENTRAL INDEX KEY: 0001058074 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133636344 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-56 FILM NUMBER: 99572762 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: SIMPSON THACHER & BARTLETT STREET 2: 425 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA MAGAZINES FINANCE INC CENTRAL INDEX KEY: 0001058075 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133616343 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-57 FILM NUMBER: 99572763 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: SIMPSON THACHER & BARTLETT STREET 2: 425 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA HOLDINGS III INC CENTRAL INDEX KEY: 0001058078 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 133617238 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-59 FILM NUMBER: 99572764 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: SIMPSON THACHER & BARTLETT STREET 2: 425 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOWRIDER PUBLISING GROUP INC CENTRAL INDEX KEY: 0001058079 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954307029 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-60 FILM NUMBER: 99572765 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: SIMPSON THACHER & BARTLETT STREET 2: 425 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA WORKPLACE LEARNING INC CENTRAL INDEX KEY: 0001058080 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752110878 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-61 FILM NUMBER: 99572766 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: SIMPSON THACHER & BARTLETT STREET 2: 425 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOWHUNTER MAGAZINE INC CENTRAL INDEX KEY: 0001058677 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-62 FILM NUMBER: 99572767 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANOE & KAYAK INC CENTRAL INDEX KEY: 0001058678 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-63 FILM NUMBER: 99572768 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLIMBING INC CENTRAL INDEX KEY: 0001058679 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-64 FILM NUMBER: 99572769 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COWLES BUSINESS MEDIA INC CENTRAL INDEX KEY: 0001058681 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-65 FILM NUMBER: 99572770 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA ENTHUSIAST PUBLICATIONS INC CENTRAL INDEX KEY: 0001058682 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 231577768 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-66 FILM NUMBER: 99572771 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FORMER COMPANY: FORMER CONFORMED NAME: COWLES ENTHUSIAST MEDIA INC DATE OF NAME CHANGE: 19980327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COWLES HISTORY GROUP INC CENTRAL INDEX KEY: 0001058683 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-67 FILM NUMBER: 99572772 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SIMBA INFORMATION CENTRAL INDEX KEY: 0001058684 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 061281600 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-74 FILM NUMBER: 99572773 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FORMER COMPANY: FORMER CONFORMED NAME: COWLES SIMBA INFORMATION INC DATE OF NAME CHANGE: 19980327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUMBERLAND PUBLISHING INC CENTRAL INDEX KEY: 0001058685 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-76 FILM NUMBER: 99572774 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HORSE & RIDER INC CENTRAL INDEX KEY: 0001058686 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-80 FILM NUMBER: 99572775 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KITPLANES ACQUISITION CO CENTRAL INDEX KEY: 0001058687 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-82 FILM NUMBER: 99572776 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RETAILVISION INC CENTRAL INDEX KEY: 0001058688 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-72 FILM NUMBER: 99572777 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWEST ART INC CENTRAL INDEX KEY: 0001058689 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51281-73 FILM NUMBER: 99572778 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIRTUAL FLYSHOP INC CENTRAL INDEX KEY: 0001058696 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-96516-1A FILM NUMBER: 99572779 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VEGETERIAN TIMES INC CENTRAL INDEX KEY: 0001058697 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 232667502 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-51891-75 FILM NUMBER: 99572780 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: BOWHUNTER MAGAZINE INC STREET 2: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN GUIDANCE SERVICE INC CENTRAL INDEX KEY: 0001082234 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410802162 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-41 FILM NUMBER: 99572955 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGS INTERNATIONAL SALES INC CENTRAL INDEX KEY: 0001082236 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 410982023 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-42 FILM NUMBER: 99572956 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE RESEARCH GROUP LTD CENTRAL INDEX KEY: 0001082237 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 550613105 STATE OF INCORPORATION: WV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-43 FILM NUMBER: 99572957 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMCORP LLC CENTRAL INDEX KEY: 0001082239 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 954653392 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-44 FILM NUMBER: 99572958 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADDUX PUBLISHING INC CENTRAL INDEX KEY: 0001082241 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 592338050 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-45 FILM NUMBER: 99572959 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIRAMAR COMMUNICATIONS INC CENTRAL INDEX KEY: 0001082243 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 952845391 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-46 FILM NUMBER: 99572960 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRIMEDIA VENTURES INC CENTRAL INDEX KEY: 0001082244 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 134019919 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-47 FILM NUMBER: 99572961 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TSECRP INC CENTRAL INDEX KEY: 0001082245 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 954259640 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-03691-48 FILM NUMBER: 99572962 BUSINESS ADDRESS: STREET 1: 745 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10151 BUSINESS PHONE: 2127450100 MAIL ADDRESS: STREET 1: PRIMEDIA INC STREET 2: 745 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10151 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------- FORM 10-K ------------ [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-11106 PRIMEDIA INC. (Exact name of registrant as specified in its charter) (SEE TABLE OF ADDITIONAL REGISTRANTS) DELAWARE 13-3647573 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 745 FIFTH AVENUE, NEW YORK, NEW YORK 10151 (Address of principal executive offices) (Zip Code)
(212) 745-0100 (Registrant's telephone number, including area code) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - --------------------------------------------------------------- ----------------------------- COMMON STOCK, PAR VALUE $.01 PER SHARE......................... NEW YORK STOCK EXCHANGE
------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE ------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__X__ No____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the common equity of PRIMEDIA Inc. ("PRIMEDIA") which is held by non-affiliates of PRIMEDIA at February 28, 1999 was approximately $246 million. As of February 28, 1999, 144,581,422 shares of PRIMEDIA's Common Stock were outstanding. The following documents are incorporated into this Form 10-K by reference: PRIMEDIA's notice of annual meeting and proxy statement for its 1999 annual meeting of shareholders into Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD I.R.S. EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER REGISTRANT AS SPECIFIED INCORPORATION OR CLASSIFICATION IDENTIFICATION IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER --------------------------------- ---------------- ------------------- ------------- American Guidance Service, Inc. ............................. Minnesota 2731 41-0802162 AGS International Sales, Inc. ............................... Minnesota 2731 41-0982023 American Heat Video Productions, Inc. ....................... Missouri 8299 43-1418177 The Apartment Guide of Nashville, Inc........................ Tennessee 2741 62-1224076 Argus Publishers Corporation................................. California 2721 95-2219151 Bacon's Information, Inc. ................................... Delaware 7389 36-4011543 Bankers Consulting Company................................... Missouri 8299 43-1771756 Bowhunter Magazine, Inc. .................................... Pennsylvania 2721 23-2667502 Cambridge Research Group, Ltd. .............................. West Virginia 7812 55-0613105 Canoe & Kayak, Inc. ......................................... Delaware 2721 41-1895510 Cardinal Business Media, Inc. ............................... Delaware 2721 23-2695564 Cardinal Business Media Holdings, Inc. ...................... Delaware 2721 23-2695951 Channel One Communications Corp. ............................ Delaware 4833 13-3783278 Climbing, Inc. .............................................. Delaware 2721 41-1885204 CommCorp. LLC................................................ California 2721 95-4653392 Cover Concepts Marketing Services, LLC....................... Delaware 7319 04-3370389 Cowles Business Media, Inc. ................................. Connecticut 2721 06-0935977 Cowles History Group, Inc. .................................. Virginia 2721 54-1606227 CSK Publishing Company Incorporated.......................... Delaware 2721 13-3023395 Cumberland Publishing, Inc. ................................. Maryland 2721 52-1758147 The Electronics Source Book, Inc. ........................... Delaware 2741 33-0645610 Excellence in Training Corporation........................... Delaware 8299 75-2532442 Films for the Humanities & Sciences, Inc. ................... Delaware 7812 13-1932571 Funk & Wagnalls Yearbook Corp. .............................. Delaware 2731 13-3603787 Gareth Stevens, Inc. ........................................ Wisconsin 2731 39-1462742 GO LO Entertainment, Inc. ................................... California 7389 95-4307031 Guinn Communications, Inc. .................................. Tennessee 2741 62-1486552 Haas Publishing Companies, Inc. ............................. Delaware 2741 58-1858150 Health & Sciences Network, Inc. ............................. California 8299 95-3654568 Horse & Rider, Inc. ......................................... California 2721 33-0480523 Intermodal Publishing Company, Ltd. ......................... New York 2721 13-2633752 IDTN Leasing Corporation..................................... Delaware 8299 13-3414420 Industrial Training Systems Corporation...................... New Jersey 8299 22-2070040 IntelliChoice, Inc. ......................................... California 2721 77-0168905 Kitplanes Acquisition Company................................ Delaware 2721 95-4617433 Law Enforcement Television Network, Inc. .................... Texas 8299 75-2257839 Lifetime Learning Systems, Inc. ............................. Delaware 2741 13-3783276 Little Rock Apartment Guide, Inc. ........................... Arkansas 2741 74-2298918 Lockert Jackson & Associates, Inc. .......................... Washington 8299 91-1395126 Low Rider Publishing Group, Inc.............................. California 2721 95-4307029 Maddux Publishing, Inc. ..................................... Florida 2741 59-2338050 McMullen Argus Publishing, Inc. ............................. California 2721 95-2663753 Memphis Apartment Guide, Inc. ............................... Tennessee 2741 62-0964956 Miramar Communications Inc. ................................. California 2721 95-2845391 Pictorial, Inc. ............................................. Indiana 2731 35-1616640 Plaza Communications, Inc. .................................. California 2721 95-3053189 PRIMEDIA Enthusiast Publications, Inc. ...................... Pennsylvania 2721 23-1577768 PRIMEDIA Holdings III Inc. .................................. Delaware 6719 13-3617238 PRIMEDIA Information Inc. ................................... Delaware 2721 13-3555670 PRIMEDIA Intertec Corporation ............................... Delaware 2721 48-1071277 PRIMEDIA Magazines Inc. ..................................... Delaware 2721 13-3616344 PRIMEDIA Magazines Finance Inc. ............................. Delaware 2721 13-3616343 PRIMEDIA Reference Inc. ..................................... Delaware 2731 13-3603781 PRIMEDIA Special Interest Publications Inc. ................. Delaware 2721 52-1654079 PRIMEDIA Ventures, Inc. ..................................... Delaware 6799 13-4019919 PRIMEDIA Workplace Learning, Inc. ........................... Texas 8299 75-2110878
ii
STATE OR OTHER PRIMARY STANDARD I.R.S. EXACT NAME OF JURISDICTION OF INDUSTRIAL EMPLOYER REGISTRANT AS SPECIFIED INCORPORATION OR CLASSIFICATION IDENTIFICATION IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER --------------------------------- ---------------- ------------------- ------------- QWIZ, Inc. .................................................. Delaware 7372 58-2302364 R.E.R. Publishing Corporation................................ New York 2721 13-3090623 RetailVision, Inc. .......................................... Delaware 2721 03-0339898 Simba Information ........................................... Connecticut 2721 06-1281600 Southwest Art, Inc. ......................................... Delaware 2721 76-0233343 Symbol of Excellence Publishers, Inc. ....................... Alabama 2721 63-0845698 Tel-A-Train, Inc............................................. Delaware 8299 75-2532446 The Virtual Flyshop, Inc. ................................... Colorado 2721 84-1318377 TI-IN Acquisition Corporation................................ Texas 8299 75-2478738 TSECRP, Inc. ................................................ California 2721 95-4259640 Vegetarian Times, Inc. ...................................... Illinois 2721 36-3636836 Weekly Reader Corporation.................................... Delaware 2721 13-3603780 Westcott Communications Michigan, Inc. ...................... Michigan 8299 38-2955660 Westcott ECI, Inc. .......................................... Texas 8299 75-2475419 Western Empire Publications, Inc. ........................... Delaware 2721 95-3363328
The address, including zip code, and telephone number, including area code, of each additional registrant's principal executive office is 745 Fifth Avenue, New York, New York 10151 (212-745-0100). The financial statements of the guarantor subsidiaries are omitted because PRIMEDIA believes the separate financial statements would not be material to the shareholders and potential investors. The total assets, revenues, income or equity of non-guarantor subsidiaries, both individually and on a combined basis are inconsequential in relation to the total assets, revenues, income or equity of PRIMEDIA. All of the equity securities of each of the additional registrants set forth in the table above are owned, either directly or indirectly, by PRIMEDIA, and there has been no default during the preceding 36 calendar months with respect to any indebtedness or material long-term leases of PRIMEDIA or any of the additional registrants. iii PRIMEDIA INC. ANNUAL REPORT ON FORM 10-K DECEMBER 31, 1998 CROSS REFERENCE SHEET FOR PARTS I, II, III AND IV
PAGE ----- PART I Item 1. Business...................................................................................... 1 Item 2. Properties.................................................................................... 8 Item 3. Legal Proceedings............................................................................. 8 Item 4. Submission of Matters to a Vote of Security Holders........................................... 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 9 Item 6. Selected Financial Data....................................................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.................................... 24 Item 8. Financial Statements and Supplementary Data................................................... 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 62 PART III -- Omitted, except Item 10 as to Executive Officers is included as part of Part I Item 1........................................................................................ 62 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 62
iv PART I ITEM 1. BUSINESS. GENERAL PRIMEDIA Inc. (which together with its subsidiaries and its predecessors is herein referred to as either "PRIMEDIA" or the "Company" unless the context implies otherwise) is a targeted media company providing highly specialized information in the consumer, business-to-business and education markets. In 1998, eighty-five percent of the Company's products held the number one or number two positions in the niches in which they compete. Some examples by segment include specialty magazines (specialty consumer: SEVENTEEN, SOAP OPERA DIGEST, FLY FISHERMAN, and technical and trade: TELEPHONY and NATIONAL REAL ESTATE INVESTOR); information (consumer: APARTMENT GUIDES, NEW HOME GUIDES, business: WARD'S and BACON'S); and education (classroom: CHANNEL ONE NETWORK and WEEKLY READER and workplace: Pictorial's APPOINTPAK software. The Company has achieved substantial revenue growth through the development of its brands, combined with its operating expertise and a successful acquisition strategy. For the period starting in 1994 through 1998, sales have grown at a compound annual rate of 13% to $1,573.6 million. Operating income in 1998 was $118.2 million compared to $10.2 million in 1994 (after charges for amortization and depreciation of $219.0 million in 1998 and $136.9 million in 1994.) GROWTH STRATEGY PRIMEDIA's strategy is to address growing information needs in specific niche markets. Its portfolio of leadership brands utilizes the "full media arsenal" of print, live events, video and interactive, including the Internet, to reach its customers in the most effective means possible. The Company also adds ancillary and spin-off products to reach its customers. Many of the Company's products, such as those provided by PRIMEDIA's specialty consumer magazines, technical and trade magazines, CHANNEL ONE NEWS and the apartment and new and resale homes guides provide advertisers with an opportunity to directly reach niche market audiences. PRIMEDIA's products are a vital sales channel into these markets. In 1998, 42% of PRIMEDIA's revenues were related to such "lead generation" advertising. Only 9% of revenues were derived from brand awareness advertising. The Company has exploited the Internet to take advantage of the opportunities that this new medium affords our targeted media properties. The Company has 177 Internet sites which complement our product lines, and provide sources of additional revenue from content delivery, advertising, subscriptions and e-commerce. Within each segment, we take advantage of these trends toward targeted media. The Company's specialty magazines take advantage of trends in the specialty consumer market where advertising growth has substantially outpaced that of general interest magazine, broadcast television, radio and newspaper advertising growth since 1989. The Company's consumer and business information products are capitalizing on the trend towards targeted marketing and away from general interest sources such as newspapers and the increased spending by businesses for information. In classroom and workplace learning, PRIMEDIA is building on rising elementary and secondary school enrollments, increased spending on supplementary educational materials and the rapid growth in outsourced workplace education. The Company seeks to maximize its operating performance by capitalizing on its leading position in each of these growing markets. Each of PRIMEDIA's businesses has opportunities for expansion through both internal organic development and product-line acquisitions. Organic growth results from both market expansion and product innovation in conventional and new media formats. Growth through product-line acquisition is made possible by the constant availability of leading brands for sale in niche markets related to PRIMEDIA's business. To support this aspect of growth, the Company has successfully developed a selective and disciplined process of identifying, evaluating and integrating acquired companies. A significant source of funds for these product-line acquisitions is the cash generated by the Company's operations, which by their nature have high operating margins and low capital requirements. Net capital expenditures were approximately $55.2 million, $31.1 million and $28.8 million, or 3.5%, 2.1% and 2.1% of sales, in 1998, 1997 and 1996, respectively. Additionally, cash available for reinvestment is amplified because the Company pays virtually no income taxes. This results largely from having structured most of its acquisitions to create tax-deductible amortization of intangible assets which has generated net operating losses. Refer to Item 7 for a description of segment sales and income. SPECIALTY MAGAZINES The specialty magazines segment consists of specialty consumer magazines and technical and trade magazines. In 1998, 63% of its 100 specialty consumer magazines and nearly 50% of its 79 technical and trade magazines, were number one in their respective markets. According to THE WALL STREET JOURNAL, PRIMEDIA is the largest magazine publisher in the United States of America by ad page count, and PRIMEDIA publishes more magazines than any other Company. SPECIALTY CONSUMER MAGAZINES The Company is the largest specialty consumer magazine company in the U.S., with 100 titles including SEVENTEEN, SOAP OPERA DIGEST, FLY FISHERMAN, AMERICAN BABY, HORTICULTURE, POWER & MOTORYACHT and leadership positions in such categories as automotive, crafts, teens, outdoor recreation, city magazines and bridal. The principal sources for specialty consumer magazines' sales are endemic advertising, circulation and ancillary revenues. In the year ended December 31, 1998, approximately 54% of the sales were from advertising, 28% from circulation and 18% were from ancillary sources. Readers value specialty consumer magazines for their targeted editorial content and also rely on them as catalogs of products in the relevant topic areas. This catalog aspect makes the specialty consumer magazines important media buys for advertisers. Advertising sales for the Company's specialty consumer magazines are generated largely by in-house sales forces. The magazines compete for advertising on the basis of circulation and the niche markets they serve. Each of the Company's specialty consumer magazines faces competition in its subject area from a variety of publishers and competes for readers on the basis of quality and targeted editorial, which is provided by in-house and free-lance writers. The Company is the largest publisher of teen magazines. SEVENTEEN is the leading young women's fashion and beauty magazine based on both circulation and advertising pages, with fashion, boys, beauty, talent and lifestyle editorial targeted to girls aged 12 to 24. SEVENTEEN'S monthly rate base is 2.35 million and its total monthly readership is 14.2 million. Its principal competitor is YM. SEVENTEEN competes for circulation based on the nature and quality of its editorial. It offers several special issues and a frequently visited Internet site, SEVENTEEN.COM. The 1998 acquisition of nine titles including TEEN BEAT and BOP formed the new Youth Entertainment Group and gave the Company access to the 10 to 13 age market. In the soap opera publication area, in 1998, PRIMEDIA commanded a 75% market share through its SOAP OPERA DIGEST and SOAP OPERA WEEKLY. SOAP OPERA DIGEST has been a weekly publication since 1997 with a 1998 average circulation of 1.1 million per week. SOAP OPERA WEEKLY had an average 1998 circulation of 406,000. Both publications are distributed mainly at supermarket, convenience store and drugstore checkout counters with SOAP OPERA DIGEST also having a significant subscriber base. In early 1999, two of the Company's main competitive soap opera magazines closed publication. SOAP OPERA DIGEST and SOAP OPERA WEEKLY compete for circulation on the basis of editorial content and quality against such publications as SOAP OPERA UPDATE and SOAPS IN DEPTH, both of which have substantially lower circulation. The Company publishes 31 automotive enthusiast magazines, including AUTOMOBILE, catering to the high-end automotive market, as well as such highly specialized titles as LOWRIDER, the largest selling retail magazine in the automotive category, TRUCKIN', the leading truck customization publication, MUSCLE MUSTANG & FAST FORDS, VETTE and SPORT COMPACT CAR. 2 In the baby care category, the Company publishes AMERICAN BABY, a monthly publication distributed to approximately 1.5 million expectant and new parents, HEALTHY KIDS, a bi-monthly publication for parents and children from birth to age ten, plus a series of ancillary products such as cable television, sampling and couponing programs. The unit's principal competitor is BABY TALK. The Company is a leading provider of information for brides through MODERN BRIDE plus 13 regional bridal magazines, and owns two city magazines, CHICAGO and NEW YORK. In the outdoor recreation market, the Company is the leading publisher of magazines for fishing enthusiasts with such titles as FLY FISHERMAN and IN-FISHERMAN, and for equine enthusiasts with such titles as EQUUS and PRACTICAL HORSEMAN. Other leading outdoor recreation titles include SAIL, POWER & MOTORYACHT and SURFING. The Company has a mix of sales between retail (largely newsstand and other retail outlets) and subscription with a mix more heavily weighted toward retail. The 1998 acquisition of Cowles Enthusiast Media balanced the mix between retail and subscription. The Company introduced 33 new products in 1998, including special issues, ancillary products and Internet sites. TECHNICAL AND TRADE MAGAZINES The company is the third largest U.S. publisher of technical and trade magazines with 79 titles that provide vital information to professionals in such fields as telecommunications (TELEPHONY), agriculture (SOYBEAN DIGEST), transportation (FLEET OWNER), real estate (NATIONAL REAL ESTATE INVESTOR), professional services (REGISTERED REPRESENTATIVE), and marketing (CATALOG AGE). In 1998, 81% of these titles ranked number one or two in the fields they serve based on advertising pages. In 1998, 85% of revenues was derived from advertising as these magazines are distributed on a controlled circulation basis, meaning that they are distributed free of charge to readers. Because each of the technical and trade magazines is distributed almost exclusively to purchasing decision makers in a targeted industry group, product and service providers are able to focus their advertising. The advertising rates charged are based on the size of the circulation within the target group as well as competitive factors. These magazines compete for advertising on the basis of advertising rates, circulation, reach, editorial content and readership commitment. Advertising sales are made by in-house sales forces, supplemented by independent representatives in selected regions and overseas. Classified advertising is sold through telemarketing. Magazine editorial is provided by in-house writers and freelance authors, well-known in their specific industry niches. In addition to its technical and trade magazines, the Company sponsors seminars and trade shows, serving the advertisers and readers of the corresponding publications, including LIGHTING DIMENSIONS INTERNATIONAL, INTERNATIONAL WIRELESS COMMUNICATIONS EXPO and THE SATELLITE COMMUNICATIONS EXPO & CONFERENCE. In 1998, the Company increased its spending on Internet site development and expects to be a leader in developing vertical online communities enabling its readers to gain additional information and services and advertisers to reach our targeted customers. These vertical online communities will be an additional source of revenue. Some sites include TELEPHONY'S INTERNETTELEPHONY.COM, the agriculture group's HOMEFARM.COM and the publishing group's MEDIACENTRAL.COM. INFORMATION The Company produces over 200 highly targeted consumer and business information products, most of which hold dominant positions in their niche markets. The Company's premier consumer information products include Apartment Guides, such business directories include Bacon's for public relations professionals and INTELLICHOICE, which is largely Internet delivered, for automotive buyers. 3 The growth in advertising supported consumer information (e.g.--targeted free publications, such as the Apartment Guides) is being driven by the desire of advertisers to reach their customers as cost effectively as possible. From 1995 to 2005, advertising revenue generated from free shopping guides is expected to nearly double. Consequently, Apartment Guides and PRIMEDIA's other targeted free publications should continue to provide significant opportunities for growth through new ventures and acquisitions. Business directories capitalize on the growth in directory spending which is expected to increase 75% between 1996 and 2001. CONSUMER INFORMATION The Company is the largest publisher of rental apartment guides in the U.S. with 70 local versions of its apartment guides, most of which are distributed monthly and provide informational listings about featured apartment communities. Advertising community managers who need to fill vacant apartments and who represent 100% of the apartment guide sales pay for these listings. The Company is the dominant information provider in apartment guides and continues to gain in market share from newspaper classifieds and competitors due to the cost effectiveness of its products as measured by cost per lease to the advertiser. The Company's only national competitor, FOR RENT, is present in 42 of the Company's markets. In those markets, on average, the Company captured 53% of total 1998 advertising pages, with FOR RENT capturing 47% of such pages. In 1998, the Company's presence on the Internet through APARTMENTGUIDE.COM was expanded through agreements with Excite, Netscape, Webcrawler and Yahoo!, and the site, which carries all advertising included in the print products, became the largest apartment rental site on the Internet. In 1998, the Company became a leader in new home guides through the acquisition of 12 guides in seven major markets including northern California, southern California, Denver, Phoenix, Dallas-Fort Worth, Tampa Bay and Columbus. These guides were added to the existing new home guides in the Philadelphia, New Jersey, Raleigh, Atlanta and Austin markets. A strategic advantage is the Company's DistribuTech Division which is the nation's largest distributor of free publications, including its own consumer directories and over 1,300 other titles. In 1998, it managed the distribution of HPC Publications' and other publishers' free publications to over 21,000 grocery, convenience, video and drug stores in 64 metropolitan areas, as well as universities, military bases and major employers. The majority of these locations are operated under exclusive distribution agreements. The Company's consumer information guides typically are displayed in free-standing, multi-pocket racks. DistribuTech generates substantial revenues by leasing additional distribution rack pockets to other publications that it also distributes. DistribuTech competes on the basis of its prime retail locations for its rack program. BUSINESS INFORMATION The Company, with over 100 products, is the leading publisher of directories and databases addressing the specialized information needs of professionals in such areas as government information technology procurement (FEDERAL SOURCES, INC.), public relations (BACON'S INFORMATION), performing arts (MUSICAL AMERICA), transportation (WARD'S and INTELLICHOICE), construction (MACHINERY INFORMATION DIVISION) and media (SIMBA). These databases are increasingly being made available via CD-ROM or the Internet in addition to print. This allows for greater functionality to the user (updatability of the product as a data management system), and opportunity for product and brand extension. Databases are compiled by an in-house editorial staff, marketed directly to subscribers and advertisers primarily by an in-house staff and distributed predominantly on a paid subscription basis. The Company also publishes periodicals that provide in-depth information on selected markets. WARD'S AUTOMOTIVE REPORTS is recognized as the authoritative source for industry-wide statistics on automotive production and sales. In addition, the Company publishes, in print and electronic formats, used vehicle valuation information. Other databases include THE ELECTRONICS SOURCE BOOK and AC-U-KWIK. 4 Most of the business directories published by the Company have no competition. Where competition does exist, in most cases, the Company's publication is dominant. Competition is on the basis of price and quality of data. Management believes that the comprehensiveness and quality of its data and the specialized focus of its publications have prevented others from launching competing publications or competing effectively. In 1998, the Company acquired Federal Sources, Inc. (FSI). FSI is the leading provider of information technology-related databases to companies competing for public sector information technology contracts. Its products are delivered via the Internet and FSI is also expanding its presence at the state and municipality level. EDUCATION The Company is a leading provider of supplemental educational materials and programming in the United States, targeting both classroom and workplace learning. PRIMEDIA's best-known brands in classroom learning include Channel One and WEEKLY READER, and in workplace learning, PRIMEDIA Workplace Learning. Classroom learning takes advantage of the growth in spending on supplementary educational materials and the projected increases in elementary and secondary school enrollments over the next decade (in particular, school enrollments are expected to rise 4% between 1997 and 2007). Workplace learning focuses on the $14 billion outsourced training market which is expected to rise 121% between 1995 and 2005. CLASSROOM LEARNING The Company is one of the largest supplemental education companies in the U.S., with such properties as CHANNEL ONE NETWORK, WEEKLY READER, Films for the Humanities and Sciences ("Films") and American Guidance Service. Channel One's Network news program, CHANNEL ONE NEWS, is the only daily news program targeted to secondary school students. CHANNEL ONE NEWS broadcasts every school day via satellite to over eight million students and 350,000 educators in approximately 12,000 secondary schools in the United States, reaching more students than any other electronically delivered educational product. CHANNEL ONE NEWS has ten times the teenage audience of the evening newscasts of ABC, CBS, NBC and the cable networks combined. Schools sign up for the CHANNEL ONE NETWORK service under a three-year contract pursuant to which they agree to show CHANNEL ONE NEWS, in its entirety, on at least 90% of all school days. CHANNEL ONE NETWORK provides to schools a turnkey system of video cassette recorders and networked televisions. These products and services are provided to schools at no charge; sales are generated by two minutes of advertising shown during the 12-minute daily newscast. In addition, CHANNEL ONE CONNECTION provides 90 minutes of educational programming per school day at no charge. Substantially all school contracts have come up for renewal at least once and approximately 99% have been renewed in each renewal cycle. CHANNEL ONE NETWORK has a library of over 1,600 broadcasts including approximately 225 single subject series, 60 of which have been released as educational videos. The Company's CHANNELONE.COM online network and its TEACH1.COM provide supplemental information to students and educators. CHANNEL ONE NEWS has no direct competition in the schools but does compete for advertising dollars with other media aimed at teenagers. In the fourth quarter of 1998, CHANNEL ONE NEWS achieved "sold-out" advertising status for the first time. The Company's primary competitive advantage is its total audience of over eight million teenagers each school day. WEEKLY READER is the best-known and highest-circulation student newspaper in the United States, with over 6.3 million subscriptions for elementary school students alone. WEEKLY READER and its related products are sold in approximately 65% of all elementary schools and 55% of all secondary schools, and for the 1997-1998 school year had a 52% share of the elementary school market and a 37% share of the secondary school market. 5 For the secondary school market, WEEKLY READER publishes eight other periodicals: READ MAGAZINE, WRITING, CURRENT EVENTS, CURRENT HEALTH I AND II, CAREER WORLD and KNOW YOUR WORLD EXTRA. The Company's main competitors in these markets are Scholastic Corporation and Time Warner, Inc. WEEKLY READER generally competes on the basis of editorial quality, content and value. Films is the exclusive distributor of approximately 6,500 educational videos, videodiscs, CD-ROMs and related products that are sold primarily by direct mail to teachers, instructors and librarians serving primarily grades 8 to 12 and college markets. Films is the largest distributor of such products to colleges and high schools and competes on the basis of quality and breadth of the subject matter. In 1998, it acquired Cambridge Educational adding an additional 4,700 videos and CD-ROMs. American Guidance Service, acquired in 1998, is the largest provider of individualized tests and assessments for students with special needs. The unit is taking advantage of the growing focus by school districts on assessment and curricular needs of such students. WORKPLACE LEARNING PRIMEDIA Workplace Learning is a leading provider of high quality accreditation-oriented vocational networks, largely delivered via satellite, and associated products such as video programming, print and computer based products. It is a leader in such markets as automotive (AUTOMOTIVE SATELLITE TELEVISION NETWORK), industrial (INDUSTRIAL TRAINING SYSTEMS), healthcare (HEALTH AND SCIENCES TELEVISION NETWORK) government (LAW ENFORCEMENT TRAINING NETWORK) and banking (BANKERS TRAINING AND CONSULTING COMPANY). Its Pictorial unit is the largest provider of specialized training and certification products for the insurance industry and QWIZ is the leading provider of computer-based office skills testing. During 1998 and the first quarter of 1999, the Company further refined its workplace learning strategy, and closed its executive education units (EXEN and IDTN) and four small, start-up networks (see Recent Developments). PRODUCTION AND FULFILLMENT Virtually all of the Company's print products are printed and bound by independent printers. The Company believes that because of its buying power, outside printing services can be purchased at good prices. With the exception of video products of PRIMEDIA Workplace Learning, Channel One and Films, and most Internet sites, all other production of electronic and video products is performed by third party vendors. The principal raw material used in the Company's products is paper. The Company has paper supply contracts and, in almost all cases, supplies paper used by its outside printers. The Company believes that even if at some point in the future paper is in limited supply, the existing arrangements providing for the supply of paper will be adequate. The Company was able to meet its paper requirements during 1998. In 1998, approximately 47% and 20% of the Company's paper purchases were supplied through Lindenmeyr Central and Graphic Communications, respectively. The Company's relationship with these suppliers is good and is expected to continue to be good for the foreseeable future. Many of the Company's products are packaged and delivered to the U.S. Postal Service directly by the printer. Other products are sent from warehouses and other facilities operated by the Company. COMPANY ORGANIZATION PRIMEDIA was incorporated on November 22, 1991 in the State of Delaware. The principal executive office of the Company is located at 745 Fifth Avenue, New York, New York 10151, telephone number (212) 745-0100. 6 EXECUTIVE OFFICERS The following table sets forth certain information regarding the executive officers of PRIMEDIA:
NAME AGE POSITION(S) - ----------------------------------------------------- --- ----------------------------------------------------- William F. Reilly.................................... 60 Chairman of the Board and Chief Executive Officer and Director Charles G. McCurdy................................... 43 President and Director Beverly C. Chell..................................... 56 Vice Chairman, General Counsel, Secretary and Director Curtis A. Thompson................................... 47 Vice President Richard J. LeBrasseur................................ 56 Vice President Michaelanne C. Discepolo............................. 46 Vice President, Human Resources Douglas B. Smith..................................... 38 Vice President and Treasurer Robert J. Sforzo..................................... 51 Vice President and Controller
Mr. Reilly is Chairman of the Board, Chief Executive Officer and a Director of PRIMEDIA. Mr. Reilly is also a director of FMC Corporation. Mr. McCurdy is President and a Director of PRIMEDIA and was Treasurer from 1991 to August 1993. Ms. Chell is Vice Chairman, General Counsel, Secretary and a Director of PRIMEDIA. Mr. Thompson had been Vice President and Controller of PRIMEDIA since November 1991. In October 1998, he was named to the position of President and Chief Executive Officer of the PRIMEDIA Information Group while retaining the title of Vice President. Mr. LeBrasseur has been a Vice President of PRIMEDIA since March 1998, President of the Supplemental Education Group since October 1997 and President and Chief Executive Officer of Weekly Reader Corporation since April 1993. Ms. Discepolo is Vice President, Human Resources of PRIMEDIA. Mr. Smith has been a Vice President of PRIMEDIA since May 1997 and Treasurer of PRIMEDIA since August 1993. Prior to that time he was at The Bank of New York starting in 1982 holding various positions. He held the position of Senior Vice President prior to joining PRIMEDIA. Mr. Sforzo has been Vice President and Controller of PRIMEDIA since October 1998. Prior to that time, he was the Vice President of Internal Audit starting in June 1997. From September 1994 to June 1997 he was the Executive Vice President and Chief Financial Officer of The Katharine Gibbs Schools, Inc. Prior to that time, he was the Corporate Controller at The Olsten Corporation. The business address of the above executive officers of the Company is the address of the principal executive office of PRIMEDIA. EMPLOYEES As of December 31, 1998, the Company had approximately 7,600 full- and part-time employees, of whom none were union members. Management considers its relations with its employees to be good. 7 ITEM 2. PROPERTIES. The Company's principal leased properties used by the specialty magazines segment are located in California, Colorado, Connecticut, Georgia, Illinois, Indiana, Kansas, Massachusetts, Michigan, Minnesota, Mississippi, New York, Pennsylvania, Texas and Virginia; used by the information segment are located in Arizona, California, Colorado, Georgia, Illinois, Maryland, New Jersey, New York and Virginia; and used by the education segment are located in California, Connecticut, Georgia, Indiana, Minnesota, New Jersey, New York, Ohio, Tennessee, Texas, West Virginia and Wisconsin. Property is owned by the Company and used in the specialty magazines segment in California, Illinois, Indiana, Minnesota and Mississippi, in the information segment in New Jersey and Georgia and in the education segment in Minnesota and West Virginia. The Company's only production facilities are small printing operations for Films, broadcast production facilities for PRIMEDIA Workplace Learning and Channel One and video duplicating facilities for PRIMEDIA Workplace Learning and Films. The Company's distribution properties and their capacity is adequate to satisfy the Company's needs. ITEM 3. LEGAL PROCEEDINGS. There are no material pending legal proceedings and no material legal proceedings including any that were terminated in the fourth quarter of 1998, to which the Company is or was a party other than ordinary routine litigation incidental to the business of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the fourth quarter of 1998. 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. PRIMEDIA Common Stock is listed on the New York Stock Exchange. As of February 28, 1999, there were 268 holders of record of PRIMEDIA Common Stock. The Company has not and has no present intention to pay dividends on its Common Stock. High and low sales prices for 1998 and 1997 were as follows:
1998 SALES PRICE -------------------- QUARTER ENDED HIGH LOW - ------------------------------------------------------------------- --------- --------- March 31........................................................... $14 7/8 $11 13/16 June 30............................................................ $15 $12 13/16 September 30....................................................... $13 13/16 $ 9 1/4 December 31........................................................ $11 15/16 $ 9 5/8 1997 SALES PRICE -------------------- QUARTER ENDED HIGH LOW - ------------------------------------------------------------------- --------- --------- March 31........................................................... $12 3/4 $ 9 1/2 June 30............................................................ $13 1/8 $10 September 30....................................................... $12 3/4 $10 3/4 December 31........................................................ $13 7/16 $11 5/8
9 ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data were derived from the consolidated financial statements of the Company which are included elsewhere in this Annual Report. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and the related notes thereto included herein. PRIMEDIA INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) OPERATING DATA: Sales, net....................................... $1,573,573 $ 1,487,595 $ 1,374,449 $ 1,046,329 $ 964,648 Depreciation and amortization.................... 218,969 184,165 190,702 192,276 136,866 Other (income) charges(1)........................ (7,216) 138,640 -- 50,114 15,025 Operating income (loss)(2)....................... 118,157 (20,793) 85,901 (26,275) 10,203 Interest expense................................. 144,442 136,625 124,601 105,837 78,351 Income tax benefit(3)............................ -- 1,685 53,300 59,600 42,100 Income (loss) before extraordinary charge........ (37,736) (157,439) 17,597 (75,435) (29,529) Extraordinary charge-extinguishment of debt(4)... -- (15,401) (9,553) -- (11,874) Net income (loss)(2)............................. (37,736) (172,840) 8,044 (75,435) (41,403) Preferred stock dividends(5)..................... 63,285 65,073 43,526 28,978 25,959 Loss applicable to common shareholders........... (101,021) (237,913) (35,482) (104,413) (67,362) Basic and diluted loss applicable to common shareholders per common share(2)(6): Loss before extraordinary charge............... $ (.71) $ (1.72) $ (.20) $ (.92) $ (.55) ---------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- Net loss....................................... $ (.71) $ (1.84) $ (.27) $ (.92) $ (.67) ---------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- ----------- Basic and diluted common shares outstanding...... 142,529,024 129,304,900 128,781,518 113,218,711 101,171,427 OTHER DATA: EBITDA(7)........................................ $ 329,910 $ 302,012 $ 276,603 $ 216,115 $ 162,094 Capital expenditures, net........................ 55,238 31,108 28,790 23,414 14,184 Net cash provided by operating activities........ 140,804 125,360 150,192 64,062 64,890 Net cash used in investing activities............ (609,621) (185,725) (721,709) (318,712) (442,126) Net cash provided by financing activities........ 470,377 46,688 580,946 263,644 383,924 AT DECEMBER 31, -------------------------------------------------------------- 1998 1997 1996 1995 1994 ---------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents........................ $ 24,538 $ 22,978 $ 36,655 $ 27,226 $ 18,232 Working capital (deficiency)(8).................. (234,045) (146,245) (44,705) (56,560) 1,338 Intangible assets, gross......................... 3,171,598 2,508,650 2,649,805 1,996,564 1,656,590 Less: accumulated amortization............... 914,854 736,597 896,824 762,393 602,542 ---------- ----------- ----------- ----------- ----------- Intangible assets, net........................... 2,256,744 1,772,053 1,752,981 1,234,171 1,054,048 Total assets..................................... 3,041,074 2,485,990 2,552,215 1,881,416 1,589,692 Long-term debt(9)................................ 1,928,892 1,656,541 1,565,686 1,134,916 1,034,689 Exchangeable preferred stock..................... 557,841 470,280 442,729 231,606 216,229 Common stock subject to redemption............... 2,964 4,376 5,957 28,022 16,552 Shareholders' equity (deficiency): Common stock................................. 1,470 1,298 1,283 1,259 1,053 Additional paid-in capital................... 979,720 780,191 772,642 748,194 572,940 Accumulated deficit.......................... (1,030,032) (929,011) (691,098) (655,616) (551,203) Accumulated other comprehensive loss......... (1,720) (1,543) (1,270) (1,275) (1,324) Common stock in treasury, at cost............ (33,141) (13,158) -- -- -- ---------- ----------- ----------- ----------- ----------- Total shareholders' equity (deficiency).......... $ (83,703) $ (162,223) $ 81,557 $ 92,562 $ 21,466 ---------- ----------- ----------- ----------- ----------- ---------- ----------- ----------- ----------- -----------
(See notes on the following page) 10 NOTES TO SELECTED FINANCIAL DATA (1) Represents (gain) loss on the sales of businesses, net and other in 1998, 1997, 1995 and 1994 and provision for restructuring and other costs in 1995. (2) The adoption of a change in method of accounting for internal use software costs effective January 1, 1998, resulted in an increase in operating income, an equal decrease in net loss and a decrease in basic and diluted loss per common share of approximately $12,450 ($.09 per share) for the year ended December 31, 1998. (3) At December 31, 1998 and 1997, the Company's management determined that no adjustment to net deferred income tax assets was required. In prior years, management determined that a portion of the net deferred income tax assets would likely be realized and accordingly, the Company recorded an income tax benefit of $53,300 in 1996, $59,600 in 1995 and $42,100 in 1994. For the year ended December 31, 1997, the Company recorded an income tax carryback claim of $1,685. At December 31, 1998, the Company had net operating loss carryforwards ("NOLs") and capital loss carryforwards of approximately $901,400 which will be available to reduce future taxable income. In addition, management estimates that approximately $1,130,000 of unamortized goodwill and other intangible assets will be available as deductions from any future taxable income. (4) Represents the write-off of unamortized deferred financing costs. For the years ended December 31, 1997 and 1996, amount also includes the premiums paid on the redemptions of the 10 5/8% Senior Notes. (5) Includes the premiums paid on the redemptions of the $11.625 Series B Exchangeable Preferred Stock ("Series B Preferred Stock") and the $2.875 Senior Exchangeable Preferred Stock in 1998 and 1997, respectively. In 1997, the Company recorded a preferred stock dividend accrual in the amount of $9,517. Of the total dividend accrual recorded in 1997, the amounts that relate to prior periods were not material. (6) Basic and diluted loss per common share, as well as the basic and diluted common shares outstanding, were computed as described in Note 15 of the notes to the audited consolidated financial statements included elsewhere in this Annual Report. (7) Earnings before interest, taxes, depreciation, amortization and provision for one-time charges ("EBITDA") is not intended to represent cash flow from operations and should not be considered as an alternative to net income (loss) as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. The Company believes EBITDA is a standard measure commonly reported and widely used by analysts, investors and other interested parties in the media industry. Accordingly, this information has been disclosed herein to permit a more complete comparative analysis of the Company's operating performance relative to other companies in its industry. This measure may not be comparable to similarly titled measures used by other companies. (8) Includes current maturities of long-term debt and net assets held for sale, where applicable. (9) Excludes current maturities of long-term debt. 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS). INTRODUCTION The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the Company's historical consolidated financial statements and notes thereto included herein. The Company organizes its businesses into three segments: specialty magazines, information and education. Management believes a meaningful comparison of the results of operations for 1998, 1997 and 1996 is obtained by using segment information as well as results from continuing businesses ("Continuing Businesses") which exclude the results of the non-core businesses ("Non-Core Businesses"), which are either sold businesses or product discontinuances. In 1998, the Company reclassified certain product lines as Non-Core Businesses and has restated prior periods accordingly. The Non-Core Businesses include: (i) Krames Communications Incorporated ("Krames"), The Katharine Gibbs Schools, Inc. ("Katharine Gibbs"), NEW WOMAN, Intertec Mailing Services, Newbridge Communications, Inc. (excluding Films for the Humanities and Sciences), STAGEBILL, Nelson Information Inc. ("Nelson"), THE DAILY RACING FORM and certain enthusiast titles which have been divested, and (ii) the Funk and Wagnalls' products and certain enthusiast titles which are being discontinued. Management believes that this presentation is the most useful way to analyze the historical trends of its businesses. In 1998, the Company reclassified PRIMEDIA Reference from the information segment to the education segment and has restated prior periods accordingly. The Company's management believes that the education segment is more reflective of the focus of the PRIMEDIA Reference products. SELECTED FINANCIAL DATA PRIMEDIA is a targeted media company, focused on highly specialized niches of the specialty magazine, information and education markets. SPECIALTY MAGAZINES (60.6% of sales from Continuing Businesses, 76.5% of operating income from Continuing Businesses before corporate overhead and 53.2% of EBITDA from Continuing Businesses before corporate overhead): Includes 100 specialty consumer magazines such as SEVENTEEN, SOAP OPERA DIGEST, NEW YORK, CHICAGO, AMERICAN BABY and FLY FISHERMAN plus 79 technical and trade magazines including TELEPHONY, FLEET OWNER and REGISTERED REPRESENTATIVE. This segment focuses on reaching enthusiasts, or those interested in the key topics (hobbies, lifestyles, industry, etc.) that its customers demand, while providing its advertisers with the most efficient mechanism for reaching the targeted audience through print, the Internet and other allied products. INFORMATION (17.8% of sales from Continuing Businesses, 35.9% of operating income from Continuing Businesses before corporate overhead and 21.1% of EBITDA from Continuing Businesses before corporate overhead): Includes over 100 consumer guides such as Apartment Guides, New Homes Guides, MICROTIMES, and over 100 specialized directories. The information segment produces consumer and business information products in a variety of formats, including print, CD-ROM and the Internet, for decision makers in business, professional and special interest consumer markets. EDUCATION (21.6% of sales from Continuing Businesses, (12.4)% of operating income from Continuing Businesses before corporate overhead and 25.7% of EBITDA from Continuing Businesses before corporate overhead): Includes classroom learning products such as CHANNEL ONE NEWS, WEEKLY READER, 12 Films for the Humanities and Sciences, American Guidance Service plus PRIMEDIA Workplace Learning. This segment targets grades Kindergarten through 12 with highly targeted supplemental periodicals, video and network products to help teach students and is also the leading provider of high-quality workplace learning programs in such fields as healthcare, automotive, banking and insurance. In 1998, PRIMEDIA completed its focusing program to accelerate growth by divesting Non-Core Businesses. Proceeds from the sales of the Non-Core Businesses in 1998 were $61,090 net of direct selling expenses. In 1998, the Company recorded a gain on sales of businesses of $19,716, associated with the sales of THE DAILY RACING FORM, Nelson and certain enthusiast titles. As a result, the Company's focusing program generated total proceeds of $232,665 and resulted in a cumulative net loss on sales of businesses and other of $118,924 for the two-year period ended December 31, 1998. Additional selected financial data for the Company organized on the foregoing basis are presented below:
YEARS ENDED DECEMBER 31, ---------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Sales, Net: Continuing Businesses: Specialty Magazines............................................... $ 927,501 $ 714,464 $ 629,001 Information....................................................... 272,819 228,145 190,014 Education......................................................... 330,790 269,246 209,366 ------------ ------------ ------------ Subtotal........................................................ 1,531,110 1,211,855 1,028,381 Non-Core Businesses................................................... 42,463 275,740 346,068 ------------ ------------ ------------ Total........................................................... $ 1,573,573 $ 1,487,595 $ 1,374,449 ------------ ------------ ------------ ------------ ------------ ------------ Depreciation, Amortization and Other Charges(1): Continuing Businesses: Specialty Magazines............................................... $ 94,152 $ 66,407 $ 71,195 Information....................................................... 30,339 33,971 25,940 Education......................................................... 105,542 71,702 54,589 Corporate......................................................... 1,284 99 779 ------------ ------------ ------------ Subtotal........................................................ 231,317 172,179 152,503 Non-Core Businesses................................................... (19,564) 150,626 38,199 ------------ ------------ ------------ Total........................................................... $ 211,753 $ 322,805 $ 190,702 ------------ ------------ ------------ ------------ ------------ ------------ Operating Income (Loss): Continuing Businesses: Specialty Magazines............................................... $ 92,952 $ 93,055 $ 65,598 Information....................................................... 43,630 29,671 31,413 Education......................................................... (15,142) 10,131 11,962 Corporate......................................................... (29,608) (25,644) (22,276) ------------ ------------ ------------ Subtotal........................................................ 91,832 107,213 86,697 Non-Core Businesses................................................... 26,325 (128,006) (796) ------------ ------------ ------------ Total........................................................... 118,157 (20,793) 85,901
(CONTINUED ON FOLLOWING PAGE) 13
YEARS ENDED DECEMBER 31, ---------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Other Income (Expense): Interest expense...................................................... (144,442) (136,625) (124,601) Amortization of deferred financing costs.............................. (3,046) (3,071) (3,662) Other, net............................................................ (8,405) 1,365 6,659 ------------ ------------ ------------ Loss before income tax benefit and extraordinary charge................. (37,736) (159,124) (35,703) Income tax benefit...................................................... -- 1,685 53,300 ------------ ------------ ------------ Income (loss) before extraordinary charge............................... (37,736) (157,439) 17,597 Extraordinary charge--extinguishment of debt............................ -- (15,401) (9,553) ------------ ------------ ------------ Net income (loss)....................................................... $ (37,736) $ (172,840) $ 8,044 ------------ ------------ ------------ ------------ ------------ ------------
- ------------------------ (1) Other charges include (gain) loss on the sales of businesses, net and other in 1998 and 1997. RESULTS OF OPERATIONS 1998 COMPARED TO 1997 CONSOLIDATED RESULTS: Sales from Continuing Businesses increased 26.3% to $1,531,110 in 1998 from $1,211,855 in 1997, due to sales increases in all segments. Sales as reported, including the Non-Core Businesses, increased by 5.8% in 1998 as compared to the same period in 1997. Operating income from Continuing Businesses decreased 14.3% to $91,832 during 1998 from $107,213 during the same period in 1997. This decrease was attributable to increased paper costs, management reorganization costs, the EXEN shutdown provision, the satellite failure at Channel One as well as the reduced margins at SOAP OPERA DIGEST due to the change from a bi-weekly to a weekly publication. In addition, amortization expense increased due to the write-off of EXEN's goodwill and other intangible assets as well as acquisitions. These factors were partially offset by the sales increases during 1998. Operating income (loss) as reported, including the Non-Core Businesses, increased to $118,157 in 1998 from $(20,793) during the same period in 1997. The change is primarily due to the $138,640 provision for loss on the sale of certain Non-Core Businesses recorded during the third quarter of 1997. Interest expense increased by 5.7% during 1998 as compared to 1997. Additional interest from increased borrowings to fund acquisitions during the period was partially mitigated by interest savings associated with the 1998 offerings (see Financing Arrangements). Other expense, net in 1998 primarily represents a final legal settlement relating to the acquisition of McMullen and Yee. The Company's management determined that no adjustment to net deferred income tax assets was required at December 31, 1998 and 1997. SPECIALTY MAGAZINES: Sales from Continuing Businesses increased 29.8% to $927,501 in 1998 from $714,464 in 1997, due to advertising and circulation growth at various specialty consumer and technical and trade magazines, particularly SEVENTEEN, as well as approximately $185,700 from acquisitions. Operating income from Continuing Businesses decreased $103 to $92,952 in 1998 from $93,055 in 1997, due to increased goodwill and other intangible amortization expense resulting from acquisitions, the SOAP OPERA DIGEST frequency change, weakness in the soap opera market, Cowles acquisition integration 14 costs, increased paper costs and management reorganization costs. These factors were offset by the sales growth during the period. Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL, Intertec Mailing Services and certain enthusiast titles recently sold or discontinued. INFORMATION: Sales from Continuing Businesses increased 19.6% to $272,819 in 1998 from $228,145 in 1997. This increase is attributable to approximately $22,500 of advertising and distribution revenue growth at the apartment and new homes guides, as well as strong growth at Bacon's and acquisitions, offset by a one-time telemarketing write-off at PRIMEDIA Information. Operating income from Continuing Businesses increased 47.0% to $43,630 in 1998 from $29,671 in 1997, due largely to the strong sales growth. Results from Continuing Businesses exclude THE DAILY RACING FORM and Nelson. EDUCATION: Sales from Continuing Businesses increased 22.9% to $330,790 in 1998 from $269,246 in 1997 primarily attributable to approximately $63,300 from acquisitions, offset by lower revenues at certain PRIMEDIA Workplace Learning networks. Advertising revenue also declined at Channel One due to the failure of PanAmSat's Galaxy IV satellite, which interrupted broadcasting for two weeks during the second quarter. Operating income (loss) from Continuing Businesses decreased to $(15,142) in 1998 from $10,131 in 1997, due to the EXEN shutdown provision, including the write-off of goodwill and other intangible assets, the satellite failure at Channel One and management reorganization costs. Results from Continuing Businesses exclude Krames, Katharine Gibbs, Newbridge (excluding Films for the Humanities and Sciences) and the Funk and Wagnalls' products. CORPORATE: Corporate expenses increased to $29,608 in 1998 from $25,644 in 1997, largely attributable to an increase in corporate headcount which is reflective of the growth of the Company. NON-CORE BUSINESSES: Sales from Non-Core Businesses declined to $42,463 in 1998 from $275,740 in 1997 due to the divestitures of most of the Non-Core Businesses during 1997. Operating income (loss) from Non-Core Businesses increased to $26,325 in 1998 from $(128,006) in 1997, largely attributable to losses on the sales of certain Non-Core Businesses in 1997. 1997 COMPARED TO 1996 CONSOLIDATED RESULTS Sales from Continuing Businesses increased 17.8% to $1,211,855 in 1997 from $1,028,381 in 1996 due to sales increases in all segments. Sales as reported, including the Non-Core Businesses, increased by 8.2% in 1997 over 1996. Operating income from Continuing Businesses increased 23.7% to $107,213 during 1997 from $86,697 during 1996. This increase is attributable to the sales increase as well as declines in paper costs which began in 1996. 15 Interest expense increased by $12,024 or 9.7% in 1997 over 1996 reflecting increased borrowings associated with acquisitions. The loss before income tax benefit and extraordinary charge increased by $123,421 to $159,124 during 1997 compared to $35,703 during 1996. This increase is attributable to the provision for loss on the sales of businesses of $138,640 recorded during the third quarter of 1997. At December 31, 1997 and 1996, management of the Company reviewed recent operating results for the years then ended and projected future operating results for the years through 2003. The Company's management determined that no adjustment to net deferred income tax assets was required at December 31, 1997 and that an income tax benefit of $53,300 should be recognized at December 31, 1996 associated with the partial recognition of NOLs and other deferred income tax assets. The Company reported a Federal income tax carryback claim of $1,685 in 1997. The extraordinary charge in 1997 reflects the aggregate premium paid of $9,537 on the redemption of the Company's 10 5/8% Senior Notes and an additional write-off of related deferred financing costs of $5,864. The extraordinary charge of $9,553 in 1996 resulted primarily from the write-off of deferred financing costs relating to the replacement of the Company's then existing credit facilities with new credit facilities. SPECIALTY MAGAZINES Sales from Continuing Businesses increased 13.6% to $714,464 in 1997 from $629,001 in 1996 due to approximately $24,400 of advertising and circulation growth at SEVENTEEN, which achieved record revenues in 1997, and at SOAP OPERA DIGEST, which became a weekly publication during 1997. Technical and trade magazines also showed strong growth, and revenue from Internet advertising, while still a small portion of the segment, grew significantly. Acquisitions such as LOWRIDER, MUSCLE MUSTANG & FAST FORDS, SURFING, REGISTERED REPRESENTATIVE and MIX, also contributed approximately $51,500 to the sales growth. Operating income from Continuing Businesses increased 41.9% to $93,055 in 1997 from $65,598 in 1996 due to the sales increase as well as declines in paper costs, which began in 1996. Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL, Intertec Mailing Services and certain enthusiast titles recently sold or discontinued. INFORMATION Sales from Continuing Businesses increased 20.1% to $228,145 from $190,014 in 1996. This increase is largely attributable to growth at the Apartment Guides approximating $32,000, including the start-up of new guides and acquisitions, and strong performance at Bacon's and the directory units. Operating income from Continuing Businesses decreased 5.5% to $29,671 in 1997 from $31,413 in 1996, largely attributable to an increase in amortization expense resulting from acquisitions, partially offset by sales increases. Results from Continuing Businesses exclude THE DAILY RACING FORM and Nelson. EDUCATION Sales from Continuing Businesses increased 28.6% to $269,246 from $209,366 in 1996. The increase is attributable to advertising growth at Channel One, and the acquisitions of PRIMEDIA Workplace Learning, QWIZ, Cover Concepts and Pictorial which added approximately $44,000 to sales growth. Operating income from Continuing Businesses decreased 15.3% to $10,131 in 1997 from $11,962 in 1996 due primarily to increased goodwill and other intangible amortization expense resulting from acquisitions. 16 Results from Continuing Businesses exclude Krames, Katharine Gibbs, Newbridge (excluding Films for the Humanities and Sciences) and the Funk and Wagnalls' products. CORPORATE Corporate expenses increased to $25,644 in 1997 from $22,276 in 1996, largely attributable to an increase in corporate headcount which is reflective of the growth of the Company as well as a one-time executive death benefit. NON-CORE BUSINESSES Sales from Non-Core Businesses declined 20.3% to $275,740 from $346,068 in 1996. Most of this decline resulted from the divestitures of Krames, Katharine Gibbs and NEW WOMAN during 1997, and lower revenue levels at Newbridge (excluding Films for the Humanities and Sciences) and THE DAILY RACING FORM. The operating loss from Non-Core Businesses increased to $128,006 in 1997 from $796 in 1996, attributable to the $138,640 provision for the loss on the sales of businesses. LIQUIDITY AND CAPITAL RESOURCES The following table sets forth certain information regarding the Company's EBITDA and other net cash flow items. Data is presented for both Continuing Businesses and Non-Core Businesses.
YEARS ENDED DECEMBER 31, ------------------------------------- 1998 1997 1996 ----------- ----------- ----------- EBITDA(1): Continuing Businesses: Specialty Magazines........................................................ $ 187,104 $ 159,462 $ 136,793 Information................................................................ 73,969 63,642 57,353 Education.................................................................. 90,400 81,833 66,551 Corporate.................................................................. (28,324) (25,545) (21,497) ----------- ----------- ----------- Subtotal................................................................. 323,149 279,392 239,200 Non-Core Businesses.......................................................... 6,761 22,620 37,403 ----------- ----------- ----------- Total.................................................................... $ 329,910 $ 302,012 $ 276,603 ----------- ----------- ----------- ----------- ----------- ----------- Net Cash Provided by (Used in) Operating Activities: Continuing Businesses: Specialty Magazines........................................................ $ 154,251 $ 154,094 $ 125,062 Information................................................................ 73,808 55,443 48,277 Education.................................................................. 70,480 67,415 66,587 Corporate.................................................................. (156,645) (162,248) (129,090) ----------- ----------- ----------- Subtotal................................................................. 141,894 114,704 110,836 Non-Core Businesses.......................................................... (1,090) 10,656 39,356 ----------- ----------- ----------- Total.................................................................... $ 140,804 $ 125,360 $ 150,192 ----------- ----------- ----------- ----------- ----------- ----------- Net Cash Provided by (Used in) Investing Activities: Continuing Businesses: Specialty Magazines........................................................ $ (414,975) $ (137,604) $ (219,821) Information................................................................ (96,521) (28,185) (36,693) Education.................................................................. (148,727) (183,381) (453,167) Corporate.................................................................. (9,442) (1,740) (1,735) ----------- ----------- ----------- Subtotal................................................................. (669,665) (350,910) (711,416) Non-Core Businesses.......................................................... 60,044 165,185 (10,293) ----------- ----------- ----------- Total.................................................................... $ (609,621) $ (185,725) $ (721,709) ----------- ----------- ----------- ----------- ----------- -----------
17
YEARS ENDED DECEMBER 31, ------------------------------------- 1998 1997 1996 ----------- ----------- ----------- Net Cash Provided by (Used in) Financing Activities: Continuing Businesses: Specialty Magazines........................................................ $ (12,060) $ (4,320) $ (10,073) Information................................................................ (2,431) (2,908) (4,159) Education.................................................................. (4,943) (1,657) (3,153) Corporate.................................................................. 489,751 54,656 600,156 ----------- ----------- ----------- Subtotal................................................................. 470,317 45,771 582,771 Non-Core Businesses.......................................................... 60 917 (1,825) ----------- ----------- ----------- Total.................................................................... $ 470,377 $ 46,688 $ 580,946 ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------ (1) Earnings before interest, taxes, depreciation, amortization and provision for one-time charges ("EBITDA") is not intended to represent cash flow from operations and should not be considered as an alternative to net income (loss) as an indicator of the Company's operating performance or to cash flows as a measure of liquidity. The Company believes EBITDA is a standard measure commonly reported and widely used by analysts, investors and other interested parties in the media industry. Accordingly, this information has been disclosed herein to permit a more complete comparative analysis of the Company's operating performance relative to other companies in its industry. This measure may not be comparable to similarly titled measures used by other companies. Consolidated working capital deficiency, which includes current maturities of long-term debt and in 1997, net assets held for sale, was $234,045 at December 31, 1998 compared to $146,245 at December 31, 1997. Consolidated working capital deficiency reflects certain industry working capital practices and accounting principles, including the expensing of editorial and product development costs when incurred and the recording of deferred revenues as a current liability. Advertising costs are expensed when the promotional activities occur except for certain direct-response advertising costs which are capitalized and amortized over the estimated period of future benefit. 1998 COMPARED TO 1997 Consolidated EBITDA from Continuing Businesses increased by 15.7% to $323,149 in 1998 from $279,392 in 1997 mainly as a result of acquisitions in all segments and sales growth attributable to existing operations in the specialty magazines and information segments partially offset by higher costs associated with the growth in sales. EBITDA from Continuing Businesses in the specialty magazines segment increased 17.3% to $187,104 primarily due to growth from acquisitions and advertising and circulation growth at SEVENTEEN, partially offset by increased paper costs, reduced margins at SOAP OPERA DIGEST due to the change from a bi- weekly to a weekly magazine, weakness in the soap opera market and integration costs associated with the Cowles acquisition. EBITDA from Continuing Businesses in the information segment increased 16.2% to $73,969 due to sales growth at HPC Publications and Bacon's as well as acquisitions. EBITDA from Continuing Businesses in the education segment increased 10.5% to $90,400, which is largely attributable to acquisitions offset by losses associated with certain networks at PRIMEDIA Workplace Learning and the satellite failure at Channel One. Corporate expenses increased to $28,324 in 1998 from $25,545 in 1997, largely attributable to an increase in corporate headcount which is reflective of the growth of the Company. EBITDA from the Non-Core Businesses declined to $6,761 primarily as a result of the timing of divestitures and product discontinuances most of which occurred in 1997. 18 Net cash provided by operating activities, as reported, during 1998, after interest payments of $139,623, was $140,804, an increase of 12.3% over 1997, due primarily to EBITDA growth. Net cash used in investing activities, as reported, increased in 1998 primarily attributable to increased spending on acquisitions. Payments for acquisitions of $609,602 were made in 1998 as compared to $326,192 in 1997. Net capital expenditures increased by $24,130 or 77.6% to $55,238 in 1998 from 1997 primarily due to increased capitalized software expenditures. Net cash provided by financing activities, as reported, increased $423,689 to $470,377 in 1998 as compared to $46,688 in 1997. The increase was primarily attributable to increased borrowings associated with acquisitions. 1997 COMPARED TO 1996 Consolidated EBITDA from Continuing Businesses increased by 16.8% to $279,392 in 1997 from $239,200 in 1996 because of higher revenues, paper price declines and acquisitions of new businesses. EBITDA from Continuing Businesses in the specialty magazines segment increased 16.6% in 1997 to $159,462 from $136,793 in 1996. This increase is attributable to strong organic revenue growth, paper price declines and acquisitions. EBITDA from Continuing Businesses in the information segment increased 11.0% in 1997 to $63,642 from $57,353 in 1996 primarily due to growth at the Apartment Guides which was attributable to increased advertising revenue and the impact of acquisitions. EBITDA from Continuing Businesses in the education segment increased 23.0% to $81,833 in 1997 from $66,551 in 1996 due to advertising revenue growth at Channel One and the inclusion of acquisitions including PRIMEDIA Workplace Learning. Corporate expenses increased to $25,545 in 1997 from $21,497 in 1996, largely attributable to an increase in corporate headcount which is reflective of the growth of the Company as well as a one-time executive death benefit. EBITDA from Non-Core Businesses declined 39.5% to $22,620 in 1997 from $37,403 in 1996, due to sales declines at Newbridge (excluding Films for the Humanities and Sciences) and THE DAILY RACING FORM. Net cash provided by operating activities, as reported, during the year ended December 31, 1997, after interest payments of $142,421, was $125,360, a decrease of $24,832 from the 1996 period, due primarily to an increase in interest payments. Net cash used in investing activities, as reported, decreased in 1997 as a result of decreased acquisition activities. The Company spent $326,192 for acquisitions during 1997 compared with $700,990 in 1996. The reported net capital expenditures were $31,108 during the 1997 period, an 8.1% increase from $28,790 in 1996. Net cash provided by financing activities, as reported, decreased in 1997 as a result of reduced debt and stock issuances during 1997 as well as the redemption of certain outstanding borrowings. NET OPERATING LOSS CARRYFORWARDS At December 31, 1998, the Company had NOLs and capital loss carryforwards of approximately $901,400 which will be available to reduce future taxable income. In addition, management estimates that approximately $1,130,000 of unamortized goodwill and other intangible assets will be available as deductions from any future taxable income. 19 FINANCING ARRANGEMENTS On February 17, 1998, the Company completed a private offering of $250,000 7 5/8% Senior Notes Due 2008 ("Old 7 5/8% Senior Notes"). The Old 7 5/8% Senior Notes were issued at 99.425% with related issuance costs of approximately $4,000 and mature on April 1, 2008, with no sinking fund requirements. Interest on the Old 7 5/8% Senior Notes was payable semi-annually in April and October at the annual rate of 7 5/8% commencing October 1, 1998. On June 10, 1998, the Company exchanged the Old 7 5/8% Senior Notes for a new series of $250,000 7 5/8% Senior Notes Due 2008 ("New 7 5/8% Senior Notes"). The terms of the New 7 5/8% Senior Notes are the same as the terms of the Old 7 5/8% Senior Notes except that the New 7 5/8% Senior Notes have been registered under the Securities Act of 1933. The New 7 5/8% Senior Notes may not be redeemed prior to April 1, 2003 other than in connection with a change of control. Beginning on April 1, 2003 and thereafter, the New 7 5/8% Senior Notes are redeemable in whole or in part, at the option of the Company, at prices ranging from 103.813% with annual reductions to 100% in 2006 plus accrued and unpaid interest. The New 7 5/8% Senior Notes are recorded on the accompanying consolidated balance sheet at their aggregate redemption value (net of unamortized discount) of $248,643 at December 31, 1998. On February 17, 1998, the Company completed a private offering of 2,500,000 shares of $.01 par value, $8.625 Series G Exchangeable Preferred Stock ("Series G Preferred Stock") at $99.40 per share. Annual dividends of $8.625 per share on the Series G Preferred Stock were cumulative and payable quarterly, in cash, commencing July 1, 1998. On June 10, 1998, the Company exchanged the 2,500,000 shares of Series G Preferred Stock for 2,500,000 shares of $.01 par value, $8.625 Series H Exchangeable Preferred Stock ("Series H Preferred Stock"). The terms of the Series H Preferred Stock are the same as the terms of the Series G Preferred Stock except that the Series H Preferred Stock has been registered under the Securities Act of 1933. Prior to April 1, 2001, the Company may, at its option, redeem in whole or in part, up to $125,000 of the aggregate liquidation preference of the Series H Preferred Stock at a price per share of $108.625 plus accrued and unpaid dividends to the redemption date, with the net proceeds of one or more public offerings, subject to certain other restrictions. On or after April 1, 2003, the Series H Preferred Stock may be redeemed in whole or in part, at the option of the Company, at prices ranging from 104.313% with annual reductions to 100% in 2006, plus accrued and unpaid dividends. The Company is required to redeem the Series H Preferred Stock on April 1, 2010 at a redemption price equal to the liquidation preference of $100 per share, plus accrued and unpaid dividends. The Series H Preferred Stock is exchangeable, in whole but not in part, at the option of the Company, on any scheduled dividend payment date into 8 5/8% Class H Subordinated Exchange Debentures due 2010. The Series H Preferred Stock is recorded on the accompanying consolidated balance sheet at its aggregate redemption value (net of unamortized issuance costs) of $242,493. Net proceeds from these offerings of approximately $486,000 were primarily used to redeem the $11.625 Series B Exchangeable Preferred Stock and to pay down borrowings under its bank credit facilities which amounts may be reborrowed for general corporate purposes including acquisitions. On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited partnership affiliated with Kohlberg Kravis Roberts & Co. ("KKR"), purchased 16,666,667 shares of newly issued common stock from the Company for approximately $200,000 (the "KKR Fund Investment"). The net proceeds (after issuance costs) from the KKR Fund Investment were used to repay borrowings outstanding under the bank credit facilities, which amounts may be reborrowed for general corporate purposes including acquisitions. On March 20, 1998, the Company redeemed all of the outstanding shares of the $11.625 Series B Exchangeable Preferred Stock at a price of $105.80 per share, plus accrued and unpaid dividends aggregating approximately $169,000. On April 20, 1998, the Company's 364-day credit facility expired. The Company had commitments of $150,000. 20 Under the bank credit facilities, the Company has total commitments of $1,400,000 and can borrow up to $1,500,000 in the aggregate. As of December 31, 1998, aggregate borrowings under the bank credit facilities were $1,258,236. As of December 31, 1998, the amounts borrowed under the bank credit facilities bore interest at a weighted average variable interest rate of 6.96%. Also, at December 31, 1998, the Company had outstanding $100,000 of 10 1/4% Senior Notes, $300,000 of 8 1/2% Senior Notes, $250,000 of 7 5/8% Senior Notes, 2,000,000 shares of $10.00 Series D Exchangeable Preferred Stock, 1,250,000 shares of $9.20 Series F Exchangeable Preferred Stock and 2,500,000 shares of $8.625 Series H Preferred Stock. The above indebtedness, among other things, limits the ability of the Company to change the nature of its businesses, incur indebtedness, create liens, sell assets, engage in mergers, consolidations or transactions with affiliates, make investments in or loans to certain subsidiaries, issue guarantees and make certain restricted payments including dividend payments on its common stock in excess of $25,000 in any given year. Under the Company's most restrictive debt covenants, the Company must maintain a minimum interest coverage ratio of 1.8 to 1 and a minimum fixed charge coverage ratio of 1.05 to 1. The Company's maximum allowable leverage ratio is 6.0 to 1. The Company believes it is in compliance with the financial and operating covenants of its principal financing arrangements. Borrowings under the above indebtedness are guaranteed by each of the domestic wholly-owned subsidiaries of the Company. Such guarantees are full, unconditional and joint and several. The separate financial statements of the domestic subsidiaries are not presented because the Company believes the separate financial statements would not be material to the shareholders and potential investors. The Company's foreign subsidiaries are not guarantors of the above indebtedness. The total assets, revenues, income or equity of such foreign subsidiaries, both individually and on a combined basis, are inconsequential in relation to the total assets, revenues, income or equity of the Company. The aggregate mandatory reductions of the commitments under the bank credit facilities are $90,000 in 1999, $280,000 per year in 2000 through 2003 with a final reduction or paydown of $190,000 in 2004. The 10 1/4% Senior Notes mature in June 2004, the 8 1/2% Senior Notes mature in February 2006 and the New 7 5/8% Senior Notes mature in April 2008. The per annum principal and interest payments relating to an acquisition obligation are scheduled to be $21,167, $19,167, and $8,833 to be made in semi-annual installments in 1999 through 2001, respectively. The Company's aggregate lease obligations for 1999, 2000 and 2001 are expected to be approximately $37,000, $35,000 and $29,000, respectively. The Company believes its liquidity, capital resources and cash flow are sufficient to fund planned capital expenditures, working capital requirements, interest and principal payments on its debt, the payment of preferred stock dividends and other anticipated expenditures for the foreseeable future. RECENT ACCOUNTING PRONOUNCEMENTS In 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which became effective for the Company's 1998 consolidated financial statements. SFAS No. 130 requires the disclosure of comprehensive income, defined as the change in equity of a business enterprise from transactions and other events and circumstances from non-owner sources during a period. SFAS No. 131 requires the disclosure of certain financial and descriptive information related to a Company's reportable operating segments. SFAS No. 132 standardizes the disclosure requirements for pensions and other postretirement benefits, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain previously required disclosures. The adoption of these new accounting standards did not have a material effect on the consolidated financial statements of the Company. In 1998, the Company adopted the American Institute of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Under the Company's previous accounting policy, costs for internal use 21 software, whether developed or obtained, were generally expensed as incurred. In compliance with SOP 98-1, the Company expenses costs incurred in the preliminary project stage and, thereafter, capitalizes costs incurred in the developing or obtaining of internal use software. Certain costs, such as maintenance and training, are expensed as incurred. Capitalized costs are amortized over a period of not more than five years and are subject to impairment evaluation in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". The adoption of SOP 98-1 resulted in an increase in operating income and a decrease in net loss of approximately $12,450 ($.09 per share) for the year ended December 31, 1998. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities," which requires that costs of start-up activities, including organizational costs, be expensed as incurred. This SOP will be effective for the Company's 1999 consolidated financial statements. In the opinion of the Company's management, it is not anticipated that the adoption of SOP 98-5 will have a material effect on the consolidated financial statements of the Company. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which becomes effective for the Company's 2000 consolidated financial statements. SFAS No. 133 requires that derivative instruments be measured at fair value and recognized as assets or liabilities in a company's balance sheet. The Company is currently evaluating the effect that SFAS No. 133 will have on the Company's consolidated financial statements. RECENT DEVELOPMENTS On February 22, 1999, the Company announced the closing by PRIMEDIA Workplace Learning of five unprofitable and recently launched product lines as part of a program to return the Company's focus to accreditation-oriented vocational networks and associated products. Accordingly, PRIMEDIA expects to record a charge related to this refocusing for severance, lease discontinuance for transponders and office sites, recoverability of certain assets, related goodwill and other items against its 1999 first quarter results. The Company is currently in the process of calculating the pre-tax charge, which is estimated to be between $20,000 and $24,000. PRIMEDIA Workplace Learning is included in the education segment. Through March 3, 1999, the Company completed five product-line acquisitions in all segments. The aggregate purchase price was approximately $35,000 and was financed primarily through borrowings under the Company's bank credit facilities. On March 11, 1999, the Company completed an amendment and restatement of its bank credit facilities to increase them by $250,000 to $1,650,000. The final maturity date is July 31, 2004. Additionally, the Company entered into a separate $150,000 bank revolving credit facility with a final maturity on December 30, 1999. There are currently no borrowings under the bank revolving credit facility. IMPACT OF INFLATION The impact of inflation was immaterial during 1998, 1997 and 1996. Paper prices, which had risen significantly during early 1996, declined around mid-year 1996 and continued that trend through the first six months of 1997. Moderate paper price increases occurred in July 1997 and in January 1998 for most of the grades of paper used by the Company and began to decline in October 1998. During 1998, paper costs represented approximately 9.1% of the Company's total operating costs and expenses. Postage for product distribution and direct mail solicitations is also a significant expense of the Company. The Company uses the U.S. Postal Service for distribution of many of its products and marketing materials. Postage costs have increased slightly in January 1999. In the past, the effects of inflation on operating expenses have substantially been offset by PRIMEDIA's ability to increase selling prices. No assurances can be given that the Company can pass such cost increases through to its customers. In addition to pricing actions, the Company is continuing to examine all aspects of the manufacturing and purchasing processes to identify ways to offset some of the effects of inflation. 22 YEAR 2000 READINESS DISCLOSURE PRIMEDIA has evaluated the potential impact of the situation commonly referred to as the "Year 2000 problem." The Year 2000 problem potentially exists for most companies since many computer systems in use today were designed and developed using two digits, rather than four, to specify the year. As a result, such systems will recognize the year 2000 as "00." This could cause many computer applications to fail completely or to create erroneous results unless corrective measures are taken. Although the Company does not believe that the Year 2000 problem will have a material effect on its operations or results, the Company has undertaken certain actions described below to mitigate the results thereof. PRIMEDIA instituted a company-wide Year 2000 Project ("Project") beginning in early 1997. The Project addresses issues regarding computer infrastructure (commonly referred to as "IT Systems"), Non-IT Systems, system software and third-party vendors. The Project has been divided into four phases: (1) inventorying all computer systems and identifying those with Year 2000 issues; (2) assessment including prioritization; (3) remediation including modification, upgrading and replacement; and (4) testing. The Company's senior management and the board of directors receive regular updates on the status of the Project. As of December 31, 1998, phase 1 and 2 have been completed. The remediation and testing phases with respect to the Company's own operations are currently being performed and are expected to be completed by July 1999. PRIMEDIA has communicated with significant third-party vendors that provide services to the Company's operations. This has enabled PRIMEDIA to assess the Year 2000 readiness of the third-party vendors and, in turn, the Company's vulnerability to their noncompliance. These vendors include the paper suppliers and service entities that provide print and distribution services. Although the Company may not be able to assure itself as to the Year 2000 compliance by such vendors, the Company will remain involved with the vendors' progress and is evaluating the need for related contingency planning. The total costs associated with required remediation by the Company are expected to be approximately $13,000 of which approximately $8,000 had been expended through December 31, 1998 through funding from existing operations. The remaining $5,000 is expected to be incurred by early 1999 and is not expected to have a material effect on the Company's liquidity or results of operations. These costs include the replacement of systems and equipment, outside consultants and software repairs. The Project has been integrated into the Company's overall technology upgrading plans and no important information technology plans have been deferred. At this time, the Company believes the risks associated with the Year 2000 problem lie within third-party vendor compliance. These risks are associated with certain production and distribution processes and could involve a loss of revenue. While an estimate of the revenue loss cannot be determined at this time, the Company believes that the diversity of its product lines would mitigate any losses until such time that the problem has been remedied. FORWARD-LOOKING INFORMATION This report contains certain forward-looking statements concerning the Company's operations, economic performance and financial condition. These statements are based upon a number of assumptions and estimates which are inherently subject to uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. Some of these assumptions may not materialize and unanticipated events will occur which can affect the Company's results. 23 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company is exposed to the impact of changes in interest rates. In the normal course of business, the Company manages fluctuations in interest rates through the use of swap agreements to hedge a majority of its floating rate borrowings. The Company's objective in managing this exposure is to reduce fluctuations in earnings and cash flows associated with changes in interest rates. The following table provides information about our financial instruments that are sensitive to changes in interest rates, including debt obligations and interest rate swaps. For debt obligations, the table presents mandatory principal reductions, repayment schedules of outstanding debt and projected weighted average interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and projected weighted average interest rates by contractual maturity dates. For variable rate instruments, we have indicated the applicable floating rate index.
FAIR VALUE 1999 2000 2001 2002 2003 THEREAFTER TOTAL AT 12/31/98 --------- --------- --------- --------- --------- ----------- --------- ----------- LIABILITIES Long-Term Debt Including Current Portion: Fixed Rate Debt.................... $ 18,002 $ 17,561 $ 8,616 $ -- $ -- $ 650,000 $ 694,179 $ 704,679 Average Interest Rate.............. 8.61% 8.49% 8.43% 8.43% 8.43% 7.51% 7.90% Variable Rate Debt................. $ -- $ 228,236 $ 280,000 $ 280,000 $ 280,000 $ 190,000 $1,258,236 $1,258,236 Average Interest Rate--Forward LIBOR Curve Plus Determined Spread........................... 6.71% 6.76% 6.86% 6.89% 7.01% 7.24% 6.84% FAIR VALUE AT 1999 2000 2001 12/31/98 --------- --------- --------- --------- INTEREST RATE DERIVATIVES Interest Rate Swaps: Pay Fixed/Receive Variable--Notional Amount $ 600,000 $ 600,000 $ 200,000 $ 18,519 Average pay rate..................... 6.33% 6.33% 6.30% Average receive rate--Forward LIBOR Curve.............................. 5.21% 5.63% 5.98%
24 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS PRIMEDIA INC. AND SUBSIDIARIES Report of Independent Auditors--Deloitte & Touche LLP................................ 26 Statements of Consolidated Operations for the Years Ended December 31, 1998, 1997 and 1996............................................................................... 27 Consolidated Balance Sheets as of December 31, 1998 and 1997......................... 28 Statements of Consolidated Cash Flows for the Years Ended December 31, 1998, 1997 and 1996............................................................................... 29 Statements of Shareholders' Equity (Deficiency) for the Years Ended December 31, 1998, 1997 and 1996................................................................ 30 Notes to Consolidated Financial Statements for the Years Ended December 31, 1998, 1997 and 1996...................................................................... 32
25 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of PRIMEDIA Inc. New York, New York: We have audited the accompanying consolidated balance sheets of PRIMEDIA Inc. and subsidiaries (the "Company") as of December 31, 1998 and 1997, and the related statements of consolidated operations, shareholders' equity (deficiency), and consolidated cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for internal use computer software costs to conform with Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use" of the American Institute of Certified Public Accountants in 1998. DELOITTE & TOUCHE LLP New York, New York January 27, 1999 (March 11, 1999 as to Note 23) 26 PRIMEDIA INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, ------------------------------------- NOTES 1998 1997 1996 --------- ----------- ----------- ----------- Sales, net...................................................... 22 $ 1,573,573 $ 1,487,595 $ 1,374,449 Operating costs and expenses: Cost of goods sold............................................ 367,466 341,879 337,065 Marketing and selling......................................... 280,323 271,351 249,301 Distribution, circulation and fulfillment..................... 260,428 262,151 230,533 Editorial..................................................... 145,235 120,952 104,484 Other general expenses........................................ 161,887 163,705 154,966 Corporate administrative expenses............................. 20 28,324 25,545 21,497 Depreciation and amortization of prepublication costs, property and equipment...................................... 7, 9 42,214 37,334 38,233 (Gain) loss on the sales of businesses, net and other......... 4, 18 (7,216) 138,640 -- Amortization of intangible assets, excess of purchase price over net assets acquired and other.......................... 4, 8 176,755 146,831 152,469 ----------- ----------- ----------- Operating income (loss)......................................... 118,157 (20,793) 85,901 Other income (expense): Interest expense.............................................. (144,442) (136,625) (124,601) Amortization of deferred financing costs...................... 9 (3,046) (3,071) (3,662) Other, net.................................................... 4 (8,405) 1,365 6,659 ----------- ----------- ----------- Loss before income tax benefit and extraordinary charge......... (37,736) (159,124) (35,703) Income tax benefit.............................................. 12 -- 1,685 53,300 ----------- ----------- ----------- Income (loss) before extraordinary charge....................... (37,736) (157,439) 17,597 Extraordinary charge--extinguishment of debt.................... -- (15,401) (9,553) ----------- ----------- ----------- Net income (loss)............................................... (37,736) (172,840) 8,044 Preferred stock dividends: Cash.......................................................... (54,144) (54,822) (26,944) Non-cash dividends in kind.................................... -- (4,451) (16,582) Preferred stock redemption premiums........................... 13 (9,141) (5,800) -- ----------- ----------- ----------- Loss applicable to common shareholders.......................... $ (101,021) $ (237,913) $ (35,482) ----------- ----------- ----------- ----------- ----------- ----------- Basic and diluted loss applicable to common shareholders per common share: 15 Loss before extraordinary charge.............................. $ (.71) $ (1.72) $ (.20) Extraordinary charge.......................................... -- (.12) (.07) ----------- ----------- ----------- Net loss...................................................... $ (.71) $ (1.84) $ (.27) ----------- ----------- ----------- ----------- ----------- ----------- Basic and diluted common shares outstanding..................... 15 142,529,024 129,304,900 128,781,518 ----------- ----------- ----------- ----------- ----------- -----------
See notes to consolidated financial statements. 27 PRIMEDIA INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, -------------------------- NOTES 1998 1997 ------------ ------------ ASSETS Current assets: Cash and cash equivalents............................................. $ 24,538 $ 22,978 Accounts receivable, net.............................................. 5 247,138 199,289 Inventories, net...................................................... 6 41,254 27,597 Net assets held for sale.............................................. 4 -- 38,665 Prepaid expenses and other............................................ 34,212 33,971 ------------ ------------ Total current assets.............................................. 347,142 322,500 Property and equipment, net............................................. 7 147,658 116,361 Other intangible assets, net............................................ 8 730,241 660,268 Excess of purchase price over net assets acquired, net.................. 8 1,526,503 1,111,785 Deferred income tax asset, net.......................................... 12 176,200 176,200 Other non-current assets................................................ 9 113,330 98,876 ------------ ------------ $ 3,041,074 $ 2,485,990 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current liabilities: Accounts payable...................................................... $ 118,637 $ 95,546 Accrued interest payable.............................................. 20,451 13,622 Accrued expenses and other............................................ 10 223,801 204,770 Deferred revenues..................................................... 197,131 140,474 Current maturities of long-term debt.................................. 11 21,167 14,333 ------------ ------------ Total current liabilities......................................... 581,187 468,745 ------------ ------------ Long-term debt.......................................................... 11, 23 1,928,892 1,656,541 ------------ ------------ Other non-current liabilities........................................... 53,893 48,271 ------------ ------------ Commitments and contingencies 19 Exchangeable preferred stock (aggregated liquidation and redemption values of $575,000 and $482,604 at December 31, 1998 and 1997, respectively)......................................................... 13 557,841 470,280 ------------ ------------ Common stock subject to redemption ($.01 par value, 294,119 shares and 402,650 shares outstanding at December 31, 1998 and 1997, respectively)......................................................... 14 2,964 4,376 ------------ ------------ Shareholders' deficiency: Common stock ($.01 par value, 250,000,000 shares authorized; 146,966,562 shares and 129,797,078 shares issued at December 31, 1998 and 1997, respectively)........................................ 14, 20 1,470 1,298 Additional paid-in capital............................................ 14, 20 979,720 780,191 Accumulated deficit................................................... 16 (1,030,032) (929,011) Accumulated other comprehensive loss.................................. (1,720) (1,543) Common stock in treasury, at cost (2,752,300 shares and 1,048,600 shares at December 31, 1998 and 1997, respectively)................. 14 (33,141) (13,158) ------------ ------------ Total shareholders' deficiency.................................... (83,703) (162,223) ------------ ------------ $ 3,041,074 $ 2,485,990 ------------ ------------ ------------ ------------
See notes to consolidated financial statements. 28 PRIMEDIA INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER 31, --------------------------------- 1998 1997 1996 --------- ---------- ---------- OPERATING ACTIVITIES: Net income (loss)........................................................... $ (37,736) $ (172,840) $ 8,044 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization............................................. 222,015 187,236 194,364 Non-cash (gain) loss on the sales of businesses, net and other............ (21,291) 138,640 -- Accretion of discount on acquisition obligation, distribution advance and other................................................................... 9,264 7,343 6,398 Extraordinary charge - extinguishment of debt............................. -- 15,401 9,553 Non-cash income tax benefit............................................... -- -- (53,300) Other, net................................................................ 3,114 (1,090) (6,213) Changes in operating assets and liabilities: (Increase) decrease in: Accounts receivable, net.................................................. (8,601) 7,885 (24,692) Inventories, net.......................................................... (739) 8,738 24,531 Prepaid expenses and other................................................ (565) (10,433) (598) Increase (decrease) in: Accounts payable.......................................................... 11,245 (7,366) 5,807 Accrued interest payable.................................................. 6,829 (8,528) 12,824 Accrued expenses and other................................................ (26,500) (16,864) (12,674) Deferred revenues......................................................... (4,853) (17,377) (11,201) Other non-current liabilities............................................. (11,378) (5,385) (2,651) --------- ---------- ---------- Net cash provided by operating activities................................. 140,804 125,360 150,192 --------- ---------- ---------- INVESTING ACTIVITIES: Additions to property, equipment and other, net............................. (55,238) (31,108) (28,790) Proceeds from sales of businesses........................................... 62,690 171,575 8,071 Payments for businesses acquired............................................ (609,602) (326,192) (700,990) Investments in joint venture and other...................................... (7,471) -- -- --------- ---------- ---------- Net cash used in investing activities..................................... (609,621) (185,725) (721,709) --------- ---------- ---------- FINANCING ACTIVITIES: Borrowings under credit agreements.......................................... 1,014,535 1,028,049 1,683,787 Repayments of borrowings under credit agreements............................ (975,900) (694,950) (1,384,800) Proceeds from issuance of 8 1/2% Senior Notes, net of discount.............. -- -- 298,734 Proceeds from issuance of 7 5/8% Senior Notes, net of discount.............. 248,562 -- -- Payments of acquisition obligation.......................................... (14,333) (6,000) (6,000) Payments of floating rate indebtedness...................................... -- -- (150,000) Proceeds from issuance of common stock, net of redemptions.................. 202,020 7,843 3,498 Proceeds from issuance of Series C (exchanged into Series D) Preferred Stock, net of issuance costs.............................................. -- -- 193,451 Proceeds from issuance of Series E (exchanged into Series F) Preferred Stock, net of issuance costs.............................................. -- 120,434 -- Proceeds from issuance of Series G (exchanged into Series H) Preferred Stock, net of issuance costs.............................................. 241,911 -- -- Redemption of Series B Preferred Stock...................................... (166,739) -- -- Redemption of Senior Preferred Stock........................................ -- (105,800) -- Redemptions and purchases of 10 5/8% Senior Notes........................... -- (242,787) (17,655) Purchases of common stock for the treasury.................................. (19,983) (13,158) -- Dividends paid to preferred stock shareholders.............................. (53,019) (45,305) (26,944) Deferred financing costs paid............................................... (5,321) (1,372) (13,132) Other....................................................................... (1,356) (266) 7 --------- ---------- ---------- Net cash provided by financing activities................................. 470,377 46,688 580,946 --------- ---------- ---------- Increase (decrease) in cash and cash equivalents.............................. 1,560 (13,677) 9,429 Cash and cash equivalents, beginning of year.................................. 22,978 36,655 27,226 --------- ---------- ---------- Cash and cash equivalents, end of year........................................ $ 24,538 $ 22,978 $ 36,655 --------- ---------- ---------- --------- ---------- ---------- SUPPLEMENTAL INFORMATION: Businesses acquired: Fair value of assets acquired............................................. $ 741,847 $ 406,382 $ 779,192 Liabilities assumed....................................................... 132,245 80,190 78,202 --------- ---------- ---------- Cash paid for businesses acquired......................................... $ 609,602 $ 326,192 $ 700,990 --------- ---------- ---------- --------- ---------- ---------- Interest paid............................................................... $ 139,623 $ 142,421 $ 111,752 --------- ---------- ---------- --------- ---------- ---------- Non-cash investing and financing activities: Assets acquired under capital lease obligations........................... $ 15,679 $ 15,760 $ -- --------- ---------- ---------- --------- ---------- ---------- Preferred stock dividends in kind......................................... $ -- $ 4,451 $ 16,582 --------- ---------- ---------- --------- ---------- ---------- Accretion in carrying value of preferred stock............................ $ 3,733 $ 2,666 $ 1,090 --------- ---------- ---------- --------- ---------- ---------- Accretion (reduction) in carrying value of common stock subject to redemption.............................................................. $ (221) $ 755 $ (885) --------- ---------- ---------- --------- ---------- ----------
See notes to consolidated financial statements. 29 PRIMEDIA INC. AND SUBSIDIARIES STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance at January 1, 1996........................................................................................ Comprehensive income: Net income.................................................................................................... Other comprehensive income--foreign currency translation adjustments.......................................... Comprehensive income.......................................................................................... Issuances of common stock, net of issuance costs.................................................................. Expiration of redemption feature on common stock subject to redemption............................................ $11.625 Series B Exchangeable Preferred Stock--dividends in kind.................................................. $2.875 Senior Exchangeable Preferred Stock--cash dividends........................................................ $10.00 Series D Exchangeable Preferred Stock--cash dividends...................................................... Reduction (accretion) of differences between carrying value and redemption value of: $2.875 Senior Exchangeable Preferred Stock.................................................................... $11.625 Series B Exchangeable Preferred Stock................................................................. $10.00 Series D Exchangeable Preferred Stock.................................................................. Common stock subject to redemption............................................................................ Balance at December 31, 1996...................................................................................... Comprehensive loss: Net loss...................................................................................................... Other comprehensive loss--foreign currency translation adjustments............................................ Comprehensive loss............................................................................................ Issuances of common stock, net of issuance costs.................................................................. Purchases of treasury stock....................................................................................... Expiration of redemption feature on common stock subject to redemption............................................ $11.625 Series B Exchangeable Preferred Stock--dividends in kind.................................................. $11.625 Series B Exchangeable Preferred Stock--cash dividends..................................................... $2.875 Senior Exchangeable Preferred Stock--cash dividends........................................................ $10.00 Series D Exchangeable Preferred Stock--cash dividends...................................................... $9.20 Series E Exchangeable Preferred Stock--cash dividends....................................................... $2.875 Senior Exchangeable Preferred Stock Redemption Premium..................................................... Accretion of differences between carrying value and redemption value of: $2.875 Senior Exchangeable Preferred Stock.................................................................... $11.625 Series B Exchangeable Preferred Stock................................................................. $10.00 Series D Exchangeable Preferred Stock.................................................................. $9.20 Series E Exchangeable Preferred Stock................................................................... Common stock subject to redemption............................................................................ Balance at December 31, 1997...................................................................................... Comprehensive loss: Net loss...................................................................................................... Other comprehensive loss--foreign currency translation adjustments............................................ Comprehensive loss............................................................................................ Issuances of common stock, net of issuance costs.................................................................. Purchases of treasury stock....................................................................................... Expiration of redemption feature on common stock subject to redemption............................................ $11.625 Series B Exchangeable Preferred Stock--cash dividends..................................................... $11.625 Series B Exchangeable Preferred Stock Redemption Premium.................................................. $10.00 Series D Exchangeable Preferred Stock--cash dividends...................................................... $9.20 Series F Exchangeable Preferred Stock--cash dividends....................................................... $8.625 Series H Exchangeable Preferred Stock--cash dividends...................................................... Reduction (accretion) of differences between carrying value and redemption value of: $11.625 Series B Exchangeable Preferred Stock................................................................. $10.00 Series D Exchangeable Preferred Stock.................................................................. $9.20 Series F Exchangeable Preferred Stock................................................................... $8.625 Series H Exchangeable Preferred Stock.................................................................. Common stock subject to redemption............................................................................ Balance at December 31, 1998......................................................................................
See notes to consolidated financial statements. 30
CUMULATIVE COMMON STOCK COMMON STOCK ADDITIONAL OTHER IN TREASURY - --------------------------- PAID-IN ACCUMULATED COMPREHENSIVE -------------------- SHARES AMOUNT CAPITAL DEFICIT INCOME (LOSS) SHARES AMOUNT TOTAL - -------------- ----------- ----------- ------------ --------------- --------- --------- --------- 125,921,221 $ 1,259 $ 748,194 $ (655,616) $ (1,275) -- $ -- $ 92,562 8,044 8,044 5 5 --------- 8,049 --------- 681,890 7 3,440 3,447 1,745,934 17 21,213 21,230 (16,582) (16,582) (11,500) (11,500) (15,444) (15,444) (273) (273) (317) (317) (500) (500) 885 885 - -------------- ----------- ----------- ------------ ------- --------- --------- --------- 128,349,045 1,283 772,642 (691,098) (1,270) -- -- 81,557 (172,840) (172,840) (273) (273) --------- (173,113) --------- 1,209,693 12 8,404 8,416 1,048,600 (13,158) (13,158) 238,340 3 2,566 2,569 (4,451) (4,451) (16,794) (16,794) (11,564) (11,564) (23,333) (23,333) (3,131) (3,131) (5,800) (5,800) (1,734) (1,734) (317) (317) (546) (546) (69) (69) (755) (755) - -------------- ----------- ----------- ------------ ------- --------- --------- --------- 129,797,078 1,298 780,191 (929,011) (1,543) 1,048,600 (13,158) (162,223) (37,736) (37,736) (177) (177) --------- (37,913) --------- 17,083,484 171 201,986 202,157 1,703,700 (19,983) (19,983) 86,000 1 1,055 1,056 (4,022) (4,022) (9,141) (9,141) (20,000) (20,000) (11,436) (11,436) (18,686) (18,686) (2,317) (2,317) (546) (546) (288) (288) (582) (582) 221 221 - -------------- ----------- ----------- ------------ ------- --------- --------- --------- 146,966,562 $ 1,470 $ 979,720 $(1,030,032) $ (1,720) 2,752,300 $ (33,141) $ (83,703) - -------------- ----------- ----------- ------------ ------- --------- --------- --------- - -------------- ----------- ----------- ------------ ------- --------- --------- ---------
31 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. DESCRIPTION OF BUSINESS PRIMEDIA Inc. (which together with its subsidiaries is herein referred to as either "PRIMEDIA" or the "Company" unless the context implies otherwise) is the authoritative source for specialized information to targeted markets. The Company's three business segments are specialty magazines, information and education. In 1998, the Company reclassified PRIMEDIA Reference from the information segment to the education segment and has restated prior periods accordingly. The Company's management believes that the education segment is more reflective of the focus of the PRIMEDIA Reference products. The specialty magazines segment includes PRIMEDIA Consumer Magazines, PRIMEDIA Special Interest Publications, McMullen Argus, PRIMEDIA Enthusiast Publications and the majority of PRIMEDIA Intertec. The specialty magazines segment is concentrated primarily on specialty consumer magazines, and technical and trade magazines. The information segment includes PRIMEDIA Information, HPC Publications, Bacon's and a portion of PRIMEDIA Intertec. The information segment produces consumer and business information products in a variety of formats for decision makers in business, professional and special interest consumer markets. The information is compiled and sold as guides, newsletters, CD-ROMs, directories and via the Internet. The education segment includes Channel One, PRIMEDIA Reference, Films for the Humanities and Sciences, PRIMEDIA Workplace Learning, American Guidance Service and WEEKLY READER. This segment specializes in providing educational materials to the classroom learning and workplace learning markets. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION. The consolidated financial statements include the accounts of PRIMEDIA and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. Significant accounting estimates used include estimates for sales returns and allowances, bad debts and estimates for the realization of deferred tax assets. Management has exercised reasonableness in deriving these estimates. However, actual results may differ from these estimates. Certain reclassifications have been made to the prior years' consolidated financial statements to conform with the presentation used in the current period. RECENT ACCOUNTING PRONOUNCEMENTS. In 1998, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," and SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which became effective for the Company's 1998 consolidated financial statements. SFAS No. 130 requires the disclosure of comprehensive income, defined as the change in equity of a business enterprise from transactions and other events and circumstances from non-owner sources during a period. SFAS No. 131 requires the disclosure of certain financial and descriptive information related to a Company's reportable operating segments. SFAS No. 132 standardizes the disclosure requirements for pensions and other postretirement benefits, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain previously required disclosures. The adoption of these new accounting standards did not have a material effect on the consolidated financial statements of the Company. 32 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In 1998, the Company adopted the American Institute of Certified Public Accountants' ("AICPA") Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". Under the Company's previous accounting policy, costs for internal use software, whether developed or obtained, were generally expensed as incurred. In compliance with SOP 98-1, the Company expenses costs incurred in the preliminary project stage and, thereafter, capitalizes costs incurred in the developing or obtaining of internal use software. Certain costs, such as maintenance and training, are expensed as incurred. Capitalized costs are amortized over a period of not more than five years and are subject to impairment evaluation in accordance with the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". The adoption of SOP 98-1 resulted in an increase in operating income and a decrease in net loss of approximately $12,450 ($.09 per share) for the year ended December 31, 1998. In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-Up Activities," which requires that costs of start-up activities, including organizational costs, be expensed as incurred. This SOP will be effective for the Company's 1999 consolidated financial statements. In the opinion of the Company's management, it is not anticipated that the adoption of SOP 98-5 will have a material effect on the consolidated financial statements of the Company. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which becomes effective for the Company's 2000 consolidated financial statements. SFAS No. 133 requires that derivative instruments be measured at fair value and recognized as assets or liabilities in a company's balance sheet. The Company is currently evaluating the effect that SFAS No. 133 will have on the Company's consolidated financial statements. CASH AND CASH EQUIVALENTS. Management considers all highly liquid instruments purchased with an original maturity of 90 days or less to be cash equivalents. INVENTORIES. Inventories, including paper, purchased manuscripts, photographs and art, are valued at the lower of cost or market, principally on a first-in, first-out ("FIFO") basis. PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation of property and equipment, and the amortization of leasehold improvements are provided at rates based on the estimated useful lives or lease terms, if shorter, using primarily the straight-line method. Improvements are capitalized while maintenance and repairs are expensed as incurred. INVESTMENTS IN JOINT VENTURE AND OTHER. Investments in which the Company has at least a 20 percent, but not more than a 50 percent interest, are accounted for under the equity method. Investments in companies below 20 percent are accounted for under the cost method. The fair value of these investments approximate cost and are recorded in other non-current assets on the accompanying consolidated balance sheet. EDITORIAL AND PRODUCT DEVELOPMENT COSTS. Editorial costs and product development costs are generally expensed as incurred. Product development costs include the cost of artwork, graphics, prepress, plates and photography for new products. 33 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ADVERTISING AND SUBSCRIPTION ACQUISITION COSTS. Advertising and subscription acquisition costs are expensed the first time the advertising takes place, except for direct-response advertising, the primary purpose of which is to elicit sales from customers who can be shown to have responded specifically to the advertising and that results in probable future economic benefits. Direct-response advertising consists of product promotional mailings, catalogues, telemarketing and subscription promotions. These direct-response advertising costs are capitalized as assets and amortized over the estimated period of future benefit using a ratio of current period revenues to total current and estimated future period revenues. The amortization periods range from 6 months to 2 years subsequent to the promotional event. Amortization of direct-response advertising costs is included in marketing and circulation expenses on the accompanying statements of consolidated operations. Advertising expense was approximately $54,700, $122,400 and $121,200 during the years ended December 31, 1998, 1997 and 1996, respectively (see Note 9). DEFERRED FINANCING COSTS. Deferred financing costs are being amortized by the straight-line method over the terms of the related indebtedness. DEFERRED WIRING AND INSTALLATION COSTS. Wiring and installation costs incurred by Channel One and PRIMEDIA Workplace Learning have been capitalized and are being amortized by the straight-line method over the related estimated useful lives which range from five to 15 years. $11.625 SERIES B EXCHANGEABLE PREFERRED STOCK ("SERIES B PREFERRED STOCK"), $10.00 SERIES D EXCHANGEABLE PREFERRED STOCK ("SERIES D PREFERRED STOCK"), $9.20 SERIES E/SERIES F EXCHANGEABLE PREFERRED STOCK ("SERIES E/SERIES F PREFERRED STOCK") AND $8.625 SERIES H EXCHANGEABLE PREFERRED STOCK ("SERIES H PREFERRED STOCK"). The Series B Preferred Stock, Series D Preferred Stock, Series E/Series F Preferred Stock and Series H Preferred Stock are stated at fair value on the date of issuance less issuance costs. The difference between their carrying values and their redemption values is being amortized (using the interest method) by periodic charges to additional paid-in capital. COMMON STOCK SUBJECT TO REDEMPTION. The common stock subject to redemption is stated at redemption value which is equal to quoted market value. The difference between the carrying value of such stock and its redemption value is being amortized by periodic charges to additional paid-in capital. COMPUTER SOFTWARE. Costs incurred in connection with computer software to be sold, leased or otherwise marketed, which represent production costs subsequent to establishing technological feasibility, are reported as other non-current assets and amortized to cost of goods sold over the estimated period of future benefit using the straight-line method. Costs incurred to develop or obtain computer software for internal use are capitalized and recorded in property and equipment. These costs are amortized over the estimated period of future benefit using the straight-line method. INTEREST RATE SWAP AGREEMENTS. The Company's interest rate swap agreements are designated and effective as modifications to existing debt obligations to reduce the impact of changes in the interest rates on its floating rate borrowings and, accordingly, are accounted for using the settlement method of accounting. The differentials to be paid or received under the interest rate swap agreements are accrued as interest rates change and are recognized as adjustments to interest expense. The Company considers swap terms including the reference rate, payment and maturity dates and the notional amount in determining if an interest rate swap agreement is effective at modifying an existing debt obligation. If the criteria for designation are no longer met or the underlying instrument matures or is extinguished, the Company will 34 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) account for outstanding swap agreements at fair market value and any resulting gain or loss will be recognized as other income or expense. Any gains or losses upon early termination of the agreements will be deferred and amortized over the shorter of the remaining life of the hedged existing debt obligation or the original life of the interest rate swap agreement. PURCHASE ACCOUNTING. With respect to the acquisitions, the total purchase price has been allocated to the tangible and intangible assets and liabilities based on their respective fair values. EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED AND INTANGIBLE ASSETS. Intangible assets are being amortized using both accelerated and straight-line methods over periods ranging from 1/4 of 1 year to 40 years. The excess of purchase price over net assets acquired is being amortized on a straight-line basis over 40 years. The recoverability of the carrying values of the excess of the purchase price over the net assets acquired and intangible assets is evaluated quarterly to determine if an impairment in value has occurred. An impairment in value will be considered to have occurred when it is determined that the undiscounted future operating cash flows generated by the acquired businesses are not sufficient to recover the carrying values of such intangible assets. If it has been determined that an impairment in value has occurred, the excess of the purchase price over the net assets acquired and intangible assets would be written down to an amount which will be equivalent to the present value of the future operating cash flows to be generated by the acquired businesses. REVENUE RECOGNITION. Advertising revenues for all consumer magazines are recognized as income at the on-sale date, net of provisions for estimated rebates, adjustments and discounts. Other advertising revenues are generally recognized based on the publications' cover dates. Newsstand sales are recognized as income at the on-sale date for all publications, net of provisions for estimated returns. Subscriptions are recorded as deferred revenue when received and recognized as income over the term of the subscription. PRIMEDIA Workplace Learning subscription and broadcast fees for satellite and videotape network services are recognized in the month services are rendered. Sales of books and other items are recognized as revenue upon shipment, net of an allowance for returns which is provided based on sales. Distribution costs charged to customers are recognized as revenue when the related product is shipped. Channel One advertising revenue, net of commissions, is recognized as advertisements are aired on the program. Certain advertisers are guaranteed a minimum number of viewers per advertisement shown; the revenue recognized is based on the actual viewers delivered not to exceed the original contract value. FOREIGN CURRENCY. Gains and losses on foreign currency transactions, which are not significant, have been included in other, net on the accompanying statements of consolidated operations. The effects of translation of foreign currency financial statements into U.S. dollars are included in the accumulated other comprehensive loss account in shareholders' equity (deficiency). 3. ACQUISITIONS AND JOINT VENTURE AND OTHER ACQUISITIONS. The Company acquired certain net assets or stock of: 1996-Cahners Consumer Magazines ("Cahners"), a publisher of specialty consumer magazines including AMERICAN BABY, MODERN BRIDE, SAIL and POWER & MOTORYACHT, along with 20 related properties and PRIMEDIA Workplace Learning, which utilizes various multi-media technologies to provide workplace 35 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 3. ACQUISITIONS AND JOINT VENTURE AND OTHER (CONTINUED) training, news, and information to professionals and students in the corporate and professional, automotive, banking, government and public service, education, healthcare, and interactive distance training markets. In addition to the aforementioned, the Company completed several other smaller acquisitions during 1996. The foregoing acquisitions, except PRIMEDIA Workplace Learning, if they had occurred on January 1 of the year prior to acquisition, would not have had a material impact on the results of operations. The following unaudited pro forma information presents the results of operations of the Company as if the acquisition of PRIMEDIA Workplace Learning had taken place on January 1, 1996:
YEAR ENDED DECEMBER 31, 1996 ----------------------- Sales, net........................................................... $ 1,413,930 Operating income..................................................... 82,100 Income before extraordinary charge................................... 1,314 Loss applicable to common shareholders before extraordinary charge............................................... (42,212) Basic and diluted loss applicable to common shareholders per common share before extraordinary charge....................... (.33)
1997-QWIZ, a provider of interactive, computer-based testing and training products; a leading electronic automotive cost guide; a publisher of automotive enthusiast magazines including LOWRIDER, ARTE, LOWRIDER BICYCLE and LOWRIDER JAPAN; the publisher of REGISTERED REPRESENTATIVE, a trade magazine edited for and circulated to the retail securities industry in the United States; a publisher of specialty magazines targeting the professional recording, sound and music production industry; and the leading provider of highly specialized training and certification software products for the insurance industry. In addition to the aforementioned, the Company completed several other smaller acquisitions during 1997. The 1997 acquisitions, if they had occurred on January 1 of the year prior to acquisition, would not have had a material impact on the results of operations. 1998-Cowles Enthusiast Media and Cowles Business Media, publishers of 25 enthusiast titles, 11 technical and trade magazines and newsletters including, FLY FISHERMAN, VEGETARIAN TIMES and CABLE WORLD; American Guidance Service, a leading publisher of assessments, textbooks and instructional materials for students with special education needs; and American Trucker, a publisher of 18 regional monthly journals. In addition to the aforementioned, the Company completed several smaller acquisitions during 1998. The 1998 acquisitions, had they occurred on January 1 of the year prior to acquisition, would not have had a material impact on the results of operations. The 1998 acquisitions affected all segments and were financed through borrowings under the Company's credit agreements. The cash payments for these acquisitions on an aggregate basis were $609,602 (net of liabilities assumed of approximately $132,000), including certain immaterial purchase price adjustments. The excess purchase price over net assets acquired was approximately $462,000. The acquisitions have been accounted for by the purchase method. The preliminary purchase cost allocations for the above-mentioned current year's acquisitions are subject to adjustment when additional information concerning asset and liability valuations are obtained. The final asset and liability fair values 36 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 3. ACQUISITIONS AND JOINT VENTURE AND OTHER (CONTINUED) may differ from those set forth on the accompanying consolidated balance sheet at December 31, 1998; however, the changes are not expected to have a material effect on the consolidated financial position of the Company. The consolidated financial statements include the operating results of these acquisitions subsequent to their respective dates of acquisition. JOINT VENTURE AND OTHER. In 1998, the Company created PRIMEDIA Ventures, a fund to invest in early-stage Internet companies and other technology opportunities such as commerce services, enterprise software applications and advertising-related technologies. Its investments include an online wedding gift registry service, subscription based Internet services for building relationships, a provider of online loyalty and rewards programs and an Internet platform for staging live interactive presentations. In addition, PRIMEDIA Intertec made an investment in a joint venture in China to publish trade magazines in Chinese language editions. The investments aggregated $7,471 during 1998 (see Note 2). 4. DIVESTITURES AND NON-CORE BUSINESSES During 1996, the Company completed the sale of certain technical and trade magazines, which were acquired in 1995 and upon acquisition were designated to be sold. The differences between the proceeds received and the carrying values of the assets sold were treated as adjustments to the excess of purchase price over net assets acquired related to the retained businesses. In addition, the Company sold a monthly tabloid targeted to electronic design engineers for consideration of a motion picture and television production magazine and cash proceeds. During 1996, the Company also completed the sale of the Kits and Leaflets Division of PRIMEDIA Special Interest Publications and certain specialty consumer magazines. In connection with these sales, the Company received aggregate cash proceeds of $8,071 and recorded a net gain on sale of businesses of approximately $5,800. During 1996, the Company decided to divest Katharine Gibbs. In 1997, the Company announced its intention to divest the following non-core business units: THE DAILY RACING FORM, Newbridge Communications, Inc. (excluding Films for the Humanities and Sciences), NEW WOMAN magazine, Krames Communications Incorporated ("Krames"), STAGEBILL and Intertec Mailing Services. In 1998, the Company decided to divest Nelson Information, Inc. ("Nelson") and certain enthusiast titles as well as discontinue the Funk and Wagnalls' products and certain other enthusiast titles. These planned divestitures and discontinuances are collectively referred to as the Non-Core Businesses and are part of the Company's plan to focus on markets that have dynamic growth opportunities. During the second quarter of 1997, the Company completed the sale of Katharine Gibbs with proceeds net of direct selling expenses approximating carrying value. During the third quarter of 1997, the Company recorded a provision aggregating $138,640 for the reduction of the carrying values of Newbridge Communications, Inc. (excluding Films for the Humanities and Sciences), THE DAILY RACING FORM, STAGEBILL, Krames, NEW WOMAN magazine and Intertec Mailing Services to the estimated realizable value of the net assets of such businesses. During the second half of 1997, the Company completed the sales of Krames, NEW WOMAN magazine, Intertec Mailing Services, Newbridge Book Clubs, Newbridge Educational Publishing and STAGEBILL. In connection with these sales, the Company received aggregate proceeds of $171,575 net of direct selling expenses. 37 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 4. DIVESTITURES AND NON-CORE BUSINESSES (CONTINUED) In 1998, the Company completed its focusing program with the sales of Nelson, certain enthusiast titles and THE DAILY RACING FORM. In connection with these sales, the Company recorded a gain of $19,716 and has received aggregate proceeds of $61,090 net of direct selling expenses. The operating results of the Non-Core Businesses are included in the accompanying statements of consolidated operations up to their date of disposition for the years ended December 31, 1998, 1997 and 1996. Total sales for the Non-Core Businesses were $42,463, $275,740 and $346,068 for the years ended December 31, 1998, 1997 and 1996, respectively. Excluding the (gain) loss on the sales of businesses net, and other, operating income (loss) for the Non-Core Businesses was $6,609, $10,634 and $(796) for the years ended December 31, 1998, 1997 and 1996, respectively. On August 1, 1998, the Company also discontinued Executive Education Network ("EXEN"), a PRIMEDIA Workplace Learning network, due to unprofitability and increased competition in this field. As a result, the Company recorded a $4,000 provision related to discontinuance costs, which is recorded net of gains on the sales of Nelson and THE DAILY RACING FORM, in (gain) loss on the sales of businesses, net and other on the accompanying statement of consolidated operations. In addition, the Company recorded a $5,800 write-down of EXEN's excess of purchase price over net assets acquired and other intangible assets which is included in amortization expense (see Note 8 and Note 23). 5. ACCOUNTS RECEIVABLE, NET Accounts receivable consist of the following:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- Accounts receivable................................................... $ 284,441 $ 236,819 Less: Allowance for doubtful accounts................................. 15,796 10,521 Allowance for returns and rebates................................ 21,507 27,009 ---------- ---------- $ 247,138 $ 199,289 ---------- ---------- ---------- ----------
6. INVENTORIES, NET Inventories consist of the following:
DECEMBER 31, -------------------- 1998 1997 --------- --------- Finished goods.......................................................... $ 21,974 $ 12,271 Work in process......................................................... 223 3,314 Raw materials........................................................... 22,262 14,494 --------- --------- 44,459 30,079 Less: Allowance for obsolescence........................................ 3,205 2,482 --------- --------- $ 41,254 $ 27,597 --------- --------- --------- ---------
38 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 7. PROPERTY AND EQUIPMENT, NET Property and equipment, including that held under capital leases, consist of the following:
DECEMBER 31, RANGE OF LIVES ---------------------- (YEARS) 1998 1997 --------------- ---------- ---------- Land.................................................. -- $ 4,160 $ 4,986 Buildings and improvements............................ 1-40 53,053 33,808 Furniture and fixtures................................ 5-10 34,748 28,135 Machinery and equipment............................... 3-10 105,594 81,226 Internal use software................................. 3-5 14,091 -- School equipment...................................... 5-10 63,111 58,665 Other................................................. 1-7 8,533 2,992 ---------- ---------- 283,290 209,812 Less: Accumulated depreciation and amortization....... 135,632 93,451 ---------- ---------- $ 147,658 $ 116,361 ---------- ---------- ---------- ----------
Included in property and equipment are assets which were acquired under capital leases in the amount of $31,439 and $27,498 with accumulated amortization of $493 and $3,043 at December 31, 1998 and 1997, respectively (see Note 19). In 1998, the Company replaced its existing satellite capital lease with a new capital lease. 8. INTANGIBLE ASSETS AND EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET Other intangible assets consist of the following:
DECEMBER 31, RANGE OF LIVES -------------------------- (YEARS) 1998 1997 --------------- ------------ ------------ Trademarks........................................ 40 $ 391,764 $ 342,645 Membership, subscriber and customer lists......... 2-20 582,812 456,716 Non-compete agreements............................ 1-10 227,108 194,116 Trademark license agreements...................... 1-40 3,721 2,909 Copyrights........................................ 3-20 36,594 25,715 Video library..................................... 1-7 14,837 14,837 Databases......................................... 10-12 10,577 10,577 Advertiser lists.................................. .25-20 200,069 223,443 Distribution agreements........................... 1-7 11,525 11,525 Other............................................. 1-15 28,994 19,647 ------------ ------------ 1,508,001 1,302,130 Less: Accumulated amortization.................... 777,760 641,862 ------------ ------------ $ 730,241 $ 660,268 ------------ ------------ ------------ ------------
The excess of the purchase price over the fair value of the net assets acquired is net of accumulated amortization of $137,094 and $94,735 at December 31, 1998 and 1997, respectively (see Note 4). 39 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 9. OTHER NON-CURRENT ASSETS Other non-current assets consist of the following:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- Deferred financing costs, net......................................... $ 16,617 $ 15,276 Deferred wiring and installation costs, net........................... 49,822 54,387 Direct-response advertising costs, net................................ 17,466 16,520 Prepublication and programming costs, net............................. 12,652 4,526 Investments in joint venture and other................................ 6,843 -- Other................................................................. 9,930 8,167 ---------- ---------- $ 113,330 $ 98,876 ---------- ---------- ---------- ----------
The deferred financing costs are net of accumulated amortization of $7,309 and $5,093 at December 31, 1998 and 1997, respectively. The deferred wiring and installation costs are net of accumulated amortization of $24,523 and $18,718 at December 31, 1998 and 1997, respectively. Direct-response advertising costs are net of accumulated amortization of $70,113 and $53,840 at December 31, 1998 and 1997, respectively. Prepublication and programming costs are net of accumulated amortization of $11,765 and $6,843 at December 31, 1998 and 1997, respectively. 10. ACCRUED EXPENSES AND OTHER Accrued expenses and other current liabilities consist of the following:
DECEMBER 31, ---------------------- 1998 1997 ---------- ---------- Payroll, commissions and related employee benefits.................... $ 68,350 $ 53,494 Systems costs......................................................... 1,357 2,066 Rent and lease liabilities............................................ 33,028 27,247 Retail display costs and allowances................................... 14,042 10,407 Promotion costs....................................................... 3,569 2,739 Royalties............................................................. 7,053 8,367 Circulation costs..................................................... 5,253 6,037 Professional fees..................................................... 10,877 12,319 Taxes................................................................. 17,290 18,528 Customer advances..................................................... 1,448 946 Deferred purchase price............................................... 10,853 16,204 Other................................................................. 50,681 46,416 ---------- ---------- $ 223,801 $ 204,770 ---------- ---------- ---------- ----------
40 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, -------------------------- 1998 1997 ------------ ------------ Borrowings under Credit Facilities................................ $ 1,258,236 $ 1,218,101 10 1/4% Senior Notes Due 2004..................................... 100,000 100,000 8 1/2% Senior Notes Due 2006..................................... 299,001 298,902 7 5/8% Senior Notes Due 2008..................................... 248,643 -- ------------ ------------ 1,905,880 1,617,003 Acquisition obligation payable.................................... 44,179 53,871 ------------ ------------ 1,950,059 1,670,874 Less: Current maturities of long-term debt........................ 21,167 14,333 ------------ ------------ $ 1,928,892 $ 1,656,541 ------------ ------------ ------------ ------------
The Company has credit facilities with The Chase Manhattan Bank, the Bank of New York, Bankers Trust Company and the Bank of Nova Scotia as agents (the "Credit Facilities"). The Credit Facilities are comprised of a $750,000 Tranche A Revolving Loan Commitment ("Tranche A Loan Commitment"), a $250,000 Term Loan ("Term Loan") and an additional $250,000 Revolving Loan Commitment ("Revolver/ Term Loan"). In addition, the Company has the right to solicit commitments of up to $250,000 under the Tranche B Revolving Loan Facility ("Tranche B Facility"). In May 1997, the Company solicited commitments of $150,000 ("Tranche B Loan Commitment") under the Tranche B Facility. The Tranche A Loan Commitment may be utilized through the incurrence of Tranche A revolving credit loans, swingline loans which may not exceed $40,000 in total, Canadian dollar loans which may not exceed the Canadian dollar equivalent of $40,000 in total or the issuance of letters of credit which may not exceed $40,000. The Tranche B Facility may be utilized through the incurrence of Tranche B revolving credit loans. The borrowings under the Credit Facilities may be used for general corporate and working capital purposes as well as to finance certain future acquisitions. The commitments under the Tranche A Loan Commitment and the Tranche B Loan Commitment are subject to mandatory reductions semi-annually on June 30 and December 31 with the first reduction on June 30, 1999 and the final reduction on June 30, 2004. The mandatory reductions for the Tranche A Loan Commitment are as follows:
YEARS ENDING DECEMBER 31, - -------------------------------------------------------------------------------- 1999............................................................................ $ 75,000 2000............................................................................ 150,000 2001............................................................................ 150,000 2002............................................................................ 150,000 2003............................................................................ 150,000 2004............................................................................ 75,000 ------------ $ 750,000 ------------ ------------
41 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. LONG-TERM DEBT (CONTINUED) The mandatory reductions for the Tranche B Loan Commitment are as follows:
YEARS ENDING DECEMBER 31, - -------------------------------------------------------------------------------- 1999............................................................................ $ 15,000 2000............................................................................ 30,000 2001............................................................................ 30,000 2002............................................................................ 30,000 2003............................................................................ 30,000 2004............................................................................ 15,000 ------------ $ 150,000 ------------ ------------
The mandatory reductions for the Tranche B Loan Commitment are based on defined percentages of the total Tranche B Loan Commitment. To the extent that the total revolving credit loans outstanding exceed the reduced commitment amount, these loans must be paid down to an amount equal to or less than the reduced commitment amount. However, if the total revolving credit loans outstanding do not exceed the reduced commitment amount, then there is no requirement to pay down any of the revolving credit loans. The principal amounts of the Term Loan and the Revolver/Term Loan will each be repaid semi-annually on June 30 and December 31 of each year, with an initial payment of $25,000 on June 30, 2000, installments of $25,000 on each payment date thereafter through December 31, 2003 and a final payment of $50,000 on June 30, 2004. On April 20, 1998, the Company's 364-day credit facility (the "New Credit Facility") expired. The Company had commitments of $150,000. At December 31, 1998, the borrowings under the Credit Facilities consist of $628,236 under the Tranche A Loan Commitment, $250,000 under the Revolver/Term Loan, $130,000 under the Tranche B Loan Commitment and $250,000 under the Term Loan. At December 31, 1998, the Company has commitments of $1,400,000 and can borrow up to $1,500,000 in the aggregate under the Credit Facilities. The amounts borrowed pursuant to the Credit Facilities bear interest, at the Company's option as follows: (i) the higher of (a) the Federal Funds Effective Rate as published by the Federal Reserve Bank of New York plus 1/2 of 1% and (b) the prime commercial lending rate announced by the Agent from time to time (in each case, the "Base Rate"); plus, in each case, an applicable margin of up to 1/8 of 1% as specified in the Credit Facilities or (ii) the Eurodollar Rate plus an applicable margin ranging from 1/2 of 1% to 1 1/2% as specified in the Credit Facilities. All swingline loans bear interest at the Base Rate plus the applicable margin of up to 1/8 of 1% as specified in the Credit Facilities. During 1998 and 1997, the weighted average interest rate on the Credit Facilities was 6.84% and 7.11%, respectively. Interest rates on the borrowings outstanding under the Credit Facilities ranged from 6.35% to 8.50% in 1998 and from 7.04% to 8.50% in 1997. Interest rates on the borrowings outstanding under the Credit Facilities ranged from 6.72% to 7.88% at December 31, 1998. 42 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. LONG-TERM DEBT (CONTINUED) Under the Credit Facilities, the Company has agreed to pay commitment fees equal to 3/8 of 1% per annum on the daily average aggregate unutilized commitment under the Tranche A Loan Commitment and the Tranche B Loan Commitment. The Company has also agreed to pay certain fees with respect to the issuance of letters of credit and an annual administration fee. Under the New Credit Facility, the Company had agreed to pay commitment fees equal to 1/8 of 1% per annum on the daily average aggregate unutilized revolving loan commitment. 10 5/8% SENIOR NOTES. The Company purchased $16,750 and $20,850 of the 10 5/8% Senior Notes in 1996 and 1997, respectively. On May 1, 1997, the Company redeemed the $212,400 remaining principal amount of the 10 5/8% Senior Notes at 104% plus accrued and unpaid interest. The aggregate premium paid and the write-off of related deferred financing costs are classified as an extraordinary charge and are recorded at an aggregate value of $15,401 on the accompanying statement of consolidated operations for the year ended December 31, 1997. 10 1/4% SENIOR NOTES. Interest is payable semi-annually in June and December at an annual rate of 10 1/4%. The 10 1/4% Senior Notes mature on June 1, 2004, with no sinking fund requirements. The 10 1/4% Senior Notes may not be redeemed prior to June 1, 1999 other than in connection with a change of control. Beginning in 1999 and thereafter, the 10 1/4% Senior Notes are redeemable at prices ranging from 104.95% with annual reductions to 100% in 2002 plus accrued and unpaid interest. 8 1/2% SENIOR NOTES. Interest is payable semi-annually in February and August at an annual rate of 8 1/2%. The 8 1/2% Senior Notes mature on February 1, 2006, with no sinking fund requirements. The 8 1/2% Senior Notes may not be redeemed prior to February 1, 2001 other than in connection with a change of control. Beginning in 2001 and thereafter, the 8 1/2% Senior Notes are redeemable in whole or in part, at the option of the Company, at prices ranging from 104.25% with annual reductions to 100% in 2003 plus accrued and unpaid interest. 7 5/8% SENIOR NOTES. On February 17, 1998, the Company completed a private offering of $250,000 7 5/8% Senior Notes Due 2008, ("Old 7 5/8% Senior Notes"). The Old 7 5/8% Senior Notes were issued at 99.425% with related issuance costs of approximately $4,000 and mature on April 1, 2008, with no sinking fund requirements. Interest on the Old 7 5/8% Senior Notes was payable semi-annually in April and October at the annual rate of 7 5/8% commencing October 1, 1998. On June 10, 1998, the Company exchanged the Old 7 5/8% Senior Notes for a new series of $250,000 7 5/8% Senior Notes Due 2008 ("New 7 5/8% Senior Notes"). The terms of the New 7 5/8% Senior Notes are the same as the terms of the Old 7 5/8% Senior Notes except that the New 7 5/8% Senior Notes have been registered under the Securities Act of 1933. The New 7 5/8% Senior Notes may not be redeemed prior to April 1, 2003 other than in connection with a change of control. Beginning on April 1, 2003 and thereafter, the New 7 5/8% Senior Notes are redeemable in whole or in part, at the option of the Company, at prices ranging from 103.813% with annual reductions to 100% in 2006 plus accrued and unpaid interest. Net proceeds from the issuance of the Old 7 5/8% Senior Notes of approximately $244,000 were primarily used to redeem the Series B Preferred Stock and to pay down borrowings under the Credit Facilities, which amounts may be reborrowed for general corporate purposes including acquisitions. The 10 1/4% Senior Notes, 8 1/2% Senior Notes and the New 7 5/8% Senior Notes (together referred to as the "Senior Notes"), and the Credit Facilities, all rank senior in right of payment to all subordinated indebtedness of PRIMEDIA Inc. (a holding company). 43 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. LONG-TERM DEBT (CONTINUED) The above indebtedness, among other things, limits the ability of the Company to change the nature of its businesses, incur indebtedness, create liens, sell assets, engage in mergers, consolidations or transactions with affiliates, make investments in or loans to certain subsidiaries, issue guarantees and make certain restricted payments including dividend payments on its common stock in excess of $25,000 in any given year. Under the Company's most restrictive debt covenants, the Company must maintain a minimum interest coverage ratio of 1.8 to 1 and a minimum fixed charge coverage ratio of 1.05 to 1. The Company's maximum allowable leverage ratio is 6.0 to 1. The Company believes it is in compliance with the financial and operating covenants of its principal financing arrangements. Borrowings under the above indebtedness are guaranteed by each of the domestic wholly-owned subsidiaries of the Company. Such guarantees are full, unconditional and joint and several. The separate financial statements of the domestic subsidiaries are not presented because the Company believes the separate financial statements would not be material to the shareholders and potential investors. The Company's foreign subsidiaries are not guarantors of the above indebtedness. The total assets, revenues, income or equity of such foreign subsidiaries, both individually and on a combined basis, are inconsequential in relation to the total assets, revenues, income or equity of the Company. ACQUISITION OBLIGATION. In connection with the acquisition of certain of the Company's specialty consumer magazine operations and THE DAILY RACING FORM, an obligation was recorded equivalent to the present value of the principal and interest payments of the notes payable in the amount of $44,179 at December 31, 1998 and $53,871 at December 31, 1997. The interest rate used in calculating the present value was 13%, which represents management's estimate of the prevailing market rate of interest for such obligation at the time of the acquisition. Principal and interest amounts aggregating $49,167 will be repaid from June 1999 through June 2001. INTEREST RATE SWAP AGREEMENTS. In May 1995, the Company entered into two, three-year interest rate swap agreements with an aggregate notional amount of $200,000 which expired in May 1998. Under these swap agreements, the Company received a floating rate of interest based on three-month LIBOR, which reset quarterly, and paid a fixed rate of interest which increased each year during the terms of the respective agreements. The weighted average variable rate and weighted average fixed rate were 5.7% and 6.7%, respectively, in 1998, 5.7% and 6.5%, respectively, in 1997 and 5.5% and 6.2%, respectively, in 1996. Also, in May 1995, the Company entered into a three-year interest rate cap agreement which expired in May 1998. As a result of this transaction, the Company had the right to receive payments based on a notional principal amount of $100,000 to the extent that three-month LIBOR exceeded 7.75% in year one, 8.75% in year two and 9.75% in year three of the agreement. Any interest differential received was recognized as an adjustment to interest expense. The interest rate cap fee was recognized as an adjustment to interest expense over the life of the interest rate cap agreement. In the fourth quarter of 1996, the Company entered into six, one-year interest rate swap agreements with an aggregate notional amount of $600,000. Under these swap agreements, the Company received a floating rate of interest based on three-month LIBOR, which reset quarterly, and paid a fixed rate of interest, each quarter, for the term of the agreements. The weighted average variable rate and weighted average fixed rate were 5.7% and 5.8%, respectively, in 1997 and 5.5% and 5.8%, respectively, in 1996. These interest rate swap agreements expired during the fourth quarter of 1997. 44 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. LONG-TERM DEBT (CONTINUED) In July 1997, the Company entered into four, three-year and two, four-year interest rate swap agreements, with an aggregate notional amount of $600,000. Under these new swap agreements, which commenced on January 2, 1998, the Company receives a floating rate of interest based on three-month LIBOR, which resets quarterly, and the Company pays a fixed rate of interest, each quarter, for the terms of the respective agreements. The weighted average variable rate and weighted average fixed rate were 5.6% and 6.3%, respectively, in 1998. The net interest differential, related to the interest rate swap agreements and the interest rate cap agreement, charged to interest expense in 1998, 1997 and 1996 was $4,674, $2,048 and $1,943, respectively. The Company is exposed to credit risk in the event of nonperformance by counterparties to its interest rate swap agreements. Credit risk is limited by entering into such agreements with primary dealers only; therefore, the Company does not anticipate that nonperformance by counterparties will occur. Notwithstanding this, the Company's treasury department monitors counterparty credit ratings at least quarterly through reviewing independent credit agency reports. Both current and potential exposure are evaluated, as necessary, by obtaining replacement cost information from alternative dealers. Potential loss to the Company from credit risk on these agreements is limited to amounts receivable, if any. The Company enters into these agreements solely to hedge its interest rate risk. 12. INCOME TAXES At December 31, 1998, the Company had aggregate net operating and capital loss carryforwards for Federal and state income tax purposes of approximately $901,400 which will be available to reduce future taxable income. The utilization of such net operating losses ("NOLs") and capital losses is subject to certain limitations under Federal income tax laws. In certain instances, such NOLs may only be used to reduce future taxable income of the respective company which generated the NOLs. The capital losses may only be used to offset future capital gains. The NOLs and capital losses are scheduled to expire in the following years: 45 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 12. INCOME TAXES (CONTINUED)
CAPITAL NOLS LOSSES TOTAL ---------- --------- ---------- 2002....................................................... $ -- $ 15,200 $ 15,200 2003....................................................... 24,900 66,500 91,400 2004....................................................... 60,400 -- 60,400 2005....................................................... 121,800 -- 121,800 2006....................................................... 93,400 -- 93,400 2007....................................................... 82,700 -- 82,700 2008....................................................... 82,700 -- 82,700 2009....................................................... 68,900 -- 68,900 2010....................................................... 154,900 -- 154,900 2011....................................................... 25,400 -- 25,400 2012....................................................... 76,900 -- 76,900 2018(*).................................................... 27,700 -- 27,700 ---------- --------- ---------- $ 819,700 $ 81,700 $ 901,400 ---------- --------- ---------- ---------- --------- ----------
- ------------------------ (*) Under the Taxpayer Relief Act of 1997, the carryforward period of NOLs arising after January 1, 1998 was extended from 15 to 20 years. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating and capital loss carryforwards. The tax effects of significant items comprising the Company's net deferred income tax assets are as follows:
DECEMBER 31, 1998 --------------------------------- FEDERAL STATE TOTAL ---------- --------- ---------- DEFERRED INCOME TAX ASSETS: Difference between book and tax basis of inventory............................. $ 452 $ 133 $ 585 Difference between book and tax basis of accrued expenses and other............ 24,298 7,118 31,416 Reserves not currently deductible.............................................. 499 146 645 Difference between book and tax basis of other intangible assets............... 47,484 13,911 61,395 Operating loss carryforwards................................................... 242,586 46,530 289,116 Capital loss carryforwards..................................................... 28,023 1,634 29,657 ---------- --------- ---------- Total.......................................................................... 343,342 69,472 412,814 ---------- --------- ---------- DEFERRED INCOME TAX LIABILITIES: Difference between book and tax basis of other intangible assets............... 59,219 17,349 76,568 Difference between book and tax basis of property and equipment................ 9,396 2,753 12,149 Other.......................................................................... 14,102 4,131 18,233 ---------- --------- ---------- Total.......................................................................... 82,717 24,233 106,950 ---------- --------- ---------- Net deferred income tax assets................................................. 260,625 45,239 305,864 Less: Valuation allowances..................................................... 107,969 21,695 129,664 ---------- --------- ---------- Net............................................................................ $ 152,656 $ 23,544 $ 176,200 ---------- --------- ---------- ---------- --------- ----------
46 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 12. INCOME TAXES (CONTINUED)
DECEMBER 31, 1997 --------------------------------- FEDERAL STATE TOTAL ---------- --------- ---------- DEFERRED INCOME TAX ASSETS: Difference between book and tax basis of inventory............................. $ 2,187 $ 641 $ 2,828 Difference between book and tax basis of accrued expenses and other............ 16,075 4,709 20,784 Reserves not currently deductible.............................................. 2,615 766 3,381 Difference between book and tax basis of other intangible assets............... 80,945 23,714 104,659 Operating loss carryforwards................................................... 215,832 44,065 259,897 ---------- --------- ---------- Total.......................................................................... 317,654 73,895 391,549 ---------- --------- ---------- DEFERRED INCOME TAX LIABILITIES: Difference between book and tax basis of other intangible assets............... 39,283 11,508 50,791 Difference between book and tax basis of property and equipment................ 16,405 4,806 21,211 Other.......................................................................... 19,424 5,691 25,115 ---------- --------- ---------- Total.......................................................................... 75,112 22,005 97,117 ---------- --------- ---------- Net deferred income tax assets................................................. 242,542 51,890 294,432 Less: Valuation allowances..................................................... 89,886 28,346 118,232 ---------- --------- ---------- Net............................................................................ $ 152,656 $ 23,544 $ 176,200 ---------- --------- ---------- ---------- --------- ----------
At December 31, 1998, 1997 and 1996, management of the Company reviewed recent operating results and projected future operating results. At the end of each of the respective years, management determined that a portion of the net deferred income tax assets would likely be realized. The amounts of the net deferred income tax assets were not adjusted in 1998 and 1997. In 1996, the Company reduced the valuation allowances by $62,400 and recorded an income tax benefit of $53,300 ($46,200 and $7,100 related to Federal and state income tax benefits, respectively) and a reduction of the excess of purchase price over net assets acquired of $9,100. The amount of the net deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. There were net increases in the valuation allowances of $11,432 and $43,638 during 1998 and 1997, respectively. A portion of the valuation allowances in the amount of approximately $71,000 at December 31, 1998 relates to net deferred tax assets which were recorded in accounting for the acquisitions of various entities. The recognition of such amount in future years will be allocated to reduce the excess of the purchase price over the net assets acquired and other non-current intangible assets. 47 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13. EXCHANGEABLE PREFERRED STOCK Exchangeable Preferred Stock consists of the following:
DECEMBER 31, 1998 1997 ---------- ---------- $11.625 Series B Exchangeable Preferred Stock............................................. $ -- $ 155,281 $10.00 Series D Exchangeable Preferred Stock.............................................. 195,042 194,495 $9.20 Series E/Series F Exchangeable Preferred Stock...................................... 120,306 120,504 $8.625 Series H Exchangeable Preferred Stock.............................................. 242,493 -- ---------- ---------- $ 557,841 $ 470,280 ---------- ---------- ---------- ----------
$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK. The Company authorized 2,000,000 shares of $.01 par value Series B Preferred Stock, 1,576,036 shares of which were issued and outstanding at December 31, 1997. The liquidation and redemption value at December 31, 1997 was $157,604. Annual dividends of $11.625 per share on the Series B Preferred Stock were cumulative and payable quarterly in cash or by issuing additional shares of the Series B Preferred Stock. Commencing in the second quarter of 1997, the Company elected to satisfy its Series B Preferred Stock dividend requirements in cash. On March 20, 1998, the Company redeemed all of the outstanding shares of the Series B Preferred Stock at a price of $105.80 per share, plus accrued and unpaid dividends aggregating approximately $169,000. $10.00 SERIES D EXCHANGEABLE PREFERRED STOCK. In 1996, the Company completed an offering of 2,000,000 shares of $.01 par value, Series D Preferred Stock at $100 per share. Annual dividends of $10.00 per share on the Series D Preferred Stock are cumulative and payable quarterly, in cash. The liquidation and redemption value at December 31, 1998 and 1997 was $200,000. On or after February 1, 2001, the Series D Preferred Stock may be redeemed in whole or in part, at the option of the Company, at specified redemption prices plus accrued and unpaid dividends. The Company is required to redeem the Series D Preferred Stock on February 1, 2008 at a redemption price equal to the liquidation preference of $100 per share, plus accrued and unpaid dividends. The Series D Preferred Stock is exchangeable in whole but not in part, at the option of the Company, on any scheduled dividend payment date, into 10% Class D Subordinated Exchange Debentures due 2008. $9.20 SERIES E/SERIES F EXCHANGEABLE PREFERRED STOCK. On September 26, 1997, the Company completed a private offering of 1,250,000 shares of $.01 par value, $9.20 Series E Exchangeable Preferred Stock ("Series E Preferred Stock") at $100 per share. Annual dividends of $9.20 per share on the Series E Preferred Stock were cumulative and payable quarterly, in cash, commencing February 1, 1998. On February 17, 1998, the Company exchanged the 1,250,000 shares of Series E Preferred Stock for 1,250,000 shares of $.01 par value, $9.20 Series F Exchangeable Preferred Stock ("Series F Preferred Stock"). The terms of the Series F Preferred Stock are the same as the terms of the Series E Preferred Stock except that the Series F Preferred Stock has been registered under the Securities Act of 1933. The Series F Preferred Stock is exchangeable into 9.20% Class F Subordinated Exchange Debentures due 2009, in whole but not in part, at the option of the Company on any scheduled dividend payment date. Dividends on the Series F Preferred Stock accrued and were cumulative from the last dividend payment date on which dividends were paid on shares of the Series E Preferred Stock. As of December 31, 1998 and 1997, all shares of the Series E/Series F Preferred Stock were issued and outstanding and the liquidation and redemption value of 48 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 13. EXCHANGEABLE PREFERRED STOCK (CONTINUED) the Series E/Series F Preferred Stock was $125,000. Net proceeds from this private offering were used to pay down borrowings under the Credit Facilities. $8.625 SERIES H EXCHANGEABLE PREFERRED STOCK. On February 17, 1998, the Company completed a private offering of 2,500,000 shares of $.01 par value, $8.625 Series G Exchangeable Preferred Stock ("Series G Preferred Stock") at $99.40 per share. Annual dividends of $8.625 per share on the Series G Preferred Stock were cumulative and payable quarterly, in cash, commencing July 1, 1998. On June 10, 1998, the Company exchanged the 2,500,000 shares of Series G Preferred Stock for 2,500,000 shares of $.01 par value, Series H Preferred Stock. The terms of the Series H Preferred Stock are the same as the terms of the Series G Preferred Stock except that the Series H Preferred Stock has been registered under the Securities Act of 1933. Prior to April 1, 2001, the Company may, at its option, redeem in whole or in part, up to $125,000 of the aggregate liquidation preference of the Series H Preferred Stock at a price per share of $108.625 plus accrued and unpaid dividends to the redemption date, with the net proceeds of one or more public offerings, subject to certain other restrictions. On or after April 1, 2003, the Series H Preferred Stock may be redeemed in whole or in part, at the option of the Company, at prices ranging from 104.313% with annual reductions to 100% in 2006, plus accrued and unpaid dividends. The Company is required to redeem the Series H Preferred Stock on April 1, 2010 at a redemption price equal to the liquidation preference of $100 per share, plus accrued and unpaid dividends. The Series H Preferred Stock is exchangeable, in whole but not in part, at the option of the Company, on any scheduled dividend payment date into 8 5/8% Class H Subordinated Exchange Debentures due 2010. Net proceeds from the issuance of Series G Preferred Stock of approximately $242,000 were primarily used to redeem the Series B Preferred Stock and to pay down borrowings under the Credit Facilities, which amounts may be reborrowed for general corporate purposes, including acquisitions. 14. COMMON STOCK STOCK ISSUANCE. On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited partnership affiliated with Kohlberg Kravis Roberts & Co. ("KKR"), purchased 16,666,667 shares of newly issued common stock from the Company for approximately $200,000 (the "KKR Fund Investment"). The net proceeds (after issuance costs) from the KKR Fund Investment were used to repay borrowings outstanding under the Credit Facilities, which amounts may be reborrowed for general corporate purposes including acquisitions (see Note 20). SHARE REPURCHASE PROGRAM. On September 9, 1997, the Company announced that its board of directors had authorized the Company to repurchase up to $15,000 of its outstanding common stock from time to time in the open market and through privately negotiated transactions. In 1998, the board of directors authorized the repurchase of an additional $15,000 of the Company's outstanding common shares. During 1998, the Company repurchased 1,703,700 shares of common stock for $19,983 at a weighted average price of $11.73. During 1997, the Company repurchased 1,048,600 shares of common stock for $13,158 at a weighted average price of $12.52. These 1997 repurchases included 523,000 shares that were repurchased for $6,422 and were not part of the share repurchase program. All repurchases above are recorded at cost and classified as common stock in treasury on the consolidated balance sheets at December 31, 1998 and 1997, respectively. 49 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 14. COMMON STOCK (CONTINUED) STOCK PURCHASE AND OPTION PLAN. The PRIMEDIA Stock Purchase and Option Plan (the "Plan") authorizes sales of shares of common stock and grants of incentive awards in the forms of, among other things, stock options to key employees and other persons with a unique relationship with the Company. The stock options are granted with exercise prices at quoted market value at time of issuance. COMMON STOCK SUBJECT TO REDEMPTION. Under the following circumstances, employees who purchased shares prior to the Company's initial public offering of common stock have the right to resell their shares of common stock to the Company: termination of employment in connection with the sale of the business for which they work, death, disability or retirement after age 65. The resale feature expires five years after the effective purchase date of the common stock. Since inception of the Company, none of the employees has exercised such resale feature as a result of such sale, death, disability or retirement and the likelihood of significant resales is considered by management to be remote because the stock is freely tradeable on the public market. The following summarizes the activity of the common stock subject to redemption:
SHARES AMOUNT --------- --------- Balance at January 1, 1996.................................................................. 2,406,513 $ 29,179 Acquisitions of common stock held by management............................................. (17,269) (148) Expiration of redemption feature............................................................ (1,745,934) (21,230) Reduction in carrying value................................................................. -- (885) --------- --------- Balance at December 31, 1996................................................................ 643,310 6,916 Acquisitions of common stock held by management............................................. (2,320) (19) Expiration of redemption feature............................................................ (238,340) (2,569) Accretion in carrying value................................................................. -- 755 --------- --------- Balance at December 31, 1997................................................................ 402,650 5,083 Acquisitions of common stock held by management............................................. (22,531) (314) Expiration of redemption feature............................................................ (86,000) (1,056) Reduction in carrying value................................................................. -- (221) --------- --------- Balance at December 31, 1998................................................................ 294,119 $ 3,492 --------- --------- --------- ---------
The redemption values of the common stock subject to redemption of $3,492 and $5,083 at December 31, 1998 and 1997, respectively, were based on a repurchase price of $11.875 per share and $12.625 per share, which are the quoted market values at December 31, 1998 and 1997, respectively. Common stock subject to redemption is recorded on the accompanying consolidated balance sheets net of the amounts of notes receivable from employees (related to common stock issuances) outstanding of $528 and $707 at December 31, 1998 and 1997, respectively. ACCOUNTING FOR EMPLOYEE STOCK BASED COMPENSATION. The Plan has authorized grants of up to 25,000,000 shares of the Company's common stock or options to management personnel. The options are exercisable at the rate of 20% per year over a five-year period commencing on the effective date of the grant; however, some optionees have received credit for periods of employment with the Company and its predecessors and subsidiaries prior to the date the options were granted. All options granted pursuant to the Plan will expire no later than ten years from the date the option was granted. 50 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 14. COMMON STOCK (CONTINUED) A summary of the status of the Company's stock option plan as of December 31, 1998, 1997 and 1996, and changes during the years ended on those dates is presented below:
1998 1997 1996 ------------------------------------- ------------------------------------- ------------------------ WEIGHTED WEIGHTED AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE EXERCISE EXERCISE OPTIONS PRICE PRICE OPTIONS PRICE PRICE OPTIONS PRICE --------- ------------- ----------- --------- ------------- ----------- --------- ------------- Outstanding-- beginning of year........... 11,562,930 $5.00-$12.00 $ 6.58 13,211,212 $5.00-$11.94 $ 6.69 12,326,087 $5.00-$ 8.00 Granted........ 1,530,590 1$2.00-$14.69 $ 12.68 135,800 1$0.88-$12.00 $ 11.27 1,830,400 1$0.00-$11.94 Exercised...... (416,817) $5.00-$11.13 $ 7.13 (1,209,693) $5.00-$11.81 $ 6.96 (681,890) $5.00-$ 8.00 Forfeited...... (446,730) $5.44-$12.63 $ 11.22 (574,389) $5.00-$11.81 $ 9.22 (263,385) $5.00-$ 8.00 --------- --------- --------- Outstanding--end of year........ 12,229,973 $5.00-$14.69 $ 7.16 11,562,930 $5.00-$12.00 $ 6.58 13,211,212 $5.00-$11.94 --------- --------- --------- --------- --------- --------- Exercisable--end of year........ 9,369,633 $5.00-$12.00 $ 5.97 8,953,280 $5.00-$11.94 $ 5.73 8,707,528 $5.00-$ 8.00 --------- --------- --------- --------- --------- --------- WEIGHTED AVERAGE EXERCISE PRICE ----------- Outstanding-- beginning of year........... $ 5.98 Granted........ $ 11.12 Exercised...... $ 5.36 Forfeited...... $ 7.69 Outstanding--end of year........ $ 6.69 Exercisable--end of year........ $ 5.38
The weighted-average fair value per option for options granted in 1998, 1997 and 1996 was $5.44, $4.45 and $4.13, respectively. The following table summarizes information about stock options outstanding at December 31, 1998:
NUMBER WEIGHTED WEIGHTED RANGE OF OUTSTANDING AVERAGE REMAINING AVERAGE EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE - --------------- ----------- ----------------------- --------------- $ 5.00-$ 5.44 6,913,043 3 $ 5.00 $ 7.00 120,400 5 $ 7.00 $ 8.00 2,475,880 7 $ 8.00 $10.00-$12.00 1,410,460 8 $ 11.14 $12.63-$14.69 1,310,190 9 $ 12.68 ----------- 12,229,973 5 $ 7.16 ----------- -----------
SFAS No. 123, "Accounting for Stock Based Compensation," provides for a fair-value based method of accounting for employee options and measures compensation expense using an option valuation model that takes into account, as of the grant date, the exercise price and expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the expected term of the option. The Company has elected to continue accounting for employee stock-based compensation under Accounting Principles Board Opinion ("APB") No. 25 and related interpretations. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value of these options was estimated at the date of grant using the Black-Scholes option pricing model for options granted in 1998, 1997 and 1996. The following weighted- 51 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 14. COMMON STOCK (CONTINUED) average assumptions were used for 1998, 1997 and 1996, respectively: risk-free interest rates of 5.63%, 6.65% and 6.36%; dividend yields of 0.0%, 0.0% and 0.0%; volatility factors of the expected market price of the Company's common stock of 24.15%, 27.70% and 20.83%; and a weighted-average expected life of the option of five years. The estimated fair value of options granted during 1998, 1997 and 1996 was $8,332, $604 and $7,560, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option's vesting period. The Company's pro forma information is as follows:
1998 1997 1996 --------- --------- --------- Pro forma net income (loss)....................................................... $ (42,659) $(176,351) $ 5,738 Pro forma loss applicable to common shareholders.................................. $(105,944) $(241,424) $ (37,788) Pro forma basic and diluted loss per common share................................. $ (.74) $ (1.87) $ (.29)
The Company had reserved approximately 11,000,000 shares of the Company's common stock or options for future grants in connection with the Plan at December 31, 1998. 15. LOSS PER SHARE Loss per share has been determined based on income (loss) before extraordinary charge after preferred stock dividends, divided by the weighted average number of common shares outstanding for all periods presented. Options to purchase 12,229,973, 11,562,930 and 13,211,212 shares of common stock were outstanding at December 31, 1998, 1997 and 1996, respectively, but were not included in the computation of diluted loss per share because the effect of their inclusion would be antidilutive. 16. ACCUMULATED DEFICIT The accumulated deficit of $1,030,032 at December 31, 1998 includes non-cash expenses related to the accumulated amortization of intangible assets, the excess of the purchase price over the net assets acquired and deferred financing costs, the write-offs of the unamortized balance of deferred financing costs associated with all previous financings, the restructurings and other costs and the (gain) loss on sales of businesses, net and other in the aggregate amount of approximately $1,378,000 which is net of the non-cash income tax benefits aggregating $155,000 through December 31, 1998. 52 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 17. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts and the estimated fair values of the Company's financial instruments for which it is practicable to estimate fair value are as follows:
DECEMBER 31, ---------------------------------------------- 1998 1997 ---------------------- ---------------------- CARRYING CARRYING VALUE FAIR VALUE VALUE FAIR VALUE ---------- ---------- ---------- ---------- 10 1/4% Senior Notes............................................. $ 100,000 $ 106,013 $ 100,000 $ 108,000 8 1/2% Senior Notes.............................................. 299,001 309,000 298,902 307,470 7 5/8% Senior Notes.............................................. 248,643 245,000 -- -- Acquisition Obligation........................................... 44,179 44,666 53,871 55,329 Series B Preferred Stock......................................... -- -- 155,281 169,818 Series D Preferred Stock......................................... 195,042 208,500 194,495 210,500 Series E/Series F Preferred Stock................................ 120,306 122,813 120,504 125,000 Series H Preferred Stock......................................... 242,493 240,625 -- -- Interest Rate Swap Agreements.................................... 1,528 18,519 485 410 Purchased Interest Rate Cap Agreement............................ -- -- (43) --
The bracketed amount above represents assets. The fair values of the senior notes and preferred stocks were determined based on the quoted market prices and the fair value of the acquisition obligation was estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the interest rate swap agreements was determined using discounted cash flow models. For instruments including cash and cash equivalents, accounts receivable and accounts payable, the carrying amount approximates fair value because of the short maturity of these instruments. The fair value of floating-rate long-term debt approximates carrying value because these instruments re-price frequently at current market prices. 18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS RETIREMENT PLANS. Substantially all of the Company's employees are eligible to participate in defined contribution plans. The expense recognized for all of these plans was approximately $7,700 in 1998, $6,300 in 1997 and $5,400 in 1996. In addition, the employees at PRIMEDIA Magazines and the non-union employees at THE DAILY RACING FORM were eligible to participate in a non-contributory defined benefit pension plan ("Pension Plan"). The benefits paid under the Pension Plan were based on years of service and compensation amounts for the highest consecutive five years of service in the most current ten years. The Pension Plan was funded by means of contributions by the Company to the plan's trust. The pension funding policy was consistent with the funding requirements of U.S. Federal and other governmental laws and regulations. Plan assets consisted primarily of fixed income, equity and other short-term investments. In January 1998, the Company amended the Pension Plan. The amendment specifically froze plan participation effective December 31, 1997. The Company received approval from the Pension Benefit Guarantee Corporation during the third quarter to terminate this plan and distribute all the plan's assets. 53 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED) In November 1998, the Company terminated this plan and settled all of its obligations by making lump-sum distributions and purchasing annuity contracts. The following tables set forth the Pension Plan's funded status as of December 31, 1998 and 1997 and amounts recognized in the Company's statement of operations for the years ended December 31, 1998, 1997 and 1996:
DECEMBER 31, --------------------- 1998 1997 ---------- --------- CHANGE IN BENEFIT OBLIGATION: Projected benefit obligation at beginning of period...................................... $ 18,036 $ 12,077 Service cost........................................................................... -- 1,387 Interest cost.......................................................................... 668 1,073 Amendments............................................................................. 4,536 2,404 Actuarial loss......................................................................... -- 1,570 Benefits paid.......................................................................... (866) (475) Curtailment............................................................................ (6,448) -- Settlement............................................................................. (15,926) -- ---------- --------- Projected benefit obligation at end of period............................................ -- 18,036 ---------- --------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of period......................................... 13,391 5,473 Actual return on plan assets........................................................... 1,692 1,763 Employer contributions................................................................. 1,859 1,715 Benefits paid.......................................................................... (866) (475) Other income........................................................................... -- 4,915 Settlement............................................................................. (15,926) -- ---------- --------- Fair value of plan assets at end of period............................................... 150 13,391 ---------- --------- Funded status.............................................................................. 150 (4,645) Unrecognized net actuarial loss............................................................ -- 697 Unrecognized prior service cost............................................................ -- (2,137) Unrecognized initial obligation............................................................ -- 2,587 ---------- --------- Prepaid (accrued) pension cost............................................................. $ 150 $ (3,498) ---------- --------- ---------- ---------
The amendments included in the change in benefit obligation represent the Pension Plan termination during the year ended December 31, 1998 and the merger of the predecessor Daily Racing Form plan into the Pension Plan during the year ended December 31, 1997. 54 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED) The obligation recorded at the acquisition date of PRIMEDIA Magazines and Daily Racing Form was the excess of the projected benefit obligation over the plan assets at the date of acquisition which was included in other non-current liabilities for the year ended December 31, 1997.
1998 1997 --------- --------- WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31, Discount rate................................................................................ 7.00% 7.00% Expected return on plan assets............................................................... N/A 8.50% Rate of compensation increases............................................................... N/A 4.00%
The components of net periodic pension (income) expense for 1998, 1997 and 1996 are as follows:
1998 1997 1996 --------- --------- --------- Service cost..................................................................... $ -- $ 1,387 $ 1,203 Interest cost.................................................................... 668 1,073 769 Expected return on plan assets................................................... (978) (1,763) (610) Amortization of initial obligation............................................... -- 274 274 Amortization of prior service cost............................................... -- (159) (27) Amortization of net actuarial loss............................................... -- 830 215 Curtailment gain................................................................. (5,301) -- -- Settlement loss.................................................................. 3,823 -- -- --------- --------- --------- Net periodic pension (income) expense.............................................. $ (1,788) $ 1,642 $ 1,824 --------- --------- --------- --------- --------- ---------
In 1998, the Company acquired American Guidance Service, Inc. ("AGS"). AGS sponsors a defined benefit pension plan (the "AGS Plan") for the benefit of its employees. The allocation of the purchase price of AGS included a liability of approximately $792 related to this plan. The benefits to be paid under the AGS Plan are based on years of service and compensation amounts for the average of the highest five consecutive plan years. The AGS Plan is funded by means of contributions by the Company to the plan's trust. The pension funding policy is consistent with the funding requirements of U.S. Federal and other governmental laws and regulations. Plan assets consist primarily of fixed income, equity and other short-term investments. The following tables set forth the AGS Plan's funded status as of December 31, 1998 and 55 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 18. RETIREMENT PLANS AND OTHER EMPLOYEE COSTS (CONTINUED) the amounts recognized in the Company's statement of operations from the acquisition date through December 31, 1998. CHANGE IN BENEFIT OBLIGATION: Projected benefit obligation at beginning of period......................... $ 8,682 Service cost.............................................................. 318 Interest cost............................................................. 287 Actuarial loss............................................................ 308 Benefits paid............................................................. (137) ------- Projected benefit obligation at end of period............................... 9,458 ------- CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of period............................ 8,198 Actual return on plan assets.............................................. (276) Benefits paid............................................................. (137) ------- Fair value of plan assets at end of period.................................. 7,785 ------- Funded status............................................................... (1,673) Unrecognized net actuarial loss............................................. 637 ------- Accrued pension cost........................................................ $ (1,036) ------- ------- COMPONENTS OF NET PERIODIC PENSION EXPENSE: Service cost.............................................................. $ 318 Interest cost............................................................. 287 Expected return on plan assets ........................................... (361) ------- Net periodic pension expense................................................ $ 244 ------- ------- WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31, 1998: Discount rate............................................................... 6.50% Expected return on plan assets.............................................. 9.00% Rate of compensation increases.............................................. 4.50%
OTHER EMPLOYEE COSTS. During the third quarter of 1998, the Company recorded management reorganization costs of approximately $8,500 which primarily represented severance costs. This charge is recorded in the caption (gain) loss on the sales of businesses, net and other on the accompanying statement of consolidated operations. 56 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 19. COMMITMENTS AND CONTINGENCIES COMMITMENTS. Total rent expense under operating leases was $36,282, $36,844 and $31,561 for the years ended December 31, 1998, 1997 and 1996, respectively. Certain leases are subject to escalation clauses and certain leases contain renewal options. Minimum rental commitments under noncancelable operating leases are as follows:
YEARS ENDING DECEMBER 31, - ------------------------------------------------------------------- 1999............................................................... $ 32,579 2000............................................................... 31,062 2001............................................................... 25,403 2002............................................................... 20,881 2003............................................................... 18,798 Thereafter......................................................... 45,890 -------- $ 174,613 -------- --------
Future minimum lease payments under capital leases (see Note 7) are as follows:
YEARS ENDING DECEMBER 31, - ------------------------------------------------------------------- 1999............................................................... $ 3,938 2000............................................................... 3,938 2001............................................................... 3,938 2002............................................................... 3,938 2003............................................................... 3,965 Thereafter......................................................... 24,351 ------- 44,068 Less: Amount representing interest................................. 16,057 ------- Present value of net minimum lease payments........................ 28,011 Less: Current portion.............................................. 1,741 ------- Long-term obligations (included in other non-current liabilities)..................................................... $ 26,270 ------- -------
CONTINGENCIES. The Company is involved in ordinary and routine litigation incidental to its business. In the opinion of management, there is no pending legal proceeding that would have a material adverse affect on the consolidated financial statements of the Company. At December 31, 1998, the Company had letters of credit outstanding of approximately $17,900 (see Note 11). 57 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 20. RELATED PARTY TRANSACTIONS During each of the years ended December 31, 1998, 1997 and 1996, the Company paid $1,000 in administrative and other fees to KKR, an affiliated party. The Company paid an aggregate of $180 in directors' fees to certain partners of KKR during the years ended December 31, 1998, 1997 and 1996. In 1998, a partnership affiliated with KKR purchased 16,666,667 shares of newly issued common stock from the Company for approximately $200,000 (see Note 14). 21. UNAUDITED QUARTERLY FINANCIAL INFORMATION
FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL -------------- -------------- -------------- -------------- -------------- FOR THE YEAR ENDED DECEMBER 31, 1998: Sales, net..................... $ 344,986 $ 390,050 $ 392,296 $ 446,241 $ 1,573,573 Operating income............... 24,282 28,414 29,783 35,678 118,157 Net loss....................... (9,732) (7,225) (9,184) (11,595) (37,736) Loss applicable to common shareholders................. (33,217) (20,427) (22,517) (24,860) (101,021) Basic and diluted loss applicable to common shareholders per common share........................ $(.25) $(.14) $(.15) $(.17) $(.71) Basic and diluted common shares outstanding.................. 134,686,401 145,659,940 145,238,934 144,530,821 142,529,024 FOR THE YEAR ENDED DECEMBER 31, 1997: Sales, net..................... $ 352,291 $ 368,762 $ 368,944 $ 397,598 $ 1,487,595 Operating income (loss)........ 20,478 39,518 (112,326) 31,537 (20,793) Income (loss) before extraordinary charge......... (12,546) 3,700 (147,674) (919) (157,439) Extraordinary charge-- extinguishment of debt....... (1,554) (13,847) -- -- (15,401) Net loss....................... (14,100) (10,147) (147,674) (919) (172,840) Loss applicable to common shareholders................. (26,426) (22,602) (160,130) (28,755) (237,913) Basic and diluted loss applicable to common shareholders per common share: Loss before extraordinary charge..................... $(.19) $(.07) $(1.24) $(.22) $(1.72) Net loss..................... $(.20) $(.18) $(1.24) $(.22) $(1.84) Basic and diluted common shares outstanding.................. 129,114,344 129,289,307 129,411,579 129,404,368 129,304,900
58 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 21. UNAUDITED QUARTERLY FINANCIAL INFORMATION (CONTINUED) During the second and third quarters of 1998, the Company recorded a gain on the sales of businesses, net and other of $1,849 and $5,367, respectively (see Note 4 and Note 18). During the first quarter of 1997, the Company purchased, in aggregate $20,850 of the 10 5/8% Senior Notes from various brokers on the open market. The premium paid on the purchase and the write-off of the related deferred financing fees totaled $1,554. In the second quarter, the Company redeemed the remaining principal of the 10 5/8% Senior Notes. The aggregate premium paid and the write-off of the related deferred financing fees totaled $13,847. During the third quarter of 1997, the Company recorded a provision for loss on the sales of businesses, net and other in the amount of $138,640. 22. BUSINESS SEGMENT INFORMATION The Company's operations have been classified into three business segments: specialty magazines, information and education (see Note 1). The Company has segregated the Non-Core Businesses from the aforementioned segments because the Company's chief decision maker views these businesses separately when evaluating and making decisions regarding ongoing operations (see Note 4). Information as to the operations of the Company in different business segments is set forth below based on the nature of the products offered. PRIMEDIA evaluates performance based on several factors, of which the primary financial measure is business segment earnings before interest, taxes, depreciation, amortization and provision for one-time charges ("EBITDA"). The accounting policies of the business segments are the same as those described in the summary of significant accounting policies (see Note 2). There were no material intersegment sales between the reported segments. 59 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 22. BUSINESS SEGMENT INFORMATION (CONTINUED)
1998 1997 1996 ------------ ------------ ------------ SALES, NET: Specialty Magazines............................... $ 927,501 $ 714,464 $ 629,001 Information....................................... 272,819 228,145 190,014 Education......................................... 330,790 269,246 209,366 Other: Non-Core Businesses............................. 42,463 275,740 346,068 ------------ ------------ ------------ Total............................................. $ 1,573,573 $ 1,487,595 $ 1,374,449 ------------ ------------ ------------ ------------ ------------ ------------ EBITDA (1): Specialty Magazines............................... $ 187,104 $ 159,462 $ 136,793 Information....................................... 73,969 63,642 57,353 Education......................................... 90,400 81,833 66,551 Other: Corporate....................................... (28,324) (25,545) (21,497) Non-Core Businesses............................. 6,761 22,620 37,403 ------------ ------------ ------------ Total............................................. $ 329,910 $ 302,012 $ 276,603 ------------ ------------ ------------ ------------ ------------ ------------ DEPRECIATION AND AMORTIZATION OF PREPUBLICATION COSTS, PROPERTY AND EQUIPMENT: Specialty Magazines............................... $ 12,518 $ 6,256 $ 4,980 Information....................................... 4,001 2,675 2,353 Education......................................... 24,323 23,553 20,808 Other: Corporate....................................... 1,314 1,031 779 Non-Core Businesses............................. 58 3,819 9,313 ------------ ------------ ------------ Total............................................. $ 42,214 $ 37,334 $ 38,233 ------------ ------------ ------------ ------------ ------------ ------------ TOTAL ASSETS: Specialty Magazines............................... $ 1,437,530 $ 977,947 $ 892,841 Information....................................... 377,355 328,574 310,681 Education......................................... 1,047,462 968,690 799,941 Other: Corporate....................................... 178,518 166,988 172,123 Non-Core Businesses............................. 209 43,791 376,629 ------------ ------------ ------------ Total............................................. $ 3,041,074 $ 2,485,990 $ 2,552,215 ------------ ------------ ------------ ------------ ------------ ------------ CAPITAL EXPENDITURES, NET: Specialty Magazines............................... $ 20,303 $ 9,085 $ 7,927 Information....................................... 8,187 2,563 2,719 Education......................................... 21,918 11,583 9,075 Other: Corporate....................................... 3,782 1,740 1,735 Non-Core Businesses............................. 1,048 6,137 7,334 ------------ ------------ ------------ Total............................................. $ 55,238 $ 31,108 $ 28,790 ------------ ------------ ------------ ------------ ------------ ------------
60 PRIMEDIA INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 22. BUSINESS SEGMENT INFORMATION (CONTINUED) - ------------------------ (1) EBITDA represents operating income before interest, taxes, depreciation, amortization and provision for one-time charges. The following is a reconciliation of EBITDA to operating income (loss).
1998 1997 1996 ----------- ----------- ----------- Total EBITDA........................................... $ 329,910 $ 302,012 $ 276,603 Depreciation and amortization of prepublication costs, property and equipment............................... (42,214) (37,334) (38,233) Gain (loss) on the sales of businesses, net and other................................................ 7,216 (138,640) -- Amortization of intangible assets, excess of purchase price over net assets acquired and other............. (176,755) (146,831) (152,469) ----------- ----------- ----------- Operating income (loss)................................ $ 118,157 $ (20,793) $ 85,901 ----------- ----------- ----------- ----------- ----------- -----------
23. SUBSEQUENT EVENTS On February 22, 1999, the Company announced the closing by PRIMEDIA Workplace Learning of five unprofitable and recently launched product lines as part of a program to return the Company's focus to accreditation-oriented vocational networks and associated products. Accordingly, PRIMEDIA expects to record a charge related to this refocusing for severance, lease discontinuance for transponders and office sites, recoverability of certain assets, related goodwill and other items against its 1999 first quarter results. The Company is currently in the process of calculating the pre-tax charge, which is estimated to be between $20,000 and $24,000. PRIMEDIA Workplace Learning is included in the education segment. Through March 3, 1999, the Company completed five product-line acquisitions in all segments. The aggregate purchase price was approximately $35,000 and was financed primarily through borrowings under the Company's Credit Facilities. On March 11, 1999, the Company completed an amendment and restatement of its Credit Facilities to increase them by $250,000 to $1,650,000. The final maturity date is July 31, 2004. Additionally, the Company entered into a separate $150,000 bank revolving credit facility with a final maturity on December 30, 1999. There are currently no borrowings under the bank revolving credit facility. 61 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None PART III Items 10, 11, 12 and 13 are omitted, except for information as to Executive Officers set forth in Part I, Item 1. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of this report: 1. Index to Financial Statements See Table of Contents to Financial Statements included in Part II, Item 8 of this report. 2. Index to Financial Statement Schedules
PAGE ----- SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS PRIMEDIA Inc. and Subsidiaries For the Year Ended December 31, 1998.............................................................. S-1 For the Year Ended December 31, 1997.............................................................. S-2 For the Year Ended December 31, 1996.............................................................. S-3 Independent Auditors' Report on Schedules--Deloitte & Touche LLP.................................... S-4
All schedules, except those set forth above, have been omitted since the information required to be submitted has been included in the Consolidated Financial Statements or Notes thereto or has been omitted as not applicable or not required. (b)--Reports on Form 8-K (c)--Exhibits 3.1 --Certificate of Incorporation of K-III. (7) 3.2 --Certificate of Amendment to Certificate of Incorporation of K-III (changing name from K-III to PRIMEDIA Inc.) (14) 3.3 --Certificate of Designations of the Series D Preferred Stock. (11) 3.4 --Certificate of Designations of the Series F Preferred Stock. (13) 3.5 --Certificate of Designations of the Series H Preferred Stock. (15) 3.6 --Amended and Restated By-laws of K-III. (7) 3.7 --Certificate of Incorporation of Intertec Publishing Corporation. (2) 3.8 --Certificate of Amendment to Certificate of Incorporation of Intertec Publishing Corporation (changing name to PRIMEDIA Intertec Corporation)(*) 3.9 --Amended and Restated By-laws of Intertec Publishing Corporation. (2) 3.10 --Certificate of Incorporation of Newbridge Communications, Inc. (2)
62 3.11 --Certificate of Amendment to Certificate of Incorporation of Newbridge Communications, Inc. (changing name to Films for the Humanities and Sciences, Inc.) (14) 3.12 --By-laws of Newbridge Communications, Inc. (2) 3.13 --Certificate of Incorporation of K-III Directory Corporation (1) 3.14 --Certificate of Amendment to Certificate of Incorporation of K-III Directory Corporation (changing name to PRIMEDIA Information Inc.) (14) 3.15 --By-laws of K-III Directory Corporation (1) 3.16 --Certificate of Incorporation of R.E.R. Publishing Corporation. (2) 3.17 --Amended and Restated By-laws of R.E.R. Publishing Corporation. (2) 3.18 --Certificate of Incorporation of Intermodal Publishing Company, Ltd. (2) 3.19 --Amended and Restated By-laws of Intermodal Publishing Company, Ltd. (2) 3.20 --Certificate of Incorporation of Weekly Reader Corporation. (2) 3.21 --By-laws of Weekly Reader Corporation. (2) 3.22 --Certificate of Incorporation of K-III Reference Corporation. (9) 3.23 --Certificate of Amendment to Certificate of Incorporation of K-III Reference Corporation (changing name to PRIMEDIA Reference Inc.) (14) 3.24 --By-laws of K-III Reference Corporation. (2) 3.25 --Certificate of Amendment to Certificate of Incorporation of Funk & Wagnalls Corporation (changing name to K-III Reference Corporation) (12) 3.26 --Certificate of Incorporation of Funk & Wagnalls Yearbook Corp. (2) 3.27 --By-laws of Funk & Wagnalls Yearbook Corp. (2) 3.28 --Certificate of Incorporation of K-III Magazine Corporation. (2) 3.29 --Certificate of Amendment to Certificate of Incorporation of K-III Magazine Corporation (changing name to PRIMEDIA Magazines Inc.) (14) 3.30 --By-laws of K-III Magazine Corporation. (2) 3.31 --Certificate of Incorporation of K-III Magazine Finance Corporation. (2) 3.32 --Certificate of Amendment to Certificate of Incorporation of K-III Magazine Finance Corporation (changing name to PRIMEDIA Magazines Finance Inc.) (14) 3.33 --By-laws of K-III Magazine Finance Corporation. (2) 3.34 --Certificate of Incorporation of K-III Holdings Corporation III. (2) 3.35 --Certificate of Amendment to Certificate of Incorporation of K-III Holdings Corporation III (changing name to PRIMEDIA Holdings III Inc.) (14) 3.36 --By-laws of K-III Holdings Corporation III. (2) 3.37 --Certificate of Incorporation of Haas Publishing Companies, Inc. (5) 3.38 --By-laws of Haas Publishing Companies, Inc. (5) 3.39 --Certificate of Incorporation of Lifetime Learning Systems, Inc. (8)
63 3.40 --By-laws of Lifetime Learning Systems, Inc. (8) 3.41 --Certificate of Incorporation of Channel One Communications Corporation. (8) 3.42 --By-laws of Channel One Communications Corporation. (8) 3.43 --Certificate of Incorporation of Bacon's Information, Inc. (9) 3.44 --By-laws of Bacon's Information, Inc. (9) 3.45 --Certificate of Incorporation of Argus Publishers Corporation (9) 3.46 --By-laws of Argus Publishers Corporation (9) 3.47 --Certificate of Incorporation of PJS Publications, Inc. (8) 3.48 --Certificate of Amendment to Certificate of Incorporation of PJS Publications, Inc. (changing name to PRIMEDIA Special Interest Publications Inc.) (14) 3.49 --By-laws of PJS Publications, Inc. (8) 3.50 --Certificate of Incorporation of Symbol of Excellence Publishers, Inc. (8) 3.51 --By-laws of Symbol of Excellence Publishers, Inc. (8) 3.52 --Certificate of Incorporation of American Heat Video Productions, Inc. (12) 3.53 --By-laws of American Heat Video Productions, Inc. (12) 3.54 --Certificate of Incorporation of Bankers Consulting Company (12) 3.55 --By-laws of Bankers Consulting Company (12) 3.56 --Certificate of Incorporation of Excellence in Training Corporation (12) 3.57 --By-laws of Excellence in Training Corporation (12) 3.58 --Certificate of Incorporation of Gareth Stevens, Inc. (12) 3.59 --By-laws of Gareth Stevens, Inc. (12) 3.60 --Certificate of Incorporation of IDTN Leasing Corporation (12) 3.61 --By-laws of IDTN Leasing Corporation (12) 3.62 --Certificate of Incorporation of Industrial Training Systems Corporation (12) 3.63 --By-laws of Industrial Training Systems Corporation (12) 3.64 --Certificate of Incorporation of Law Enforcement Television Network, Inc. (TX) (12) 3.65 --By-laws of Law Enforcement Television Network, Inc. (TX) (12) 3.66 --Certificate of Incorporation of Lockert Jackson & Associates, Inc. (12) 3.67 --By-laws of Lockert Jackson & Associates, Inc. (12) 3.68 --Certificate of Incorporation of Tel-A-Train, Inc. (12) 3.69 --By-laws of Tel-A-Train, Inc. (12) 3.70 --Certificate of Incorporation of TI-IN Acquisition Corporation (12) 3.71 --By-laws of TI-IN Acquisition Corporation (12) 3.72 --Certificate of Incorporation of Westcott Communications, Inc. (12)
64 3.73 --Certificate of Amendment to Certificate of Incorporation of Westcott Communications, Inc. (changing name to PRIMEDIA Workplace Learning, Inc.) (14) 3.74 --By-laws of Westcott Communications, Inc. (12) 3.75 --Certificate of Incorporation of Westcott Communications Michigan, Inc. (12) 3.76 --By-laws of Westcott Communications Michigan, Inc. (12) 3.77 --Certificate of Incorporation of Westcott ECI, Inc. (12) 3.78 --By-laws of Westcott ECI, Inc. (12) 3.79 --Certificate of Incorporation of Western Empire Publications, Inc. (12) 3.80 --By-laws of Western Empire Publications, Inc. (12) 3.81 --Certificate of Incorporation of McMullen Argus Publishing, Inc. (12) 3.82 --By-laws of McMullen Argus Publishing, Inc. (12) 3.83 --Certificate of Incorporation of The Electronics Source Book, Inc. (12) 3.84 --By-laws of The Electronics Source Book, Inc. (12) 3.85 --Certificate of Incorporation of The Apartment Guide of Nashville, Inc. (14) 3.86 --By-laws of The Apartment Guide of Nashville, Inc. (14) 3.87 --Certificate of Incorporation of Cardinal Business Media, Inc. (14) 3.88 --By-laws of Cardinal Business Media, Inc. (14) 3.89 --Certificate of Incorporation of Cardinal Business Media Holdings, Inc. (14) 3.90 --By-laws of Cardinal Business Media Holdings, Inc. (14) 3.91 --Certificate of Formation of Cover Concepts Marketing Services, LLC (14) 3.92 --Limited Liability Company Agreement of Cover Concepts Marketing Services, LLC (14) 3.93 --Certificate of Incorporation of CSK Publishing Company Incorporated (14) 3.94 --By-laws of CSK Publishing Company Incorporated (14) 3.95 --Certificate of Incorporation of GO LO Entertainment, Inc. (14) 3.96 --By-laws of GO LO Entertainment, Inc. (14) 3.97 --Certificate of Incorporation of Guinn Communications, Inc. (14) 3.98 --By-laws of Guinn Communications, Inc. (14) 3.99 --Certificate of Incorporation of Health & Sciences Network, Inc. (14) 3.100 --By-laws of Health & Sciences Network, Inc. (14) 3.101 --Certificate of Incorporation of IntelliChoice, Inc. (14) 3.102 --By-laws of IntelliChoice, Inc. (14) 3.103 --Certificate of Incorporation of Little Rock Apartment Guide, Inc. (14) 3.104 --By-laws of Little Rock Apartment Guide, Inc. (14) 3.105 --Certificate of Incorporation of Memphis Apartment Guide, Inc. (14)
65 3.106 --By-laws of Memphis Apartment Guide, Inc. (14) 3.107 --Certificate of Incorporation of Low Rider Publishing Group, Inc. (14) 3.108 --By-laws of Low Rider Publishing Group, Inc. (14) 3.109 --Certificate of Incorporation of Pictorial, Inc. (14) 3.110 --By-laws of Pictorial, Inc. (14) 3.111 --Certificate of Incorporation of Plaza Communications, Inc. (14) 3.112 --By-laws of Plaza Communications, Inc. (14) 3.113 --Certificate of Incorporation of QWIZ, Inc. (14) 3.114 --By-laws of QWIZ, Inc. (14) 3.115 --Certificate of Incorporation of Bowhunter Magazine, Inc. (14) 3.116 --By-laws of Bowhunter Magazine, Inc. (14) 3.117 --Certificate of Incorporation of Canoe & Kayak, Inc. (14) 3.118 --By-laws of Canoe & Kayak, Inc. (14) 3.119 --Certificate of Incorporation of Climbing, Inc. (14) 3.120 --By laws of Climbing, Inc. (14) 3.121 --Certificate of Incorporation of Cowles Business Media, Inc. (14) 3.122 --By-laws of Cowles Business Media, Inc. (14) 3.123 --Certificate of Amendment to Certificate of Incorporation of Cowles Enthusiast Media, Inc. (changing name to PRIMEDIA Enthusiast Publications, Inc.) (*) 3.124 --Certificate of Incorporation of Cowles Enthusiast Media, Inc. (14) 3.125 --By-laws of Cowles Enthusiast Media, Inc. (14) 3.126 --Certificate of Incorporation of Cowles History Group, Inc. (14) 3.127 --By-laws of Cowles History Group, Inc. (14) 3.128 --Certificate of Incorporation of Cowles/Simba Information, Inc. (14) 3.129 --Certificate of Amendment to Certificate of Incorporation of Cowles/Simba Information, Inc. (changing name to Simba Information)(*) 3.130 --By-laws of Cowles/Simba Information, Inc. (14) 3.131 --Certificate of Incorporation of Cumberland Publishing, Inc. (14) 3.132 --By-laws of Cumberland Publishing, Inc. (14) 3.133 --Certificate of Incorporation of Horse & Rider, Inc. (14) 3.134 --By-laws of Horse & Rider, Inc. (14) 3.135 --Certificate of Incorporation of Kitplanes Acquisition Company (14) 3.136 --By-laws of Kitplanes Acquisition Company (14) 3.137 --Certificate of Incorporation of RetailVision, Inc. (14) 3.138 --By-laws of RetailVision, Inc. (14)
66 3.139 --Certificate of Incorporation of Southwest Art, Inc. (14) 3.140 --By-laws of Southwest Art, Inc. (14) 3.141 --Certificate of Incorporation of Vegetarian Times, Inc. (14) 3.142 --By-laws of Vegetarian Times, Inc. (14) 3.143 --Certificate of Incorporation of The Virtual Flyshop, Inc. (14) 3.144 --By-laws of The Virtual Flyshop, Inc. (14) 3.145 --Certificate of Restated Articles of Incorporation of American Guidance Service, Inc. (*) 3.146 --Amended By-laws of American Guidance Service, Inc. (*) 3.147 --Certificate of Incorporation of AGS International Sales, Inc. (*) 3.148 --By-laws of AGS International Sales, Inc. (*) 3.149 --Certificate of Incorporation of Cambridge Research Group, Ltd. (*) 3.150 --By-laws of Cambridge Research Group, Ltd. (*) 3.151 --Certificate of Formation of CommCorp. LLC (*) 3.152 --Amendment to Limited Liability Company Operating Agreement of CommCorp. LLC (*) 3.153 --Certificate of Incorporation of Maddux Publishing, Inc. (*) 3.154 --By-laws of Maddux Publishing, Inc. (*) 3.155 --Certificate of Amendment of Articles of Incorporation of Miramar Communications, Inc. (*) 3.156 --By-laws of Miramar Communications, Inc. (*) 3.157 --Certificate of Incorporation PRIMEDIA Ventures, Inc. (*) 3.158 --By-laws of PRIMEDIA Ventures, Inc. (*) 3.159 --Certificate of Incorporation for TSECRP, Inc. (*) 3.160 --By-laws of TSECRP, Inc. (*) 4.1 --10 1/4% Senior Note Indenture (including form of note and form of guarantee). (8) 4.2 --8 1/2% Senior Note Indenture (including forms of note and guarantee). (9) 4.3 --Form of Class D Subordinated Debenture Indenture (including form of deben- ture). (11) 4.4 --Form of Class F Subordinated Debenture Indenture (including form of deben- ture). (13) 4.5 --Form of Class H Subordinated Debenture Indenture (including form of deben- ture). (15) 4.6 --7 5/8% Senior Note Indenture (including form of note and form of guarantee). (15) 10.1 --Non-Competition Agreement, dated as of June 17, 1991, between News America Holdings Incorporated, K-III Holdings Corporation III, K-III Magazines and Daily Racing Form. (2)
67 10.2 --$250,000 Credit Facility with The Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The Bank of Nova Scotia, as agents (including forms of Guaranty and Contribution Agreements). (12) 10.3 --$1,500,000 Credit Facility with The Chase Manhattan Bank, Canadian Sailings Inc., The Bank of New York, Bankers Trust Company and the Bank of Nova Scotia, as agents (including forms of Guaranty and Contribution Agreements). (*) 10.4 --Amendment to the $250,000 Credit Facility with The Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The Bank of Nova Scotia, as agents.(*) 10.5 --$150,000 Credit Facility with The Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The Bank of Nova Scotia, as agents (including forms of Guaranty and Contribution Agreements). (*) +10.6 --Form of Amended and Restated K-III 1992 Stock Purchase and Option Plan. (7) +10.7 --Amendment No. 1 to the 1992 Stock Purchase and Option Plan Amended and Restated as of March 5, 1997. (12) +10.8 --Form of Common Stock Purchase Agreement between K-III and senior manage- ment. (2) +10.9 --Form of Common Stock Purchase Agreement between K-III and various purchas- ers. (2) +10.10 --Form of Non-Qualified Stock Option Agreement between K-III and various employees. (2) 10.11 --Form of Common Stock Purchase Agreement between K-III and senior manage- ment. (2) 10.12 --Form of Common Stock Purchase Agreement between K-III and various purchas- ers. (2) 10.13 --Form of Securities Purchase Agreement between PRIMEDIA Inc. and KKR 1996 Fund L.P. (*) +10.14 --Form of Non-Qualified Stock Option Agreement between K-III and various employees. (2) 10.15 --Amended Registration Rights Agreement dated as of February 5, 1998 among PRIMEDIA Inc., KKR 1996 Fund L.P., MA Associates, L.P., FP Associates, L.P., Magazine Associates, L.P., Publishing Associates, L.P., Channel One Associates, L.P. and KKR Partners II, L.P. with respect to common stock of K-III. (*) +10.16 --Free Cash Flow Long-Term Plan. (1) +10.17 --Executive Incentive Compensation Plan. (8) +10.18 --Pension Plan. (1) +10.19 --1995 Restoration Plan. (8) +10.20 --Form of K-III Communications Short Term Senior Executive Non-Discretionary Plan. (7) +10.21 --Form of K-III Communications Short Term Senior Executive Performance Plan. (7)
68 +10.22 --Form of K-III Communications Corporation Directors' Deferred Compensation Plan. (12) +10.23 --Agreement, dated as of December 24, 1996, between K-III Communications Corporation and Harry A. McQuillen (12) +10.24 --Agreement, dated as of December 24, 1996, between K-III Communications Corporation and Jack L. Farnsworth (12) 21 --Subsidiaries of K-III. (*) 27 --1998 Financial Data Schedule (*)
- ------------------------ (1) Incorporated by reference to K-III Communications Corporation's Annual Report on Form 10-K for the year ended December 31, 1992. File No. 1-11106. (2) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-1, File No. 33-46116. (3) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-1, File No. 33-60786. (4) Incorporated by reference to K-III Communications Corporation's Annual Report on Form 10-K for the year ended December 31, 1993. File No. 1-11106. (5) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-1, File No. 33-77520. (6) Incorporated by reference to K-III Communications Corporation's Current Report on Form 8-K dated September 30, 1994. (7) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-1, File No. 33-96516. (8) Incorporated by reference to K-III Communications Corporation Annual Report on Form 10-K for the year ended December 31, 1994, File No. 1-11106. (9) Incorporated by reference to K-III Communications Corporation's Form 10-K for the year ended December 31, 1995, File No. 1-11106. (10) Incorporated by reference to K-III Communications Corporation's Form 10-Q for the quarter ended March 31, 1996. (11) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-4, File No. 333-3691. (12) Incorporated by reference to K-III Communications Corporation's Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-11106. (13) Incorporated by reference to K-III Communications Corporation's Registration Statement on Form S-4, File No. 333-38451. (14) Incorporated by reference to K-III Communications Corporation's Annual Report on Form 10-K for the year ended December 31, 1997, File No. 1-11106. (15) Incorporated by reference to PRIMEDIA Inc.'s Registration Statement on Form S-4, File No. 333-51891. + Executive contract or compensation plan or arrangement. (*) Filed herewith. 69 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on March 25, 1999. PRIMEDIA INC. By /S/ BEVERLY C. CHELL ................................... (Beverly C. Chell) VICE CHAIRMAN AND SECRETARY Pursuant to the requirements of the Securities and Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons in the capacities indicated on March 25, 1999.
SIGNATURES TITLE - --------------------------------------------------- ------------------------------------------------------------ /s/ WILLIAM F. REILLY Chairman, Chief Executive Officer and Director (Principal ................................................... Executive Officer) (William F. Reilly) /s/ CHARLES G. MCCURDY President and Director (Principal Financial Officer) ................................................... (Charles G. McCurdy) /s/ BEVERLY C. CHELL Vice Chairman, Secretary and Director ................................................... (Beverly C. Chell) /s/ MEYER FELDBERG Director ................................................... (Meyer Feldberg) /s/ PERRY GOLKIN Director ................................................... (Perry Golkin) /s/ H. JOHN GREENIAUS Director ................................................... (H. John Greeniaus) /s/ HENRY KRAVIS Director ................................................... (Henry Kravis) /s/ GEORGE R. ROBERTS Director ................................................... (George R. Roberts) /s/ MICHAEL T. TOKARZ Director ................................................... (Michael T. Tokarz) /s/ ROBERT J. SFORZO Vice President and Controller (Principal Accounting Officer) ................................................... (Robert J. Sforzo)
70 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York on March 25, 1999. American Guidance Service, Inc. AGS International Sales, Inc. American Heat Video Productions, Inc. The Apartment Guide of Nashville, Inc. Argus Publishers Corporation Bacon's Information, Inc. Bankers Consulting Company Bowhunter Magazine, Inc. Cambridge Research Group, Ltd. Canoe & Kayak, Inc. Cardinal Business Media, Inc. Cardinal Business Media Holdings, Inc. Channel One Communications Corp. Climbing, Inc. CommCorp. LLC Cover Concepts Marketing Services, LLC Cowles Business Media, Inc. Cowles History Group, Inc. CSK Publishing Company Incorporated Cumberland Publishing, Inc. The Electronics Source Book, Inc. Excellence in Training Corporation Films for the Humanities & Sciences, Inc. Funk & Wagnalls Yearbook Corp. Gareth Stevens, Inc. GO LO Entertainment, Inc. Guinn Communications, Inc. Haas Publishing Companies, Inc. Health & Sciences Network, Inc. Horse & Rider, Inc. Intermodal Publishing Company, Ltd. IDTN Leasing Corporation Industrial Training Systems Corporation IntelliChoice, Inc. Kitplanes Acquisition Company Law Enforcement Television Network, Inc. Lifetime Learning Systems, Inc. Little Rock Apartment Guide, Inc. Lockert Jackson & Associates, Inc. Low Rider Publishing Group, Inc. Maddux Publishing, Inc. McMullen Argus Publishing, Inc. Memphis Apartment Guide, Inc. Miramar Communications, Inc. Pictorial, Inc. Plaza Communications, Inc. PRIMEDIA Enthusiast Publications, Inc. PRIMEDIA Holdings III Inc. PRIMEDIA Information Inc. PRIMEDIA Intertec Corporation PRIMEDIA Magazines Inc. PRIMEDIA Magazines Finance Inc. PRIMEDIA Reference Inc. PRIMEDIA Special Interest Publications Inc. PRIMEDIA Ventures, Inc. PRIMEDIA Workplace Learning, Inc. QWIZ, Inc. R.E.R. Publishing Corporation RetailVision, Inc. Simba Information Southwest Art, Inc. Symbol of Excellence Publishers, Inc. Tel-A-Train, Inc. The Virtual Flyshop, Inc. TI-IN Acquisition Corporation TSECRP, Inc. Vegetarian Times, Inc. Weekly Reader Corporation Westcott Communications Michigan, Inc. Westcott ECI, Inc. Western Empire Publications, Inc. 71 By: /s/ BEVERLY C. CHELL -------------------------------------- (Beverly C. Chell) VICE CHAIRMAN AND SECRETARY
Pursuant to the requirements of the Securities and Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons in the capacities indicated on March 25, 1999.
SIGNATURES TITLE - --------------------------------------------------- ------------------------------------------------------------ /s/ WILLIAM F. REILLY Chairman and Director (Principal Executive Officer) ................................................... (William F. Reilly) /s/ CHARLES G. MCCURDY Vice Chairman, Chief Financial Officer and Director ................................................... (Principal Financial Officer) (Charles G. McCurdy) /s/ BEVERLY C. CHELL Vice Chairman, Secretary and Director ................................................... (Beverly C. Chell) /s/ ROBERT J. SFORZO Vice President (Principal Accounting Officer) ................................................... (Robert J. Sforzo)
72 SCHEDULE II PRIMEDIA INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998 (DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING OF COSTS AND OTHER END OF DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------------- ------------ ---------- ---------- ---------- ---------- Accounts receivable Allowance for doubtful accounts...................................... $ 10,521 $ 12,584 $ 2,629(1) $(14,911)(3) $ 15,796 $ 5,314(2) $ (341)(4) Allowance for sales returns and rebates....................................... $ 27,009 $ 22,556 $ 1,328(1) $(28,474)(3) $ 21,507 $ (912)(4) Inventory Allowance for obsolescence...................... $ 2,482 $ 595 $ 1,621(1) $ (1,472)(3) $ 3,205 $ (21)(4) Accumulated amortization Goodwill........................................ $ 94,735 $ 42,623 $ 364(1) $ (57)(3) $ 137,094 (571)(4) Other intangibles............................... $641,862 $127,099 $12,854(1) $ (1,721)(3) $ 777,760 (2,334)(4) Deferred financing costs........................ $ 5,093 $ 3,046 $ (215)(4) $ (615)(3) $ 7,309 Deferred wiring and installation costs............................ $ 18,718 $ 7,033 $ -- $ (1,228)(3) $ 24,523 Prepublication and programming costs............ $ 6,843 $ 5,759 $ -- $ (837)(3) $ 11,765 Direct-response advertising costs............... $ 53,840 $ 33,354 $ (235)(4) $(16,846)(3) $ 70,113
- ------------------------ Notes: (1) Increases in related valuation account result from acquisitions. (2) Increases in related valuation account result from the recovery of amounts previously written off. (3) Deductions from related valuation account result from write-offs and actual returns. (4) Deductions from related valuation account result from reclassifications and write-offs related to divestitures. S-1 SCHEDULE II PRIMEDIA INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING OF COSTS AND OTHER END OF DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------------- ------------ ---------- ---------- ----------- -------------- Accounts receivable Allowance for doubtful accounts...................................... $ 15,418 $ 20,904 $ 850(1) $ (21,982)(3) $ 10,521 $ 1,732(2) $ (6,401)(4) Allowance for sales returns and rebates................................... $ 24,098 $ 83,438 $ (3,378)(4) $ (77,149)(3) $ 27,009 Inventory Allowance for obsolescence...................... $ 8,703 $ 5,674 $ 218(2) $ (4,837)(3) $ 2,482 $ (7,276)(4) Accumulated amortization Goodwill........................................ $ 82,763 $ 29,024 $(17,026)(4) $ (26)(3) $ 94,735 Other intangibles............................... $814,061 $110,799 $(282,911)(4) $ (87)(3) $ 641,862 Deferred financing costs........................ $ 9,794 $ 3,071 $ -- $ (7,772)(3) $ 5,093 Deferred wiring and installation costs............................ $ 12,850 $ 7,008 $ (7)(4) $ (1,133)(3) $ 18,718 Prepublication and programming costs............ $ 7,968 $ 4,491 $ (3,489)(4) $ (2,127)(3) $ 6,843 Direct-response advertising costs......................................... $ 70,661 $ 42,659 $(49,320)(4) $ (10,160)(3) $ 53,840
- ------------------------ Notes: (1) Increases in related valuation account result from acquisitions. (2) Increases in related valuation account result from the recovery of amounts previously written off. (3) Deductions from related valuation account result from write-offs and actual returns. (4) Deductions from related valuation account result from reclassifications and write-offs related to net assets held for sale. S-2 SCHEDULE II PRIMEDIA INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING OF COSTS AND OTHER END OF DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD - -------------------------------------------------- ------------ ---------- ---------- ------------ ---------- Accounts receivable Allowance for doubtful accounts...................................... $ 14,364 $ 21,438 $ 62(1) $(21,069)(3) $ 15,418 $ 970(2) $ (347)(4) Allowance for sales returns and rebates....................................... $ 23,015 $ 79,819 $ -- $(78,736)(3) $ 24,098 Inventory Allowance for obsolescence...................... $ 7,129 $ 4,423 $ 279(2) $ (3,128)(3) $ 8,703 Accumulated amortization Goodwill........................................ $ 66,889 $ 23,576 $ (640)(4) $ (7,062)(3) $ 82,763 Other intangibles............................... $695,504 $122,140 $(2,932)(4) $ (651)(3) $ 814,061 Deferred financing costs........................ $ 8,139 $ 3,662 $ -- $ (2,007)(3) $ 9,794 Deferred wiring and installation costs............................ $ 7,163 $ 6,753 $ -- $ (1,066)(3) $ 12,850 Prepublication and programming costs............ $ 4,121 $ 5,963 $ -- $ (2,116)(3) $ 7,968 Direct-response advertising costs............... $ 29,569 $ 41,481 $ -- $ (389)(3) $ 70,661
- ------------------------ Notes: (1) Increases in related valuation account result from acquisitions. (2) Increases in related valuation account result from the recovery of amounts previously written off. (3) Deductions from related valuation account result from write-offs and actual returns. (4) Deductions from related valuation account result from reclassifications and write-offs related to net assets held for sale. S-3 INDEPENDENT AUDITORS' REPORT ON SCHEDULES To the Shareholders and Board of Directors of PRIMEDIA Inc. New York, New York: We have audited the consolidated balance sheets of PRIMEDIA Inc. and subsidiaries as of December 31, 1998 and 1997, and the related statements of consolidated operations, consolidated cash flows and shareholders' equity (deficiency) for each of the three years in the period ended December 31, 1998, and have issued our report thereon dated January 27, 1999 (March 11, 1999 as to Note 23); such report is included elsewhere in this Form 10-K. Our audits also included the financial statement schedules of PRIMEDIA Inc. and subsidiaries, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP New York, New York January 27, 1999 (March 11, 1999 as to Note 23) S-4 EX-3.8 2 EXHIBIT 3.8 Exhibit 3.8 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION **** Intertec Publishing Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation at a meeting duly held, adopted a resolution proposing and declaring advisable the following amendment to the Certificate of Incorporation of said corporation: RESOLVED, that the Certificate of Incorporation of Intertec Publishing Corporation be amended by changing the First Article thereof so that, as amended, said Article shall be and read as follows: "The name of the corporation shall be PRIMEDIA Intertec Corporation." SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of sections 242 and 228 of the General Corporation Law of the State of Delaware. EX-3.123 3 EXHIBIT 3.123 Exhibit 3.123 Microfilm Number Filed with the Department of State on Feb 03 1999 Entity No. 161885 --------------------------------------------------- ACTING Secretary of the Commonwealth ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (Rev 90) In compliance with the requirements of 15 Pa.C.S. section 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Cowles Enthusiast Media Inc. --------------------------------------------- --------------------------------------------------------------------------- 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name of its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) ------------------------------------------------------------------------ Number and Street City State Zip County (b)c/o: CT Corporation System Philadelphia ------------------------------------------------------------------- Name of Commercial Registered Office Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated is: Business ---------------------- Corporation Law of the Commonwealth of Pennsylvania approved May 5, 1933, --------------------------------------------------------------------------- P.L. 364 --------------------------- 4. The name of the corporation is: (February 1, 1960) --------------------------------------------- 5. (Check , and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of --- Amendment in the Department of State. The amendment shall be effective on at --- ------------------ ------------------ Date Hour 6. (Check one of the following): The amendment was adopted by the shareholders (or members) pursuant to --- 15 Pa.C.S. section 1914(a) and (b). The amendment was adopted by the board of directors pursuant to 15 --- Pa.C.S. section 1914(c). 7. (Check , and if appropriate complete, one of the following): The amendment adopted by the corporation, set forth in full, is as --- follows: X The amendment adopted by the corporation as set forth in full in --- Exhibit A attached hereto and made a part hereof. 8. X The restated Articles of Incorporation supersede the original --- Articles and all amendments thereto. IN TESTIMONY WHEREOF, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 3rd day of February, 1999. ---- -------- --- --------------------------------------------- (Name of Corporation) BY: /s/ Beverly C. Chell ------------------------------------------ (Signature) TITLE: Beverly C. Chell, Secretary - - --------------------------------------- EXHIBIT A --------- CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION COWLES ENTHUSIAST MEDIA INC., a corporation organized and existing under and by virtue of the Business Corporation Law of the Commonwealth of Pennsylvania (the "Corporation"). DOES HEREBY CERTIFY: FIRST: That the Board of Directors of the Corporation duly adopted resolutions setting forth and declaring advisable a proposed amendment to the Articles of Incorporation of said Corporation: RESOLVED, that the articles of Incorporation of this Corporation be amended by changing Article I so that, as amended, said Article shall be and read as follows: "The name of the Corporation is PRIMEDIA Enthusiast Publications, Inc.". SECOND: That by written consent, filed with the minutes of the Corporation, the sole stockholder approved said amendment in accordance with the provisions of Section 801 of the Business Corporation Law of the Commonwealth of Pennsylvania. THIRD: That the aforesaid amendment to the Corporation's Articles of Incorporation was duly adopted in accordance with the applicable provisions of Section 801 of the Business Corporation Law of the the Commonwealth of Pennsylvania. IN WITNESS WHEREOF, said Cowles Enthusiast Media Inc. has caused these Articles of Incorporation to be executed by Beverly C. Chell, its authorized officer, on this 3rd day of February, 1999. By: /s/ Beverly C. Chell ---------------------------------------- Name: Beverly C. Chell Title: Secretary Microfilm Number Files with the Department State on Entity No 161885 Secretary of the Commonwealth ARTICLES OF AMENDMENT DOMESTIC BUSINESS CORPORATION DSCB:15-1915 (REV 90) In compliance with the requirements of 15 Pa.C.S. 1915 (relating to articles of amendment), the undersigned business corporation, desiring to amend its Articles, hereby states that: 1. The name of the corporation is: Cowles Enthusiast Media Inc. 2. The (a) address of this corporation's current registered office in this Commonwealth or (b) name its commercial registered office provider and the county of venue is (the Department is hereby authorized to correct the following information to conform to the records of the Department): (a) Number and Street City State Zip County (b) c/o: CT Corporation System Philadelphia Name of Commercial Registered Officer Provider County For a corporation represented by a commercial registered office provider, the county in (b) shall be deemed the county in which the corporation is located for venue and official publication purposes. 3. The statute by or under which it was incorporated: Business Corporation Law of the Commonwealth of Pennsylvania approved May 5, 1933, P.L. 364 4. The date of incorporation is: (February 1, 1960) 5. (Check, and if appropriate complete, one of the following): X The amendment shall be effective upon filing these Articles of Amendment in the Department of State The amendment shall be effective on Date at Hour 6. (Check one of the following): The amendment was adopted by the board of shareholders (or members) pursuant to 15 Pa.C.S. 1914(a) and (b). X The amendment was adopted by the board of directors pursuant to 15 Pa.C.S. 1914(c) 7. (Check, and if appropriate complete, one of the following): The amendment adopted by the corporation, set forth in full, is a follows: X The amendment adopted by the corporation as set forth in full in Exhibit A attached hereto and made a part hereof. X The restated Articles of Incorporation supersede the original Articles and all amendments thereto. In testimony whereof, the undersigned corporation has caused these Articles of Amendment to be signed by a duly authorized officer thereof this 3rd day of February, 1999. (Name of Corporation) By: Signature Title: Beverly C. Chell, Secretary Exhibit A Certificate of Amendment Of the Articles of Incorporation Cowles Enthusiast Media Inc., a corporation organized and existing under and by virtue of the Business Corporation Law of the Commonwealth of Pennsylvania (the "Corporation"). Does hereby certify: First: That the Board of Directors of the Corporation duly adopted resolutions setting forth and declaring advisable a proposed amendment to the Articles of Incorporation of said Corporation: Resolved, that the Articles of Incorporation of this Corporation be amended by changing Article I so that, as amended, said Article shall be and read as follows: "The name of the Corporation is PRIMEDIA Enthusiast Publications, Inc.". Second: That by written consent, filed with the minutes of the Corporation, the sole stockhlder approved said amendment in accordance with the provisions of Section 801 of the Business Corporation Law of the Commonwealth of Pennsylvania. Third: That the aforesaid amendment to the Corporation's articles of Incorporation was duly adopted in accordance with the applicable provision of Section 801 of the Business Corporation Law of the Commonwealth of Pennsylvania. In Witness Whereof, said Cowles Enthusiast Media Inc., has caused these Articles of Incorporation to be executed by Beverly C. Chell, its authorized officer, on this 3rd day of February, 1999. By: Name Beverly C. Chell Title Secretary EX-3.129 4 EXHIBIT 3.129 Exhibit 3.129 FILING #0001832638 PG 01 OF 02 VOL B-00187 FILED 04/24/1998 01:00 PM PAGE 00533 SECRETARY OF THE STATE CONNECTICUT SECRETARY OF THE STATE CERTIFICATE AMENDING OR RESTATING CERTIFICATE OF INCORPORATION 61-38 Rev. 9/90 Stock Corporation STATE OF CONNECTICUT SECRETARY OF THE STATE 30 TRINITY STREET HARTFORD, CT 06106 Cowles/Simba Information, Inc. - -------------------------------------------------------------------------------- 1. Name of Corporation ( Please enter name within lines) - -------------------------------------------------------------------------------- 2. The Certificate of Incorporation is: (Check one) |X| A. Amended only, |_| B. Amended only, to cancel authorized shares (state number of shares to be cancelled, the class, the series, if any, and the par value, P.A. 90-107.) |_| C. Restated only, pursuant to Conn. Gen. Stat. ss.33 - 362(a). |_| D. Amended and restated, pursuant to Conn. Gen. Stat. ss.33 - 362(c). |_| E. Restated and superseded pursuant to Conn. Gen. Stat. ss.33 - 362(d). Set forth here the resolution of amendment and/or restatement. Use an 8 1/2 X 11 attached sheet if more space is needed. Resolved, that the Certificate of Incorporation be amended to read in its entirety as follows: "1. The name of the Corporation is Simba Information, Inc." (If 2A or 2B is checked, go to 5 & 6 to complete this certificate. If 2C or 2D ia checked, complete 3A or 3B. If 2E is checked, complete 4.) 3. (Check one) |_| A. This certificate purports merely to restate but not to change the provisions of the original Certificate of Incorporation as supplemented and amended to date, and there is no discrepancy between the provisions of the original Certificate of Incorporation as supplemented and amended to date, and the provisions of this Restated Certificate of Incorporation. (If 3A is checked, go to 5 & 6 to complete this certificate.). |_| B. This Restated Certificate of Incorporation shall give effect to the amendment(s) and purports to restate all those provisions now in effect not being amended by such new amendment(s). (If 3B is checked, check 4, if true, and go to 5 & 6 to complete this Certificate.) 4. (Check, if true) |_| This restated Certificate of Incorporation was adopted by the greatest vote which would have been required to amend any provision of the Certificate of Incorporation as in effect before such vote and supersedes such Certificate of Incorporation. FILING# 0001832638 PG 02 OF 02 VOL B-00187 FILED 04/24/1998 01:00 PM PAGE 00534 SECRETARY OF THE STATE CONNECTICUT SECRETARY OF THE STATE [ILLEGIBLE] of adopting the resolution was as follows: |_| A. By the board of directors and shareholders, pursuant to Conn. Gen. Stat. ss.33 - 360. Vote of Shareholders: (Check (i) or (ii), and check (iii) if applicable.) (i) |_| No shares are required to be voted as a class; the shareholder's vote was as follows: Vote Required for Adoption ___________ Vote Favoring Adoption __________ (ii) |_| There are shares of more than one class entitled to vote as a class. The designation of each class required for adoption of the resolution and the vote of each class in favor of adoption were as follows: (Use an 8 1/2 x 11 attached sheet if more space is needed. Conn. Gen. Stat. ss. 1 - 9.) (iii) |_| Check here if the corporation has 100 or more recordholders, as defined in Conn. Gen. Stat. ss.33 - 311a(a). |X| B. By the board of directors acting alone The number of affirmative votes required to adopt such resolution is: 11 The number of directors' votes in favor of the resolution was: 11 [ILLEGIBLE] hereby declare, under the penalties of false statement, that the statements made in the foregoing certificate are (Print or Type) Signature - -------------------------------------------------------------------------------- Name of Pres. / V. Pres. /s/ Michaelanne Discepolo Michaelanne Discepolo - -------------------------------------------------------------------------------- (Print or Type) Signature - -------------------------------------------------------------------------------- Name of Sec. /s/ Beverly C. Chell Beverly C. Chell - -------------------------------------------------------------------------------- |_| C. The corporation does not have any shareholders. The resolution was adopted by vote of at least two-thirds of the incorporators before the organization meeting of the corporation, and approved in writing by all subscribers for shares of the corporation. If there are no subscribers, state NONE below. [ILLEGIBLE](at least two-thirds of the incorporators) hereby declare, under the penalties of false statement, that the statements made in the foregoing certificate are true. - -------------------------------------------------------------------------------- Signed Incorporator Signed Incorporator Signed Incorporator - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Signed Subscriber Signed Subscriber Signed Subscriber - -------------------------------------------------------------------------------- (Use an 8 1/2 X 11 attached sheet if more space is needed. Conn. Gen. Stat. ss. 1 - 9) Dated at ____ this 22nd day of April, 1998 Rec, CC, GS: (Type or Print) - ---------------------------------------- - ---------------------------------------- - ---------------------------------------- - ---------------------------------------- - ---------------------------------------- Please provide filer's name and complete address for mailing receipt EX-3.145 5 EXHIBIT 3.145 Exhibit 3.145 CERTIFICATE OF RESTATED ARTICLES OF INCORPORATION OF AMERICAN GUIDANCE SERVICE, INC. The undersigned, being the President of AMERICAN GUIDANCE SERVICE, INC., a Minnesota corporation subject to the provisions of Chapter 302A of the Minnesota Statutes, known as the Minnesota Business Corporation Act, does hereby certify that pursuant to a Written Action taken in accordance with Section 302A.441 of the Minnesota Business Corporation Act effective as of the 26th day of June, 1990, the following resolution was unanimously adopted by the company's shareholders entitled to vote thereon and these Restated Articles of Incorporation supersede and take the place of existing Articles of Incorporation and all amendments thereto: RESOLVED, that the Articles of Incorporation of AMERICAN GUIDANCE SERVICE, INC. be, and the same are hereby restated and the following Restated Articles of Incorporation take the place of and supersede the existing Articles of Incorporation and all amendments thereto, pursuant to Minnesota Statutes Section 302A.135, subd. 4, to read as follows: ARTICLE 1. NAME The name of the Corporation is AMERICAN GUIDANCE SERVICE, INC. ARTICLE 2. REGISTERED OFFICE The address of the registered office of the Corporation is Publishers' Building, Circle Pines, Minnesota 55014. ARTICLE 3. AUTHORIZED SHARES The number of shares which the Corporation shall have authority to issue, itemized by class and par value of the shares, if any, is: Class Shares Par Value - ----- -------- --------- Class A Common Stock 10,000,000 $.01 Par Value Class B Common Stock 1,000,000 $.01 Par Value Class C Common Stock 5,000,000 $.01 Par Value ARTICLE 4. PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF AUTHORIZED SHARES The preferences, limitations, designation and relative rights of each class of stock of the Corporation shall be identical with regard to dividend rights, preferences on liquidation and all other respects except as more specifically set forth as follows: 1. The shares of Class A Common Stock shall be voting stock and shall be entitled to dividends if and when declared by the Board of Directors; and 2. The shares of Class B Common Stock shall be voting stock and shall be entitled to dividends if and when declared by the Board of Directors. 3. The shares of Class C Common Stock shall be nonvoting stock and shall be entitled to dividends if and when declared by the Board of Directors. The Board of Directors may declare dividends with respect to only one class of stock and shall not be required to declare dividends with respect to all classes of stock. If dividends are declared with respect to only one class of stock, other than Class A common stock, the dividends must also be declared with respect to the shares of Class A Common Stock. The shares of the Class B Common Stock and Class C Common Stock may not be owned by an Employee Stock Ownership Plan and Trust ("ESOP") as defined in Sections 401 and 4975(e)(7) of the Internal Revenue Code of 1986, as amended (the "Code"). In the event any shares of the Class B Common Stock or Class C Common Stock are sold, distributed, or otherwise transferred or disposed of to an ESOP, such stock shall immediately be converted to Class A Common Stock on a share for share basis. The Class B Common Stock and the Class C Common Stock may be converted at any time, on a share for share basis, to Class A Common Stock, at the sole discretion of a shareholder, by giving thirty (30) days advance notice to the Corporation of the shareholder's desire to convert his or her shares upon delivering his or her Class B or Class C Common Stock Certificates to the Secretary of the Corporation. Upon receipt of such notice and the appropriate Class B or Class C Common Stock Certificates, the Secretary of the Corporation will issue new Class A Common Stock Certificates to such shareholder. ARTICLE 5. NO CUMULATIVE VOTING There shall be no cumulative voting by the shareholders of the Corporation. ARTICLE 6. NO PREEMPTIVE RIGHTS The shareholders of the Corporation shall not have preemptive rights. ARTICLE 7. DIRECTOR LIABILITY A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for (i) liability based on a breach of the director's duty of loyalty to the Corporation or its shareholders; (ii) liability for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (iii) liability under Sections 302A.559 or 80A.23 of the Minnesota Business Corporation Act or on violations of federal or state securities laws; (iv) liability for any transaction from which the director derived an improper personal benefit; or (v) liability for any act or omission occurring prior to the date this Article 7 becomes effective. If Chapter 302A, the Minnesota Business Corporation Act, hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation in addition to the limitation on personal liability provided herein, shall be eliminated or limited to the fullest extent permitted by the amended Chapter 302A, the Minnesota Business Corporation Act as amended. Any repeal or modification of this Article by the shareholders of the Corporation shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, I have subscribed my name this 26th day of June,1990. /s/ John P. Yackel -------------------------------- John P. Yackel, the President of American Guidance Service, Inc. EX-3.146 6 EXHIBIT 3.146 Exhibit 3.146 AMENDED BY-LAWS AMERICAN GUIDANCE SERVICE, INC. ARTICLE I. OFFICE & SEAL SECTION 1. OFFICE. The registered office of the corporation shall be Publisher's Building, Circle Pines, Minnesota, 55014, and the corporation shall have other offices at such places as the Board of Directors may from time to time determine. SECTION 2. SEAL. The corporation seal shall have inscribed thereon the name of the corporation and the words, "Corporate Seal, Minnesota". Said seal may be used by causing it, or a facsimile thereof to be impressed, affixed, reproduced or otherwise. ARTICLE II. SHAREHOLDERS MEETINGS SECTION 1. PLACE. All meetings of the Shareholders shall be held at the registered office of the corporation in the County of Anoka, Minnesota, and such other places as the Board of Directors may determine except as limited by law. SECTION 2. TIME. A meeting of the Shareholders shall be held at a time to be determined by the Corporation's Board of Directors, when they shall elect by a majority vote a Board of Directors. Except as otherwise provided in the articles, pursuant to provisions of Section 301.06 Subdivision 4 and 12 of Minnesota Statutes 1945, directors other than constituting the first board shall be elected by the Shareholders in accordance with the relative voting granted in the shares of each class by the articles. SECTION 3. ANNUAL MEETINGS. Written notice of the annual meeting shall be mailed at least ten (10) days prior to the meeting to each Shareholder entitled to vote thereat to the last known address of such Shareholder as same appears upon the books of the corporation. Amended By-Laws Page 2 SECTION 4. SPECIAL MEETINGS. Written notice of a special meeting of Shareholders, stating the time, place and object thereof, shall be mailed to the last known address of such Shareholder, postage prepaid, at least ten (10) days before such meeting to each Shareholder entitled to vote thereat. SECTION 5. QUORUM. The presence at any meeting, in person or by proxy, of the holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of business. If, however, such majority shall not be present in person or by proxy, at any meeting of the Shareholders, entitled to vote thereat, those present shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting shares shall be represented. At such adjourned meeting at which the required amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. SECTION 6. VOTING. At each meeting of the Shareholders, every Shareholder having the right to vote shall be entitled to vote in person, or by proxy, duly appointed by an instrument in writing subscribed by such shareholder. Upon demand of any Shareholder, the vote for directors, or the vote upon any question before the meeting, shall be by ballot. All elections shall be had and all questions decided by a majority vote, except as otherwise required by statute. SECTION 7. CALL FOR SPECIAL MEETINGS. Special meetings of the Shareholders, for any purpose, or purposes, unless otherwise prescribed by statute, shall be called by the President, or shall be called by the President and Secretary at the request in writing of the Shareholders owning not less than one-tenth of the voting power of the Shareholders of the corporation. Such call shall state the purpose or purposes of the proposed meeting. SECTION 8. ORDER FOR BUSINESS. Business transacted at all special meetings shall be confined to purposes stated in the call. Amended By-Laws Page 3 ARTICLE III. BOARD OF DIRECTORS SECTION 1. ELECTION OF DIRECTORS. The management of this corporation shall be vested in a Board of Directors to be chosen at each annual meeting by the shareholders. The Board of Directors shall consist of not less than three (3) nor more than seven (7) persons who need not be shareholders, except that where all of the shares of the Corporation are owned beneficially and of record by either one or two shareholders, the number of directors may be less than three (3), but not less than the number of shareholders. They shall be elected at the annual meeting of Shareholders, by majority vote and each Director shall be elected to serve for one year or until their successor shall have been elected and qualified. Except as otherwise provided in the articles pursuant to provisions of Section 301.26, Subdivision 4 and 12, of the Minnesota Statutes 1945, directors, other than those constituting the first board, shall be selected by the Shareholders in accordance with the relative voting rights granted to the shares of each class by the articles. SECTION 2. ANNUAL MEETING. The regular annual meetings of the board shall be held without notice at the time and immediately following the adjournment of the annual Shareholders' meeting, for the purpose of election of officers for the ensuing year and to transact such other business as may properly come before it. SECTION 3. REGULAR MEETINGS. Regular meetings of the board shall be held without notice at the registered office or such other place within and without the State of Minnesota and at such times as a majority of the members of the board may from time to time determine. Amended By-Laws Page 4 SECTION 4. SPECIAL MEETINGS. Special meetings of the board may be called by the President at any time and shall be called by him whenever requested to do so in writing by any member of the Board. Notice of special meetings may be given to each director personally or by mail or telegram at least five (5) days prior to the meeting. A special meeting may be called without notice to the directors if a full board convenes and all agree to the holding of the meeting at such time and place and waive all rights to notice thereof. Any action which might be taken at a meeting of the Board of Directors may be taken without meeting if done in writing, signed by all the directors. SECTION 5. QUORUM. At all meetings of the board, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at the meeting at which there is a quorum, shall be the act of the Board of Directors. SECTION 6. ORDER FOR BUSINESS. The Board of Directors may from time to time determine the order of business at their meeting. ARTICLE IV. POWERS OF BOARD OF DIRECTORS SECTION 1. MANAGEMENT. The Board of Directors shall have full power and authority to manage and control the affairs and business of this corporation. SECTION 2. CHAIRMAN OF THE BOARD. At each annual meeting, directors shall choose from among its members a Chairman of the board who shall conduct the affairs of the Board of Directors and shall preside at all meetings of the Shareholders and Board of Directors. SECTION 3. ISSUANCE OF SHARES. The Board of Directors are authorized and directed to issue shares of the corporation to the full amount authorized by the Articles of Incorporation in such amounts and at such times as may be determined by the board and as may be permitted by law. Amended By-Laws Page 5 SECTION 4. TRANSFER OF SHARES. Transfer of shares shall be made on the books of the corporation only by the person named in the certificate, or by attorney, lawfully constituted in writing, and upon surrender of the certificate thereof properly endorsed. SECTION 5. CLOSING OF BOOKS. The Board of Directors may fix a time not exceeding (60) days preceding the date of any meeting of the Shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against transfer of shares during the whole or any part of such period. SECTION 6. OTHER POWERS. In addition to the powers and authorities conferred upon them by these By-Laws, the Board of Directors shall have the power to do all lawful acts necessary and expedient to the conduct of the business of this corporation, that are not conferred upon the shareholders, by these By-Laws, or by the Articles of Incorporation, or by Statutes. ARTICLE V. OFFICERS SECTION 1. BOARD OF DIRECTORS. The Board of Directors at its first meeting after each annual meeting of Shareholders shall elect a President, one or more Vice-Presidents, a Secretary and Treasurer, none of whom need be a member of the board. Any two offices, except that of President and Vice-President, may be held by the same person. SECTION 2. OTHER OFFICERS. The board may appoint such other officers and agents as it shall deem necessary, from time to time, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. Amended By-Laws Page 6 SECTION 3. TERMS OF OFFICE. The officers of the corporation shall hold office for one year or until their successors are chosen and qualify in their stead, notwithstanding an earlier termination of their office as directors. Any officer elected or appointed by the Board of Directors may be removed by the affirmative of a majority of the whole Board of Directors. SECTION 4. PRESIDENT. (a) The President shall be the chief executive officer of the corporation; he shall have general active management of the business of the corporation, and shall see that all orders and resolutions of the board are carried into effect. (b) He shall execute all bonds, mortgages, and other contracts. (c) He shall be ex-officio a member of all standing committees, and shall have the general powers and duties of supervision and management usually vested in the office of the President of a corporation. SECTION 5. VICE-PRESIDENTS. One of the officers shall be designated First Vice-President, who in the absence or disability of the President shall perform the duties and exercise the powers of the President and shall perform such other duties as the Board of Directors shall prescribe. All other Vice-Presidents shall perform such duties as the Board of Directors shall prescribe. SECTION 6. SECRETARY. The Secretary shall attend all sessions of the Board of Directors and all meetings of the Shareholders and record all votes and the minutes of all proceedings in a book kept for that purpose; and shall perform like duties for the standing committee when required. He shall give, or cause to be given, notice of all meetings of the Shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. He shall keep in safe custody the seal of the corporation and, when authorized by the board, affix the same to any instrument requiring it. SECTION 7. TREASURER. (a) The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation and shall deposit all monies 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. Amended By-Laws Page 7 (b) He shall disburse the funds of the corporation as may be ordered by the board, taking the proper vouchers for such disbursements, and shall render to the President and Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. (c) He shall give the corporation a bond if required by a majority of the Board of Directors, in such amount as they may determine, and with one or more sureties satisfactory to the board, for the faithful performance of the duties of his office, and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control, belonging to the corporation. SECTION 8. VACANCIES. If the office of any director or any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors then in office, although less than a quorum, by a majority vote, may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. ARTICLE VI. COMPENSATION OF DIRECTORS & OFFICERS SECTION 1. COMPENSATION OF DIRECTORS. Directors may be paid such compensation for their services rendered as directors, as may be fixed by resolution of the Board of Directors itself, and it shall be lawful for the Board to allow to each director his expense for attendance at meetings of the Board. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 2. COMPENSATION OF OFFICERS. The salaries of all officers and agents of the corporation shall be determined by the Board of Directors. Amended By-Laws Page 8 SECTION 3. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Each director and officer of the corporation, whether or not then in office, shall be indemnified by the corporation against reasonable costs and expenses (including counsel fees) incurred by him in connection with any action, suit or proceedings to which he may be a party by reason of his being or having been a director or officer of the corporation, except in relation to matters as to which he shall finally be adjudged in such action, suit or proceeding to have been derelict in the performance of his duties as such director or officer; and the foregoing right of indemnification shall not be exclusive of other rights to which he shall be entitled as a matter of law. ARTICLE VII. CERTIFICATES OF SHARES SECTION 1. CERTIFICATES OF SHARES. Certificates of shares of the corporation shall be in a form approved by the directors to comply with the statues and shall be registered in the books of the corporation as they are issued. They shall exhibit the holder's name, number of shares, and shall be signed by the President and Secretary. SECTION 2. LOST CERTIFICATES. Any shareholder claiming a certificate of shares to be lost or destroyed shall make an affidavit or affirmation of the fact in such form as the Board of Directors may require, and shall, if the directors so require, give the corporation a bond of indemnity in form and with one or more sureties satisfactory to the board, in at least double the value of the shares represented by said certificate, whereupon a new certificate may be issued of the same tenure and for the same number of share as the one alleged to have been lost or destroyed. Amended By-Laws Page 9 ARTICLE VIII. DIVIDENDS SECTION 1. DECLARATION. The Board of Directors shall have authority to declare dividends upon the shares of the corporation to the extent permitted by law. SECTION 2. RECORD DATE. The Board of Directors may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend as a record date for the determination of the shareholders entitled to receive payment of any such dividend, and in such case, only shareholders of record on that date so fixed shall be entitled to receive payment of such dividend notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against the transfer of shares during the whole or any part of such period. ARTICLE IX. FISCAL YEAR SECTION 1. FISCAL YEAR. The fiscal year of this corporation shall terminate on June 30th of each year. Amended By-Laws Page 10 ARTICLE X. AMENDMENTS SECTION 1. AMENDMENTS TO BY-LAWS. These By-Laws may be amended or altered by the vote of a majority of the whole Board of Directors at any meeting provided that notice of such proposed amendments shall have been given in the notice to the directors of such meeting. Such authority in the Board of Directors is subject to the powers of the Shareholders to change or repeal such By-Laws by a majority vote of the shareholders present and represented at any annual meeting or at any special meeting called for that purpose, and the Board of Directors shall not make or alter any By-Laws fixing their number, qualifications, or terms of office. This is to certify that the foregoing By-Laws are the duly adopted By-Laws of this corporation. American Guidance Service, Inc. By /s/ Marc J. Berman ---------------------------- Marc J. Berman Its Secretary/Treasurer ---------------------------- Date January 30, 1995 --------------------------- EX-3.147 7 EXHIBIT 3.147 Exhibit 3.147 ARTICLES OF INCORPORATION OF AGS INTERNATIONAL SALES, INC. We, the undersigned incorporators of full age, for the purpose of forming a corporation under and pursuant to the provisions of Chapter 301, Minnesota Statutes, known as the Minnesota Business Corporation Act, and laws amendatory thereof and supplementary thereto, do hereby associate ourselves as a body corporate and do hereby adopt the following Articles of Incorporation: I. The name of this corporation shall be AGS INTERNATIONAL SALES, INC. II. The period of existence and the duration or life of this corporation shall be perpetual. III. The principal office and registered place of business of this corporation shall be Publishers' Building, Circle Pines, Minnesota, 55014. IV. This corporation is organized for general business purposes and shall have unlimited power to engage in, and to do any lawful act concerning any and all lawful business and in particular, but without limitation on the general business purpose hereinabove stated, to engage in the sale and export in foreign markets of literary, educational, guidance and testing supplies, materials and services. V. The management of this corporation shall be vested in a Board of Directors to be chosen at each annual meeting by the Shareholders. The Board of Directors shall consist of not less than three (3) nor more than seven (7) persons who need not be Shareholders, except that where all of the shares of the corporation are owned beneficially and of record by either one or two shareholders, the number of directors may be less than three (3), but not less than the number of Shareholders. At each annual meeting of the Shareholders, the first order of business shall be to determine the number of members upon the Board of Directors for the ensuing year. The power of the Board of Directors shall be specified in the By-Laws to be adopted. The Directors shall choose a President, Vice-President, Secretary and Treasurer. Any two offices, except President and Vice-President, may be held by the same person. VI. The authorized stock of this corporation shall be $25,000.00 which shall be divided into 2,500 shares, each with a par value of $10.00 per share. Said stock may be issued by the corporation from time to time, for such consideration as may be fixed from time to time by the Board of Directors without regard to pre-emptive rights of Shareholders and shall be fully paid and not subject to assessment upon the corporation's receipt of such consideration. There shall be only one class of stock which shall be common stock. Each share of common stock shall convey with it to the owner of said share, one vote in the management of the corporation and the election of Directors. VII. The amount of stated capital with which the corporation shall commence doing business shall not be less than $2,500.00. VIII. The name and address of each person who has been selected as a director of the corporation to manage the business and affairs thereof until the next annual meeting is: John P. Yackel, 20 E. Golden Lake Road, Circle Pines, Mn. 55014 A. P. Bergee, 26 Golden Lake Road, Circle Pines, Mn. 55014 Norman Dahl, 24 West Road, Circle Pines, Mn. 55014 IX. The name and address of each incorporator, who, by this instrument, forms the corporation named above is as follows: Norman Dahl, 24 West Road, Circle Pines, Mn. 55014 X. The By-Laws of this corporation shall be adopted by the Board of Directors to be effective until the first annual meeting of the Shareholders. IN WITNESS WHEREOF, Each incorporator has hereunto affixed his signature this 29th day of l972. IN PRESENCE OF: /s/ Mary Louise Juhnke - ------------------------- /s/ Margaret Wall Eide - ------------------------- /s/ Norman Dahl - ------------------------- Norman Dahl STATE OF MINNESOTA COUNTY OF Anoka On this 29th day of February, 1972, personally appeared before me, a notary public in and for said County, Norman Dahl to me known to be the person named in and who executed the foregoing Articles of Incorporation, and he executed the same as his own free act and deed for the uses and purposes herein expressed. /s/ Mary Louise Juhnke ----------------------------------- Notary Public, Anoka County, Mn. My Commission Expires: Oct 28, 1978 [SEAL] - -------------------------------------------------------------------------------- STATE OF MINNESOTA DEPARTMENT OF STATE I hereby certify that the within instrument was filed for record in this office on the 3 day of March A.D. 1972, at 8:00 o'clock A.M., and was duly recorded in Scok C.-38 of incorporation, on page 284 /s/ Arlen I. Erdahl Secretary of State - -------------------------------------------------------------------------------- - ------------------ APPR'D & FILED INDEXED _________ IND. FILED_______ [Illegible] - ------------------ Filed for record on the 10 day of Mar. A.D. 1972 at 9 o'clock A.M. EX-3.148 8 EXHIBIT 3.148 Exhibit 3.148 BY-LAWS AGS INTERNATIONAL SALES, INC. ARTICLE I. OFFICE & SEAL SECTION 1. OFFICE. The registered office of the corporation shall be Publishers' Building, Circle Pines, Minnesota, 55014 and the corporation shall have other offices at such places as the Board of Directors may from time to time determine. SECTION 2. SEAL. The corporation seal shall have inscribed thereon the name of the corporation and the words, "Corporate Seal, Minnesota". Said seal may be used by causing it, or a facsimile thereof to be impressed, affixed, reproduced or otherwise. ARTICLE II. SHAREHOLDERS MEETINGS SECTION 1. PLACE. All meetings of the Shareholders shall be held at the registered office of the corporation in the County of Anoka, Minnesota, and such other places as the Board of Directors may determine except as limited by law. SECTION 2. TIME. An annual meeting of the Shareholders after the year 1972, shall be held on the 2nd Monday in May of each year, or if the date shall fall upon a holiday, then on the next succeeding business day, when they shall elect by a majority vote a Board of Directors. Except as otherwise provided in the articles, pursuant to provisions of Section 301.06 Subdivision 4 and 12 of Minnesota Statutes 1945, directors other than those constituting the first board shall be elected by the Shareholders in accordance with the relative voting rights granted in the shares of each class by the articles. SECTION 3. ANNUAL MEETINGS. Written notice of the annual meeting shall be mailed at least ten (10) days prior to the meeting to each Shareholder entitled to vote thereat to the last known address of such Shareholder as same appears upon the books of the corporation. SECTION 4. SPECIAL MEETINGS. Written notice of a special meeting of Shareholders, stating the time, place and object thereof, shall be mailed to the last known address of such Shareholders, postage prepaid, at least three (3) days before such meeting to each Shareholder entitled to vote thereat. SECTION 5. QUORUM. The presence at any meeting, in person or by proxy, of the holders of a majority of the shares entitled to vote shall constitute a quorum for the transaction of business. If, however, such majority shall not be present in person or by proxy, at any meeting of the Shareholders, entitled to vote thereat, those present shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting shares shall be represented. At such adjourned meeting at which the required amount of voting shares shall be represented, any business may be transaction which might have been transacted at the meeting as originally notified. SECTION 6. VOTING. At each meeting of the Shareholders, every Shareholder having the right to vote shall be entitled to vote in person, or by proxy, duly appointed by an instrument in writing subscribed by such Shareholder. Upon demand of any Shareholder, the vote for directors, or the vote upon any question before the meeting, shall be by ballot. All elections shall be had and all questions decided by a majority vote, except as otherwise required by statute. SECTION 7. CALL FOR SPECIAL MEETINGS. Special meetings of the Shareholders, for any purpose, or purposes, unless otherwise prescribed by statute, shall be called by the President, or shall be called by the President and Secretary at the request in writing of the Shareholders owning not less than one-tenth of the voting power of the Shareholders of the corporation. Such call shall state the purpose or purposes of the proposed meeting. SECTION 8. ORDER FOR BUSINESS. Business transacted at all special meetings shall be confined to purposes stated in the call. ARTICLE III. BOARD OF DIRECTORS SECTION 1. ELECTION OF DIRECTORS. The property and business of this corporation shall be managed by its Board of Directors, consisting of not less than three (3) nor more than seven (7) persons who need not be Shareholders, except that where all of the shares of the corporation are owned beneficially and of record by either one or two shareholders, the number of directors may be less than three (3), but not less than the number of Shareholders. They shall be elected at the annual meeting of the Shareholders, by majority vote and each director shall be elected to serve for one year or until his successor shall have been elected and qualified. Except as otherwise provided in the articles pursuant to provisions of Section 301.06, Subdivision 4 and 12 of Minnesota Statutes 1945, directors, other than those constituting the first board, shall be selected by the Shareholders in accordance with the relative voting rights granted to the shares of each class by the articles. SECTION 2. ANNUAL MEETINGS. The regular annual meetings of the board shall be held without notice at the time and immediately following the adjournment of the annual Shareholders' meeting, for the purpose of election of officers for the ensuing year and to transact such other business as may properly come before it. SECTION 3. REGULAR MEETINGS. Regular meetings of the board shall be held without notice at the registered office or such other place within and without the State of Minnesota and at such times as a majority of the members of the board may from time to time determine. SECTION 4. SPECIAL MEETINGS. Special meetings of the board may be called by the President at any time and shall be called by him whenever requested to do so in writing by any member of the Board. Notice of special meetings may be given to each director personally or by mail or telegram at least three (3) days prior to the meeting. A special meeting may be called without notice to the directors if a full board convenes and all agree to the holding of the meeting at such time and place and waive all rights to notice thereof. Any action which might be taken at a meeting of the Board of Directors may be taken without meeting if done in writing, signed by all the directors. SECTION 5. QUORUM. At all the meetings of the board, a majority of the directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the directors present at the meeting at which there is a quorum, shall be the act of the Board of Directors. SECTION 6. ORDER FOR BUSINESS. The Board of Directors may from time to time determine the order of business at their meeting. ARTICLE IV. POWERS OF BOARD OF DIRECTORS SECTION 1. MANAGEMENT. The Board of Directors shall have full power and authority to manage and control the affairs and business of this corporation. SECTION 2. ISSUANCE OF SHARES. The Board of Directors are authorized and directed to issue shares of the corporation to the full amount authorized by the Articles of Incorporation in such amounts and at such times as may be determined by the board and as may be permitted by law. SECTION 3. TRANSFER OF SHARES. Transfer of shares shall be made on the books of the corporation only by the person named in the certificate, or by attorney, lawfully constituted in writing, and upon surrender of the certificate therefor, properly endorsed. SECTION 4. CLOSING OF BOOKS. The Board of Directors may fix a time not exceeding sixty (60) days preceding the date of any meeting of the Shareholders, as a record date for the determination of the shareholders entitled to notice of and to vote at such meeting, notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against transfer of shares during the whole or any part of such period. SECTION 5. OTHER POWERS. In addition to the powers and authorities conferred upon them by these By-Laws, the Board of Directors shall have the power to do all lawful acts necessary and expedient to the conduct of the business of this corporation, that are not conferred upon the shareholders, by these By-Laws, or by the Articles of Incorporation, or by Statutes. ARTICLE V. OFFICERS SECTION 1. OFFICERS. The Board of Directors at its first meeting after each annual meeting of Shareholders shall elect a President, Vice-President, Secretary and Treasurer, none of whom need be a member of the board. Any two officers, except that of President and Vice-President, may be held by the same person. SECTION 2. OTHER OFFICERS. The board may appoint such other officers and agents as it shall deem necessary, from time to time, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. SECTION 3. TERMS OF OFFICE. The officers of the corporation shall hold office for one year or until their successors are chosen and qualify in their stead, notwithstanding an earlier termination of their office as directors. Any officer elected or appointed by the Board of Directors may be removed by the affirmative of a majority of the whole Board of Directors. SECTION 4. PRESIDENT. (a) The President shall be the chief executive officer of the corporation; he shall preside at all meetings of the shareholders and directors; he shall have general active management of the business of the corporation, and shall see that all orders and resolutions of the board are carried into effect. (b) He shall execute all bonds, mortgages, and other contracts. (c) He shall be ex-officio a member of all standing committees, and shall have the general powers and duties of supervision and management usually vested in the office of the President of a corporation. SECTION 5. VICE-PRESIDENT. The Vice-President shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties as the Board of Directors shall prescribe. SECTION 6. SECRETARY. The Secretary shall attend all sessions of the Board of Directors and all meetings of the Shareholders and record all votes and the minutes of all proceedings in a book kept for that purpose; and shall perform like duties for the standing committee when required. He shall give, or cause to be given, notice of all meetings of the Shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. He shall be sworn to the faithful discharge of his duty. He shall keep in safe custody the seal of the corporation and, when authorized by the board, affix the same to any instrument requiring it. SECTION 7. TREASURER. (a) The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the corporation and shall deposit all monies 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. (b) He shall disburse the funds of the corporation as may be ordered by the board, taking the proper vouchers for such disbursements, and shall render to the President and Directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. (c) He shall give the corporation a bond if required by a majority of the Board of Directors, in such amount as they may determine, and with one or more sureties satisfactory to the board, for the faithful performance of the duties of his office, and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control, belonging to the corporation. SECTION 8. VACANCIES. If the office of any director or any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors then in office, although less than a quorum, by a majority vote, may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred. ARTICLE VI. COMPENSATION OF DIRECTORS & OFFICERS SECTION 1. COMPENSATION OF DIRECTORS. Directors may be paid such compensation for their services rendered as directors, as may be fixed by resolution of the Board of Directors itself, and it shall be lawful for the Board to allow to each director his expense for attendance at meetings of the Board. Nothing herein shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 2. COMPENSATION OF OFFICERS. The salaries of all officers and agents of the corporation shall be determined by the Board of Directors. SECTION 3. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Each director and officer of the corporation, whether or not then in office, shall be indemnified by the corporation against reasonable costs and expenses (including counsel fees) incurred by him in connection with any action, suit or proceedings to which he may be a party by reason of his being or having been a director or officer of the corporation, except in relation to matters as to which he shall finally be adjudged in such action, suit or proceeding to have been derelict in the performance of his duties as such director or officer; and the foregoing right of indemnification shall not be exclusive of other rights to which he shall be entitled as a matter of law. ARTICLE VII. CERTIFICATES OF SHARES SECTION 1. CERTIFICATES OF SHARES. Certificates of shares of the corporation shall be in a form approved by the directors to comply with the statutes and shall be registered in the books of the corporation as they are issued. They shall exhibit the holder's name, number of shares, and shall be signed by the President and Secretary. SECTION 2. LOST CERTIFICATES. Any shareholder claiming a certificate of shares to be lost or destroyed shall make an affidavit or affirmation of the fact in such form as the Board of Directors may require, and shall, if the directors so require, give the corporation a bond of indemnity in form and with one or more sureties satisfactory to the board, in at least double the value of the shares represented by said certificate, whereupon a new certificate may be issued of the same tenure and for the same number of shares as the one alleged to have been lost or destroyed ARTICLE VIII. DIVIDENDS SECTION 1. DECLARATION. The Board of Directors shall have authority to declare dividends upon the shares of the corporation to the extent permitted by law. SECTION 2. RECORD DATE. The Board of Directors may fix a time not exceeding sixty (60) days preceding the date fixed for the payment of any dividend as a record date for the determination of the shareholders entitled to receive payment of any such dividend, and in such case, only shareholders of record on that date so fixed shall be entitled to receive payment of such dividend notwithstanding any transfer of any shares on the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation after any record date so fixed. The Board of Directors may close the books of the corporation against the transfer of shares during the whole or any part of such period. ARTICLE IX. FISCAL YEAR SECTION 1. FISCAL YEAR. The fiscal year of this corporation shall terminate on the last day of January of each year. ARTICLE X. AMENDMENTS SECTION 1. AMENDMENTS TO BY-LAWS. These By-Laws may be amended or altered by the vote of a majority of the whole Board of Directors at any meeting provided that notice of such proposed amendments shall have been given in the notice to the directors of such meeting. Such authority in the Board of Directors is subject to the powers of the Shareholders to change or repeal such By-Laws by a majority vote of the shareholders present and represented at any annual meeting or at any special meeting called for that purpose, and the Board of Directors shall not make or alter any By-Laws fixing their number, qualifications, or terms of office. This is to certify that the foregoing By-Laws are the duly adopted By-Laws of this corporation. /s/ Norman N. Dahl ----------------------- EX-3.149 9 EXHIBIT 3.149 Exhibit 3.149 BOOK 342 PAGE 362 State of West Virginia [SEAL OF THE STATE OF WEST VIRGINIA] CERTIFICATE I, A. James Manchin, Secretary of State of the State of West Virginia, hereby certify that pursuant to the provisions of Section 28, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended, duplicate originals of Articles of Incorporation of CAMBRIDGE RESEARCH GROUP, LTD., have been received and are found to conform to law, and declared to be from this date a Corporation by the name and for the purposes as set forth in the said Articles, with the right of perpetual existence. ACCORDINGLY, I hereby issue this Certificate of Incorporation. Given under my hand and the Great Seal of the said State at the City of Charleston, this TWENTY-EIGHTH day of JULY, 1981 [Seal of State of West Virginia] /s/ A. James Manchin ------------------------ Secretary of State BOOK 342 PAGE 363 FILED IN THE OFFICE OF SECRETARY OF STATE OF WEST VIRGINA No. [ILLEGIBLE] ARTICLES OF INCORPORATION OF CAMBRIDGE RESEARCH GROUP, LTD. The undersigned, acting as incorporator(s) of a corporation under Section 27, Article 1, Chapter 31 of the Code of West Virginia adopt(s) the following Articles of Incorporation for such corporation, FILED IN DUPLICATE: I. The undersigned agree to become a corporation of the name of CAMBRIDGE RESEARCH GROUP, LTD. II. The address of the principal office of said corporation will be P. 0. Box 389, 808 Union Building, Charleston, WV 25322. III. The purpose or purposes for which this corporation is formed are as follows: To engage in general survey research, marketing research, evaluation research, advertising research, data tabulation, statistical consulting, political polling and projection, and computer software development, and to undertake and carry on any business transaction or operation commonly undertaken by those in such businesses and generally to institute, advise, consult, enter into, assist, promote, and participate any such businesses or operations. To purchase, to receive by way of gift, subscribe for, invest in, and in all other ways acquire, import, lease, possess, maintain, handle on consignment, own, hold for investment or otherwise use, enjoy, exercise, operate, manage, conduct, perform, make, borrow, guarantee, contract in respect of, trade and deal in, sell, exchange, let, lend, export, mortgage, pledge, deed in trust, hypothecate, encumber, transfer, assign and in all other ways dispose of, design, develop, invent, improve, equip, repair, alter, fabricate, assemble, build, construct, operate, manufacture, plant, cultivate, produce, market, and in all other ways (whether like or unlike any of the foregoing), deal in and with property of every kind and character, real, personal or mixed, tangible or BOOK 342 PAGE 364 intangible, wherever situated and however held, including but not limited to, money, credits, choses in action, securities, stocks, bonds, warrants, script, certificates, debentures, mortgages, notes, commercial paper and other obligations and evidences of interest in or indebtedness of any person, firm or corporation, foreign or domestic, or of any government or subdivision or agency thereof, documents of title, and accompanying rights, and every other kind and character of personal property, real property (improved or unimproved), and the products and avails thereof, and every character of interest therein and appurtenance thereto, including, but not limited to, mineral, oil, gas and water rights, all or any part of any going business and its incidents, franchises, subsidies, charters, concessions, grants, rights, powers or privileges, granted or conferred by any government or subdivision or agency thereof, and any interest in or part of any of the foregoing, and to exercise in respect thereof all of the rights, powers, privileges, and immunities of individual owners or holders thereof. To incur debts, and to raise, borrow and secure the payment of money in any lawful manner, including the issue or sale or other distribution of bonds, warrants, space, debentures, obligations, negotiable and transferrable instruments, and evidences of indebtedness of all kinds, whether secured by mortgage, pledge, deed of trust or otherwise and without limit as to amount. To enter into, make, perform and carry out contracts of every sort and kind with any person, firm, association, corporation, public private or municipal, or body politic. To hire, and employ agents, servants and employees and to enter in to agreements of employment and collective bargaining agreements, and to act as agent, contractor, trustee, factor or otherwise, either alone or in company with others. To promote or aid in any manner, financially or otherwise, any person, firm, association or corporation, and to guarantee contracts and other obligations. - 2 - BOOK 342 PAGE 365 To let concessions to others to do any of the things that this corporation is empowered to do, and to enter into, make, perform and carry out, contracts and arrangements of every kind and character with any person, firm, association or corporation, or any government or authority or subdivision or agency thereof. For the purpose of attaining or furthering any of its objects, to do any and all other acts and things, and to exercise any and all other powers which a copartnership or a natural person, could do and exercise, and which now or hereafter may be authorized by law. To carry on any business whatsoever that this corporation may deem proper or convenient in connection with any of the foregoing purposes or otherwise, or that it may deem calculated, directly or indirectly, to improve the interests of this corporation, and to do all things specified in Chapter 31 of the West Virginia Code of 1931, as amended, and to have and to exercise all powers conferred by the laws of the State of West Virginia on corporations formed under the laws pursuant to which and under which this corporation is formed, as such laws are now in effect or may at any time hereafter be amended, and to do any and all things hereinabove set forth to the same extent and as fully as natural persons might or could do, either alone or in connection with other persons, firms, associations or corporations, and in any part of the world. The foregoing statement of purposes shall be construed as a statement of both purposes and powers, shall be liberally construed in aid of the powers of this corporation, and the powers and purposes stated in each clause shall, except where otherwise stated, be in nowise limited or restricted by any term or provision of any other clause, and shall be regarded not only as independent purposes, but the purposes and powers stated shall be construed distributively as each object expressed, and the enumeration as to specific powers shall not be construed as to limit in any manner the aforesaid general powers, but are in furtherance of, and in addition to, and not in limitation of said general powers. - 3 - BOOK 342 PAGE 366 IV. Provisions granting preemptive rights are: Preemptive rights are not granted by these Articles of Incorporation. V. Provisions for the regulation of the internal affairs of the corporation are: Regulation for the internal affairs of the corporation are not provided for by these Articles of Incorporation, but bylaws will later be adopted by the shareholders. VI. The amount of the total authorized capital stock of said corporation shall be $1,000.00, which shall be divided into 1000 shares of the par value of $1.00 each. VII. The full name and address of the incorporator is: Edward T. Gardner III P.O. Box 389 Charleston, WV 25322 VIII. The name and address of the appointed person to whom notice of process may be sent: Edward T. Gardner III P.O. Box 389 Charleston, WV 25322 X. The number of directors shall be fixed by, or in the manner provided in, the bylaws. - 4 - BOOK 342 PAGE 367 THE UNDERSIGNED, for the purpose of forming a corporation under the laws of the State of West Virginia, does make and file these Articles of Incorporation, and has accordingly hereunto set his respective hand this 27th day of July, 1981. /s/ Edward T. Gardner III --------------------------------- Edward T. Gardner III This instrument prepared by: STEVEN F. WHITE, ESQUIRE GOODWIN & GOODWIN 1717 Charleston National Plaza Charleston, West Virginia 25301 STATE OF WEST VIRGINIA, COUNTY OF KANAWHA, to-wit: I, Shirley M. Hill, a Notary Public in and for the County and State aforesaid, do hereby certify that STEVEN F. WHITE, whose name is signed to the foregoing writing, bearing date the 27th day of July, 1981, has this day acknowledged the same before me in my said County. Given under my hand this 27th day of July, 1981 /s/ Shirley M. Hill --------------------------------- Notary Public My commission expires September 15, 1988. ------------------- This instrument was presented to the Clerk of the County Commission of Kanawha County, West Virginia, on and the same is admitted to record. JUL 31 1981 Teste: /s/ Margaret D. Miller Clerk Kanawha County Commission - 5 - BOOK 448 PAGE 290 State of West Virginia [SEAL OF THE STATE OF WEST VIRGINIA] CERTIFICATE I, Ken Hechler, Secretary of State of the State of West Virginia, hereby certify that originals of the Articles of Amendment to the Articles of Incorporation of CAMBRIDGE RESEARCH GROUP, LTD. are filed in my office, signed and verified, as required by the provisions of Chapter 31, Article 1, Section 31 of the West Virginia Code and conform to law. Therefore, I issue this CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION of the corporation, to which I have attached a duplicate original of the Articles of Amendment. Given under my hand and the Great Seal of the State of West Virginia on this EIGHTH day of JANUARY, 1988 [SEAL OF THE STATE OF WEST VIRGINIA] /s/ Ken Hechler ------------------ Secretary of State RECORDED 1989 JAN 13 AM 8:30 CLERK OF THE [ILLEGIBLE] BOOK 448 PAGE 291 FILED JAN 08 1988 IN THE OFFICE OF SECRETARY OF STATE WEST VIRGINIA ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF CAMBRIDGE RESEARCH GROUP, LTD. Pursuant to the provisions of Section 31, Article 1, Chapter 31 of the Code of West Virginia, 1931 as amended, the undersigned corporation adopts the following Articles of Amendment to its Articles of Incorporation: 1. The name of the corporation is Cambridge Research Group, Ltd. 2. The following Amendments of the Articles of Incorporation were adopted by the shareholders of the corporation on 4th day of January, 1988 in the manner prescribed by Sections 107 and 147, Article 1, Chapter 31 of the Code of West Virginia: Section VI - Capitalization is amended by deleting the existing Section in its entirety and substituting the following: VI. Capitalization. The amount of the total authorized capital stock of said corporation shall be Two Thousand Five Hundred Dollars ($2,500.00) which shall be divided into Two Thousand (2,000) shares of authorized voting shares of a par value of One Dollar ($1.00) per share, and Five Hundred (500) authorized Class B non-voting shares at a par value of One Dollar ($1.00) per share. Class A stock shall have all rights and authorities, including voting privileges and power of common stock. Class B stock shall be distinguished from Class A stock in that: (a) Class B stock shall have no voting privileges or power; BOOK 448 PAGE 292 (b) Class B stock may be converted to Class A stock by vote of two-thirds (2/3) of Class A stock stockholders. 3. The number of shares of the Corporation outstanding, at the time of the adoption of this amendment, was One Thousand (1,000) of Class A stock and the number of shares entitled to vote thereon was One Thousand (1,000) of Class A stock. 4. The designation and number of outstanding shares of each class entitled to vote thereon as a class are as follows: Class A common stock, number of shares One Thousand (1,000). 5. The number of shares voted for such amendment was One Thousand (1,000) of Class A stock, and the number of shares voted against such amendment was zero. 6. The manner in which such amendment effects a change in the amount of stated capital is as follows: Prior to said amendment the stated capital was One Thousand Dollars ($1,000.00). After such amendment the amount of stated capital is Two Thousand Five Hundred Dollars ($2,500.00). The undersigned, for the purpose of adopting this Amendment to the Articles of Incorporation of Cambridge Research Group, Ltd. have executed this document in duplicate this 4th day of January, 1988. CAMBRIDGE RESEARCH GROUP, LTD. By: /s/ Edward T. Gardner, III ----------------------------------- Its President and By: /s/ Robert P. Martin ----------------------------------- Its Secretary BOOK 448 PAGE 293 STATE OF WEST VIRGINIA COUNTY OF KANAWHA, to-wit: I, Janie S. Pote, a Notary Public in and for the said County and State aforesaid, do hereby certify that Edward T. Gardner III, President, and Robert P. Martin, Secretary, who signed the above and hereto annexed writing for CAMBRIDGE RESEARCH GROUP, LTD., has this day in my said County, before me, acknowledged the same to be the act and deed of said Corporation. My commission expires June 18th, 1996. --------------- /s/ Janie S. Pote ----------------------------------- Notary Public ------------------------------------- OFFICIAL SEAL STATE OF WEST VIRGINIA [SEAL] NOTARY PUBLIC JANIE S. POTE 2 Players Club Dr. Charleston, WV 25311 MY COMMISSION EXPIRES 6-18-96 ------------------------------------- This Instrument was presented to the Clerk of the County Commission of Kanawha County, West Virginia, on and the same is admitted to record. JAN 13, 1988 Teste: /s/ Alma Y. King, Clerk Kanawha County Commission BOOK 505 PAGE 734 State of West Virginia [SEAL OF THE STATE OF WEST VIRGINIA] CERTIFICATE I, Ken Hechlen, Secretary of State of the State of West Virginia, hereby certify that originals of the Articles of Amendment to the Articles of Incorporation of CAMBRIDGE RESEARCH GROUP, LTD. are filed in my office, signed and Verified, as required by the provisions of Chapter 31, Article 1, Section 31 of the West Virginia Code and conform to law. Therefore, I issue this CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION of the corporation, to which I have attached a duplicate original of the Articles of Amendment. [SEAL OF THE STATE OF WEST VIRGINIA] Given under my hand and the Great seal of the State of West Virginia, on this Thirtieth day of December 1994 Ken Hechlen, ------------------- Secretary of State. BOOK 505 PAGE 735 FILED DEC 30 1994 IN THE OFFICE OF SECRETARY OF STATE WEST VIRGINIA ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF CAMBRIDGE RESEARCH GROUP, LTD. Pursuant to the provisions of Section 31, Article 1, Chapter 31 of the Code of West Virginia, 1931, as amended, the undersigned corporation adopts the following Articles of amendment to its Articles of Incorporation: 1. The name of the corporation is Cambridge Research Group, Ltd. 2. The following Amendments of the Articles of Incorporation were adopted by the shareholders of the corporation on 29th day of December, 1994 in the manner prescribed by Section 107, Article 1, Chapter 31 of the Code of West Virginia: Section VI of the Articles of Incorporation is amended by deleting the existing Section in its entirety and substituting the following: VI. Capitalization. The amount of the total authorized capital stock of said corporation shall be Ten Thousand Dollars ($10, 000) which shall be divided into Eight Hundred Thousand (800,000) shares of authorized voting shares of a par value of One Cent ($.01) per share of Class A Common Stock and Two Hundred Thousand (200,000) authorized Class B Common Stock non-voting shares at a par value of One Cent ($.01) per share. Class A Common Stock shall have all rights and authorities, including voting privileges and power of common stock. Class B Common Stock shall be distinguished from Class A Common Stock in that Class B Common Stock shall have no voting privileges or power. BOOK 505 PAGE 736 Further, Section I of the Articles of Incorporation is amended by deleting the existing Section in its entirety and substituting the following: "I. The name of the corporation shall be Cambridge Research Group, Ltd. and its period of duration shall be perpetual." 3. The number of shares of the Corporation outstanding, at the time of the adoption of this amendment, was One Thousand Five Hundred (1,500) shares of Class A Stock and Four Hundred (400) shares of Class B stock and the number of shares entitled to vote thereon was One Thousand Five Hundred (1,500) shares of Class A Stock. 4. The designation and number of outstanding shares of each class entitled to vote thereon as a class are as follows: Class A common stock, number of shares One Thousand Five Hundred (1,500). 5. The number of shares voted for such amendment was One Thousand Five Hundred (1,500) shares of Class A Stock, and the number of shares voted against such amendment was zero (0). 6. The manner in which such amendment effects a change in the amount of stated capital is as follows: Prior to said amendment the stated capital was Two Thousand Five Hundred Dollars ($2,500). After such amendment the amount of stated capital is Ten Thousand Dollars ($10,000). BOOK 505 PAGE 737 The undersigned, for the purpose of adopting this Amendment to the Articles of Incorporation of Cambridge Research Group, Ltd. have executed this document in duplicate this 29th day of December, 1994. CAMBRIDGE RESEARCH GROUP, LTD. By: /s/ Edward T. Gardner, III --------------------------- Its: Chairman and CEO and By: /s/ Janie S. Pote --------------------------- Its: Secretary BOOK 505 PAGE 738 STATE OF WEST VIRGINIA, COUNTY OF KANAWHA, to-wit: I, Kelly L. Parsons, a Notary Public in and for the said County and State aforesaid, do hereby certify that EDWARD T. GARDNER, III, Chairman and CEO, and Janie S. Pote, Secretary, who signed the above and hereto annexed writing for CAMBRIDGE RESEARCH GROUP, LTD., has this day in my said County, before me, acknowledged the same to be the act and deed of said Corporation. My commission expires March 9, 2004 ------------------------. /s/ Kelly L. Parsons ------------------------ Notary Public - ----------------------------------------- OFFICIAL SEAL NOTARY PUBLIC STATE 0F WEST VIRGINIA [SEAL] KELLY L. PARSONS CAMBRIDGE EDUCATIONAL 90 MacCORKLE AVENUE. SW SO. CHARLESTON. WV 25303 My Commission Expires March 9, 2004 - ----------------------------------------- This Instrument was presented to the Clerk of the County Commission of Kanawha County, West Virginia, on and the same is admitted to record. JAN 04 1995 Teste: /s/ Alma Y. King -------------------------- Kanawha County Commission EX-3.150 10 EXHIBIT 3.150 Exhibit 3.150 WRITTEN AGREEMENT OF SHAREHOLDERS OF CAMBRIDGE RESEARCH GROUP, LTD. Edward T. Gardner, III and Catherine H. White being the sole shareholders of Cambridge Research Group, Ltd. (the "Corporation"), pursuant to the provisions of P.31-1-73 of the West Virginia Code, 1981, as amended, hereby dispenses with a meeting and vote of the shareholders of the Corporation, and agrees in writing to the following corporate action being taken: RESOLVED: That the attached By Laws are adopted as the By Laws for the government of the Corporation. RESOLVED: That the following persons are elected directors of the Corporation: EDWARD T. GARDNER, III CATHERINE H. WHITE Dated this 31st day of August, 1981. /s/ Edward T. Gardner, III ----------------------------- EDWARD T. GARDNER, III /s/ Catherine H. White ----------------------------- CATHERINE H. WHITE CAMBRIDGE RESEARCH GROUP, LTD. BYLAWS ARTICLE I OFFICES Section 1. The principal office of the corporation shall be located at P. 0. Box 389, 808 Union Building, Charleston, West Virginia 25322, provided that the Board of Directors shall have power to change the location of the principal office at its discretion. Section 2. The corporation may also have offices and keep its books at such other place or places within the State of West Virginia as the Board of Directors may from time to time appoint, or as the business of the corporation may require. ARTICLE II Shareholders and shares of stock Section 1. Annual Meetings. The annual meeting of the shareholders shall be held on the first Monday in January of each calendar year or on such other date in the month of January as may be designated in the notice and call of such meeting, at the principal office of the corporation, or at such other place either within or without the State of West Virginia as the Board of Directors shall, from time to time, determine, and the place and the hour at which such meeting shall be held shall be stated in the notice and call of such meeting. At such meeting, the Board of Directors shall be elected and such other business shall be transacted as is usual at the annual meeting of a corporation. Such Meeting may adjourn to a later date, and no notice of such adjourned meeting shall be necessary. If such meeting be not held as herein prescribed, the election of directors to succeed those whose terms expire may be held at any meeting thereafter called pursuant to these Bylaws. Section 2. Special Meetings. Special meetings of the shareholders may be held at such places within the State of West Virginia as may be designated in the notice and call of such meeting, or if no place be specified, then at the principal office of the corporation; provided, however, that when called by the Board of Directors any special meeting of the shareholders may be held either within or without the State of West Virginia at such place as may be designated in the notice and call of such meeting. Special meetings of the shareholders may be called by the Board of Directors, the President, any Vice President, the Secretary, or any number of shareholders owning in the aggregate at least one tenth of the number of shares outstanding. The notice of special meetings shall state the business to be transacted, and no business other than that included in the notice or incidental thereto shall be transacted at such meeting. Special meetings may adjourn to a later date, and no notice of such adjourned meeting shall be necessary. Section 3. Notice of Meetings. Notice of annual and special meetings shall be given by mailing to each shareholder a written notice thereof specifying the time and place of such meeting, and, in the case of special meetings, the business to be transacted, as hereinbefore set forth, such notice to be mailed to the last addresses of the shareholders as they respectively appear upon the books of the corporation, and in the case of annual meetings not less than ten (10) days, and in the case of special meetings not less than five (5) days, before the date of such meeting and the mailing of such notice shall be sufficient and no publication or further notice shall be sufficient and no publication or further notice shall be necessary. Such notice may be signed by the President or a Vice President or the Secretary or an Assistant Secretary. Section 4. Waiver of Notice. Notice of the time, place or purpose of any meeting of shareholders, whether required by the provisions of the corporation laws of the State of West Virginia or by these Bylaws, shall be dispensed with if every shareholder shall attend such meeting either in person or by proxy, or if every absent shareholder shall, in writing filed with the records of the meeting either before or after the holding thereof, waive such notice. Section 5. Action by Unanimous Consent. Whenever the vote of shareholders at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of such shareholders may be dispensed with if all of the shareholders who would have been entitled to vote upon the action if such meeting were held, shall agree in writing to such corporation action being taken, and such agreement shall have like effect and validity as though the action were duly taken by the unanimous action of all shareholders entitled to vote at a meeting of such shareholders duly called and legally held. Section 6. Quorum. A quorum of the shareholders shall consist of at least a majority of all of the shares of stock entitled to vote. Any number less than a quorum present may adjourn any shareholders' meeting until a quorum is present, and no notice as to such adjourned meeting shall be necessary. Section 7. Voting Rights. In all elections of directors of the corporation, each shareholder shall have the right to cast one vote for each share of stock owned by him and entitled to a vote, and he may cast the same in person or by proxy for as many persons as there are directors to be elected, or he may cumulate such votes and give one candidate as many votes as the number of directors to be elected multiplied by the number of his shares of stock shall equal; or he may distribute them on the same principle among as many candidates and in such manner as he shall desire, and the directors shall not be elected in any other manner; and on any other question to be determined by a vote of shares at any meeting of shareholders, each shareholder shall be entitled to one vote for each share of stock owned by him and entitled to a vote, and he may exercise this right in person or by proxy; provided, however, no voting rights shall attach to any fractional part of a share of stock, and no person shall vote on any proxy after three (3) years from the date thereof, unless the proxy specifically confers the right to vote for a longer period and then only within the period specified. Section 8. Organization of Shareholders' Meeting. The President of the corporation, or, in his absence, a Vice President shall call the meetings of the shareholders to order and shall act as Chairman of such meetings, and the Secretary or an Assistant Secretary of the corporation shall act as Secretary of such meetings. In the absence of such officers, or any one of them, the meeting shall designate the Chairman and/or Secretary, as the case may be. Section 9. Order of Business. No formal order of business need be followed in any meeting, regular or special, of the shareholders. Section 10. Certificates for Shares of Stock. Every holder of shares of stock in this corporation, when the same shall be fully paid for, shall be entitled to have a certificate signed by, or in the name of the corporation by, the President or a Vice President and the Secretary or an Assistant Treasurer, of this corporation, certifying the number of shares owned by him in this corporation. Section 11. Lost or Destroyed Stock Certificates. A certificate of stock may be issued in lieu of the certificate lost or destroyed upon compliance with the following terms and conditions by the person who appears by the books of the corporation to be the owner of the lost or destroyed certificate, that is to say: (a) Such apparent owner shall file with the officers of the corporation, first, an affidavit setting forth the time, place and circumstances of the loss to the best of his knowledge, and belief; second, proof of his having advertised the loss in a newspaper of general circulation published near the principal office of the corporation once a week for two weeks; and (b) he shall execute and deliver to the corporation a bond with good security, in a penalty of at least the value of the shares of stock represented by the lost or destroyed certificate, conditioned to indemnify the corporation and all persons whose rights may be affected by the issuance of the new certificate against any loss in consequence of the new certificate being issued; provided, however, that a new certificate may be issued in lieu of the one lost in the discretion of the Board of Directors, without requiring the publication of the above notice or the giving of a bond. Section 12. Ownership of Capital Stock. The person in whose name shares of stock stand on the books of the corporation shall be deemed the owner thereof so far as the corporation is concerned. The personal representatives of a deceased stockholder shall be entitled to vote the shares of stock of his decedent without having any such shares transferred to him. No voting right shall be given to any stock while owned by the corporation nor shall any stock so held be entitled to any dividend. Section 13. Stock Transfer Books. Stock transfer books shall be kept by the Secretary of the corporation, in which the shares shall be transferred under such regulations as may be prescribed by the Board of Directors. Section 14. Restrictions on Transfer, Pledge or Sale of Stock. The rights to subscribe for, and to transfer, pledge or sell, shares of stock of this corporation may be made subject to such conditions and restrictions as are provided for in any written agreement among and between the stockholders and this corporation that may be authorized and approved by the Board of Directors. Section 15. Closing of Stock Books. The Board of Directors are authorized to fix the time, not exceeding forty (40) days preceding the date of any meeting of the shareholders or any dividend payment date, or any date for the allotment of rights, during which the books of the corporation shall be closed against the transfer of stock, or in lieu of providing for the closing of the books against transfer of stock, the Board of Directors are authorized to fix a date, not exceeding forty (40) days preceding the date of any meeting of the shareholders or any dividend payment date, or any date for allotment of rights, as a record date for the determination of the shareholders entitled to notice of, or to vote at, such meeting and/or entitled to receive such dividend payments or rights, as the case may be, and only shareholders of record on such date shall be entitled to notice of and/or to vote at such meeting or to receive such dividend payments or rights. ARTICLE III Director Section 1. Board of Directors. The business and affairs of the corporation shall be managed by a Board of Directors. Directors need not be residents of the State of West Virginia or shareholders in the corporation. Section 2. Election of Directors. The number of directors shall be at least two (2) provided that the number may be increased or decreased from time to time by an amendment to these Bylaws, but no increase shall have the effect of shortening the term of any incumbent director. The directors shall be elected at each annual meeting of the shareholders, or any adjournment thereof, to serve until the next annual meeting of the shareholders or until their offices shall be declared vacant, or until their successors are elected and qualified. Section 3. Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of the remaining directors, though less than a quorum of the Board. Any directorship to be filled by reason of an increase in the number of directors shall be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Section 4. Quorum of Directors. A majority of the Board of Directors shall constitute a quorum for the transaction of business. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 5. Annual Meeting of Directors. Within thirty (30) days after each annual meeting of shareholders, the Board of Directors elected at such meeting shall hold an annual meeting at which they shall elect officers and transact such other business as may come before the meeting. Section 6. Regular Meetings of Directors. A regular meeting of the Board of Directors may be held at such time as shall be determined from time to time by resolution of the Board of Directors. Section 7. Special Meetings of Directors. The Secretary shall call a special meeting of the Board of Directors whenever requested to do so by the President or by two (2) directors. Such special meeting shall be held at the time specified in the notice of meeting. Section 8. Place of Directors' Meeting. All meetings of the Board of Directors (annual, regular or special) shall be held either at the principal office of the corporation or at such other place, either within or without the State of West Virginia, as shall be specified in the notice of meeting. Section 9. Notice of Directors' Meetings. All meetings of the Board of Directors (annual, regular or special) shall be held upon not less than three (3) days written notice stating the date, place and hour of meeting delivered to each director either personally or by mail at the direction of the President or the Secretary of the officer or person calling the meeting. Section 10. Waiver of Notice. Notice of the time, place or purpose of any meeting of directors, whether required by the provisions of the corporation laws of the State of West Virginia or by these Bylaws, shall be dispensed with if every director shall attend such meeting in person, or if every absent director shall, in writing filed with the records of the meeting either before or after the holding thereof, waive such notice. Section 11. Action by Unanimous Consent. Whenever the vote of directors at a meeting thereof is required or permitted to be taken in connection with any corporate action, the meeting and vote of such directors may be dispensed with if all the directors shall agree in writing to such corporate action being taken, and such agreement shall have like effect and validity as though the action were duly taken by the unanimous action of all directors at a meeting of such directors duly called and legally held. Section 12. Specification of Purpose of Meeting Not Required. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 13. Order of Business. No formal order of business need be followed in any meeting of the directors, either regular or special. Section 14. Committees. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in such resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 15. Election of Officers. The directors shall elect the President, one or more Vice Presidents, the Treasurer and Secretary of the corporation, and may elect all other officers and agents, or, as to the latter, may delegate their election to an officer and/or officers of the corporation. In addition to the foregoing officers, the Board of Directors may designate such other officers or officials as from time to time may be deemed advisable, and may prescribe their duties. The directors shall have the power to fix the salaries of all officers, agents and employees of the corporation, but in the absence of action by the directors, such power shall be vested in the President, except as to his own salary and that of any Vice President. Section 16. Compensation. Directors, as such, shall not receive any stated salary for their services, but by resolution of the Board of Directors a fixed sum and expenses of attendance, if any, may be allowed for attendance at each annual, regular or special meeting of the Board, provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE IV Officers and Agents Section 1. Officers. Officers of the corporation shall be a President/Treasurer, and a Secretary/Vice President each of whom shall be chosen by the Board of Directors, and, if from time to time designated and chosen by the Board of Directors, an Assistant Secretary and an Assistant Treasurer. None of the officers of the corporation need be a shareholder or director of the corporation. Any two of the above named officers, except those of the President and Secretary or Assistant Secretary, may be held by the same person, but no officer shall execute, acknowledge, or verify any instrument in more than one capacity, if such instrument is required by law or by these Bylaws to be executed, acknowledged, verified or countersigned by any two or more officers. The foregoing officers shall hold office until the next regular annual meeting of the Board of Directors, held after the annual meeting of the shareholders, and until their successors are elected and qualified. Any duty to be performed by an officer of the corporation may be performed by his duly authorized assistant officer. Section 2. Removal of Officers. Any and all officers of the corporation may he removed at any time and their successors elected by a majority vote of the Board of Directors at any regular or special meeting of the directors. Section 3. Agents and Employees. All agents and employees of the corporation may be appointed and their salaries fixed by the Board of Directors, by the President, and except as to any Vice President, the Secretary, and Assistant Secretary, the Treasurer and the Assistant Treasurer, they shall hold office during the will and pleasure of the President, subject to action by the Board of Directors, and may be removed at any time by the President, subject to action by the Board of Directors. If such agents and employees are appointed by the directors, they (except the above specified officers) may nevertheless be removed by the President, unless he be expressly forbidden so to do by the directors. Section 4. Powers and Duties of the President. The President shall preside at all meetings of the shareholders and the Board of Directors. Subject to the control of the Board of Directors, he shall have general charge of the business of the corporation; he shall keep the Board of Directors fully informed of the business of the corporation; he may sign and execute all authorized bonds, contracts or other obligations in the name of, and on behalf of the corporation; and, with the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, he shall sign all certificates of stock; and, without further authorization than these presents, he may sign all checks and/or drafts upon funds of the corporation in its name and on its behalf, and any bank or depository in which funds of the corporation shall be deposited shall be fully and conclusively protected in honoring any checks and/or drafts on behalf of the corporation signed by the President. Subject to the action of the Board of Directors, he shall have the power to fix the salaries of all officers, agents and employees of the corporation, except the President and Vice Presidents, and shall have the power to employ and discharge all agents and employees of the corporation, subject to the control of the Board of Directors, except the Vice Presidents, the Secretary, the Assistant Secretary, the Treasurer and the Assistant Treasurer. He shall generally conduct the affairs 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 5. Vice President. The Vice President shall perform all of the duties and be vested with all of the authority of the President in case of a vacancy in the office of President or in the absence of disqualification of the President, and shall have such other powers and shall perform such other duties as may be assigned to him by the Board of Directors. If there be more than one Vice President, the Board of Directors may designate one of them as the Senior Vice President and he shall perform all the duties and be vested with all the authority set forth in the preceding sentence; and the other Vice President or Vice Presidents shall have such other powers and shall perform such other duties as may be assigned to him or them by the Board of Directors. Section 6. Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors and the shareholders. The Secretary shall likewise attend to the giving and serving of all notices of meetings, and shall affix the seal of the corporation to all certificates of stock and all authorized contracts and obligations of the corporation, and shall attest the same, and shall keep the transfer books and ledgers of the corporation, which books shall be at all reasonable times, open for examination to any director, and he shall in general perform all of the duties incident to the office of the Secretary, and shall have such other powers and duties as shall be from time to time conferred upon him by the Board of Directors. Section 7. Assistant Secretary. The Board of Directors may designate and choose an Assistant Secretary, who shall have the usual powers and duties pertaining to his office together with such other powers and duties as may be assigned to him by the Board of Directors. In case of the absence or disability of the Secretary, the duties of the Secretary shall be performed by the Assistant Secretary. Section 8. Treasurer. The Treasurer shall have the custody of all the funds and securities of the corporation, and shall have the power to sign checks and drafts of the corporation, and any depository in which the funds of the corporation are deposited shall be conclusively protected in honoring and acting upon any check or draft signed by the Treasurer. The treasurer shall keep full and accurate account of all moneys received and paid on account of the corporation which shall truly reflect all of the financial transactions and conditions of the corporation, and shall conform to the requirements of Article V hereof, and he shall generally perform all acts incident to the position of Treasurer, and shall have such further powers and duties as shall be from time to time conferred upon him by the Board of Directors. Section 9. Assistant Treasurer. The Board of Directors may designate and choose an Assistant Treasurer, who shall have the usual powers and duties pertaining to his office together with such other powers and duties as may be assigned to him by the Board of Directors. In case of the absence or disability of the Treasurer, the duties of the Treasurer shall be performed by the Assistant Treasurer. Section 10. Absence or Inability to Act. In the case of absence or inability to act of any officer of the corporation and of any person herein authorized to act in his place, the Board of Directors may from time to time delegate the powers or duties of such officer to any other officer, or any director or other person whom it may select. ARTICLE V Corporate Records Section 1. Corporate Records. The directors and officers of the corporation shall keep accurate account of the corporate transactions. The books and records of the corporation shall at all times be subject to examination by any director or by any committee appointed for the purpose at a meeting of the shareholders, or by the holders of at least one-tenth of the stock outstanding not in a meeting. The minutes and resolutions of the Board of Directors shall at all times be open to examination by any member of the Board or by any committee appointed by the shareholders, and such minutes shall be produced whenever required by the shareholders at any meeting. The books of the corporation shall be so kept as to show at all times what money or other consideration was received by the corporation for the stock issued by it and the number of shares issued. ARTICLE VI Dividends and Finance Section 1. Dividends. The Board of Directors may from time to time declare and pay dividends of so much of the net profits of the corporation as they deem it prudent to divide, payable in cash or other property of the corporation, against its accumulated earnings or surplus, whenever such declaration of dividends will not impair the capital of the corporation. Section 2. Depository of Funds. The moneys of the corporation shall be deposited in the name of the corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out only by check, signed by persons designated by resolution of the Board of Directors. Section 3. Fiscal Year. The fiscal year of the corporation shall begin on the first day of _____ in each year, unless otherwise provided by the Board of Directors. ARTICLE VII Corporate Seal Section 1. Corporate Seal. The corporate seal of this corporation shall be circular in form and shall have inscribed thereon the name of this corporation and the words "Corporate Seal" in the center, and for this purpose hereby adopts the seal the impression of which is made on the margin hereof. ARTICLE VIII Amendment to Bylaws Section 1. Amendment to Bylaws. These Bylaws may be altered, amended or repealed in whole or in part at any meeting of the Board of Directors by the affirmative vote of a majority of the directors present at the meeting, a quorum being present, subject to repeal or change by the affirmative vote of the holders of a majority of the issued and outstanding shares then entitled to vote, at any meeting of the shareholders. EX-3.151 11 EXHIBIT 3.151 Exhibit 3.151 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE ================================================================================ State of California [SEAL OF THE SECRETARY Bill Jones OF STATE OMITTED] Secretary of State SACRAMENTO I, BILL JONES, Secretary of State of California, hereby certify: That the annexed transcript of 1 page(s) was prepared by and in this office from tire record on file, of which it purports to be a copy, and that it is full, true and correct. [SEAL OF THE STATE OF CALIFORNIA] IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California ------------------------------------ OCT 20 1997 ------------------------------------ /s/ Bill Jones Secretary of State ================================================================================ - -------------------------------------------------------------------------------- [SEAL OF THE STATE STATE OF CALIFORNIA OF CALIFORNIA] ACTING SECRETARY OF STATE TONY MILLER LIMITED LIABILITY COMPANY ARTICLES OF ORGANIZATION IMPORTANT - Read instructions before completing the form. This document is presented for filing pursuant to Section 17050 of the California Corporations Code. ================================================================================ 1. Limited liability company name: CommCorp, LLC (End the name with "LLC" or "Limited Liability Company". No periods between the letters in "LLC" and "Company" may be abbreviated to "Ltd." and "Co.") - -------------------------------------------------------------------------------- 2. Latest date on which the limited liability company is to dissolve: September 30, 2027 - -------------------------------------------------------------------------------- 3. The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Beverly-Killea Limited Liability Company Act. - -------------------------------------------------------------------------------- 4. Enter the name of initial agent for service of process and check the appropriate provision below: Timothy Novoselski, which is |X| an individual residing in California, Proceed to Item 5. |_| a corporation which has filed a certificate pursuant to Section 1505 of the California Corporations Code. Skip Item 5 and proceed to Item 6. - -------------------------------------------------------------------------------- 5. If the initial agent for service of process is an individual, enter a business or residential street address in California: Street address: 22313 Carbon Mesa Road City: Malibu State: CALIFORNIA Zip Code: 90265 - -------------------------------------------------------------------------------- 6. The limited liability company will be managed by : (check one) |_| one manager |_| more than one manager |X| limited liability company members - -------------------------------------------------------------------------------- 7. If other matters are to be included in the articles of organization attach one or more separate pages. Number of pages attached, if any: - -------------------------------------------------------------------------------- 8. It is hereby declared that I am For Secretary of State Use the person who executed this instrument, which execution is 101997290036 my act and deed. FILED /s/ Timothy Novoselski In the office of the Secretary of ------------------------------- State of the State of California Signature of organizer OCT 17 1997 Timothy Novoselski ------------------------------- /s/ BILL JONES Type or print name of organizer BILL JONES, Secretary of State Date: October 14, 1997 ------------------------- [SEAL OF THE SECRETARY OF STATE OMITTED] ================================================= LLC-1 Approved by the Secretary of State Filing Fee $80 8/31/94 - -------------------------------------------------------------------------------- EX-3.152 12 EXHIBIT 3.152 Exhibit 3.152 ================================================================================ LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF COMMCORP, LLC A CALIFORNIA LIMITED LIABILITY COMPANY Dated October 14, 1997 ================================================================================ TABLE OF CONTENTS ARTICLE 1 DEFINITIONS 1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT 1 1.2 AFFILIATE 1 1.3 AGREEMENT 1 1.4 ARTICLES OF ORGANIZATION 2 1.5 AVAILABLE CASH FLOW 2 1.6 BUSINESS OF THE LLC 2 1.7 CAPITAL ACCOUNT 2 1.8 CAPITAL CONTRIBUTION 2 1.9 CODE 2 1.10 DEPRECIATION 2 1.11 DISSOLUTION 2 1.12 ECONOMIC INTEREST 2 1.13 FISCAL YEAR 2 1.14 LLC 2 1.15 LLC INTEREST 3 1.16 LLC LOANS 3 1.17 LLC MINIMUM GAIN 3 1.18 MAJORITY IN INTEREST OF THE MEMBERS 3 1.19 MANAGER 3 1.20 MEMBER NONRECOURSE DEBT 3 1.21 MEMBER NONRECOURSE DEBT MINIMUM GAIN 3 1.22 MEMBER NONRECOURSE DEDUCTIONS 3 1.23 MEMBER 4 1.24 NET CAPITAL CONTRIBUTIONS 4 1.25 NET PROFITS AND NET LOSS 4 1.26 PERCENTAGE INTEREST 5 1.27 PERIOD OF DURATION 5 1.28 PERSON 5 1.29 PRINCIPAL 5 1.30 PROPERTY 5 1.31 REGULATIONS 5 1.32 RESERVES 5 1.33 SECRETARY OF STATE 5 1.34 STATUTE 5 1.35 VOTE 5 ARTICLE 2 INTRODUCTORY MATTERS 2.1 FORMATION OF LLC 6 2.2 NAME 6 2.3 PRINCIPAL OFFICE 6 2.4 AGENT FOR SERVICE OF PROCESS 6 2.5 PERIOD OF DURATION 6 2.6 BUSINESS AND PURPOSE OF THE LLC 6 ARTICLE 3 MEMBERS AND CAPITAL CONTRIBUTIONS 3.1 NAMES AND ADDRESSES OF INITIAL MEMBERS 7 3.2 CONTRIBUTIONS 7 3.3 ADDITIONAL CONTRIBUTIONS 7 3.4 RIGHTS WITH RESPECT TO CAPITAL 7 3.5 GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS 7 3.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS 8 3.7 TRANSFEREE'S CAPITAL ACCOUNT 8 ARTICLE 4 ALLOCATION OF PROFITS AND LOSSES 4.1 ALLOCATION OF NET PROFITS AND LOSSES 9 4.2 RESIDUAL ALLOCATIONS 9 4.3 QUALIFIED INCOME OFFSET 9 4.4 MINIMUM GAIN CHARGEBACK 10 4.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK 10 4.6 MEMBER NONRECOURSE DEDUCTIONS 10 4.7 SPECIAL ALLOCATIONS 10 4.8 FEES TO MEMBERS OR AFFILIATES 11 4.9 SECTION 704(c) ALLOCATION 11 ARTICLE 5 DISTRIBUTIONS 5.1 AVAILABLE CASH FLOW 11 ARTICLE 6 RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION OF MANAGERS AND OFFICERS 6.1 CO-MANAGERS 12 6.2 MEETINGS OF MANAGERS 13 6.3 LIMITATIONS ON RIGHTS AND POWERS 14 6.4 COMPENSATION OF MANAGERS 14 6.5 COMPENSATION OF MEMBERS 15 6.6 EXPENSE REIMBURSEMENT 15 6.7 RELATED PARTY TRANSACTIONS 15 ARTICLE 7 MEMBERS' MEETINGS 7.1 PLACE OF MEETINGS 15 7.2 ANNUAL MEETINGS OF MEMBERS 15 7.3 SPECIAL MEETINGS 15 7.4 NOTICE OF MEETINGS 15 7.5 VALIDATION OF MEMBERS' MEETINGS 16 7.6 ACTIONS WITHOUT A MEETING 16 7.7 QUORUM AND EFFECT OF VOTE 16 ARTICLE 8 RESTRICTIONS ON TRANSFER OR CONVERSION OF LLC INTERESTS, ADDITIONAL CAPITAL CONTRIBUTIONS; ADMISSION OF NEW MEMBERS 8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST 17 8.2 VOID TRANSFERS 17 8.3 ADMISSION OF NEW MEMBERS 17 ARTICLE 9 BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS 9.1 MAINTENANCE OF BOOKS AND RECORDS 18 9.2 ANNUAL ACCOUNTING 18 9.3 INSPECTION AND AUDIT RIGHTS 19 9.4 RIGHTS OF MEMBERS AND NON-MEMBERS 19 9.5 BANK ACCOUNTS 19 9.6 TAX MATTERS HANDLED BY MANAGERS 19 9.7 FEDERAL INCOME TAX ELECTIONS MADE BY MANAGERS 19 9.8 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS 20 ARTICLE 10 TERMINATION AND DISSOLUTION 10.1 DISSOLUTION 20 10.2 STATEMENT OF INTENT TO DISSOLVE 20 10.3 CONDUCT OF BUSINESS 20 10.4 DISTRIBUTION OF NET PROCEEDS 21 ARTICLE 11 INDEMNIFICATION OF THE MEMBERS, MANAGERS, AND THEIR AFFILIATES 11.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS 21 11.2 EXPENSES 22 11.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE 22 11.4 ERRORS AND OMISSIONS INSURANCE 22 11.5 ASSETS OF THE LLC 22 ARTICLE 12 ISSUANCE OF LLC CERTIFICATES 12.1 ISSUANCE OF LLC CERTIFICATES 22 12.2 TRANSFER OF LLC CERTIFICATES 23 12.3 LOST, STOLEN OR DESTROYED CERTIFICATES 23 ARTICLE 13 AMENDMENTS 13.1 AMENDMENT, ETC. OF OPERATION AGREEMENT 24 13.2 AMENDMENT, ETC. OF ARTICLES OF ORGANIZATION 24 ARTICLE 14 MISCELLANEOUS PROVISIONS 14.1 COUNTERPARTS 24 14.2 SURVIVAL OF RIGHTS 24 14.3 SEVERABILITY 24 14.4 NOTIFICATION OR NOTICES 24 14.5 CONSTRUCTION 25 14.6 SECTION HEADINGS 25 14.7 GOVERNING LAW 25 14.8 ADDITIONAL DOCUMENTS 25 14.9 PRONOUNS AND PLURALS 25 14.10 TIME OF THE ESSENCE 25 14.11 FURTHER ACTIONS 25 14.12 MANDATORY ARBITRATION 25 14.13 EQUITABLE RELIEF 26 14.14 WAIVER OF JURY 27 14.15 THIRD PARTY BENEFICIARIES 27 14.16 TAX ELECTIONS 27 14.17 PARTITION 27 14.18 ENTIRE AGREEMENT 27 14.19 WAIVER 27 14.20 ATTORNEYS' FEES 27 14.21 CONFIDENTIALITY 28 COMMCORP, LLC LIMITED LIABILITY COMPANY OPERATING AGREEMENT This Limited Liability Company Operating Agreement (the "Agreement") is made and entered into and effective as of October 14, 1997, by and among Tim Novoselski, an individual, and Denise Novoselski, an individual, husband and wife. The Members have formed a limited liability company (hereinafter called the "LLC") pursuant to the provisions of the (California) Beverly-Killea Limited Liability Company Act as set forth in Title 2.5 (commencing with Section 17000) of the Corporations Code of the State of California. In consideration of the covenants and the promises made herein, the parties hereto, as signatories to the Agreement, hereby agree as follows: ARTICLE 1 DEFINITIONS 1.1 ADJUSTED CAPITAL ACCOUNT DEFICIT. "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: 1.1.1 increase such Capital Account by any amounts which such Member is obligated to contribute to the LLC (pursuant to the terms of this Agreement or otherwise) or is deemed to be obligated to contribute to the LLC pursuant to Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and 1.1.2 reduce such Capital Account by the amount of the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). 1.2 AFFILIATE. "Affiliate" means, when used with reference to a specified Person, (i) the Principal of the Person, (ii) any Person directly or indirectly controlling, controlled by or under common control with such Person, (iii) any Person owning or controlling 10% or more of the outstanding voting interests of such Person, and (iv) any relative or spouse of such Person. 1.3 AGREEMENT. "Agreement" means this Limited Liability Company Operating Agreement, as originally executed and as amended from time to time, as the context requires. Words such as "herein", "hereinafter", "hereto", "hereby" and "hereunder", when used with reference to this Agreement, refer to this Agreement as a whole, unless the context otherwise requires. 1.4 ARTICLES OF ORGANIZATION. "Articles of Organization" means the articles of organization filed with the California Secretary of State for the purpose of forming the LLC. 1.5 AVAILABLE CASH FLOW. "Available Cash Flow" means, with respect to any Fiscal Year or other period, the sum of all cash receipts of the LLC from any and all sources, less all cash disbursements (including loan repayments, capital improvements and replacements) and a reasonable allowance for Reserves, contingencies and anticipated obligations as determined by the Manager. 1.6 BUSINESS OF THE LLC. "Business of the LLC" shall have the meaning set forth in Section 2.6 hereof. 1.7 CAPITAL ACCOUNT. "Capital Account" of a Member shall have the meaning set forth in Section 3.5 hereof. 1.8 CAPITAL CONTRIBUTION. "Capital Contribution" shall have the meaning set forth in Article 3 hereof. 1.9 CODE. "Code" means the Internal Revenue Code of 1986, as amended (or any corresponding provision or provisions of any succeeding law). 1.10 DEPRECIATION. "Depreciation" means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery reduction allowable with respect to an asset for such Fiscal Year or other period. 1.11 DISSOLUTION. "Dissolution" means (i) when used with reference to the LLC, the earlier of (a) the date upon which the LLC is terminated under the Statute, or any similar provision enacted in lieu thereof, or (b) the date upon which the LLC ceases to be a going concern, and (ii) when used with reference to any Member, the earlier of (a) the date upon which there is a Dissolution of the LLC or (b) the date upon which such Member's entire interest in the LLC is terminated by means of a distribution or series of distributions by the LLC to such Member. 1.12 ECONOMIC INTEREST. "Economic Interest" means a Person's right to share in the Net Profits, Net Loss or similar items of, and to receive distributions from, the LLC, but does not include any other rights of a Member including, without limitation, the right to vote or to participate in the management of the LLC, or, except as provided in Section 9.4, any right to information concerning the business and affairs of the LLC. 1.13 FISCAL YEAR. "Fiscal Year" means the period of January 1 to and including December 31. 1.14 LLC. "LLC" means CommCorp, LLC. 1.15 LLC INTEREST. "LLC Interest" or "Interest" means an ownership interest in the LLC, which includes the Economic Interest, the right to vote or participate in the management of the LLC, and the right to information concerning the business and affairs of the LLC, as provided in this Agreement and under the Statute. 1.16 LLC LOANS. "LLC Loans" shall refer to any loans or advances made by any Member to the LLC at the Member's option, without obligation to so do, to the extent the LLC does not have sufficient resources (assets, borrowings or otherwise) to meet its LLC obligations. Such LLC Loans shall bear interest at the rate agreed to between the Member and the Manager. 1.17 LLC MINIMUM GAIN. "LLC Minimum Gain" means the amount determined by computing with respect to each nonrecourse liability of the LLC, the amount of gain (of whatever character), if any, that would be realized by the LLC if it disposed (in a taxable transaction) of the Property subject to such liability in full satisfaction thereof, and by then aggregating the amounts so computed as set forth in Regulations Section 1.704-2(d). 1.18 MAJORITY IN INTEREST OF THE MEMBERS. "Majority in Interest of the Members." unless otherwise provided in the Agreement, means more than fifty percent (50%) of the interests of the Members in the current profits of the LLC. 1.19 MANAGER. "Manager" means the Person elected to manage the LLC pursuant to Section 6.1 of this Agreement. At any time that the Members shall have elected to have more than one Manager, all such Persons so elected shall be referred to as the "Managers." 1.20 MEMBER NONRECOURSE DEBT. "Member Nonrecourse Debt" has the meaning set forth in Regulations Section 1.704-2(b)(4). 1.21 MEMBER NONRECOURSE DEBT MINIMUM GAIN. "Member Nonrecourse Debt Minimum Gain" means an amount, with respect to each Member Nonrecourse Debt, equal to the LLC Minimum Gain that would result if such Member Nonrecourse Debt were treated as a nonrecourse liability of the LLC, determined in accordance with Regulations Sections 1.704-2(i)(2) and (3). 1.22 MEMBER NONRECOURSE DEDUCTIONS. "Member Nonrecourse Deductions" has the meaning set forth in Regulations Section 1.704-2(i)(2). The amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year of the LLC equals the excess (if any) of the net increase (if any) in the amount of Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over the aggregate amount of any distributions during that Fiscal Year to the Member that bears (or is deemed to bear) the economic loss for such Member Nonrecourse Debt to the extent such distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(2). 1.23 MEMBER. "Member" means a Person who: 1.23.1 Has been admitted to the LLC as a member in accordance with the Articles of Organization or this Agreement, or an assignee of an Interest, other than an Economic Interest, who has become a Member pursuant to Section 8.1. 1.23.2 Has not resigned, withdrawn or been expelled as a Member or, if other than an individual, been dissolved. Reference to a "Member" shall be to any one of the Members. Reference to an "Initial Member" shall be to any one of the Members listed in Section 3.1. 1.24 NET CAPITAL CONTRIBUTIONS. "Net Capital Contributions" means the aggregate of a Member's Capital Contributions over the aggregate distributions theretofore made to such Member pursuant to Section 5.1. 1.25 NET PROFITS AND NET LOSS. "Net Profits" and "Net Loss" mean, for each Fiscal Year or other period, an amount equal to the LLC's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: 1.25.1 Any income of the LLC that is exempt from Federal income tax and not otherwise taken into account in computing Net Profits or Net Loss shall be added to such taxable income or loss; 1.25.2 Any expenditures of the LLC described in Code Section 705(b)(2)(B) or treated as Code Section 705(b)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Profits or Net Loss shall be subtracted from such taxable income or loss; 1.25.3 Gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the fair market value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its fair market value; 1.25.4 In lieu of depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year or other period, computed in accordance with the subsection hereof entitled "Depreciation"; and Page 4 of 28 1.25.5 Notwithstanding any other provision of this subsection, any items of income, gain, loss or deduction which are specifically allocated shall not be taken into account in computing Net Profits or Net Loss. 1.26 PERCENTAGE INTEREST. The Initial Member's "Percentage Interest" shall be in the following percentages: Tim Novoselski, an individual 50% Denise Novoselski, an individual 50% 1.27 PERIOD OF DURATION. "Period of Duration" shall have the meaning set forth in Section 2.5 hereof. 1.28 PERSON. "Person" means an individual, partnership, limited partnership, corporation, trust, estate, association, limited liability company, or other entity, whether domestic or foreign. 1.29 PRINCIPAL. Principal" means the natural Person which is in ultimate control of a Member. 1.30 PROPERTY. "Property" means all assets of the LLC, both tangible and intangible, or any portion thereof. 1.31 REGULATIONS. "Regulations" means the federal income tax regulations promulgated by the Treasury Department under the Code, as such regulations may be amended from time to time. All references herein to a specific section of the Regulations shall be deemed also to refer to any corresponding provisions of succeeding Regulations. 1.32 RESERVES. "Reserves" means funds set aside from Capital Contributions or gross cash revenues as reserves. Such Reserves shall be maintained in amounts reasonably deemed sufficient by the Manager for working capital and the payment of taxes, insurance, debt service, repairs, replacements renewals, or other costs or expenses incident to the Business of the LLC, or in the alternative, the Dissolution of the LLC. 1.33 SECRETARY OF STATE. "Secretary of State" shall mean the Secretary of State of the State of California. 1.34 STATUTE. "Statute" shall mean the (California) Beverly-Killea Limited Liability Company Act as set forth in Title 2.5 (commencing with Section 17000) of the Corporations Code of the State of California (or any corresponding provision or provisions of any succeeding law). 1.35 VOTE. Except where superseded by another Section of this Agreement, or required by the terms of the Statute, Code or applicable Regulations thereunder, all decisions Page 5 of 28 made by the LLC shall be approved by fifty-one percent (51%) of the votes ("Vote") of the Members, wherein each Member casts a number of votes equal to the Member's Percentage Interest in the LLC. ARTICLE 2 INTRODUCTORY MATTERS 2.1 FORMATION OF LLC. The parties have formed the LLC pursuant to the provisions of the Statute by filing the Articles of Organization with the Secretary of State. 2.2 NAME. The name of the LLC is "COMMCORP, LLC" The Members shall operate the Business of the LLC under such name or use such other or additional names as the Members may deem necessary or desirable provided that: (i) no such name shall contain the words "bank," "insurance," "trust," "trustee," "incorporated," "inc.," "corporation," "corp.," or any similar name or variation thereof; (ii) the Members shall have reasonably determined, before use of any such name, that the LLC is entitled to use such name and will not by reason of such use infringe upon any rights of any other Person, or violate any applicable laws or governmental regulations; and (iii) the Members shall register such name under assumed or fictitious name statutes or similar laws of the states in which the LLC operates. 2.3 PRINCIPAL OFFICE. The LLC shall maintain its principal place of business at 22313 Carbon Mesa Road, Malibu, California 90265, or any other location agreed upon by the Managers. 2.4 AGENT FOR SERVICE OF PROCESS. The name and address of the LLC's agent for service of process is Tim Novoselski, 22313 Carbon Mesa Road, Malibu, California 90265. 2.5 PERIOD OF DURATION. The period of duration of the LLC ("Period of Duration") shall be thirty (30) years, commencing on the date of the filing of the Articles of Organization with the California Secretary of State, unless the LLC is terminated or dissolved sooner, in accordance with the provisions of this Agreement. 2.6 BUSINESS AND PURPOSE OF THE LLC. The purpose of the LLC is to engage in any lawful activities for which a LLC may be organized under the Statute, including, but not limited to ownership, operation, and management of a custom publishing business; provided that the LLC shall not conduct any banking, insurance or trust company business. Page 6 of 28 ARTICLE 3 MEMBERS AND CAPITAL CONTRIBUTIONS 3.1 NAMES AND ADDRESSES OF INITIAL MEMBERS. The names and addresses of the Initial Members are as follows: Tim Novoselski, an individual, whose address is 22313 Carbon Mesa Road, Malibu, California 90265 Denise Novoselski, an individual, whose address is 22313 Carbon Mesa Road, Malibu, California 90265 3.2 CONTRIBUTIONS. The Initial Members shall contribute the aggregate sum of Five Thousand Dollars ($5,000.00), to the LLC in proportion to their Percentage Interest. 3.3 ADDITIONAL CONTRIBUTIONS. No Member shall be required to (a) make any additional Capital Contributions, (b) make any loan, or (c) cause to be loaned any money or other assets to the LLC. 3.4 RIGHTS WITH RESPECT TO CAPITAL. 3.4.1 LLC CAPITAL. No Member shall have the right to withdraw, or receive any return of, its Capital Contribution, and no Capital Contribution may be returned in the form of property other than cash except as specifically provided herein. 3.4.2 NO INTEREST ON CAPITAL. No Capital Contribution of any Member shall bear any interest or otherwise entitle the contributing Member to any compensation for use of the contributed capital. 3.4.3 ESTABLISHMENT OF CAPITAL ACCOUNTS. A separate capital account ("Capital Account") shall be maintained for each Member. For book purposes, each Member's Capital Account will be separated into a contribution account and an income (loss) account and will be maintained according to generally accepted accounting principles. Sections 3.6 and 3.7 below describe the appropriate accounting treatment for tax purposes of the Capital Accounts. 3.5 GENERAL RULES FOR ADJUSTMENT OF CAPITAL ACCOUNTS. The Capital Account of each Member shall be: 3.5.1 INCREASES. Increased by: (i) Such Member's cash contributions; Page 7 of 28 (ii) The agreed fair market value of property contributed by such Member (net of liabilities secured by such contributed property that the LLC is considered to assume or take subject to under Code Section 752); (iii) All items of LLC income and gain (including income and gain exempt from tax) allocated to such Member pursuant to Article 4 or other provisions of this Agreement; and 3.5.2 DECREASES. Decreased by: (i) The amount of cash distributed to such Member: (ii) The agreed fair market value of all actual and deemed distributions of property made to such Member pursuant to this Agreement (net of liabilities secured by such distributed property that the Member is considered to assume or take subject to under Code Section 752); (iii) All items of LLC deduction and loss allocated to such Member pursuant to Article 4 or other provisions of this Agreement. 3.6 SPECIAL RULES WITH RESPECT TO CAPITAL ACCOUNTS. 3.6.1 TIME OF ADJUSTMENT FOR CAPITAL CONTRIBUTIONS. For purposes of computing the balance in a Member's Capital Account, no credit shall be given for any Capital Contribution which such Member is to make until such contribution is actually made. "Capital Contribution" refers to the total amount of cash and the agreed fair market value (net of liabilities) contributed to the LLC by that Member and any subsequent contributions of cash and the agreed fair market value (net of liabilities) of any other property subsequently contributed to the LLC by that Member. 3.6.2 INTENT TO COMPLY WITH TREASURY REGULATIONS. The foregoing provisions of Sections 3.6 and 3.7 and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations Section. To the extent such provisions are inconsistent with such Regulations Section or are incomplete with respect thereto, Capital Accounts shall be maintained in accordance with such Regulations Section. 3.7 TRANSFEREE'S CAPITAL ACCOUNT. In the event a Member, of the holder of an Economic Interest, transfers an Interest in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest. Page 8 of 28 ARTICLE 4 ALLOCATION OF PROFITS ANTI LOSSES 4.1 ALLOCATION OF NET PROFITS AND LOSSES. Except as otherwise provided in this Article 4, Net Profits and Net Loss of the LLC in each Fiscal Year shall be allocated among the Members as follows: 4.1.1 NET PROFITS. Net Profits shall be allocated among the Members as follows: (i) first, to each of the Members until the cumulative Net Profits allocated to such Member pursuant to this Section 4.1.1 is equal to the cumulative Net Loss allocated to the Member pursuant to Section 4.1.2 for any prior period; and (ii) thereafter, to the Members in accordance with their Percentage Interests. 4.1.2 ALLOCATION OF NET LOSS. Except as otherwise provided in this Article 4, Net Loss shall be allocated among the Members as follows: (i) first, to offset any Net Profits allocated pursuant to Section 4.1.1(i) hereof, and then to offset any Net Profits allocated pursuant to Section 4.1.1(ii) hereof (in each case pro rata in proportion to their shares of Net Profits being offset); (ii) second, in proportion to the positive balances, if any, in the Members' respective Capital Accounts, until such balances are reduced to zero; and (iii) third, to the Members, pro rata, in accordance with their Percentage Interests; provided, however, that if, and to the extent that the allocation of Net Loss in this manner would cause a Member to have an Adjusted Capital Account Deficit at the end of the Fiscal Year, then such Net Loss shall instead be allocated to the Member who has the largest Percentage Interest. 4.2 RESIDUAL ALLOCATIONS. Except as otherwise provided in this Agreement, all items of LLC income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Net Profits or Net Losses, as the case may be, for the Fiscal Year. Page 9 of 28 4.3 QUALIFIED INCOME OFFSET. If any Member unexpectedly receives any adjustments, allocation or distributions described in clauses (4), (5) or (6) of Regulations Section 1.704-1(b)(2)(ii)(d), items of LLC income shall be specially allocated to such Member in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit created by such adjustments, allocations or distributions as quickly as possible. This Section 4.3 is intended to constitute a "qualified income offset" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d)(3). 4.4 MINIMUM GAIN CHARGEBACK. If there is a net decrease in LLC Minimum Gain during a Fiscal Year, each Member will be allocated, before any other allocation under this Article 4, items of income and gain for such Fiscal Year (and if necessary, subsequent years) in proportion to and to the extent of an amount equal to such Member's share of the net decrease in LLC Minimum Gain determined in accordance with Regulations Section l.704-2(g)(2). This Section 4.4 is intended to comply with, and shall be interpreted consistently with, the "minimum gain chargeback" provisions of Regulations Section 1.704-2(f). 4.5 MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding any other provision of this Article 4, but except Section 4.4, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year of the LLC, each Member who has a share of the Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5), shall be specially allocated items of LLC income and gain for such year (and, if necessary, subsequent years) in an amount equal such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4). This Section 4.5 is intended to comply with a minimum gain chargeback requirement of that Section of the Regulations and shall be interpreted consistently therewith. 4.6 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse Deductions for any Fiscal Year or other period shall be specially allocated to the Member who bears (or is deemed to bear) the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(2). 4.7 SPECIAL ALLOCATIONS. Any special allocations of items of Net Profits pursuant to Sections 4.4, 4.5 and 4.6 shall be taken into account in computing subsequent allocations of Net Profits pursuant to Section 4.1, so that the net amount of any items so allocated and the gain, loss and any other item allocated to each Member pursuant to Section 4.1 shall, to the extent possible, be equal to the net amount that would have been Page 10 of 28 allocated to each such Member pursuant to the provisions of this Article if such special allocations had not occurred. 4.8 FEES TO MEMBERS OR AFFILIATES. Notwithstanding the provisions of Section 4.1, in the event that any fees, interest, or other amounts paid to any Member or any Affiliate thereof pursuant to this Agreement or any other agreement between the LLC and any Member or Affiliate thereof providing for the payment of such amount, and deducted by the LLC in reliance on Section 707(a) and/or 707(c) of the Code, are disallowed as deductions to the LLC on its federal income tax return and are treated as LLC distributions, then 4.8.1 the Net Profits or Net Loss, as the case may be, for the Fiscal Year in which such fees, interest, or other amounts were paid shall be increased or decreased, as the case may be, by the amount of such fees, interest, or other amounts that are treated as LLC distributions; and 4.8.2 there shall be allocated to the Member to which (or to whose Affiliate) such fees, interest, or other amounts were paid, prior to the allocations pursuant to Section 4.1, an amount of gross income for the Fiscal Year equal to the amount of such fees, interest, or other amounts that are treated as LLC distributions. 4.9 SECTION 704(c) ALLOCATION. Any item of income, gain, loss, and deduction with respect to any property (other than cash) that has been contributed by a Member to the capital of the LLC and which is required or permitted to be allocated to such Member for income tax purposes under Section 704(c) of the Code so as to take into account the variation between the tax basis of such property and its fair market value at the time of its contribution shall be allocated to such Member solely for income tax purposes in the manner so required or permitted. ARTICLE 5 DISTRIBUTIONS 5.1 AVAILABLE CASH FLOW. Available Cash Flow of the LLC shall be distributed to the Members in accordance with the following priority and agreements: 5.1.1 FIRST. Pro rata among the Members, in the ratio of the principal loan balances outstanding, until all of the accrued but unpaid interest on all LLC Loans, if any, has been paid, and then the principal amounts thereof. 5.1.2 SECOND. To the Members, pari passu, on a pro rata basis, until all Net Capital Contributions are reduced to zero. 5.1.3 THIRD. To the Members in accordance with their applicable Percentage Interests as of the time of such distribution. Page 11 of 28 ARTICLE 6 RIGHTS, DUTIES, OBLIGATIONS AND COMPENSATION OF MANAGERS AND OFFICERS 6.1 CO-MANAGERS. The LLC shall be managed by TIM NOVOSELSKI and DENISE NOVOSELSKI (the "Managers"). The Managers shall have such rights, duties and powers as are specified in this Agreement, or conferred upon the Managers by Vote of the Members. 6.1.1 DUTIES OF THE MANAGERS. The Managers shall share the duties described in Section 6.1.1. The Managers are the co-general managers and co-chief executive officers of the LLC and have, subject to the control of the Members, general supervision, direction, and control of the business of the LLC. The Managers shall preside at all meetings of the Members. The Managers shall have the general powers and duties of management typically vested in the office of president of a corporation, and such other powers and duties as may be prescribed by the Members. The Members acknowledge that Tim Novoselski and Denise Novoselski have other business interests related to Miramar Communications, Inc., and otherwise, which take a substantial portion of their time, and, accordingly, the Managers shall be required to devote to the LLC business the time and attention that each in his/her sole discretion shall determine is necessary. 6.1.2 ELECTION. Each Manager shall hold office until the Manager resigns or shall be removed or otherwise disqualified to serve, or the Manager's successor is elected and qualified. In voting for Managers, each Member shall have a number of votes equal to its Percentage Interest in the LLC. 6.1.3 SUBORDINATE OFFICERS. The Members may appoint a secretary, a chief financial officer, and such other officers of the LLC as the Business of the LLC may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in this Agreement, or as the Members determine. 6.1.4 REMOVAL AND RESIGNATION. Any Manager or other officer of the LLC may be removed, with or without cause, by the Vote of the Members. Any Manager or other officer of the LLC may resign at any time without prejudice to any rights of the LLC under any contract to which the Manager or other officer of the LLC is a party, by giving written notice to the Members, or to the Manager, as applicable. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Page 12 of 28 6.1.5 VACANCIES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled by a Vote of the Members through the appointment of a successor Manager, or officer who shall hold the office for the unexpired term. 6.2 MEETINGS OF MANAGERS. Meetings of the Managers shall be held at the principal office of the LLC, unless some other place is designated in the notice of the meeting. Any Manager may participate in a meeting through use of a conference telephone or similar communication equipment so long as all Managers participating in such a meeting can hear one another. 6.2.1 Regular meetings of the Managers shall be held immediately following the adjournment of the annual meeting of the Members. No notice need be given of such regular meetings. 6.2.2 Special meetings of the Managers for any purpose may be called at any time by any Manager. At least forty-eight (48) hours notice of the time and place of a special meeting of the Managers shall be delivered personally to the Managers or personally communicated to them by an officer of the LLC by telephone, telegraph or facsimile. If the notice is sent to a Manager by letter, it shall be addressed to him at his last known business address as it is shown on the records of the LLC. In case such notice is mailed, it shall be deposited in the United States mail, first-class postage, prepaid, in the place in which the principal office of the LLC is located at least four (4) days prior to the time of the holding of the meeting. Such mailing, telegraphing, telephoning or delivery as above provided shall be considered due, legal and personal notice to such Manager. 6.2.3 With respect to a special meeting which has not been duly called or noticed pursuant to the provisions of Section 6.2.2, transactions carried out at the meeting are as valid as if had at a meeting regularly called and noticed if: (i) all Managers are present at the meeting, and sign a written consent to the holding of such meeting, or (ii) if a majority of the Managers are present and if those not present sign a waiver of notice of such meeting or a consent to holding the meeting or an approval of the minutes thereof, whether prior to or after the holding of such meeting, which waiver, consent or approval shall be filed with the other records of the LLC, or (iii) if a Manager attends a meeting without notice and does not protest prior to the meeting or at its commencement that notice was not given to him or her. 6.2.4. Any action required or permitted to be taken by the Managers may be taken without a meeting and will have the same force and effect as if taken by a vote of Managers at a meeting properly called and noticed, if authorized by a writing signed individually or collectively by all, but not less than all, the Managers. Such consent shall be filed with the records of the LLC. Page 13 of 28 6.2.5 A majority of the total number of incumbent Managers shall be necessary to constitute a quorum for the transaction of business at any meeting of the Managers, and except as otherwise provided in this Agreement or by the Statute, the action of a majority of the Managers present at any meeting at which there is a quorum, when duly assembled, is valid. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of Managers, if any action taken is approved by a majority of the required quorum for such meeting. 6.3 LIMITATIONS ON RIGHTS AND POWERS. Except by the unanimous agreement of the Members which is evidenced in writing, neither the Manager nor any other officer of the LLC shall have authority to: 6.3.1 Enter into or commit to any agreement, contract, commitment or obligation on behalf of the LLC obligating any Member or Principal to find additional capital, to make or guarantee a loan or to increase its personal liability either to the LLC or to third parties; 6.3.2 Receive or permit any Member or Principal to receive any fee or rebate, or to participate in any reciprocal business arrangements that would have the effect of circumventing any of the provisions hereof; 6.3.3 Materially alter the Business of the LLC or deviate from any approved business plan of the LLC as set forth in this Agreement; 6.3.4 Permit the LLC's fund to be commingled with the funds of any other Person; 6.3.5 Do any act in contravention of this Agreement; 6.3.6 Possess Property, or assign rights in specific Property, for other than a LLC purpose; 6.3.7 Do any act of which would make it impossible to carry on the Business of the LLC; 6.3.8 Admit any person as a Member, except as otherwise provided in this Agreement; 6.3.9 Sell, lease, pledge or grant or specify interest in any Property, except in the ordinary course of business; and 6.3.10 Attempt to dissolve from the LLC. Page 14 of 28 6.4 COMPENSATION OF MANAGERS. The LLC shall pay to the Manager such salary and other benefits, as shall be approved from time to time by Vote of the Members. The LLC shall reimburse the Manager for any expense paid by the Manager that properly is to be borne by the LLC. 6.5 COMPENSATION OF MEMBERS. Except as expressly permitted by this Agreement or any other written agreement, the LLC shall pay no compensation to any Member or any Principal of any Member for their services to the LLC. 6.6 EXPENSE REIMBURSEMENT. The LLC shall reimburse the Members for any expense paid by them that properly is to be borne by the LLC, as pre-approved from time to time by the Managers. 6.7 RELATED PARTY TRANSACTIONS. The Managers may cause the LLC to provide, or obtain, products or services to or from Miramar Communications, Inc. or other entities controlling, controlled by, or under common control with the Members, and to receive from, or to pay, such entities reasonable fees for such products and services. ARTICLE 7 MEMBERS' MEETINGS 7.1 PLACE OF MEETINGS. Meetings of the Members shall be held at the principal office of the LLC, unless some other appropriate and convenient location, either within or without the state where the Articles of Organization were filed, shall be designated for that purpose from time to time by the Manager. 7.2 ANNUAL MEETINGS OF MEMBERS. An annual meeting of the Members shall be held, each year, on the anniversary of the date of this Agreement, at 10:00 a.m. If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same time. At the annual meeting, the Members shall elect the Manager (or Managers) and transact such other business as may be properly brought before the meeting. 7.3 SPECIAL MEETINGS. Special meetings of the Members may be called at any time by the Manager or by one or more Members holding in the aggregate more than ten percent (10%) of the Percentage Interests. Upon receipt of a written request, which request may be mailed or delivered personally to the Manager, by any Person entitled to call a special meeting of Members, the Manager shall cause notice to be given to the Members that a meeting will be held at a time requested by the Person or Persons calling the meeting, which time for the meeting shall be not less than ten (10) nor more than sixty (60) days after the receipt of such request. If such notice is not given within twenty (20) days after receipt of such request, the Persons calling the meeting may give notice thereof in the manner provided by this Agreement. Page 15 of 28 7.4 NOTICE OF MEETINGS. Except as provided for in Section 7.3 for special meetings, notice of meetings shall be given to the Members in writing not less than ten (10) nor more than sixty (60) days before the date of the meeting by the Manager. Notices for regular and special meetings shall be given personally, by mail, or by facsimile, and shall be sent to each Member's last known business address appearing on the books of the LLC. Such notice shall be deemed given at the time it is delivered personally, or deposited in the mail, or sent by facsimile. Notice of any meeting of Members shall specify the place, the day and the hour of the meeting, and (i) in case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of an annual meeting, those matters which the Manager, at the date of mailing, intends to present for action by the Members. 7.5 VALIDATION OF MEMBERS' MEETINGS. The transactions of a meeting of Members which was not called or noticed pursuant to the provisions of Section 7.3 or 7.4 shall be valid as though transacted at a meeting duly held after regular call and notice, if Members holding in the aggregate fifty-one percent (51%) or more of the Percentage Interests are present, and if, either before or after the meeting, each of the Members entitled to vote but not present (whether in person or by proxy, as that term is used in the Statute) at the meeting signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the records of the LLC. Attendance shall constitute a waiver of notice, unless objection shall be made. 7.6 ACTIONS WITHOUT A MEETING. 7.6.1 Any action which may be taken at any annual or special meeting of Members may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by Members holding in the aggregate the number of votes equal to or greater than the Vote, unless a lesser vote is provided for by this Agreement or the Statute; provided, however, that any action which by the terms of this Agreement or by the Statute is required to be taken pursuant to a greater vote of the Members may only be taken by a written consent which has been signed by Members holding the requisite number of votes. 7.6.2 Unless the consents of all Members have been given in writing, notice of any approval made by the Members without a meeting by less than unanimous written consent shall be given at least ten (10) days before the consummation of the action authorized by such approval. Any Member giving a written consent may revoke the consent by a writing received by the LLC prior to the time that written consents of Members required to authorize the proposed action have been filed with the LLC. Such revocation is effective upon its receipt by the LLC. 7.7 QUORUM AND EFFECT OF VOTE. Each Member shall have a number of votes equal to the Percentage Interest held by such Member, provided that if, pursuant to the Statute or the terms of this Agreement, a Member is not entitled to vote on a specific Page 16 of 28 matter, then such Member's number of votes and Percentage Interest shall not be considered for purposes of determining whether a quorum is present, or whether approval by Vote of the Members has been obtained, in respect of such specific matter. Members holding an aggregate of fifty-one percent (51%) or more of the Percentage Interests shall constitute a quorum at all meetings of the Members for the transaction of business, and the Vote of Members shall be required to approve any action, unless a greater vote is required or a lesser vote is provided for by this Agreement or by the Statute. ARTICLE 8 RESTRICTIONS ON TRANSFER OR CONVERSION OF LLC INTERESTS, ADDITIONAL CAPITAL CONTRIBUTIONS; ADMISSION OF NEW MEMBERS 8.1 TRANSFER OR ASSIGNMENT OF MEMBER'S INTEREST, The Interest of each Member and the Economic Interest of a Person who is not a Member constitutes personal property of the Member or Economic Interest holder. Each Member and each Economic Interest holder has no interest in the Property. 8.1.1 A Member's Interest or an Economic Interest may be transferred or assigned only as provided in this Agreement. 8.1.2 No transfer, encumbrance or assignment ("Transfer") of a Member's Interest, or an Economic Interest, or any part thereof, in the LLC will be valid without the consent of a Majority in Interest of the Members, other than the Members proposing to dispose of its Interest. 8.1.3 Any holder of an Economic Interest shall have no right to vote or to participate in the management of the business and affairs of the LLC or to become or exercise any rights of a Member thereof. 8.2 VOID TRANSFERS. Any Transfer of an Interest which does not satisfy the requirements of Article 8, including, without limitation, Section 8.1.2, shall be null and void. 8.3 ADMISSION OF NEW MEMBERS. A new Member may be admitted into the LLC only upon the unanimous consent of all of the Members, which consent may be given or withheld in the sole and absolute discretion of each Member. 8.3.1 The amount of Capital Contribution which must be made by a new Member shall be determined by the Vote of all existing Members. Page 17 of 28 8.3.2 A new Member shall not be deemed admitted into the LLC until the Capital Contribution required of such Person shall have been made and such Person has become a party to this Agreement. 8.3.3 A new Member shall not be deemed admitted into the LLC until receipt by the Managers of a signed and acknowledged request from the Member proposing to Transfer an Interest that the proposed assignee be admitted as a Member, and execution by the proposed assignee of an amendment to the Agreement agreeing to be bound by the terms and provisions thereof. ARTICLE 9 BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS 9.1 MAINTENANCE OF BOOKS AND RECORDS. The LLC shall cause books and records of the LLC to be maintained in accordance with generally accepted accounting principles, and shall give reports to the Members in accordance with prudent business practices and the Statute. There shall be kept at the principal office of the LLC, as well as at the office of record of the LLC specified in Section 2.3, if different, the following LLC documents: 9.1.1 A current list of the full name and last known business or residence address of each Member and of each holder of an Economic Interest in the LLC set forth in alphabetical order, together with the Capital Contributions and share in Net Profits and Net Loss of each Member and holder of an Economic Interest; 9.1.2 A current list of the full name and business or residence address of each Manager; 9.1.3 A copy of the Articles of Organization and any amendments thereto, together with any powers of attorney pursuant to which the Articles of Organization and any amendments thereto were executed; 9.1.4 Copies of the LLC's federal, state and local income tax or information returns and reports, if any, for the six most recent Fiscal Years; 9.1.5 A copy of this Agreement and any amendments thereto, together with any powers of attorney pursuant to which this Agreement and any amendments thereto were executed; 9.1.6 Copies of the financial statements of the LLC, if any, for the six most recent Fiscal Years; 9.1.7 The LLC's books and records as they relate to the internal affairs of the LLC for at least the current and past four Fiscal Years; Page 18 of 28 9.1.8 Originals or copies of all minutes, actions by written consent, consents to action and waivers of notice to Members and Member Votes, actions and consents; and 9.1.9 Any other information required to be maintained by the LLC pursuant to the Statute. 9.2 ANNUAL ACCOUNTING. Within 120 days after the close of each Fiscal Year of the LLC, the LLC shall (i) cause to be prepared and submitted to each Member a balance sheet and income statement for the preceding Fiscal Year of the LLC (or portion thereof) in conformity with generally accepted accounting principles and (ii) provide to the Members all information necessary for them to complete federal and state tax returns. 9.3 INSPECTION AND AUDIT RIGHTS. Each Member and each holder of an Economic Interest in the LLC who is not a Member has the right upon reasonable request, for purposes reasonably related to the interest of that Person, to inspect and copy during normal business hours any of the LLC books and records required to be maintained in accordance with Section 9.1. Such right may be exercised by the Person or by that Person's agent or attorney. Any Member may require a review and/or audit of the books, records and reports of the LLC. The determination of the Manager as to adjustments to the financial reports, books, records and returns of the LLC, in the absence of fraud or gross negligence, shall be final and binding upon the LLC and all of the Members. 9.4 RIGHTS OF MEMBERS AND NON-MEMBERS. Upon the request of a Member or a holder of an Economic Interest who is not a Member, for purposes reasonably related to the interest of that Person, the Manager shall promptly deliver to the Member or holder of an Economic Interest, at the expense of the LLC, a copy of this Agreement and a copy of the information listed in Sections 9.1.1, 9.1.2 and 9.1.4 of this Agreement. 9.5 BANK ACCOUNTS. The bank accounts of the LLC shall be maintained in such banking institutions as the Manager shall determine, provided such institutions have a net worth in excess of One Hundred Million Dollars ($100,000,000). 9.6 TAX MATTERS HANDLED BY MANAGERS. One of the Managers who is also a Member, or in the event no Manager is a Member, a Member or an officer of a corporate Member, shall be designated as "Tax Matters Partner" (as defined in Code section 6231), to represent the LLC (at the LLC's expense) in connection with all examinations of the LLC's affairs by tax authorities, including resulting judicial and administrative proceedings, and to expend LLC funds for professional services and costs associated therewith. In its capacity as "Tax Matters Partner," the designated Person shall oversee the LLC tax affairs in the overall best interests of the LLC. Unless the Members designate another Member to be "Tax Matters Partner," Tim Novoselski shall be the "Tax Matters Partner." Page 19 of 28 9.7 FEDERAL INCOME TAX ELECTIONS MADE BY MANAGERS. The Manager on behalf of the LLC may make all elections for federal income tax purposes, including but not limited to, the following: 9.7.1 USE OF ACCELERATED DEPRECIATION METHODS. To the extent permitted by applicable law and regulations, the LLC may elect to use an accelerated depreciation method on any depreciable unit of the assets of the LLC; and 9.7.2 ADJUSTMENT OF BASIS OF ASSETS. In case of a transfer of all or part of the Interest of any Member, the LLC may elect, pursuant to code Sections 734, 743, and 754 of the Code to adjust the basis of the assets of the LLC. 9.7.3 ACCOUNTING METHOD. For financial reporting purposes, the books and records of the LLC shall be kept on the accrual method of accounting applied in a consistent manner and shall reflect all transactions of the LLC and be appropriate and adequate for the purposes of the LLC. 9.8 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware of the income tax consequences of the allocations made by this Agreement and hereby agree to be bound by the provisions of this Section 9.8 in reporting their shares of the LLC income and loss for income tax purposes. ARTICLE 10 TERMINATION AND DISSOLUTION 10.1 DISSOLUTION. The LLC shall be dissolved upon the occurrence of any of the following events: 10.1.1 When the Period of Duration of the LLC expires; 10.1.2 The written approval by a Majority In Interest of the Members to dissolve the LLC; 10.1.3 The death, withdrawal, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event which terminates the Member's continued membership in the LLC, unless the Managers and a Majority in Interest of the remaining Members, within ninety (90) days of the happening of that event, consent to continue any business of the LLC. For purposes of this Section 10.1.3, a "Majority in Interest" means a majority of both capital and profits interest, as determined under Revenue Procedure 94-46, 1994-28 I.R.B. 129. Page 20 of 28 10.2 STATEMENT OF INTENT TO DISSOLVE. As soon as possible after the occurrence of any of the events specified in Section 10.1 above, the LLC shall execute a Statement of Intent to Dissolve in such form as prescribed by the Secretary of State. 10.3 CONDUCT OF BUSINESS. Upon the filing of the Statement of Intent to Dissolve with the Secretary of State, the LLC shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but the LLC's separate existence shall continue until the Articles of Dissolution have been filed with the Secretary of State or until a decree dissolving the LLC has been entered by a court of competent jurisdiction. 10.4 DISTRIBUTION OF NET PROCEEDS. The Members shall continue to divide Net Profits and Losses and Available Cash Flow during the winding-up period in the same manner and the same priorities as provided for in Articles 4 and 5 hereof. The proceeds from the liquidation of Property shall be applied in the following order: 10.4.1 To the payment of creditors, in the order of priority as provided by law, except to Members on account of their contributions; 10.4.2 To the payment of loans or advances that may have been made by any of the Members or their Principals for working capital or other requirements of the LLC; 10.4.3 To the Members in accordance with the positive balances in their Capital Accounts after adjustments for all allocations of Net Profits and Net Loss. Where the distribution pursuant to this Section 10.4 consists both of cash (or cash equivalents) and non-cash assets, the cash (or cash equivalents) shall first be distributed, in a descending order, to fully satisfy each category starting with the most preferred category above. In the case of noncash assets, the distribution values are to be based on the fair market value thereof as determined in good faith by the liquidator, and the shortest maturity portion of such non-cash assets (e.g., notes or other indebtedness) shall, to the extent such non-cash assets are readily divisible, be distributed, in a descending order, to fully satisfy each category above, starting with the most preferred category. ARTICLE 11 INDEMNIFICATION OF THE MEMBERS, MANAGERS, AND THEIR AFFILIATES 11.1 INDEMNIFICATION OF THE MEMBERS AND THEIR PRINCIPALS. The LLC shall indemnify and hold harmless the Members, the Managers, their Affiliates and their respective officers, directors, employees, agents and Principals (individually, an "Indemnitee") from and against any and all losses, claims, demands, costs, damages, Page 21 of 28 liabilities, joint and several, expenses of any nature (including reasonable attorneys' fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or investigative, in which the Indemnitee was involved or may be involved, or threatened to be involved, as a party or otherwise, arising out of or incidental to the Business of the LLC, excluding liabilities to any Member, regardless of whether the Indemnitee continues to be a Member, an Affiliate, or an officer, director, employee, agent or Principal of the Member at the time any such liability or expense is paid or incurred, to the fullest extent permitted by the Statute and all other applicable laws. No Manager shall be liable to any of the Members for good faith errors (meaning mistakes of judgment or losses due to such mistakes or to the negligence or bad faith of any employee, broker, adviser or other agent or representative of the LLC, provided that such agent or representative was selected with reasonable care). The Managers may consult with legal counsel and shall have no liability for the consequences of any action or omission resulting from good faith reliance on the advice of such counsel. The exculpation provided herein also shall apply to the agents, employees and other legal representatives of each Manager. 11.2 EXPENSES. Expenses incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding subject to Section 11.1 shall, from time to time, be advanced by the LLC prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the LLC of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that such Person is not entitled to be indemnified as authorized in Section 11.1. 11.3 INDEMNIFICATION RIGHTS NON-EXCLUSIVE. The indemnification provided by Section 11.1 shall be in addition to any other rights to which those indemnified may be entitled under any agreement, vote of the Members, as a matter of law or equity or otherwise, both as to action in the Indemnitee's capacity as a Member, as an Affiliate or as an officer, director, employee, agent or Principal of a Member and as to any action in another capacity, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee. 11.4 ERRORS AND OMISSIONS INSURANCE. The LLC may purchase and maintain insurance, at the LLC's expense, on behalf of the Members and such other Persons as the Members shall determine, against any liability that may be asserted against, or any expense that may be incurred by, such Person in connection with the activities of the LLC and/or the Members' acts or omissions as the Members of the LLC regardless of whether the LLC would have the power to indemnify such Person against such liability under the provisions of this Agreement. 11.5 ASSETS OF THE LLC. Any indemnification under Section 11.1 shall be satisfied solely out of the assets of the LLC. No Member shall be subject to personal liability or required to fund or to cause to be funded any obligation by reason of these indemnification provisions. Page 22 of 28 ARTICLE 12 ISSUANCE OF LLC CERTIFICATES 12.1 ISSUANCE OF LLC CERTIFICATES. The interest of each Member in the LLC shall be represented by an LLC Certificate. Upon the execution of this Agreement and the payment of the Capital Contributions by the Members pursuant to Section 3.2 hereof, the Manager shall cause the LLC to issue one or more LLC Certificates in the name of each Member certifying that the Person named therein is the record holder of the LLC Units (representing such Member's Percentage Interest of the total of the initial 1,000 LLC Units) set forth therein. For purposes of this Agreement, the term "record holder" shall mean the person whose name appears in Section 1.27 as the Member owning the LLC Interest at issue. 12.2 TRANSFER OF LLC CERTIFICATES. An LLC Interest which is transferred in accordance with the terms of Article 8.1 of this Agreement shall be transferable on the books of the LLC by the record holder thereof in person or by such record holder's duly authorized attorney, but, except as provided in Section 12.3 hereof with respect to lost, stolen or destroyed certificates, no transfer of an LLC Interest shall be entered until the previously issued LLC Certificate representing such LLC Interest shall have been surrendered to the LLC and cancelled and a replacement LLC Certificate issued to the assignee of such LLC Interest in accordance with such procedures as the Manager may establish. The Manager shall issue to the transferring Member a new LLC Certificate representing the LLC Units not being transferred by the Member, in the event such Member only transferred some, but not all, of the LLC Units represented by the original LLC Certificate. Except as otherwise required by law, the LLC shall be entitled to treat the record holder of an LLC Certificate on its books as the owner thereof for all purposes regardless of any notice or knowledge to the contrary. 12.3 LOST, STOLEN OR DESTROYED CERTIFICATES. The LLC shall issue a new LLC Certificate in place of any LLC Certificate previously issued if the record holder of the LLC Certificate: 12.3.1 makes proof by affidavit, in form and substance satisfactory to the Manager, that a previously issued LLC Certificate has been lost, destroyed or stolen; 12.3.2 requests the issuance of a new LLC Certificate before the LLC has notice that the LLC Certificate has been acquired by a purchaser for value in good faith and without notice of an adverse claim 12.3.3 if requested by the Manager, delivers to the LLC a bond, in form and substance reasonably satisfactory to the Manager, with such surety or sureties and with fixed or open penalty as the Manager may direct, in his reasonable discretion, to Page 23 of 28 indemnify the LLC against any claim that may be made on account of the alleged loss, destruction or theft of the LLC Certificate; and 12.3.4 satisfies any other reasonable requirements imposed by the Manager. If a Member fails to notify the LLC within a reasonable time after it has notice of the loss, destruction or theft of an LLC Certificate, and a transfer of the LLC Interest represented by the LLC Certificate is registered before receiving such notification, the LLC shall have no liability with respect to any claim against the LLC for such transfer or for a new LLC Certificate. ARTICLE 13 AMENDMENTS 13.1 AMENDMENT OF AGREEMENT. This Agreement may be adopted, altered, amended, or repealed and a new operating agreement may be adopted by consent of the Managers and a Majority In Interest of the Members, which consent may be given or withheld in the sole and absolute discretion of the Managers and the Members. 13.2 AMENDMENT OF ARTICLES OF ORGANIZATION. Notwithstanding any provision to the contrary in the Articles of Organization or this Agreement, in no event shall the Articles of Organization be amended without the consent of the Managers and a Majority In Interest of the Members, which consent may be given or withheld in the sale and absolute discretion of the Managers and the Members. ARTICLE 14 MISCELLANEOUS PROVISIONS 14.1 COUNTERPARTS. This Agreement may be executed in several counterparts, and all counterparts so executed shall constitute one Agreement, binding on all of the parties hereto, notwithstanding that all of the parties are not signatory to the original or the same counterpart. 14.2 SURVIVAL OF RIGHTS. This Agreement shall be binding upon, and, as to permitted or accepted successors, transferees and assigns, inure to the benefit of the Members and the LLC and their respective heirs, legatees, legal representatives, successors, transferees and assigns, in all cases whether by the laws of descent and distribution, merger, reverse merger, consolidation, sale of assets, other sale, operation of law or otherwise. Page 24 of 28 14.3 SEVERABILITY. In the event any Section, or any sentence within any Section, is declared by a court of competent jurisdiction to be void or unenforceable, such sentence or Section shall be deemed severed from the remainder of this Agreement and the balance of this Agreement shall remain in full force and effect. 14.4 NOTIFICATION OR NOTICES. Except for notices to be given under Articles 6 and 7 for purposes of meetings of Managers and meetings of Members, any notice or other communication required or permitted hereunder shall be in writing and shall be deemed to have been given if personally delivered, transmitted by facsimile (with mechanical confirmation of transmission), or deposited in the United States mail, registered or certified, postage prepaid, addressed to the parties' addresses set forth below. Notices given in the manner provided for in this Section 14.4 shall be deemed effective on the third day following deposit in the mail or on the day of transmission or delivery if given by facsimile or by hand. Notices must be addressed to the parties hereto at the following addresses, unless the same shall have been changed by notice in accordance herewith: 14.5 CONSTRUCTION. The language in all parts of this Agreement shall be in all cases construed simply according to its fair meaning and not strictly for or against any of the Members. 14.6 SECTION HEADINGS. The captions of the Articles or Sections in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any of the provisions hereof, shall not be deemed part of this Agreement and shall not be used in construing or interpreting this Agreement. 14.7 GOVERNING LAW. This Agreement shall be construed according to the laws of the State of California. 14.8 ADDITIONAL DOCUMENTS. Each Member, upon the request of another Member, agrees to perform all further acts and execute, acknowledge and deliver all documents which may be reasonably necessary, appropriate or desirable to carry out the provisions of this Agreement, including but not limited to acknowledging before a notary public any signature heretofore or hereafter made by a Member. 14.9 PRONOUNS AND PLURALS. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine and neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. 14.10 TIME OF THE ESSENCE. Except as otherwise provided herein, time is of the essence in connection with each and every provision of this Agreement. 14.11 FURTHER ACTIONS. Each of the Members agrees to execute, acknowledge and deliver such additional documents, and take such further actions, as may reasonably be required from time to time to carry out each of the provisions, and the intent, of Page 25 of 28 this Agreement, and every agreement or document relating hereto, or entered into in connection herewith. 14.12 MANDATORY ARBITRATION. Subject to the provision of Section 14.13 below, in the event of any controversy, dispute or claim arising out of or related to this agreement, or the interpretation, breach, termination or validity hereof, the parties shall submit such controversy, dispute or claim to binding arbitration hereunder. All arbitration proceedings pursuant to this section shall be before a retired judge of the United States District Court for the Central District of California, Los Angeles Division, or the Los Angeles County Superior Court or such other arbitrator as the parties shall mutually agree upon. In the event that the parties are unable to agree upon the selection of an arbitrator, any party may request the presiding judge of the United States District Court for the Central District of California, Los Angeles Division, or the Los Angeles County Superior Court to appoint such arbitrator. Arbitration of the dispute shall commence no later than thirty (30) days after the selection or appointment of such arbitrator. The arbitrator shall be bound by the express terms of this agreement and shall endeavor to reach his or her decision as quickly as possible, which decision shall be final and binding on the parties to this agreement. The arbitrator shall also have the power to award costs and expenses (including, without limitation, attorneys' fees) to the prevailing party. Application to enforce the arbitrator's decision can be made in any court or other tribunal of competent jurisdiction; any other application or dispute shall be submitted to the United States District Court for the Central District of California, Los Angeles Division, or the Los Angeles County Superior Court for determination. The rules of discovery then pertaining to the United States District Court for the Central District of California, Los Angeles Division, or a California State Court of Law, as the case may be, shall apply to any such arbitration, including, without limitation, sections 1283.01 and 1283.05 of the California Code of Civil Procedure, the provisions of which are hereby incorporated herein and made a part hereof by reference. The provisions of the California Arbitration Statute, contained in the California Code of Civil Procedure Section 1280 et seq. Shall apply. The parties hereby consent to arbitration to be held within the City of Los Angeles, State of California and agree that all actions or proceedings relating to this agreement shall take place in the City of Los Angeles, and waive any objections that they may have based on improper venue or forum non conveniens. NOTICE: BY SIGNING THIS AGREEMENT, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE MANDATORY ARBITRATION OF DISPUTES' PROVISION DECIDED BY NEUTRAL ARBITRATION AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES' PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE APPLICABLE STATE STATUTE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. Page 26 of 28 WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES' PROVISION TO NEUTRAL ARBITRATION. 14.13 EQUITABLE RELIEF. Each party agrees that a monetary remedy for any breach or threatened breach of any provision of Article 8 would be inadequate and impracticable and extremely difficult to prove, and that such breach or threatened breach would cause the other parties irrevocable harm. Accordingly, each party agrees that the other parties shall be entitled to temporary and permanent injunctive relief, specific performance and other equitable relief for any breach or threatened breach of any provision of Article 8 above, without the necessity of proving actual damages. Nothing contained in this section, however, shall be deemed to constitute a waiver of the right of arbitration or shall be construed as prohibiting or precluding any party from pursuing any other rights and remedies that may be available to such party for such breach or threatened breach, including, without limitation, recovery of damages from the defaulting party. 14.14 WAIVER OF JURY. Waiver of jury with respect to any dispute arising under or in connection with this agreement or any related agreement, as to which no member invokes the right to arbitration hereinabove provided, or as to which legal action nevertheless occurs, each member hereby irrevocably waives all rights it may have to demand a jury trial. This waiver is knowingly, intentionally, and voluntarily made by the members and each member acknowledges that none of the other members nor any person acting on behalf of the other parties has made any representation of fact to induce this waiver of trial by jury or in any way to modify or nullify its effect. The members each further acknowledge that it has been represented (or has had the opportunity to be represented) in the signing of this agreement and in the making of this waiver by independent legal counsel, selected of its own free will, and that it has had the opportunity to discuss this waiver with counsel. The members each further acknowledges that it has read and understand the meaning and ramifications of this waiver provision. 14.15 THIRD PARTY BENEFICIARIES. There are no third party beneficiaries of this Agreement except (i) Affiliates and Principals of the Members and (ii) any other Persons as may be entitled to the benefits of Article 11.1 hereof. 14.16 TAX ELECTIONS. The Managers, in their sole discretion, shall cause the LLC to make or not make all elections required or permitted to be made for income tax purposes. 14.17 PARTITION. The Members agree that the Property that the LLC may own or have an interest in is not suitable for partition. Each of the Members hereby irrevocably waives any and all rights that it may have to maintain any action for partition of any Property the LLC may at any time have an interest in. 14.18 ENTIRE AGREEMENT. This Agreement and the Articles of Organization constitute the entire agreement of the Members with respect to, and supersedes Page 27 of 28 all prior written and oral agreements, understandings and negotiations with respect to, the subject matter hereof. 14.19 WAIVER. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition. 14.20 ATTORNEYS' FEES. In the event of any litigation, arbitration or other dispute arising as a result of or by reason of this Agreement, the prevailing party in any such litigation, arbitration or other dispute shall be entitled to, in addition to any other damages assessed, its reasonable attorneys' fees, and all other costs and expenses incurred in connection with settling or resolving such dispute. The attorneys' fees which the prevailing party is entitled to recover shall include fees for prosecuting or defending any appeal and shall be awarded for any supplemental proceedings until the final judgment is satisfied in full. In addition to the foregoing award of attorneys' fees to the prevailing party, the prevailing party in any lawsuit or arbitration procedure on this Agreement shall be entitled to its reasonable attorneys' fees incurred in any post judgment proceedings to collect or enforce the judgment. This attorneys' fees provision is separate and several and shall survive the merger of this Agreement into any judgment. 14.21 CONFIDENTIALITY. The Members and their respective Affiliates and Principals hereby agree that it is in all of their best interests to keep this Agreement and the Business of the LLC and all information concerning such business confidential. IN WITNESS WHEREOF, the parties hereto have hereunto executed this Agreement as of the date first written above. /s/ Tim Novoselski -------------------------------- TIM NOVOSELSKI /s/ Denise Novoselski -------------------------------- DENISE NOVOSELSKI Page 28 of 28 EXHIBIT A (FACE OF CERTIFICATE) THE LLC INTERESTS AND LLC UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. SUCH LLC INTERESTS AND LLC UNITS MAY NOT BE SOLD OR TRANSFERRED UNLESS SUBSEQUENTLY REGISTERED OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. THE LLC AGREEMENT (AS DEFINED BELOW) PROVIDES FOR FURTHER RESTRICTIONS ON TRANSFER OF THE LLC INTERESTS AND LLC UNITS REPRESENTED HEREBY. CERTIFICATE FOR LLC INTEREST IN COMMCORP, LLC Certificate No. ___________ _________ LLC UNITS TIM NOVOSELSKI and DENISE NOVOSELSKI, as the Managers of CommCorp, LLC, a California limited liability LLC (the "LLC"), hereby certify that _________________________________________________ is the holder of _________ LLC Offered Interest, as that term is defined in the Operating Agreement of California, LLC, dated as of October 14, 1997, as amended and restated from time to time (the "Agreement") (copies of which are on file at the principal office of the LLC). This Certificate is not negotiable or transferable except by operation of law, or as otherwise provided in the Agreement, and any such transfer will be valid only upon delivery of this Certificate, together with an assignment in the form set forth on the reverse hereof (or otherwise acceptable to the Managers and sufficient to convey an interest in an LLC pursuant to the (California) Beverly-Killea Limited Liability LLC Act, as it may be amended and in effect from time to time, or any successor statute thereto), duly executed, to the Managers of the LLC. Dated:________________ ____________________________________ TIM NOVOSELSKI and DENISE NOVOSELSKI Managers of CommCorp, LLC A California Limited Liability Company EXHIBIT A - 1 - (REVERSE OF CERTIFICATE) ASSIGNMENT OF LLC INTEREST IN COMMCORP, LLC FOR VALUE RECEIVED, the undersigned ("Assignor") hereby assigns, conveys, sells and transfers unto ________________________________________________________________________________ ("Assignee") ________________________________________ _____________________________ (Please insert Social Security (Please print or typewrite or other identifying number of Assignee) name and address of Assignee) all rights and interest of Assignor in _________ LLC Units evidenced hereby and directs that all future distributions and allocations with respect to such specified assigned LLC Units be paid or allocated by the LLC to such Assignee. The Assignor hereby irrevocably constitutes and appoints the Managers, and each of them, as Assignor's attorney-in-fact with full power of substitution in the premises to transfer the same on the books of the LLC. Dated: __________________________ _______________________________ Signature of Assignor Signature guaranteed: _________________________________________ Note: The signature to any assignment must correspond with the name as written upon the face of this Certificate, in every particular, without alteration or enlargement or any change whatever. If the assignment is executed by an attorney, executor, administrator, trustee or guardian, the person executing the assignment must give such person's full title in such capacity, and proper evidence of authority to act in such capacity, if not on file with the LLC or its transfer agent, must be forwarded with this Certificate. EXHIBIT A - 2 - The undersigned, the Managers of the LLC, hereby consents to this Assignment pursuant to Section 12.2 of the Agreement. Dated: _____________________ ____________________________ _____________________________ TIM NOVOSELSKI DENISE NOVOSELSKI Manager Manager THE LLC INTEREST AND LLC UNITS EVIDENCED HEREBY ARE SUBJECT TO ALL TERMS AND CONDITIONS OF THE AGREEMENT AND UNLESS AND UNTIL ADMITTED TO THE LLC AS A MEMBER, NO ASSIGNEE SHALL BE ENTITLED TO ANY OF THE RIGHTS, POWERS OR PRIVILEGES OF THE ASSIGNOR EXCEPT THAT ASSIGNEE SHALL BE ENTITLED TO THE DISTRIBUTIONS PAID AND ALLOCATIONS MADE WITH RESPECT TO SUCH INTEREST AS DIRECTED BY THE ASSIGNOR ABOVE. EXHIBIT A - 3 - AMENDMENT TO LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF COMMCORP, LLC A CALIFORNIA LIMITED LIABILITY COMPANY AMENDMENT, dated as of October 1, 1998 (this "Amendment"), to the Limited Liability Company Operating Agreement (the "Agreement") of CommCorp, LLC, a California Limited Liability Company ("CommCorp"), dated as of October 14, 1997, among PRIMEDIA Intertec Corporation, a Delaware corporation ("Intertec"), and Plaza Communications, Inc., a Delaware corporation ("Plaza," together with Intertec, "Purchaser"). W I T N E S S E T H WHEREAS, Purchaser has entered into a Purchase Agreement pursuant to which Purchaser acquired all of the issued and outstanding membership interests of CommCorp as of October 1, 1998; and WHEREAS, Purchaser desires to amend the Agreement as provided hereunder; NOW, THEREFORE, Purchaser has acquired all the membership interests of CommCorp and are now the sole parties to the Agreement and the parties hereto agree as follows: 1. Amendments. (a) Article 1 of the Agreement is hereby amended by deleting both of the Initial Members' names and interest percentages in Section 1.26 and inserting new Members and interest percentages as follows: "PRIMEDIA Intertec Corporation, a Delaware corporation: 99% "Plaza Communications, Inc., a Delaware corporation: 1%." (b) Article 3 of the Agreement is hereby amended by deleting both of the Initial Members in Section 3.1 and inserting new Members in Section 3.1 as follows: "PRIMEDIA Intertec Corporation, a Delaware corporation, whose address is 9800 Metcalf, Overland Park, Kansas 66212-2215. "Plaza Communications, Inc., a Delaware corporation, whose address is 745 Fifth Avenue, New York, New York 10151-0099." (c) Article 6 of the Agreement is hereby amended by deleting Tim Novoselski and Denise Novoselski as Managers and replacing them with Charles G. McCurdy and Beverly C. Chell, who shall serve as the Managers of CommCorp. (d) Other than as set forth in this Amendment, all terms and conditions of the Agreement shall remain unchanged in full force and effect. IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first above written. PRIMEDIA INTERTEC CORPORATION By: /s/ Beverly C. Chell ---------------------------------- Name: Beverly C. Chell Title: Vice Chairman PLAZA COMMUNICATIONS, INC. By: /s/ Ann M. Riposanu ---------------------------------- Name: Ann M. Riposanu Title: Vice Chairman EX-3.153 13 EXHIBIT 3.153 Exhibit 3.153 ================================================================================ State of Florida [GRAPHIC OMITTED] Department of State I certify the attached is a true and correct copy of the Articles of Incorporation of MADDUX PUBLISHING, INC., a corporation organized under the laws of the State of Florida, filed on October 19, 1983, as shown by the records of this office. The document number of this corporation is G66717. Given under my hand and the Great Seal of the State of Florida at Tallahassee, the Capitol, this the Nineteenth day of June, 1998 [Seal of the State of Florida Omitted]] /s/ Sandra B. Mortham Sandra B. Mortham Secretary of State ================================================================================ EFFECTIVE DATE [ILLEGIBLE] -------------- ARTICLES OF INCORPORATION OF MADDUX PUBLISHING, INC. We, the undersigned, hereby associate ourselves together for the purpose of becoming a corporation for profit under the laws of the State of Florida. ARTICLE I NAME The name of the corporation is Maddux Publishing, Inc. ARTICLE II DURATION The term of existence of this corporation shall commence on October 19, l983, and shall be perpetual. ARTICLE III PURPOSE The general nature of the business to be transacted by this corporation and its purpose is: to manufacture, purchase, or otherwise acquire, and to own, mortgage, pledge, sell, assign, transfer, or otherwise dispose of, and to invest in, trade in, deal in and with goods, wares, merchandise, real and personal property, and services, of every class, kind, and description, or any other business activity permitted under the laws of the United States and of the State of Florida. ARTICLE IV PREEMPTIVE RIGHTS GRANTED Each shareholder of any class of stock of this corporation shall be entitled to full preemptive rights to purchase any unissued or treasury shares of the corporation and any securities of the corporation convertible into or carrying a right to subscribe to or acquire shares of an unissued or treasury shares. ARTICLE V REGISTERED OFFICE The address of the initial registered office of the corporation is One Beach Drive, SE, Suite 205, St. Petersburg, Florida. The initial resident agent at this address will be C. Philip Campbell, Jr. ARTICLE VI CAPITAL STOCK The corporation is hereby authorized to issue ten thousand (10,000) shares of common stock with the par value of ten cents ($0.10) per share. ARTICLE VII DIRECTORS The initial Board of Directors of this Corporation shall consist of one (1) member whose name and address is: NAME ADDRESS ---- ------- Carlen Maddux 138 16th Avenue North St. Petersburg, Florida 33701 The number of directors may be either increased or decreased from time to time by the Bylaws but shall never be less than one(1). ARTICLE VIII INCORPORATORS The name and address of the Incorporator is: NAME ADDRESS ---- ------- Carlen Maddux 138 16th Avenue North St. Petersburg, Florida 33701 IN WITNESS WHEREOF, the undersigned has made and subscribed these Articles of Incorporation at St. Petersburg, Pinellas County, Florida, for the use and purposes aforesaid. /s/ Carlen Maddux ----------------- CARLEN MADDUX STATE OF FLORIDA DEPARTMENT OF STATE Certificate Designating Place of Business or Domicile for the Service of Process Within This State, Naming Agent Upon Whom Process may Be Served and Names and Addresses of the Officers and Directors. -------------------- The following is submitted, in compliance with Chapter 48.091, Florida Statutes: Maddux Publishing, Inc., a corporation organized (or organizing) under the Laws of the State of Florida with its registered office at One Beach Drive, SE, Suite 205, in the City of St. Petersburg, County of Pinellas, State of Florida, has named C. Philip Campbell, Jr., located at said registered office, as its agent to accept service of process within this state. OFFICERS: NAME TITLE SPECIFIC ADDRESS CARLEN MADDUX President 138 16th Avenue North St. Petersburg, Florida 33701 CARLEN MADDUX Secretary Same as above CARLEN MADDUX Treasurer Same as above DIRECTORS: SPECIFIC ADDRESS CARLEN MADDUX Same as above BY: /s/ Carlen Maddux ----------------------- (Corporate Officer) ACCEPTANCE: I agree as Resident Agent to accept Service of Process; to keep office open during prescribed hours; to post my name (and any other officers of said corporation authorized to accept service of process at the above Florida designated address) in some conspicuous place in office as required by Law. /s/ C. Philip Campbell, Jr. --------------------------- Resident Agent STATE OF FLORIDA ) COUNTY OF PINELLAS ) BE IT REMEMBERED, that on the 19 day of October, 1983, personally appeared before the undersigned, a Notary Public of the State of Florida, CARLEN MADDUX, party to the foregoing Articles of Incorporation, and who acknowledged and declared that he did make, subscribe and acknowledge these foregoing Articles of Incorporation as his voluntary act and deed and that the facts therein set forth are true and correct to the best of his knowledge. /s/ [ILLEGIBLE] ------------------------------- NOTARY PUBLIC, State of Florida My Commission Expires: EX-3.154 14 EXHIBIT 3.154 Exhibit 3.154 ================================================================================ STATE OF FLORIDA [GRAPHIC OMITTED] Department of State I certify from the records of this office that MADDUX PUBLISHING, INC., is a corporation organized under the laws of the State of Florida, filed on October 19, 1983. The document number of this corporation is G66717. I further certify that said corporation has paid all fees and penalties due this office through December 31, 1998, that its most recent annual report was filed on February 16, 1998, and its status is active. I further certify that said corporation has not filed Articles of Dissolution. Given under my hand and the Great Seal of the State of Florida at Tallahassee, the Capitol, this the Nineteenth day of June, 1998 [SEAL OF THE STATE OF FLORIDA OMITTED] /s/ Sandra B. Mortham Sandra B. Mortham Secretary of State ================================================================================ BY-LAWS OF MADDUX PUBLISHING, INC. ARTICLE I NAME, REGISTERED OFFICE AND REGISTERED AGENT Section 1. NAME. The name of this Corporation is MADDUX PUBLISHING, INC. Section 2. REGISTERED OFFICE AND REGISTERED AGENT. The address of the registered office of the Corporation shall be One Beach Drive, SE, Suite 205, St. Petersburg, Pinellas County, Florida. The Corporation may also have offices at such other places as the Board of Directors may from time to time appoint, or as the business of the Corporation may require. ARTICLE II SEAL AND FISCAL YEAR Section 1. SEAL. The seal of this Corporation shall have inscribed on it the name of this Corporation, the date of its organization and the words "Corporate Seal, State of Florida." Section 2. FISCAL YEAR. The fiscal year of this Corporation shall be determined by the Board of Directors upon filing the tax return of the Corporation. ARTICLE III MEETING OF STOCKHOLDERS Section 1. ANNUAL MEETING. The annual meeting of Stockholders shall be held at the principal office of the Corporation, in the City of St. Petersburg, County of Pinellas, State of Florida, or at such other places as the Board of Directors may from time to time determine, either within or without the State of Florida in the month of June of each year, and at such time as the Directors may designate. The Secretary shall serve personally, or by mail, a written notice thereof, not less than 20 days nor more than 45 days previous to such meeting, addressed to each stockholder at his address as it appears on the stock book; but at any meeting at which all Stockholders shall be present, or of which all Stockholders not present have waived notice in writing, the giving of notice as above required may be dispensed with. If the annual meeting of Stockholders be not held as herein prescribed, the election of Directors may be held at any meeting thereafter called pursuant to these By-Laws. -2- Section 2. SPECIAL MEETINGS. Special meetings of Stockholders other than those regulated by Statute, may be called at any time by: the President; a majority of the Board of Directors; or the Secretary, upon the request of Stockholders owning at least 51% of the outstanding stock of the Corporation entitled to vote at such meeting. Notice of such meeting stating the purpose for which it is called shall be served personally or by mail by the Secretary not less than 7 days before the date set for such meeting. If mailed, it shall be directed to a Stockholder at his address as it appears on the stock book; but at any meeting of which all Stockholders shall be present, or of which Stockholders not present have waived notice in writing, the giving of notice as above described may be dispensed with. No business other than that specified in the call for the meeting, shall be transacted at any meeting of the Stockholders, except upon the unanimous consent of all the Stockholders entitled to notice thereof. Special meetings may be held within or without the State of Florida. Section 3. ADJOURNMENTS. Any meeting of shareholders may be adjourned. Notice of the adjourned meeting or of the business to be transacted there, other than by announcement at the meeting at which the adjournment is taken shall not be necessary. If, however, after the adjournment the board fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given in compliance with Section 2 hereof to each shareholder of record on the new record date entitled to vote at such meeting. At an adjourned meeting at which a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. Section 4. INFORMAL ACTION BY SHAREHOLDERS. Any action that may be taken at a shareholders' meeting may be taken without a meeting if a consent in writing, setting forth the action, shall be signed by the holders of outstanding stock 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, and filed with the Secretary of the corporation. Within ten (10) days after obtaining such authorization by written consent, notice must be given to those shareholders who have not consented in writing to such action taken. Section 5. VOTING. At all meetings of the Stockholders, each Stockholder of the Corporation shall be entitled at each proposal presented at the meeting, to one vote for each share of voting stock recorded in the name of such Stockholder on the books of the company. All voting may be viva voce, but any qualified voter may demand a stock vote whereupon such stock vote shall be taken by ballot, each of which shall state the name of the Stockholder voting and the number of shares voted by him. Votes may be cast in person or by written authorized proxy. Any ballot including proxy shall state the name of the shareholder on such proxy in order to be valid. Section 6. PROXY. Each proxy must be executed in writing by the Stockholder of the Corporation, or his duly authorized attorney in fact. No proxy shall be valid after the expiration of eleven (11) months from the date of its execution unless it shall have specified therein its duration. Section 7. QUORUM. The presence in person or by proxy of the holders of a majority of the shares outstanding and entitled to vote shall constitute a quorum at shareholders' meetings, but in no event can a quorum consist of less than one-third (1/3) of the shares entitled to vote. At a duly organized meeting shareholders present can continue to do business until adjournment even though enough shareholders withdraw to leave less than a quorum. The affirmative vote of a majority of the shares present and entitled to vote shall be the act of the shareholders. Section 8. FIXING OF RECORD DATE. For the purpose of determining shareholders entitled to notice of, or to vote at, any meeting of shareholders, or any adjournment thereof, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice or to vote at the meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed, or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders has been made, as provided herein, such determination shall apply to any adjournment thereof, unless the Board of Directors fixes a new record date for the adjourned meeting. Section 9. VALIDATION. When Stockholders who hold four-fifths of the voting stock having the right and entitled to vote at any meeting shall be present at such meeting, however called or notified, and shall sign a written consent thereto on the record of the meeting, the acts of such meeting shall be as valid as if legally called and notified. Section 10. ORDER OF BUSINESS. The annual meeting of the Stockholders shall proceed as follows: A. Calling meeting to order. B. Proof of mailing notice of meeting or waiver of notice. C. Reading of Minutes of last previous annual meeting. D. Reports of officers. E. Reports of committees. F. Election of directors. G. Miscellaneous business. -3- ARTICLE IV BOARD OF DIRECTORS Section 1. NUMBER. The affairs and business of this Corporation shall be managed and its corporate powers exercised by a Board of Directors composed of not less than one (1), nor more than five (5) directors, who need not be stockholders of record. All of the directors shall be of full age and at least one of such directors shall be a citizen of the United States. Section 2. HOW ELECTED. At the annual meeting of Stockholders, the one (1) person receiving a plurality of the votes cast shall be the director and shall constitute the Board of Directors until the next annual meeting of the Stockholders and election and qualification of their successors. Section 3. TERM OF OFFICE. The term of office of each of the directors shall be one (1) year, and thereafter until his successor has been elected and qualified. Section 4. DUTIES. The affairs and business of this Corporation shall be managed and its corporate powers exercised by a Board of Directors composed of one (1) member who need not be a Stockholder of record. All of the Directors shall in all cases act as a Board, regularly convened, by majority vote, and they may adopt such rules and regulations for the conduct of their meetings and the management of the company as they may deem proper, not inconsistent with these By-Laws, the Articles of Incorporation, and the Laws of the State of Florida. Section 5. DIRECTORS' MEETINGS. Regular meetings of the Board of Directors shall be held immediately following the meetings of the Stockholders, and at such other times as the Board of Directors may determine. Special meetings of the Board of Directors may be called by the President at any time, and shall be called by the President or the Secretary upon the written request of two (2) directors. Directors' meetings may be held within or without the State of Florida. Section 6. ANNUAL MEETING. The Board of Directors shall meet each year immediately after the annual meeting of the shareholders at the place that meeting has been held to elect officers and consider other business. Section 7. NOTICE OF MEETINGS. Notice of meetings, other than the regular annual meeting, shall be given by service upon each director in person, or by mailing to him at his last known post office address, at least 7 days before the date therein designated for such meeting including the day of mailing, of a -4- written or printed notice thereof specifying the time and place of such meeting, and the business to be brought before the meeting, and no business other than that specified in such notice shall be transacted at any special meeting. At any meeting at which every member of the Board of Directors shall be present, although held without notice, any business may be transacted as if the meeting had been duly called. Section 8. VOTING RIGHTS. Subject to the provisions of the laws of the State of Florida and to the Articles of Incorporation dealing with cumulative voting, each holder of capital stock in this corporation shall be entitled to each shareholders' meeting to one (1) vote for every share of stock standing in his name on the books of the corporation; but transferees of shares that are transferred on the books of the corporation within ten (10) days next preceding the date set for a meeting shall not be entitled to notice of or to vote at the meeting. Section 9. VACANCIES. Vacancies in the Board occurring between annual meetings shall be filled for the unexpired portion of the term by majority vote of the remaining directors. Section 10. REMOVAL OF DIRECTORS. Any one or more of the Directors may be removed either with or without cause, at any time by a vote of the Stockholders holding 51 percent (51%) of the stock, at any special meeting called for the purpose. Section 11. WAIVER OF NOTICE. Whenever by statute, the provisions of the Articles of Incorporation or these By-Laws, the Stockholders or the Board of Directors are authorized to take any action after notice, such notice may be waived, in writing, before or after the holding of the meeting, by the person or persons entitled to such notice, or, in the case of a Stockholder, by his attorney in fact thereunto authorized. Section 12. QUORUM. At any meeting of the Board of Directors, a majority of the Board shall constitute a quorum for the transaction of business, but in the event of a quorum not being present, a less number may adjourn the meeting to some future time, no more than seven (7) days later. The number of directors who shall be present at any meeting of the Board of Directors in order to constitute a quorum for the transaction of any business of any specified item of business shall be two (2) directors. If a quorum shall not be present at any meeting of the Board of Directors, those present may adjourn the meeting from time to time, until a quorum shall be present. Section 13. INFORMAL ACTION. If all the directors severally or collectively consent in writing to any action taken or to be taken by the corporation, and the writing or writings evidencing their consent are filed with the Secretary of the corporation, the action shall be as valid as though it has been authorized at a meeting of the Board. -5- Section 14. EXECUTIVE COMMITTEE. The Board of Directors may, by resolution, designate two (2) or more of their number to constitute an Executive Committee, who, to the extent provided in such resolution, shall have and may exercise the powers of the Board of Directors. Section 15. STANDING OR TEMPORARY COMMITTEES. The Board of Directors may from time to time appoint two (2) or more of its own number to standing or temporary committees for such purposes as designated by the Board of Directors and invest such committees with such powers as it may see fit, subject to any conditions as may be prescribed by such Board. Said committee shall have all of the powers exercisable by the Board subject to any specific limitations by the Board. All committees so appointed shall keep regular minutes of the transactions of their meetings and shall cause them to be recorded in books kept for that purpose in the office of the Corporation and shall report the same to the Board of Directors at its next meeting. ARTICLE V OFFICERS Section 1. OFFICERS. This Corporation shall have a President, a Vice-President, a Secretary and a Treasurer, and such other officers as shall be elected, from time to time by the Board. Any person may hold two or more offices. Section 2. ELECTION. All officers of the Corporation shall be elected annually by the Board of Directors at its meeting held immediately after the meeting of Stockholders, and shall hold office for the term of one (1) year, or until their successors are duly elected. Officers need not be members of the Board. The Board may appoint such other officers, agents and employees as it shall deem necessary who shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. Section 3. DUTIES OF OFFICERS. The duties and powers of the officers of the company shall be as follows: PRESIDENT. The President shall be the chief executive officer of the Corporation, shall have general and active management of the business and affairs of the Corporation subject to the directions of the Board of Directors, and shall preside at all meetings of the Stockholders and Board of Directors unless a Chairman is elected as one of the officers of the Corporation, in which case the Chairman of the Board shall preside. He shall present at each annual meeting of the shareholders and directors a report of the condition of the business of the Corporation. He shall cause to be called regular and special meetings of the Stockholders and directors in accordance with these By-Laws. -6- He shall appoint and remove, employ and discharge, and fix the compensation of all servants, agents, employees and clerks of the Corporation other than the duly appointed officers, subject to the approval of the Board of Directors. He shall sign and make all contracts and agreements in the name of the Corporation and see that they are properly carried out. He shall see that the books, reports, statements and certificates required by the Statutes are properly kept, made and filed according to law. He shall enforce these By-Laws and perform all the duties incident to the position and office and which are required by the Laws of the State of Florida. VICE-PRESIDENT. The Vice-President shall, in the event that the President is absent or unable to render or perform his duties or exercise his powers as set forth in these By-Laws or in the acts under which this Corporation is organized, assume all of the rights, privileges, authority, duties, obligations and responsibilities of the President. The Board of Directors may, at their pleasure, omit the appointment of a person to the office of Vice-President. SECRETARY. The Secretary shall have custody of, and maintain, all of the corporate records except the financial records; shall record the minutes of all meetings of the Stockholders and Board of Directors, send out all notices of meetings, and perform such other duties as may be prescribed by the Board of Directors or President. He shall give and serve all notices of the Corporation. He shall keep the stock and transfer books in the manner prescribed by law, so as to show at all times the amount of capital stock, the manner and the time the same was paid in, the names of the owners thereof, alphabetically arranged, their respective places of residence, their post office addresses, the number of shares owned by each, the time at which each person became such owner, and the amount paid thereon; and keep such stock and transfer books open daily during business hours at the office of the Corporation or the office of the Resident Agent of the Corporation, subject to the inspection of any Stockholder of the Corporation, and permit such Stockholder to make extracts from said books at the expense of said Stockholder to the extent and as prescribed by law. He shall sign all certificates of stock. -7- He shall present to the Board of Directors at their stated meetings all communications addressed to him officially by the President or any officer or shareholder of the Corporation. He shall attend to all correspondence and perform all the duties incident to the office of Secretary. TREASURER. The Treasurer shall have custody of all corporate funds and financial records, shall keep full and accurate accounts of receipts and disbursements and render account thereof at the annual meetings of Stockholders and whenever else required by the Board of Directors or President, and shall perform such other duties as may be prescribed by the Board of Directors or President. He shall render to the President or the Board of Directors from time to time as may be requested an account of the financial condition of the Corporation. Section 4. BOND. The Treasurer shall, if required by the Board of Directors, give to the Corporation such security for the faithful discharge of his duties as the Board may direct. Section 5. VACANCIES, HOW FILLED. All vacancies in any office shall be filled by the Board of Directors without undue delay at its regular meeting or at a meeting specially called for that purpose. In the case of the absence of any officer of the Corporation or for any reason that the Board of Directors may deem sufficient, the Board may, except as specifically otherwise provided in these By-Laws, delegate the powers or duties of such officers to any other officer or director for the time being, provided 51 percent of the entire Board concur therein. Section 6. COMPENSATION OF OFFICERS. The officers shall receive such salary or compensation as may be determined by the Board of Directors. Section 7. REMOVAL OF OFFICERS. The Board of Directors may remove any officer by a majority vote, at any time with or without cause. ARTICLE V CERTIFICATES OF STOCK Section 1. DESCRIPTION OF STOCK CERTIFICATES. The certificates of stock shall be numbered in the order in which they are issued. They should be in a book and shall be issued in consecutive order and a record of the name of the person owning the shares, with the date of issuance and number thereof, shall be kept by the Secretary. Such certificates shall exhibit the holder's name and the number of shares. They shall be signed by the President or Vice-President, and countersigned by the Secretary, assistant Secretary, Treasurer or Assistant Treasurer and sealed with the seal of the Corporation. -8- Section 2. TRANSFER OF STOCK. The stock of the Corporation shall be assignable and transferable on the books of the Corporation only by the person in whose name it appears on said books, his legal representatives or by his duly authorized agent. In case of transfer by attorney, the power of attorney, duly executed and acknowledged, shall be deposited with the Secretary. In all cases of transfer, the former certificate must be surrendered up and canceled before a new certificate be issued. No transfers of stock shall be made in any manner which is inconsistent with the Security and Exchange Act of 1933 as amended. Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. The Corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that it has been lost, destroyed or wrongfully taken; (b) requests the issue of a new certificate before the corporation has notice that the certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim; (c) gives bond in such form as the corporation may direct, to indemnify the corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction or theft of a certificate; and (d) satisfies any other reasonable requirements imposed by the corporation. Section 4. REGISTERED STOCKHOLDERS. Registered Stockholders only shall be entitled to be treated by the Corporation as the holders in fact of the stock standing in their respective names, and the Corporation shall not be bound to recognize any equitable or other claim to or interest in any share on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of the State of Florida. Section 5. CLOSING OF TRANSFER BOOKS. The Board of Directors shall have power to close the stock transfer books of the Corporation for a period not exceeding forty (40) days preceding the date of any meeting of Stockholders, or the date of payment of any dividend, or the date of the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or for a period of not exceeding forty (40) days in connection with obtaining the consent of Stockholders for any purpose; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors shall fix in advance a date, not exceeding forty (40) days preceding the date of any meeting of Stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the Stockholders entitled to notice of and to vote at any such meeting, and the adjournment thereof, or entitled to receive payment of any -9- such dividend, or to any such allotment or rights, or to exercise the rights in respect of any change, conversion, or exchange of capital stock or to give such consent without actually closing such transfer books, and in such case such shareholders, and only such shareholders as shall be Stockholders of record on the date fixed, shall be entitled to such notice of and to vote at such meeting, and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any such record date fixed as aforesaid. ARTICLE VII DIVIDENDS Section 1. WHEN DECLARED. The Board of Directors shall by vote declare dividends from net earnings or from surplus of the assets over liabilities including capital, whenever, in their opinion, the condition of the Corporation affairs will render it expedient for such dividends to be declared. When the Board of Directors shall so determine, the dividends may be paid in stock. ARTICLE VIII AMENDMENTS Section 1. BY--LAWS. These By-Laws may be altered, amended, repealed or added to by the majority vote of the Board of Directors of this Corporation at any regular meeting of said Board, or at a special meeting of directors called for that purpose provided a quorum of the directors are present at such regular or special meeting. These By-Laws, and any amendments thereto, and new By-Laws added by the directors, may be amended, altered or replaced by the majority vote of the Stockholders at any annual or special meeting of the Stockholders. Section 2. ARTICLES OF INCORPORATION. The Articles of Incorporation may be altered, amended, repealed or added to by a two-thirds vote of the Board of Directors, and any rights of amendment conferred upon the shareholders is subject to this reservation. Such amendments shall be in compliance with the Laws of the State of Florida. ARTICLE IX DISALLOWED EXPENSES Any payment to an officer and/or director of this Corporation (such as salary, commission, bonus, interest, rent, royalty, and reimbursement of entertainment expenses, etc.) which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer and/or director to this Corporation to the full extent of such disallowance. It shall be the duty of the directors, as a Board, to enforce recovery of any disallowed expense. -10- ARTICLE X NOTICES Section 1. FORM. Whenever the provisions of the Statutes or these By-Laws require notice to be given to any director, officer or Stockholder, they shall not be construed to mean personal notice; such notice may be given in writing by depositing the same in a post office or letter box, in a post paid, sealed wrapper, addressed to such director, officer or Stockholder at his or her address as the same appears on the books of the Corporation, and the time when the same shall be mailed shall be deemed to be the time of the giving of such notice. Section 2. WAIVER. A Waiver of any notice in writing, signed by a Stockholder, director or officer, whether before or after the time stated in said Waiver for holding a meeting, shall be deemed equivalent to a notice required to be given to any director, officer or shareholder. ARTICLE XI INDEMNIFICATION The corporation may be empowered to indemnify any officer or director, or any former officer or director, by a majority vote of a quorum of directors, or by a majority vote of a quorum of shareholders, who were not parties to such action, suit or proceeding, in the manner provided in Section 607.014 of the Florida Statutes, as amended. If such indemnification is authorized by the directors and shareholders, expenses incurred in defending such 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 in the manner described in Subsection 5 of Section 607.014 of the Florida Statutes, as amended, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless he or she is found to be entitled to such indemnification. ARTICLE XII LOANS No loans shall be contracted on behalf of the corporation, and no evidences of indebtedness shall be issued in its name, unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. -11- ARTICLE XIII LONG-TERM EMPLOYMENT CONTRACTS The Board of Directors may authorize the corporation to enter into employment contracts with any executive officer for periods longer than one (1) year and any charter or By-Law provision for annual election shall be without prejudice to contract rights, if any, of the executive officer under such contracts. ARTICLE XIV BOOKS AND RECORDS Section 1. BOOKS AND RECORDS. This corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, Board of Directors and committee of directors. It shall keep at its registered office or principal place of business a record of its shareholders, giving the names and addresses of all shareholders, and the number, class and series, if any, of the shares held by each. Section 2. SHAREHOLDERS' INSPECTION RIGHTS. Any person who shall have been a holder of record of one quarter (1/4) of one percent (1%) of shares, or of voting trust certificates, therefor at least six (6) months immediately preceding his demand, or shall be the holder of record of, or the holder of record of voting trust certificates for, at least five percent (5%) of the outstanding shares of any class or series of a corporation, upon written demand stating the purpose thereof, shall have the right to examine, in person or by agent or attorney, at any reasonable time or times, for any proper purpose, its relevant books and records of accounts, minutes and records of shareholders and to make extracts therefrom. Section 3. FINANCIAL INFORMATION. Not later than four (4) months after the close of each fiscal or calendar year, this corporation shall prepare a balance sheet showing in reasonable detail the financial condition of the corporation as of the date of its fiscal or calendar year, and a profit and loss statement showing the results of the operations of the corporation during its fiscal or calendar year. Upon written request of any shareholder or holder of voting trust certificate for shares of the corporation, the corporation shall mail to such shareholder or holder of voting trust certificates a copy of the most recent such balance sheet and profit and loss statement. The balance sheets and profit and loss statements shall be filed in the registered office of the corporation, kept for at least five (5) years, and shall be subject to inspections during business hours by any shareholder or holder of voting trust certificates, in person or by agent. -12- ARTICLE XV LOANS TO OFFICERS The corporation may lend money to, guarantee any obligation of, or otherwise assist any officer of the corporation, or of a subsidiary, including any officer who is a director of the corporation or of a subsidiary, when, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured or secured in such manner as the Board of Directors shall approve including, without limitation, a pledge of shares of stock of the corporation. ARTICLE XVI DEADLOCK A. Should deadlock, dispute or controversy arise among the shareholders or directors of the corporation in regard to matters of management and company policy or matters arising under the provisions of the charter and should the shareholders, by using their legal power and influence as shareholders, be unable to resolve such deadlock, dispute or controversy, the matter shall be submitted by the shareholders to arbitration. B. Should the shareholders or directors be unable to agree as to the scope of this provision or the application of this provision to the deadlock, dispute or controversy at issue, the scope and applicability of this provision shall be determined by the arbitrator. C. The shareholders shall then select an arbitrator within sixty (60) days of the receipt of such notice of deadlock, upon a unanimous vote of the shares of stock outstanding and entitled to vote. The shareholders shall reserve the right to replace the arbitrator by unanimous vote of the shares outstanding and entitled to vote. D. Should the shareholders be unable to select an arbitrator or a successor arbitrator, the deadlock, dispute or controversy shall be resolved in accordance with the Florida Arbitration Code, Section 682 of the Florida Statutes. E. The decision of the arbitrator shall be final and binding upon all shareholders. The shareholders shall vote their shares as the arbitrator shall direct. F. To enforce those provisions, the arbitrator may obtain an injunction from a court having jurisdiction to direct the shareholders to vote as the arbitrator has determined. -13- G. After arbitration and settlement, should matters in controversy continue to arise, the arbitrator shall determine when arbitration shall no longer reasonably resolve the deadlock, dispute or controversy. Upon the making of such a determination by the arbitrator, the objecting shareholder(s) shall offer for sale, first to the corporation and then to the remaining shareholders his or her stock interest in the corporation upon the terms of sale and methods of valuation provided for in these By-Laws. If the value or terms of sale be disputed, this matter shall be submitted to arbitration as provided in Article XVI hereinabove. H. The corporation and the remaining shareholder(s) shall each have sixty (60) days to exercise their option to purchase the shares of the objecting shareholder(s). Should the corporation or the remaining shareholder(s) refuse to exercise their option to purchase the shares of the objecting shareholders(s), the shareholder(s), upon the written demand of the objecting shareholder(s), shall unanimously vote to voluntarily dissolve the corporation. Should a shareholder refuse to vote his stock in this matter, the arbitrator may obtain an injunction from a court of competent jurisdiction to direct the shareholder to so vote. ARTICLE XVII INTERESTED DIRECTORS A. No contract or other transaction between a corporation and one (1) or more of its directors, or between a corporation and any other corporation, firm, association or other entity in which one or more of its directors are directors or officers or financially interested, shall be either void or voidable for this reason alone or by reason alone that such director or directors are present at the meeting of the Board of Directors, or of a committee thereof, which approves such contract or transaction, or that his or their votes are counted for such purposes: 1. If the fact of such common directorship, officership or financial interest is disclosed or known to the Board or Committee, and the Board or Committee approves such contract or transaction by vote sufficient for such purpose without counting the vote or votes of such interested director or directors; or 2. If such common directorship, officership or financial interest is disclosed or known to be shareholders entitled to vote thereon, and such contract or transaction is approved by vote of the shareholders; or 3. If the contract or transaction if fair and reasonable as to the corporation at the time it is approved by the Board, a committee or the shareholders. B. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which approved such contract or transaction. -14- WAIVER OF NOTICE OF SPECIAL MEETING OF SHAREHOLDERS AND DIRECTORS The undersigned, being the sole shareholder and sole director of MADDUX PUBLISHING, INC., a Florida Corporation, hereby waives all notice of the special meeting of said corporation, and hereby consents that August 29, 1986, shall be the date of said meeting, and that said meeting shall be held at One Beach Drive SE, Suite 205, St. Petersburg, Florida 33701, for the purpose of electing a Vice President of the Corporation, and for conducting such other business as may lawfully come before the special meeting. Dated this 29th day of August, 1986. /s/ Carlen Maddux ----------------- CARLEN MADDUX EX-3.155 15 EXHIBIT 3.155 Exhibit 3.155 [GRAPHIC OMITTED] State of California ================================================================================ SECRETARY OF STATE'S OFFICE CORPORATION DIVISION I, TONY MILLER, Acting Secretary of State of the State of California, hereby certify: That the annexed transcript has been compared with the corporate record on file in this purports to be a copy, and that same is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this JUL 5 1994 ------------------------ [SEAL OF THE STATE OF CALIFORNIA OMITTED] /s/ Tony Miller Acting Secretary of State ================================================================================ ENDORSED FILED In the office of the Secretary of State of the State of California AUG 29 1975 EDMUND G. BROWN, Jr., Secretary of State By BILL HOLDEN Deputy ARTICLES OF INCORPORATION OF MIRAMAR PUBLISHING COMPANY I The name of this corporation shall be MIRAMAR PUBLISHING COMPANY II The specific business in which the corporation will primarily engage is the publication of trade magazines. III The purposes for which this corporation is formed in addition to conducting the primary business hereinbefore described, are the following: (1) To engage in one or more other businesses or transactions which the Board of Directors of the corporation may from time to time authorize or approve, whether related or unrelated to the business described in Article II above or to any other business then or theretofore done by this corporation. (2) To purchase, lease, sell, convey, mortgage, hypothecate and/or encumber such real and personal property as may be requisite or necessary in connection with the operation of this corporation. 1. (3) To exercise any and all rights and powers which a corporation may now or hereafter exercise. (4) To act as principal, agent, joint venturer, partner or in any other capacity which may be authorized or approved by the Board of Directors of this corporation. (5) To transact business in the State of California or in any other jurisdiction of the United States Of America or elsewhere in the world. The foregoing statement of purposes shall be construed as a statement of both purposes and powers, and the purposes and powers in each clause shall, except where otherwise expressed, be in no wise limited or restricted by reference to or inference from the terms or provisions of any other clause but shall be regarded as independent purposes and powers. IV The county in the State of California where the principal office for the transaction of the business of this corporation is to be located is the County of Los Angeles. V This corporation is authorized to issue only one class of shares; the total number of such shares is seven hundred fifty (750); all such shares are to have a par value of one hundred dollars ($100.00) per share; the aggregate 2. par value of all shares is seventy-five thousand dollars ($75,000.00). VI The number of Directors of the corporation shall be three (3). VII The names and addresses of the persons who are appointed to act as the first Directors of the corporation are: Name Address Harriet Hamilton 6380 Wilshire Boulevard Los Angeles, California 90048 Ann J. Graham 11320 Exposition Boulevard Los Angeles, California 90064 Bonnie J. Black 6330 Green Valley Circle Culver City, California 90230 IN WITNESS WHEREOF, for the purpose of forming this corporation under the laws of the State of California, the undersigned, constituting the persons named hereinabove as the first Directors of this corporation, have executed these Articles Of Incorporation this 21st day of August, 1973. /s/ Harriet Hamilton -------------------- Harriet Hamilton /s/ Ann J. Graham -------------------- Ann J. Graham /s/ Bonnie J. Black -------------------- Bonnie J. Black 3. STATE OF CALIFORNIA ) ) ss. COUNTY OF LOS ANGELES ) On August 21, 1973, before me, the undersigned, a Notary Public in and for said State, personally appeared HARRIET HAMILTON, ANN J. GRAHAM, and BONNIE J. BLACK, known to me to be the persons whose names are subscribed to the foregoing Articles Of Incorporation and acknowledged that they executed the same. WITNESS my hand and official seal. ==================================================== OFFICIAL SEAL [SEAL OMITTED] AUDREY DEUTSCH /s/ Audrey Deutsch NOTARY PUBLIC - CALIFORNIA ------------------ LOS ANGELES COUNTY Notary Public My Commission Expires Apr. 27, 1976 ==================================================== 4. (Department of ------------------------------------------ Corporations DEPARTMENT OF CORPORATIONS Use Only) FILE NO., If Any Fee Paid $___________ (Insert File Number(s) of Previous Filings Before the Department, If Any) Receipt No.__________ ------------------------------------------ - --------------------- FEE: $25.00 TO THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA Notice of Issuance of Securities Pursuant to Subdivision (h) of Section 25102 of the California Corporations Code - -------------------------------------------------------------------------------- Name of Issuer MIRAMAR PUBLISHING COMPANY - -------------------------------------------------------------------------------- State of Incorporation California - -------------------------------------------------------------------------------- Address of Principal Place of Business Number and Street City State Zip Code 2048 Cotner Avenue Los Angeles California 90025 - -------------------------------------------------------------------------------- 1. Under the exemption provided by Section 25102(h), shares of voting common stock have been or are proposed to he issued pursuant to this Notice to not more than 10 persons, whose names are set forth below: Francis B. Frank - ----------------------------------- -------------------------------------- James J. Gartland - ----------------------------------- -------------------------------------- - ----------------------------------- -------------------------------------- - ----------------------------------- -------------------------------------- - ----------------------------------- -------------------------------------- 2. Immediately after the issuance and sale of such shares, the above-named issuer had or will have only one class of stock outstanding which was or will he owned beneficially by no more than 10 persons. Mailed with check for $25.00 on 4/27/78. vn 3. The offer and sale of such shares was not nor will be accompanied by the publication of any advertisement and neither selling expenses nor promotional considerations were or will be given, paid or incurred in connection therewith. 4. Pursuant to the requirements of Section 260.102.6 of Title 10 of the California Administrative Code, all certificates evidencing such shares bear or will bear on their face the legend required by such Section, and a Copy of such Section has been or will be delivered to each issuee or transferee of the shares. The undersigned officer of the issuer hereby declares that the foregoing is true under penalty of perjury. Executed at Los Angeles, California this 26 day of April, 1978. /s/ James Gartland ------------------ Name President ------------------ Title NOTE If the officer signs this form outside of California, there must be attached a verification executed and sworn to before a notary public. OPINION OF COUNSEL I certify that I am an active member of the State Bar of California. On the basis of the facts stated in the foregoing Notice and other information, including representations as to the type of consideration received or to be received, supplied to me by officials and shareholders of the issuer and by proposed issuees, it is my opinion that the exemption from qualification with the Commissioner of Corporations provided by Subdivison (h) of Section 25102 of the California Corporations Code is available for the offer and sale of the shares referred to in this Notice. /s/ Gilbert Woolway ------------------------------------------------- Member of the State of California Gilbert Woolway 800 West First Street Los Angeles, California 90012 ------------------------------------------------- Address Tel. No. GILBERT WOOLWAY ------------------------------------------------- Firm Name (This opinion of counsel must be signed by an active member of the State Bar of California. Type name of attorney, address, phone number and firm name, if any, under signature.) NOTE: If the issuer is a non-California corporation, a Consent to Service of Process as prescribed in the Commissioner's Rule 102.8(b) must be Filed concurrently. ENDORSED FILED In the office of the Secretary of State of the State of California JUN 30 1994 TONY MILLER, Acting Secretary of State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF MIRAMAR PUBLISHING COMPANY TIMOTHY NOVOSELSKI and DENISE NOVOSELSKI certify that: 1. They are the President and Secretary of Miramar Publishing Company, a California corporation, respectively. 2. Article I of the Articles of Incorporation is hereby amended as follows: I. The name of this Corporation shall be MIRAMAR COMMUNICATIONS, INC. 3. The foregoing amendment of the Articles of Incorporation has been duly approved by the directors. 4. The foregoing amendment of the Articles of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 902 of the California Corporations Code. The total number of outstanding common shares entitle to vote with respect to the amendment was 100. The number of shares voting in favor of the amendment equalled or exceeded the vote required. The vote required was more than fifty percent (50%). The undersigned further declare under penalty of perjury under the laws of the State of California that the matters set forth in this Certificate are true and correct of their own respective knowledge, and this Certificate is executed in Los Angeles, California. DATED: June 8, 1994 /s/ Timothy Novoselski ----------------------------- TIMOTHY NOVOSELSKI, President /s/ Denise Novoselski ----------------------------- DENISE NOVOSELSKI, Secretary EX-3.156 16 EXHIBIT 3.156 Exhibit 3.156 BY-LAWS OF MIRAMAR PUBLISHING COMPANY A California Corporation ARTICLE I SHAREHOLDERS' MEETINGS Section 1. Place of Meetings. All meetings of the shareholders shall be held at the office of the corporation in the State of California, as may be designated for that purpose from time to time by the Board of Directors. Section 2. Annual Meetings. The annual meeting of the shareholders shall be held on the following date: The third Friday in April of each year, commencing on the 19th day of April, 1974, at 11:00 a.m. If said date shall fall on a legal holiday, the meeting shall be held at the same time on the next succeeding business day as is not a legal holiday. At the annual meeting, the shareholders shall elect by plurality vote a Board of Directors, consider reports of the affairs of the corporation, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the President, or by the Board of Directors, or by any two or more members thereof, or by one or more shareholders holding not less than one-tenth of the voting power of the corporation. Section 4. Notice of Meetings. Notices of meetings, annual or special, shall be given in writing to shareholders entitled to vote by the Secretary or the Assistant Secretary, or if there be no such officer, or in case of his neglect or refusal, by any director or shareholder. Such notices shall be sent to the shareholder's address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice, not less than seven days before such meeting. Notice of any meeting of shareholders shall specify the place, the day, and the hour of meeting, and in case of special meeting, as provided by the Corporations Code of the State of California, the general nature of the business to be transacted. When a meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in case of an original meeting. Save, as aforesaid, it shall not be necessary to give any notice of the adjournment or of the business to be transacted at an adjourned meeting other than by announcement at the meeting at which such adjournment is taken. Section 5. Consent To Shareholders' Meetings. The transactions of any meeting of shareholders, however called and noticed, shall be valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if authorized by a writing signed by all of the holders of shares who would be entitled to vote at a meeting for such purpose, and filed with the Secretary of the corporation. Section 6. Quorum. The holders of a majority of the shares entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation, or by these By-Laws. If, however, such majority shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person, or by proxy, shall have power to adjourn the meeting from tine to time, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented, any business may be transacted which might have been transacted at the meeting as originally notified. Section 7. Voting Rights; Cumulative Voting. Only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day of any meeting of shareholders, unless some other day be fixed by the 2. Board of Directors for the determination of shareholders of record, then on such other day, shall be entitled to vote at such meeting. Every shareholder entitled to vote shall be entitled to one vote for each of said shares and shall have the right to accumulate his votes as provided in Section 2235, Corporations Code of the State of California. Section 8. Proxies. Every shareholder entitled to vote, or to execute consents, may do so either in person or by written proxy, executed in accordance with the provisions of Section 2225 of the Corporations Code of the State of California and filed with the Secretary of the corporation. ARTICLE II DIRECTORS; MANAGEMENT Section 1. Powers. Subject to the limitation of the Articles of Incorporation, these By-Laws, and the laws of the State of California as to action to be authorized or approved by the shareholders, all corporate powers shall be exercised by or under authority of, and the business and affairs of this corporation shall be controlled by, a Board of Directors. Section 2. Number And Qualification. The authorized number of directors of this corporation shall be three (3). Said authorized number of directors of this corporation shall remain unchanged until amendment to the Articles of Incorporation or by an amendment to this Section 2, Article II, of these By-Laws, adopted by the vote or written assent of the shareholders entitled to exercise the majority of the voting power of the corporation, except that the votes or written consents of shareholders holding more than eighty per cent (80%) of the voting power shall be necessary to reduce the number of directors below five (5). Section 3. Election And Tenure Of Office. The directors shall be elected by ballot at the annual meeting of the shareholders, to serve for one year and until their successors are elected and have qualified. Their term of office shall begin immediately after election. Section 4. Vacancies. Vacancies in the Board of Directors may be filled by a 3. majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his successor is elected at an annual meeting of shareholders or at a special meeting called for that purpose. The shareholders may at any time elect a director to fill any vacancy not filled by the directors, and may elect the additional directors at the meeting at which an amendment of the By-Laws is voted authorizing an increase in the number of directors. A vacancy or vacancies shall be deemed to exist in case of the death, resignation or removal of any director, or if the shareholders shall increase the authorized number of directors but shall fail at the meeting at which such increase is authorized, or at an adjournment thereof, to elect the additional director so provided for, or in case the shareholders fail at any tine to elect the full number of authorized directors. If the Board of Directors accepts the resignation of a director tendered to take effect at a future time, the Board, or the shareholders, shall have power to elect a successor to take office when the resignation shall become effective. No reduction of the number of directors shall have the effect of removing any director prior to the expiration of his term of office. Section 5. Removal Of Directors. The entire Board of Directors or any individual director may be removed from office as provided by Section 810 of the Corporations Code of the State of California. Section 6. Place Of Meetings. Meetings of the Board of Directors shall be held at the office of the corporation in the State of California, as designated for that purpose, from tine to time, by resolution of the Board of Directors or written consent of all of the members of the Board. Any meeting shall be valid, wherever held, if held by the written consent of all members of the Board of Directors, given either before or after the meeting and filed with the Secretary of the corporation. Section 7. Organization Meetings. The organization meetings of the Board of Directors shall be held immediately following the adjournment of the annual meetings of the shareholders. 4. Section 8. Other Regular Meetings. Regular meetings of the Board of Directors shall be held on the following date: The third Friday in April of each year, commencing on the 19th day of April, 1974, at 1:00 p.m. If said date shall fall upon a holiday, such meetings shall be held on the next succeeding business day thereafter. No notice need be given of such regular meetings. Section 9. Special Meetings - Notices. Special meetings of the Board of Directors for any purpose or purposes shall be called at any tine by the President or if he is absent or unable or refuses to act, by any Vice President or by any two directors. Written notice of the time and place of special meetings shall be delivered personally to the directors or sent to each director by letter or by telegram, charges prepaid, addressed to him at his address as it is shown upon the records of the corporation, or if it is not so shown upon the records of the corporation or is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the place in which the principal office of the corporation is located at least forty-eight hours prior to the time of the holding of the meeting. In case such notice is not delivered as above provided, it shall be so delivered at least twenty-four hours prior to the time of the holding of the meeting, Such mailing, telegraphing, or delivery as above provided shall be due, legal, and personal notice to such director. Section 10. Waiver Of Notice. When all of the directors are present at any directors' meeting, however called or noticed, and sign a written consent thereto on the records of such meeting, or, if a majority of the directors are present, and if those not present sign in writing a waiver of notice of such meeting, whether prior to or after the holding of such meeting, which said waiver shall be filed with the Secretary of the corporation, the transactions thereof are as valid as if had at a meeting regularly called and noticed. Section 11. Directors Acting Without A Meeting. Any action required or permitted to be taken by the Board of Directors, may be taken without a meeting, and with the same 5. force and effect as a unanimous vote of directors, if all members of the Board shall individually or collectively consent in writing to such action. Section 12. Notice Of Adjournment. Notice of the time and place of holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. Section 13. Quorum. A majority of the number of directors as fixed by the Articles of Incorporation or the By-Laws shall be necessary to constitute a quorum for the transaction of business, and the action of a majority of the directors present at any meeting at which there is a quorum, when duly assembled, is valid as a corporate act; provided that a minority of the directors, in the absence of a quorum, may adjourn from time to time, but may not transact any business. ARTICLE III OFFICERS Section 1. Officers. The officers of the corporation shall be a president, a vice president, a secretary, and a treasurer. The corporation may also have, at the discretion of the Board of Directors, a chairman of the board, one or more additional vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article III. One person may hold two or more offices, except those of president and secretary. Section 2. Election. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article III shall be chosen annually by the Board of Directors, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified. Section 3. Subordinate Officers, Etc. The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom 6. shall hold office for such period, have such authority, and perform such duties as are provided in the By-Laws or as the Board of Directors may from time to time determine. Section 4. Removal and Resignation. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors. Any officer may resign at any time by giving written notice to the Board of Directors or to the president, or to the Secretary of the corporation. Any such resignation shall take effect at the date of the receipt or such notice or at any later tine specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in the By-Laws for regular appointments to such office. Section 6. Chairman Of The Board. The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by the By-laws. Section 7. President. Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders and in the absence of the Chairman of the Board, or if there be none, at all meetings of the Board of Directors. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of President of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or the By-Laws. 7. Section 8. Vice President. In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform all the duties of the President, and when so acting, shall have all the powers of, and be subject to, all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them, respectively, by the Board of Directors or the By-Laws. Section 9. Secretary. The Secretary shall keep, or cause to be kept, a book of minutes at the principal office or such other place as the Board of Directors may order, of all meetings of directors and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings and the proceedings thereof. The Secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register, or duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; and the number and date of cancellation of every certificate surrendered for cancellation. The Secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the Board of Directors required by the By-Laws or by law to be given, and he shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws. Section 10. Treasurer. The Treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus, and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all reasonable times be open to inspection by any director. 8. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors, shall render to the President and directors, whenever they request it, an account of all of his transactions as Treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or the By-Laws. ARTICLE IV EXECUTIVE AND OTHER COMMITTEES The Board of Directors may appoint an executive committee, and such other committees as may be necessary from time to time, consisting of such number of its members and with such powers as it may designate, consistent with the Articles of Incorporation and By-Laws and the general corporation laws of the State of California. Such committees shall hold office at the pleasure of the Board. ARTICLE V CORPORATE RECORDS AND REPORTS - INSPECTION Section 1. Records. The corporation shall maintain adequate and correct accounts, books, and records of its business and properties. All of such books, records, and accounts shall be kept at its principal place of business in the State of California, as fixed by the Board of Directors from time to time. Section 2. Inspection Of Books And Records. All books and records provided for in Section 3003 of the Corporations Code of the State of California shall be open to inspection of the directors and shareholders from time to time and in the manner provided in said Section 3003. Section 3. Certification And Inspection Of By-Laws. The original or a copy of these By-Laws, as amended or otherwise altered to date, certified by the Secretary, shall be open to inspection by the shareholders of the corporation, as provided in Section 502 of the Corporations Code of the State of California. 9. Section 4. Checks, Drafts, Etc. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as shall be determined from time to time by resolution of the Board of Directors. Section 5. Contracts, Etc. - How Executed. The Board of Directors, except as in the By-Laws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation. Such authority may be general or confined to specific instances. Unless so authorized by the Board of Directors, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement, or to pledge its credit, or to render it liable for any purpose or to any amount. Section 6. Annual Report. The Board of Directors shall cause an annual report or statement to be sent to the shareholders of this corporation not later than one hundred twenty days after the close of the fiscal or calendar year in accordance with the provisions of Sections 3006-10 of the Corporations Code of the State of California. ARTICLE VI CERTIFICATES AND TRANSFER OF SHARES Section 1. Certificates For Shares. Certificates for shares shall be of such form and device as the Board of Directors may designate and shall state the name of record holder of the shares represented thereby; its number; date of issuance, the number of shares for which it is issued; the par value, if any, or a statement that such shares are without par value; a statement of the rights, privileges, preferences, and restrictions, if any; a statement as to the redemption or conversion, if any; a statement of liens or restrictions upon transfer or voting, if any; if the shares be assessable or, if assessments are collectible by personal action, a plain statement of such facts. Every certificate for shares must be signed by the President or a Vice President and the Secretary or an Assistant Secretary or must be authenticated by facsimiles of the signatures of the President and Secretary or by a facsimile of the signature of its President and the written signature of its 10. Secretary or an Assistant Secretary. Before it becomes effective, every certificate for shares authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer clerk and must be registered by an incorporated bank or trust company, either domestic or foreign, as registrar of transfers. Section 2. Transfer On the Books. Upon surrender to the Secretary or transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. Section 3. Lost Or Destroyed Certificates, Any person claiming a certificate of stock to be lost or destroyed shall make an affidavit or affirmation of that fact and advertise the same in such manner as the Board of Directors may require, and shall, if the directors so require, give the corporation a bond of indemnity, in form and with one or more sureties satisfactory to the Board, in at least double the value of the stock represented by said certificate, whereupon a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost or destroyed. Section 4. Transfer Agents And Registrars. The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, which shall be an incorporated bank or trust company - either domestic or foreign - who shall be appointed at such times and places as the requirements of the corporation may necessitate and the Board of Directors may designate. Section 5. Closing Stock Transfer Books. The Board of Directors may close the transfer books in its discretion for a period not exceeding thirty days preceding any meeting, annual or special, of the shareholders, or the day appointed for the payment of a dividend. ARTICLE VII CORPORATE SEAL The corporate seal shall be circular in form, and shall have inscribed thereon the name of the corporation, the date 11. of its incorporation, and the word "California." ARTICLE VIII AMENDMENTS TO BY-LAWS Section 1. By Shareholders. New By-Laws may be adopted or these By-Laws may be repealed or amended at an annual meeting or at any other meeting of the shareholders called for that purpose, by a vote of shareholders entitled to exercise a majority of the voting power of the corporation, or by written assent of such shareholders. Section 2. Powers Of Directors. Subject to the right of the shareholders to adopt, amend, or repeal By-Laws, as provided in Section 1 of this Article VIII, the Board of Directors may adopt, amend or repeal any of these By-Laws other than a By-Law or amendment thereof changing the authorized number of directors. Section 3. Record Of Amendments. Whenever an amendment or new By-Laws are adopted, it shall be copied in the book of By-Laws with the original By-Laws, in the appropriate place. If any By-Law is repealed, the fact of repeal with the date of the meeting at which the repeal was enacted or written assent was filed shall be stated in said book. KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, being all of the persons appointed in the Articles of Incorporation to act as the first Board of Directors of this corporation, hereby assent to the foregoing By-Laws, and adopt the same as the By-Laws of the corporation. DATED: September 4, 1973. /s/ Harriet Hamilton ----------------------------------- HARRIET HAMILTON /s/ Bonnie J. Black ----------------------------------- BONNIE J. BLACK /s/ Ann J. Graham ----------------------------------- ANN J. GRAHAM 12. TEMPORARY SECRETARY'S CERTIFICATE THIS IS TO CERTIFY that I am the duly elected, qualified, and acting Temporary Secretary of MIRAMAR PUBLISHING COMPANY, a California corporation, and that the above and foregoing by-laws were adopted as the by-laws of said corporation on the 4th day of September, 1973, by the persons appointed in the Articles Of Incorporation to act as the first Directors of said corporation. IN WITNESS WHEREOF, I have hereunto set my hand this 4th day of September, 1973. /s/ Ann J. Graham ------------------------------------- ANN J. GRAHAM, Temporary Secretary of MIRAMAR PUBLISHING COMPANY (Corporate Seal) EX-3.157 17 EXHIBIT 3.157 Exhibit 3.157 PAGE 1 State of Delaware Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "PRIMEDIA VENTURES, INC." FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF APRIL, A.D. 1998, AT 4.30 O'CLOCK P.M. A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS. [SEAL] [SEAL] /s/ Edward J. Freel ----------------------------------- Edward J. Freel, Secretary of State 2889214 8100 AUTHENTICATION: 9051806 981160924 DATE: 04-29-98 CERTIFICATE OF INCORPORATION OF PRIMEDIA VENTURES, INC. The undersigned, in order to form a corporation for the purpose hereinafter stated, under and pursuant to the provisions of the Delaware General Corporation Law, hereby certifies that: FIRST: The name of the Corporation is PRIMEDIA Ventures, Inc. SECOND: The registered office and registered agent of the Corporation is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware, 19801. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares of stock that the Corporation is authorized to issue is 1,000 shares of Common Stock, par value $0.01 each. FIFTH: The name and address of the incorporator is Beverly C. Chell, 745 Fifth Avenue, New York, NY 10151. SIXTH: The Board of Directors of the Corporation, acting by majority vote, may alter, amend or repeal the By-Laws of the Corporation. SEVENTH: Except as otherwise provided by the Delaware General Corporation Law as the same exists or may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this Article SEVENTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, the undersigned has signed this Certificate of Incorporation on April 2, 1998. /s/ Beverly C. Chell ------------------------- Beverly C. Chell EX-3.158 18 EXHIBIT 3.158 Exhibit 3.158 PRIMEDIA VENTURES, INC. BY-LAWS ARTICLE I MEETINGS OF STOCKHOLDERS Section 1. Place of Meeting and Notice. Meetings of the stockholders of the Corporation shall be held at such place either within or without the State of Delaware as the Board of Directors may determine. Section 2. Annual and Special Meetings. Annual meetings of stockholders shall be held, at a date, time and place fixed by the Board of Directors and stated in the notice of meeting, to elect a Board of Directors and to transact such other business as may properly come before the meeting. Special meetings of the stockholders may be called by the President for any purpose and shall be called by the President or Secretary if directed by the Board of Directors or requested in writing by the holders of not less than 25% of the capital stock of the Corporation. Each such stockholder request shall state the purpose of the proposed meeting. Section 3. Notice. Except as otherwise provided by law, at least 10 and not more than 60 days before each meeting of stockholders, written notice of the time, date and place of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder. Section 4. Quorum. At any meeting of stockholders, the holders of record, present in person or by proxy, of a majority of the Corporations issued and outstanding capital stock shall constitute a quorum for the transaction of business, except as otherwise provided by law. In the absence of a quorum, any officer entitled to preside at or to act as secretary of the meeting shall have power to adjourn the meeting from time to time until a quorum is present. Section 5. Voting. Except as otherwise provided by law, all matters submitted to a meeting of stockholders shall be decided by vote of the holders of record, present in person or by proxy, of a majority of the Corporation's issued and outstanding capital stock. ARTICLE II DIRECTORS Section I. Number. Election and Removal of Directors. The number of Directors that shall constitute the Board of Directors shall not be less than one or more than fifteen. The first Board of Directors shall consist of three Directors. Thereafter, within the limits specified above, the number of Directors shall be determined by the Board of Directors or the stockholders. The Directors shall be elected by stockholders at their annual meeting. Vacancies and newly created directorships resulting from any increase in the number of Directors may be filled by a majority of the Directors then in office, although less than a quorum, or by the sole remaining Director or by the stockholders. A Director may be removed with or without cause by the stockholders. Section 2. Meetings. Regular meetings of the Board of Directors shall be held at such times and places as may from time to time be fixed by the Board of Directors or as may be specified in a notice of meeting. Section 3. Quorum. One-third of the total number of Director shall constitute a quorum for the transaction of business. If a quorum is not present at any meeting of the Board of Directors, the Directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until such a quorum is present. Except as otherwise provided by law, the Certificate of Incorporation of the Corporation, these By-Laws or any contract or agreement to which the Corporation is a party, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. Section 4. Committees. The Board of Directors may, by resolution adopted by a majority of the whole Board, designate one or more committees, including, without limitation, an Executive Committee, to have and exercise such power and authority as the Board of Directors shall specify. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another Director to act at the meeting in place of any such absent or disqualified member. ARTICLE III OFFICERS The officers of the Corporation shall consist of a President, a Secretary, a Treasurer and such other additional officers with such titles as the Board of Directors shall determine, all of which shall be chosen by and shall serve at the pleasure of the Board of Directors. Such officers shall have the usual powers and shall perform all the usual duties incident to their respective offices. All officers shall be subject to the supervision and direction of the Board of Directors. The authority, duties or responsibilities of any officer of the Corporation may be suspended by the President with or without cause. Any officer elected or appointed by the Board of Directors may be removed by the Board of Directors with or without cause. ARTICLE IV INDEMNIFICATION To the fullest extent permitted by the Delaware General Corporation Law, the Corporation shall indemnify any current or former Director or officer of the Corporation and may, at the discretion of the Board of Directors, indemnify any current or former employee or agent of the Corporation against all expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding brought by or in the right of the Corporation or otherwise, to which he was or is a party by reason of his current or former position with the Corporation or by reason of the fact that he is or was serving, at the request of the Corporation, as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. ARTICLE V GENERAL PROVISIONS Section I. Notices. Whenever any statute, the Certificate of Incorporation or these By-Laws require notice to be given to any Director or stockholder, such notice may be given in writing by mail, addressed to such Director or stockholder at his address as it appears in the records of the Corporation, with postage thereon prepaid. Such notice shall be deemed to have been given when it is deposited in the United States mail. Notice to Directors may also be given by telegram. Section 2. Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors. EX-3.159 19 EXHIBIT 3.159 Exhibit 3.159 [GRAPHIC OMITTED] State Of California OFFICE OF THE SECRETARY OF STATE ================================================================================ CORPORATION DIVISION I, MARCH FONG EU, Secretary of State of the State of California, hereby certify: That the annexed transcript has been compared with the corporate record on file in this office, of which it purports to be a copy, and that same is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California this JAN 3 1990 ---------------------- /s/ March Fong Eu Secretary of State [SEAL OF THE STATE OF CALIFORNIA] ================================================================================ ENDORSED FILED in the office of the Secretary of State of the State of California DEC 26 1989 MARCH FONG EU, Secretary of State ARTICLES OF INCORPORATION I The name of this corporation is TSECRP, INC. II The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. III The name and address in this State of the corporation's initial agent for service of process is: Tim Novoselski, 6133 Bristol Parkway, Culver City, California 90231. IV This corporation is authorized to issue only one class of shares of stock; and the total number of shares which the corporation is authorized to issue is 100,000. Dated: December 19, 1989 /s/ Kenneth A. Braun -------------------- KENNETH A. BRAUN EX-3.160 20 EXHIBIT 3.160 Exhibit 3.160 BYLAWS OF TSECRP, INC. ARTICLE I OFFICES Section 1. PRINCIPAL EXECUTIVE OFFICE. The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California, and is hereby granted full power and authority to change the principal executive office from one location to another. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the board of directors shall fix and designate a principal business office in the State of California. Section 2. OTHER OFFICES. The board of directors may at any time establish branch or subordinate offices at any place or places. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders' meeting shall be held at the principal executive office of the corporation. Section 2. ANNUAL MEETING. The annual meeting of shareholders shall be held on the third Thursday or such other date or such other time as may be designated by the board of directors. However, if this day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At such meeting, directors shall be elected, and any other proper business may be transacted. Section 3. SPECIAL MEETING. A special meeting of the shareholders may be called at any time by the board of directors, by the chairman of the board, by the president, or by one or more shareholders entitled to cast not less than ten percent (10%) of the votes at such meeting. If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmissions to the chairman of the board, the president, any vice president, or the secretary of the corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held. Section 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meeting of shareholders shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted; or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders, but subject to the provisions of applicable law, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California; (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code; (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code; (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code; or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal. Section 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if 2 sent to that shareholder by first-class mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of the giving of the notice. An affidavit of the mailing or other means of giving any notice of any shareholders' meeting shall be executed by the secretary, assistant secretary, or any transfer agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation. Section 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. Section 7. ADJOURNED MEETING, NOTICE. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 4 3 and 5 of this Article II. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. Section 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Section 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation, or in joint ownership). The shareholder's vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by California General Corporation Law or by the articles of incorporation. At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which that shareholder's shares are entitled, or distribute the shareholder's votes in the same principle amount among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. Section 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions of any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice or a consent to a holding of the meeting, or an approval of the minutes. Neither the business to be transacted at nor the purpose of any regular or special meeting of 4 shareholders need be specified in any written waiver of notice, except as provided in Section 601(f) of the California General Corporation Law. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting. Section 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. In the case of election of directors, such a consent shall be effective only if signed by the holders of all outstanding shares entitled to vote for the election of directors; provided, however, that a director may be elected at any time to fill a vacancy on the board of directors that has not been filled by the directors, by the written consent of the holders of a majority of the outstanding shares entitled to vote for the election of directors. All such consents shall be filed with the secretary of the corporation and shall be maintained in the corporate records. Any shareholder giving a written consent, or the shareholder's proxy holders, or a transferee of the shares or a personal representative of the shareholder of their respective proxy holders, may revoke the consent by a writing received by the secretary of the corporation before written consents of the number of shares required to authorize the proposed action have been filed with the secretary. If the consents of all shareholders entitled to vote have not been solicited in writing, and if the unanimous written consent of all such shareholders shall not have been received, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. This notice shall be given in the manner specified in Section 5 of this Article II. In the case of approval of (i) contracts or transactions in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California; (ii) indemnification of agents of the corporation, pursuant to Section 317 of that Code; (iii) a reorganization of the corporation, pursuant to Section 1201 of that Code; and (iv) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall be 5 given at least ten (10) days before the consummation of any action authorized by that approval. Section 11. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING, AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to corporate action without a meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days not less than ten (10) days before the date of any such meeting nor more than sixty (60) days before any such action without a meeting, and in this event only shareholders of record on the date so fixed are entitled to notice and to vote or to give consents, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, (i) when no prior action by the board has been taken, shall be the day on which the first written consent is given; or (ii) when the prior action of the board has been taken, shall be at the close of business on the day on which the board adopts the resolution relating to that action, or the sixtieth (60th) day before the date of such other action, whichever is later. Section 12. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, or otherwise) by the shareholder or the shareholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, 6 unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 702(e) and 705(f) of the Corporations Code of California. Section 13. INSPECTORS OF ELECTION. Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill that vacancy. These inspectors shall: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies; (b) Receive votes, ballots, or consents; (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine when the polls shall close; (f) Determine the result; and (g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. ARTICLE III DIRECTORS Section 1. POWERS. Subject to the provisions of the California General Corporation Law and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be 7 managed and all corporate powers shall be exercised by or under the direction of the board of directors. Without prejudice to these general powers, and subject to the same limitations, the directors shall have the power to: (a) Select and remove all officers, agents, and employees of the corporation; prescribe any powers and duties for them that are consistent with law, with the articles of incorporation, and with these bylaws; and fix their compensation. (b) Change the principal executive office or the principal business office in the State of California from one location to another; cause the corporation to be qualified to do business in any other state, territory, dependency, or country and conduct business within or without the State of California; and designate any place within or without the State of California for the holding of any shareholders' meeting, or meetings, including annual meetings. (c) Adopt, make and use a corporate seal; prescribe the forms of certificates of stocks; and alter the form of the seal and certificates. (d) Authorize the issuance of shares of stock of the corporation on any lawful terms, in consideration of money paid, labor done, services actually rendered, debts or securities cancelled, or tangible or intangible property actually received. (e) Borrow money and incur indebtedness on behalf of the corporation, and cause to be executed and delivered for the corporation's purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, and other evidences of debt and securities. Section 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number of directors shall be four (4) until changed by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw adopted by the vote of written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote. Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at each annual meeting of shareholders but if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Each director shall hold 8 office until the next annual meeting and until a successor has been elected and qualified. Section 4. VACANCIES. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, except that a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of holders of a majority of the outstanding shares entitled to vote. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent shall require the consent of a majority of the outstanding shares entitled to vote. Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary, or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. Section 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is not notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar 9 communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting. Section 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, any desired election of officers, and the transactions of other business. Notice of this meeting shall not be required. Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice. Section 8. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board or the president or any vice president or the secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. In case the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In case the notice is delivered personally, or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting nor the place if the meeting is to be held at the principal executive office of the corporation. Section 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees), Section 317(e) of that Code (as to indemnification of directors). A meeting, at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 10 Section 10. WAIVER OF NOTICE. The transactions of any meeting of the board of directors, however called and noticed or whenever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting before or at its commencement, the lack of notice to that director. Section 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. Section 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment. Section 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Section 14. FEES AND COMPENSATION OF DIRECTORS. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation for those services. ARTICLE IV COMMITTEES Section 1. COMMITTEES OF DIRECTORS. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The 11 board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) The approval of any action which, under the General Corporation Law of California, also requires shareholders' approval or approval of the outstanding shares; (b) The filling of vacancies on the board of directors or in any committee; (c) The fixing of compensation of the directors for serving on the board or on any committee; (d) The amendment or repeal of bylaws or the adoption of new bylaws; (e) The amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable; (f) A distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; or (g) The appointment of any other committees of the board of directors or the members of these committee. Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Sections 5 (place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment), and 13 (action without meeting) , with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee; special meetings of committees may also be called by resolution of the board of directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. 12 ARTICLE V OFFICERS Section 1. OFFICERS. The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one of more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with provisions of Section 3 of this Article V. Any number of officers may be held by the same person. Section 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract employment. Section 3. SUBORDINATE OFFICERS. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine. Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office. Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, if present, shall preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by 13 the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V. Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of the president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the bylaws. Section 8. VICE PRESIDENTS. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors, or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or the bylaws, and the president, or the chairman of the board. Section 9. SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings. The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by the bylaws or by law to be given, and he shall keep the seal of the corporation if one be adopted, in safe custody, and 14 shall have such other powers and perform such other duties as may be prescribed by the board of directors or by the bylaws. Section 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the bylaws. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER AGENTS The corporation may at its option, to the maximum extent permitted by the California General Corporation Law, indemnify each of its agents against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding arising by reason of the fact that such person is or was an agent of the corporation. For the purposes of this Section, an "agent" of the corporation includes a person who is or was a Director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was a Director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of any other enterprise at the request of such predecessor corporation. ARTICLE VII RECORDS AND REPORTS Section 1. MAINTENANCE AND INSPECTION OF REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of 15 directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each shareholder. A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders' names and addresses and shareholdings during usual business hours on five days prior written demand on the corporation; and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such transfer agent's usual charges for such list, a list of the shareholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interest as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney of the shareholder or holder of a voting trust certificate making the demand. Section 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date. Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors, or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's 16 interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include the right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation. Section 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records, and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. Section 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501 of the California General Corporation Law is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the board of directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate. Section 6. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder. If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of the stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six- month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholders its annual report for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder or shareholders within thirty (30) days after the request. The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual, or quarterly income statement which it has prepared, and a balance sheet as of the end of that period. 17 The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation. Section 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The Corporation shall, within the ninety days after filing its original articles, and every year thereafter during the calendar month of original filing or within the five calendar months preceding the month of original filing, file on the prescribed form a statement setting forth the presently authorized number of directors of the corporation, the names and complete business or residence addresses of all the incumbent directors, the names and complete business or residence addresses of the chief executive officer, secretary, and chief financial officer, the street address of its principal executive office or principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the Corporations Code of California. ARTICLE VIII GENERAL CORPORATE MATTERS Section 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action (other than action by shareholders by written consent without a meeting), the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the California General Corporation Law. If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later. Section 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes, or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or 18 persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. Section 3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. Section 4. CERTIFICATES FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation shall be issued to each shareholder when any of these shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of the consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the secretary or an assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. Section 5. LOST CERTIFICATES. Except as provided in this Section 5, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. Section 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, or any vice president, or any other person authorized by resolution of the board of directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation, foreign or domestic, standing in the name of the corporation. The authority granted to these officers to vote or represent on behalf of the corporation any and all shares held by the corporation in any other corporation or corporations may be exercised by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers. 19 Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" included both a corporation and a natural person. ARTICLE IX AMENDMENTS Section 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation. Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article IX, bylaws, other than a bylaw or an amendment of a bylaw changing the authorized number of directors, may be adopted, amended, or repealed by the board of directors. 20 CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting secretary of TSECRP, Inc., a California corporation; and (2) That the foregoing Bylaws of said corporation were adopted by Action of Incorporator of said corporation on January 2, 1990. IN WITNESS WHEREOF, I have hereunto set my hand and affixed seal of the corporation this 29th day of January, 1990, at Los Angeles, California. /s/ Denise Novoselski ---------------------------- DENISE NOVOSELSKI 21 EX-10.3 21 EXHIBIT 10.3 Exhibit 10.3 ================================================================================ AMENDED AND RESTATED CREDIT AGREEMENT among PRIMEDIA INC. (f/k/a K-III Communications Corporation), CANADIAN SAILINGS INC., VARIOUS LENDING INSTITUTIONS, THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent and THE CHASE MANHATTAN BANK, as Administrative Agent ---------------------------------------------- Dated as of May 24, 1996 and amended and restated as of March 11, 1999 ---------------------------------------------- ================================================================================ CHASE SECURITIES INC., as Lead Arranger and Book Manager TABLE OF CONTENTS Page ---- SECTION 1. Amount and Terms of Credit.........................................2 1.01 Commitments.....................................................2 1.02 Minimum Borrowing Amounts, etc..................................6 1.03 Notice of Borrowing.............................................6 1.04 Disbursement of Funds...........................................7 1.05 Register........................................................8 1.06 Conversions.....................................................8 1.07 Pro Rata Borrowings.............................................9 1.08 Interest........................................................9 1.09 Interest Periods...............................................10 1.10 Increased Costs, Illegality, etc...............................11 1.11 Compensation...................................................14 1.12 Changeof Lending Office........................................14 1.13 Tranche B Commitments..........................................15 SECTION 2. Letters of Credit.................................................15 2.01 Letters of Credit..............................................15 2.02 Minimum Stated Amount..........................................16 2.03 Letter of Credit Requests; Notices of Issuance.................16 2.04 Agreement to Repay Letter of Credit Drawings...................16 2.05 Letter of Credit Participations................................17 2.06 Increased Costs................................................19 SECTION 3. Fees; Commitments.................................................20 3.01 Fees...........................................................20 3.02 Voluntary Reduction of Commitments.............................20 3.03 Mandatory Reduction of Commitments, etc........................21 SECTION 4. Payments..........................................................23 4.01 Voluntary Prepayments..........................................23 4.02 Mandatory Repayments...........................................24 4.03 Method and Place of Payment....................................27 4.04 Net Payments...................................................27 SECTION 5. Conditions Precedent..............................................28 5.01 Conditions Precedent to the Restatement Effective Date.........28 5.02 Conditions Precedent to each Credit Event......................30 (a) No Default; Representations and Warranties.............30 (b) Notice of Borrowing; Letter of Credit Request..........31 SECTION 6. Representations, Warranties and Agreements........................31 6.01 Corporate Status...............................................31 6.02 Corporate Power and Authority..................................31 6.03 No Violation...................................................32 6.04 Litigation.....................................................32 6.05 Use of Proceeds; Margin Regulations............................32 6.06 Governmental Approvals.........................................33 6.07 Investment Company Act.........................................33 6.08 Public Utility Holding Company Act.............................33 6.09 True and Complete Disclosure...................................33 6.10 Financial Statements; Financial Condition......................34 6.11 Tax Returns and Payments.......................................34 6.12 Compliance with ERISA..........................................34 6.13 Subsidiaries...................................................35 6.14 Intellectual Property..........................................35 6.15 Compliance with Statutes, etc..................................36 SECTION 7. Affirmative Covenants.............................................36 7.01 Information Covenants..........................................36 7.02 Books, Records and Inspections.................................38 7.03 Payment of Taxes...............................................38 7.04 Corporate Franchises...........................................38 7.05 Compliance with Statutes, etc..................................39 7.06 ERISA..........................................................39 7.07 End of Fiscal Years; Fiscal Quarters...........................39 7.08 Use of Proceeds................................................39 7.09 Ownership of Subsidiaries......................................40 7.10 Maintenance of Corporate Separateness..........................40 7.11 Canadian Borrower Capital Structure............................40 SECTION 8. Negative Covenants................................................40 8.01 Changes in Business............................................40 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.........41 8.03 Liens..........................................................43 8.04 Indebtedness...................................................45 8.05 Advances, Investments and Loans................................47 8.06 Contingent Obligations.........................................48 8.07 Dividends, etc.................................................49 8.08 Transactions with Affiliates...................................51 8.09 Fixed Charge Coverage Ratio....................................52 8.10 Interest Coverage Ratio........................................52 8.11 Leverage Ratio.................................................52 8.13 Modifications of Certain Agreements, etc.......................53 8.14 Limitation on the Creation of Subsidiaries; Redesignation of Partially-Owned Restricted Subsidiaries..................54 8.15 Limitation on Payments Under the Non-Compete Notes.............55 SECTION 9. Events of Default.................................................55 9.01 Payments.......................................................55 9.02 Representations, etc...........................................55 9.03 Covenants......................................................55 9.04 Default Under Other Agreements.................................55 9.05 Bankruptcy, etc................................................56 9.06 ERISA..........................................................56 9.07 Guaranty.......................................................57 9.08 Judgments......................................................57 9.09 Ownership......................................................57 SECTION 10. Definitions......................................................58 SECTION 11. The Administrative Agent.........................................90 11.02 Delegation of Duties..........................................90 11.03 Exculpatory Provisions........................................90 11.04 Reliance by Administrative Agent..............................91 11.05 Notice of Default.............................................91 11.06 Non-Reliance on Administrative Agent and Other Banks..........91 11.07 Indemnification...............................................92 11.08 Administrative Agent in Its Individual Capacity...............93 11.10 Resignation of the Administrative Agent; Successor Agent......93 SECTION 12. Miscellaneous....................................................93 12.01 Payment of Expenses, etc......................................93 12.02 Right of Setoff...............................................94 12.03 Notices.......................................................94 12.04 Benefit of Agreement..........................................95 12.05 No Waiver; Remedies Cumulative................................97 12.06 Payments Pro Rata.............................................97 12.08 Governing Law; Submission to Jurisdiction; Venue..............98 12.09 Counterparts..................................................99 12.10 Effectiveness.................................................99 12.11 Headings Descriptive..........................................99 12.12 Amendment or Waiver...........................................99 12.13 Survival.....................................................100 12.14 Domicile of Loans............................................100 12.15 Confidentiality..............................................100 ANNEX I List of Banks ANNEX II Bank Addresses ANNEX III Subsidiaries ANNEX IV Liens ANNEX V Existing Debt/Existing Contingent Obligations ANNEX VI Existing Preferred Stock EXHIBIT A -- Form of Notice of Borrowing EXHIBIT B -- Form of Tranche B Assumption Agreement EXHIBIT C-1 -- Form of Opinion of Simpson, Thacher & Bartlett EXHIBIT C-2 -- Form of Opinion of Beverly C. Chell, Esq. EXHIBIT C-3 -- Form of Opinion of White & Case LLP EXHIBIT D -- Form of Officer's Certificate EXHIBIT E-1 -- Form of Amended and Restated Subsidiary Guaranty EXHIBIT E-2 -- Form of Amended and Restated Company Guaranty EXHIBIT F -- Form of Amended and Restated Contribution Agreement EXHIBIT G -- Form of Assignment and Assumption Agreement EXHIBIT H -- Form of Subsidiary Assumption Agreement CREDIT AGREEMENT, dated as of May 24, 1996 and amended and restated as of March 11, 1999, among PRIMEDIA INC., a Delaware corporation (f/k/a K-III Communications Corporation) (the "Company"), CANADIAN SAILINGS INC., a Canada corporation (the "Canadian Borrower"), the lending institutions listed from time to time on Annex I hereto (each a "Bank" and, collectively, the "Banks"), THE BANK OF NOVA SCOTIA, as the Canadian Lender, THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H: WHEREAS, the Company, the Canadian Borrower, the Banks, the Canadian Lender, the Co-Syndication Agents, the Documentation Agent and the Administrative Agent are parties to a Credit Agreement, dated as of May 24, 1996 (as the same may have been amended, modified and supplemented to but excluding the Restatement Effective Date, the "Original Credit Agreement"); and WHEREAS, subject to and upon the terms and conditions herein set forth, the parties hereto wish to amend and restate the Original Credit Agreement in the form of this Agreement; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01 Commitments. (a) Subject to and upon the terms and conditions set forth herein, each Bank with a Term Loan Commitment severally agrees to make, on the Initial Borrowing Date, a term loan or term loans (each a "Term Loan" and, collectively, the "Term Loans") to the Company, which Term Loans (i) shall be made pursuant to a single drawing, (ii) shall, at the option of the Company, be Base Rate Loans or Eurodollar Loans, provided that all Term Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Term Loans of the same Type, (iii) shall equal for each Bank, in initial aggregate principal amount, that amount which equals the Term Loan Commitment of such Bank on the Initial Borrowing Date (before giving effect to the termination thereof on such date pursuant to Section 3.03(d)). Once repaid, Term Loans incurred hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions herein set forth, each Bank with a Tranche A Revolving Loan Commitment severally agrees at any time and from time to time on and after the Initial Borrowing Date and prior to the Original Final Maturity Date, to make a revolving loan or revolving loans (each a "Tranche A Revolving Loan" and, collectively, the "Tranche A Revolving Loans") to the Company, which Tranche A Revolving Loans (i) shall, at the option of the Company, be Base Rate Loans or Eurodollar Loans, provided that all Tranche A Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Tranche A Revolving Loans of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when combined with such Bank's Adjusted Percentage, if any, of the sum of (x) the Letter of Credit Outstandings at such time, (y) the outstanding principal amount of Swingline Loans at such time plus (z) the Dollar Equivalent of the outstanding principal amount of Canadian Dollar Loans at such time, equals (1) if such Bank is a Non-Defaulting Bank, the Adjusted Tranche A Commitment of such Bank at such time and (2) if such Bank is a Defaulting Bank, the Tranche A Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Swingline Loans then outstanding, the Dollar Equivalent of the aggregate principal amount of Canadian Dollar Loans then outstanding and the aggregate amount of all Letter of Credit Outstandings at such time, an amount equal to the Total Tranche A Revolving Loan Commitment at such time. (c) Subject to and upon the terms and conditions herein set forth, each Bank with a Tranche B Revolving Loan Commitment severally agrees at any time and from time to time on and after the Tranche B Assumption Date with respect to such Bank and prior to the Original Final Maturity Date, to make a revolving loan or revolving loans (each a "Tranche B Revolving Loan" and together with the Tranche A Revolving Loans, the "Revolving Loans") to the Company, which Tranche B Revolving Loans (i) shall, at the option of the Company, be Base Rate Loans or Eurodollar Loans, provided that all Tranche B Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Tranche B Revolving Loans of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which equals the Tranche B Revolving Loan Commitment of such Bank at such time. (d) Subject to and upon the terms and conditions herein set forth, Chase in its individual capacity agrees to make, at any time and from time to time on and after the Initial Borrowing Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans (each a "Swingline Loan" and, collectively, the "Swingline Loans") to the Company, which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Tranche A Revolving Loans made by Non-Defaulting Banks then outstanding, the Dollar Equivalent of the principal amount of all Canadian Dollar Loans then outstanding and the Letter of Credit Outstandings at such time, an amount equal to the Adjusted Total Tranche A Commitment then in effect (after giving effect to any reductions to the Adjusted Total Tranche A Commitment on such date) and (iv) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. Chase will not make a Swingline Loan after it has received written notice from the Required Banks that one or more of the applicable conditions to Credit Events specified in Section 5 are not then satisfied. -3- (e) On any Business Day, Chase may, in its sole discretion, give notice to the Banks that its outstanding Swingline Loans shall be funded with a Borrowing of Tranche A Revolving Loans (provided that each such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default under Section 9.05), in which case a Borrowing of Tranche A Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all Banks with a Tranche A Revolving Loan Commitment pro rata based on each Bank's Adjusted Percentage (determined before giving effect to any termination of the Tranche A Revolving Loan Commitments pursuant to the last paragraph of Section 9), and the proceeds thereof shall be applied directly to repay Chase for such outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by Chase notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Tranche A Revolving Loan Commitment or Adjusted Total Tranche A Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Company), then each such Bank (other than Chase) hereby agrees that it shall forth-with purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Company on or after such date and prior to such purchase) from Chase (without recourse or warranty other than that such Swingline Loans are free and clear of any Liens) such assignment of the outstanding Swingline Loans as shall be necessary to cause such Banks to share in such Swingline Loans ratably based upon their respective Adjusted Percentages (determined before giving effect to any termination of the Tranche A Revolving Loan Commitments pursuant to the last paragraph of Section 9), provided that all interest payable on the Swingline Loans shall be for the account of Chase until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Bank purchasing same from and after such date of purchase. Upon any change in the Tranche A Revolving Loan Commitments or Adjusted Percentages of the Banks pursuant to Section 1.10(c)(ii) or 12.04(b), or upon the occurrence of a Bank Default, it is hereby agreed that, with respect to all outstanding Swingline Loans, there shall be an automatic adjustment to the participations pursuant to this Section 1.01(e) to reflect the new Adjusted Percentages of the assigning and assignee Banks or of all Non-Defaulting Banks, as the case may be. (f) Subject to and upon the terms and conditions herein set forth, the Canadian Lender in its individual capacity agrees to make, at any time and from time to time on and after the Initial Borrowing Date and prior to the Original Final Maturity Date, a revolving loan or revolving loans (each a "Canadian Dollar Loan" and, collectively, the "Canadian Dollar Loans") to the Canadian Borrower, which Canadian Dollar Loans (i) shall, at the option of the Canadian Borrower, be Base Rate Loans or Eurodollar Loans, provided that all Canadian Dollar Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, -4- consist of Canadian Dollar Loans of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in Dollar Equivalent aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Tranche A Revolving Loans made by Non-Defaulting Banks then outstanding, the aggregate principal amount of all Swingline Loans then outstanding and the Letter of Credit Outstandings at such time, an amount equal to the Adjusted Total Tranche A Commitment then in effect (after giving effect to any reductions to the Adjusted Total Tranche A Commitment on such date) and (iv) shall not exceed in Dollar Equivalent aggregate principal amount at any time outstanding the Maximum Canadian Dollar Amount. The Canadian Lender will not make a Canadian Dollar Loan after it has received written notice from the Required Banks that one or more of the applicable conditions to Credit Events specified in Section 5 are not then satisfied. On the date of the making of any Canadian Dollar Loan, the Canadian Lender shall notify the Administrative Agent and the Canadian Borrower of the Dollar Equivalent of such Borrowing of Canadian Dollar Loans on such date. (g) On any Business Day, the Canadian Lender may, in its sole discretion, give notice to the Banks that all outstanding Canadian Dollar Loans shall be assigned to the Banks (provided that such notice shall be deemed to have been automatically given upon the occurrence of an Event of Default under Section 9.05). Each Bank with a Tranche A Revolving Loan Commitment hereby irrevocably and unconditionally agrees that in the event that any such notice is given or deemed given, such Bank shall purchase from the Canadian Lender (without recourse or warranty other than that such Canadian Dollar Loans are free and clear of any Liens) an assignment of the outstanding Canadian Dollar Loans in an amount equal to such Bank's Adjusted Percentage of such outstanding Canadian Dollar Loans in accordance with the provisions of this Section 1.01(g). Any such purchase shall be made on the second immediately succeeding Business Day, on which Business Day each such Bank shall pay to the Administrative Agent for the account of the Canadian Lender an amount equal to such Bank's Adjusted Percentage of all outstanding Canadian Dollar Loans in Canadian Dollars and same day funds. If and to the extent any such Bank shall not have so made its Adjusted Percentage of the outstanding principal amount of the Canadian Dollar Loans available to the Administrative Agent for the account of the Canadian Lender, such Bank agrees to pay to the Administrative Agent for the account of the Canadian Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Canadian Lender at the overnight Federal Funds rate. All interest payable on the Canadian Dollar Loans shall be for the account of the Canadian Lender until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Bank purchasing same from and after such date of purchase. The failure of any such Bank to make available to the Administrative Agent for the account of the Canadian Lender its Adjusted Percentage of the outstanding principal amount of Canadian Dollar Loans shall not relieve any other Bank of its obligation hereunder to make available to the Administrative Agent for the account of the Canadian Lender its Adjusted Percentage of the outstanding principal amount of Canadian Dollar Loans on the date required, as specified above, but no Bank shall be responsible for the failure of any other Bank to make available to the Administrative Agent for the account of the Canadian Lender such other Bank's Adjusted Percentage of any such payment. Each such Bank hereby irrevocably agrees to -5- purchase its Adjusted Percentage of the outstanding Canadian Dollar Loans in the manner specified above and on the date specified above notwithstanding (i) whether any conditions specified in Section 5 are then satisfied, (ii) whether a Default or an Event of Default has occurred and is continuing, (iii) the date of such purchase and (iv) any reduction in the Total Tranche A Revolving Loan Commitment or Adjusted Total Tranche A Commitment after any such Canadian Dollar Loans were made. Notwithstanding the foregoing, to the extent any Bank determines that at the time of a purchase of Canadian Dollar Loans pursuant to this Section 1.01(g), it is unable to obtain Canadian Dollars with which to fund such purchase, it may, upon notice to the Canadian Lender and the Administrative Agent, fund such purchase in U.S. Dollars in an aggregate amount which the Canadian Lender determines, in its sole discretion, is equivalent to what the Canadian Lender would have received if such Bank had funded in Canadian Dollars. (h) Subject to and upon the terms and conditions set forth herein, each Bank with a B Term Loan Commitment severally agrees to make, on the Restatement Effective Date, a term loan or term loans (each a "B Term Loan" and, collectively, the "B Term Loans") to the Company, which B Term Loans (i) shall be made pursuant to a single drawing, (ii) shall, at the option of the Company, be Base Rate Loans or Eurodollar Loans, provided that all B Term Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of B Term Loans of the same Type, (iii) shall equal for each Bank, in initial aggregate principal amount, that amount which equals the B Term Loan Commitment of such Bank on the Restatement Effective Date (before giving effect to the termination thereof on such date pursuant to Section 3.03(f)). Once repaid, B Term Loans incurred hereunder may not be reborrowed. 1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount of each Borrowing shall not be less than the Minimum Borrowing Amount for such Loans. More than one Borrowing may be incurred on any day, provided that at no time shall there be outstanding more than 20 Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. (a) Whenever the Company desires to incur Loans hereunder (excluding Swingline Loans, Canadian Dollar Loans, and Revolving Loans incurred pursuant to a Mandatory Borrowing), it shall give the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be incurred hereunder. Each such notice (each, together with each notice referred to in Sections 1.03(b)(i) and 1.03(c), a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable, and, in the case of each written notice and each confirmation of telephonic notice, shall be in the form of Exhibit A, appropriately completed to specify (i) whether the Loans being incurred pursuant to such Borrowing shall consist of Term Loans, B Term Loans, Tranche A Revolving Loans or Tranche B Revolving Loans, (ii) the aggregate principal amount of such Loans to be made pursuant to such Borrowing, (iii) the date of such Borrowing (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent -6- shall promptly give each Bank which is required to make Loans pursuant to the Borrowing specified in the respective Notice of Borrowing written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof, if any, and of the other matters covered by the Notice of Borrowing. (b) (i) Whenever the Company desires to incur a Borrowing of Swingline Loans hereunder, it shall give Chase no later than 12:00 Noon (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be incurred hereunder. Each such Notice of Borrowing shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loans to be incurred pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(e), with the Company irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section. (c) Whenever the Canadian Borrower desires to incur a Borrowing of Canadian Dollar Loans hereunder, it shall give the Canadian Lender and the Administrative Agent, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be incurred hereunder. Each such Notice of Borrowing, except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall specify in each case (i) the date of such Borrowing (which shall be a Business Day), (ii) the aggregate principal amount of the Canadian Dollar Loan to be made pursuant to such Borrowing and (iii) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. (d) Without in any way limiting the obligation of either Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent, Chase (in the case of a Borrowing of Swingline Loans), the Canadian Lender (in the case of a Borrowing of Canadian Dollar Loans) or the Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Administrative Agent, Chase, the Canadian Lender or the Letter of Credit Issuer, as the case may be, in good faith to be from the chairman, a vice chairman, the president, a vice president, a treasurer, an assistant treasurer or the director of treasury operations of such Borrower. In each such case, each Borrower hereby waives the right to dispute the Administrative Agent's, Chase's, the Canadian Lender's or the Letter of Credit Issuer's record of the terms of such telephonic notice. 1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing relating to any Loans other than Canadian Dollar Loans (or (x) in the case of Swingline Loans, no later than 2:00 P.M. (New York time) on the date specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, no later -7- than 12:00 Noon (New York time) on the date specified in Section 1.01(e)), each Bank with a Commitment under the respective Tranche will make available its Pro Rata Share (if any) of each Borrowing of Loans requested to be made on such date in the manner provided below (or, in the case of Swingline Loans, Chase will make available the full amount thereof). All such amounts shall be made available to the Administrative Agent in U.S. Dollars and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Company by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received (other than in respect of Mandatory Borrowings). Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing of any Loans referred to in this Section 1.04(a) that such Bank does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Company a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank and the Administrative Agent has made available same to the Company, the Administrative Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Company, and the Company shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Bank or the Company, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Company to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds rate or (y) if paid by the Company, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Company may have against any Bank as a result of any failure by such Bank to make Loans hereunder. (b) No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing relating to Canadian Dollar Loans, the Canadian Lender will make available to the Canadian Borrower such Canadian Dollar Loans requested to be made on such date, in Canadian Dollars and in immediately available funds at the Canadian Payment Office. 1.05 Register. (a) The Administrative Agent shall maintain a register for the recordation of the Commitments of the Banks from time to time and the principal amount of the Term Loans, B Term Loans, Tranche A Revolving Loans, Tranche B Revolving Loans, Swingline Loans and Canadian Dollar Loans owing to each Bank (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error. The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. -8- (b) Each Borrower hereby agrees to provide a Note, promptly upon the request of any Bank, to the extent such Bank has requested such Note in connection with any pledge or assignment by such Bank of any or all of its Loans hereunder to a Federal Reserve Bank. 1.06 Conversions. Either Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans, which at all times shall be maintained as Base Rate Loans) owing by a Borrower into a Borrowing or Borrowings of another Type of Loan; provided that (i) no such partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may not be converted into Eurodollar Loans if a Default or Event of Default is in existence and the Administrative Agent and/or the Required Banks have notified the Company that such a conversion will not be permitted as a result thereof and (iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the respective Borrower by giving the Administrative Agent at its Notice Office (and, in the case of any proposed conversion of Canadian Dollar Loans, the Canadian Lender at the Canadian Notice Office), prior to 12:00 Noon (New York time), at least three Business Days (or one Business Day in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each a "Notice of Conversion") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Term Loans, B Term Loans, Tranche A Revolving Loans and Tranche B Revolving Loans under this Agreement shall be made by the Banks pro rata on the basis of their Term Loan Commitments, B Term Loan Commitments, Tranche A Revolving Loan Commitments or Tranche B Revolving Loan Commitments, as the case may be, provided that all Borrowings of Tranche A Revolving Loans made pursuant to a Mandatory Borrowing shall be incurred from the Banks with Tranche A Revolving Loan Commitments pro rata on the basis of their Adjusted Percentages. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans to be made by it hereunder, regardless of the failure of any other Bank to make its Loans hereunder. 1.08 Interest. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Margin (or, in the case of B Term Loans, the Applicable B Term Loan Margin) plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate -9- per annum which shall at all times be the Applicable Margin (or, in the case of B Term Loans, the Applicable B Term Loan Margin) plus the relevant Eurodollar Rate. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Margin (or, in the case of B Term Loans, 1.75%) for Base Rate Loans; provided that principal in respect of Eurodollar Loans shall bear interest after the same becomes due (whether by acceleration or otherwise) until the end of the applicable Interest Period for such Eurodollar Loan at a per annum rate equal to 2% in excess of the rate of interest applicable on the due date therefor. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each March, June, September and December, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.07(b). (f) The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the respective Borrower and the Banks thereof. 1.09 Interest Periods. At the time either Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the respective Borrower, be a one, two, three, six or, if available to each of the Banks (as determined by each such Bank in good faith based on prevailing conditions in the interbank Eurodollar market on any date of determination thereof) (available to the Canadian Lender in the case of the Canadian Dollar Loans), nine or twelve month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period applicable thereto expires; -10- (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which 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 which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) no Interest Period in respect of Term Loans, Tranche A Revolving Loans or Tranche B Revolving Loans shall extend beyond the Original Final Maturity Date, and no Interest Period in respect of B Term Loans shall extend beyond the Final Maturity Date; and (v) no Interest Period may be elected at any time when a Default or Event of Default is then in existence and the Administrative Agent and/or the Required Banks have notified the Company that such an election will not be permitted as a result thereof. If upon the expiration of any Interest Period, the respective Borrower has failed to elect a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, or a Default or an Event of Default then exists and the Administrative Agent and/or the Required Banks have given the notice referred to in clause (v) above, such Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent (or the Canadian Lender in the case of Canadian Dollar Loans) or (y) in the case of clauses (ii) and (iii) below, any Bank, shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans because of (x) any change since the date of this Agreement in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request such as, for example, but not limited to, (A) a change since the Original Effective Date in the basis of taxation of payment to any Bank of the principal of or interest on the Loans or any other amounts payable hereunder (except for changes with respect to Taxes and those taxes described in -11- clauses (x) and (y) of the proviso in the second sentence of Section 4.04) or (B) a change since the Original Effective Date in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances affecting such Bank, the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time since the Original Effective Date, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a contingency occurring after the Original Effective Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within 10 Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to each Borrower and (except in the case of clause (i)) to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrowers and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by a Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by such Borrower, (y) in the case of clause (ii) above, the Company (or, in the case of Canadian Dollar Loans, each of the Company and the Canadian Borrower) agrees to pay to such Bank, upon written demand therefor (accompanied by the written notice referred to below), such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the respective Borrower by such Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the respective Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the respective Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the respective Borrower shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof promptly (but in any event no later than the later of (x) the Business Day next preceding the date of such Borrowing and (y) one Business Day after the respective Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then -12- outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); provided that if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) (i) If any Bank shall have determined that after the Original Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change 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 such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy), then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), accompanied by the notice referred to in the last sentence of this clause (i), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Company, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Company's obligations to pay additional amounts pursuant to this Section 1.10(c). (ii) If (x) any Bank becomes a Defaulting Bank or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y) any Bank has notified the Borrower that one of its Eurodollar Loans is affected by the circumstances described in Section 1.10(a)(ii) or (iii), or (z) any Bank is owed increased costs or other amounts under Section 1.10(c)(i), 2.06 or 4.04 and, in the case of such clause (y) or (z), compensation or other action with respect to such event is not otherwise requested generally by the other Banks, the Company shall have the right, if no Default or Event of Default then exists and, in the case of a Bank described in clause (y) or (z) above, such Bank has not changed its applicable lending office with the effect of eliminating such increased cost, to replace such Bank (the "Replaced Bank") with another commercial bank or banks or other financial institutions (collectively, the "Replacement Bank") reasonably acceptable to the Administrative Agent, and, in the case of any Replaced Bank with a Tranche A Revolving Loan Commitment, the Canadian Lender and the Letter of Credit Issuer, provided that (i) at the time of any replacement pursuant to this Section 1.10(c)(ii), the Replacement Bank shall enter into one or more assignment agreements pursuant to Section 12.04(b) hereof (and with all fees payable pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans of, and participations in Letters of Credit by, the Replaced Bank and, in connection therewith, shall pay to the Replaced Bank (or the Letter of Credit Issuer in the case of the proviso contained in clause (b) below, the Canadian Lender in the case of clause (c) below or Chase in the case of -13- clause (d) below) in respect thereof an amount equal to the sum of (a) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank, (b) an amount equal to the sum of such Replaced Bank's Adjusted Percentage (for this purpose, determined as if the adjustment described in clause (y) of the immediately succeeding sentence had been made with respect to such Replaced Bank) of all Unpaid Drawings and all then unpaid interest with respect thereto at such time, provided that in the event such Replaced Bank did not reimburse the Letter of Credit Issuer pursuant to Section 2.05(c) in respect of any Unpaid Drawing, such amount shall instead be paid to the Letter of Credit Issuer, (c) an amount equal to any unpaid obligation of the Replaced Bank pursuant to Section 1.01(g), which amount shall be paid to the Canadian Lender, (d) an amount equal to any unpaid obligation of the Replaced Bank pursuant to Section 1.01(e), which amount shall be paid to Chase, and (e) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01 hereof and (ii) all obligations of each Borrower owing to the Replaced Bank (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective assignment documentation pursuant to clause (i) above and the payment of amounts referred to in clauses (i) above and (ii) above, (x) the Replacement Bank shall become a Bank or Banks hereunder, as the case may be, and the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions (including, without limitation, Sections 1.10, 1.11, 2.06, 4.04, 11.07 and 12.01 of this Agreement) under this Agreement, which shall survive as to such Replaced Bank and (y) the Adjusted Percentages of the Banks shall be automatically adjusted at such time to give effect to such replacement (and to give effect to the replacement of a Defaulting Bank with one or more Non-Defaulting Banks). 1.11 Compensation. The Company (or, in the case of Canadian Dollar Loans, each of the Company and the Canadian Borrower) agrees to compensate each Bank in the appropriate currency, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding loss of anticipated profit with respect to any Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the respective Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment, prepayment or conversion of any Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by a Borrower; or (iv) as a consequence of (x) any other default by a Borrower to repay its Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of -14- that Bank in the United States of America (or Canada, in the case of Canadian Dollar Loans); provided, however, that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. 1.12 Change of Lending Office. Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c)(i), 2.06 or 4.04 with respect to such Bank, it will, if requested by the respective Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event; provided that such designation is made on such terms that in the sole judgment of such Bank, such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequences of the event giving rise to the operation of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of either Borrower or the right of any Bank provided in Sections 1.10, 2.06 or 4.04. 1.13 Tranche B Commitments. At any time and from time to time on and after the Original Effective Date and prior to June 30, 1999, the Company may request one or more Banks or other lending institutions to assume a Tranche B Revolving Loan Commitment and to make Tranche B Revolving Loans to the Company as provided in Section 1.01(c) and, in the sole discretion of each such Bank or other institution, any such Bank or other institution may agree to so commit; provided that (i) no Default or Event of Default then exists, (ii) the increase in the Total Tranche B Revolving Loan Commitment pursuant to any such request shall be in an aggregate amount of at least $50,000,000 and (iii) after giving effect to each such increase, the Total Tranche B Revolving Loan Commitment shall not exceed $250,000,000. The Company and each such Bank or other lending institution (each an "Assuming Bank") which agrees to commit to make Tranche B Revolving Loans shall execute and deliver to the Administrative Agent a Tranche B Assumption Agreement substantially in the form of Exhibit B (with the increase in, or in the case of a new Assuming Bank, assumption of, such Bank's Tranche B Revolving Loan Commitment to be effective upon delivery of such Tranche B Assumption Agreement to the Administrative Agent). The Administrative Agent shall promptly notify each Bank as to the occurrence of the Initial Tranche B Assumption Date and as to each Additional Tranche B Assumption Date occurring thereafter. On each Tranche B Assumption Date, (x) Annex I shall be deemed modified to reflect the revised Tranche B Revolving Loan Commitments of such Banks, and (y) the Company shall pay to each such Assuming Bank such up front fee (if any) as may have been agreed between the Company and such Assuming Bank. Notwithstanding anything to the contrary contained in this Agreement, in connection with any increase in the Total Tranche B Revolving Loan Commitment after the Initial Tranche B Assumption Date, the Company shall, in coordination with the Administrative Agent and the Banks with Tranche B Revolving Loan Commitments, repay outstanding Tranche B Revolving Loans of certain Banks and, if necessary, incur additional Tranche B Revolving Loans from other Banks, in each case so that such Banks participate in each Borrowing of Tranche B Revolving Loans pro rata on the basis of their Tranche B Revolving Loan Commitments (after giving effect to any increase thereof). It is hereby agreed that any breakage costs of the type described in -15- Section 1.11 incurred by the Banks in connection with the repayment of Tranche B Revolving Loans contemplated by this Section 1.13 shall be for the account of the Company. SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Company may request the Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the Business Day next preceding the Original Final Maturity Date to issue, for the account of the Company and in support of (x) trade obligations of the Company and/or its Restricted Subsidiaries and/or (y) on a standby basis, such other obligations (contingent or otherwise) of the Company and/or its Restricted Subsidiaries to any other Person, in each case, that arise in the ordinary course of business and are in respect of general corporate purposes (including, without limitation, in connection with Permitted Acquisitions) of the Company and/or its Restricted Subsidiaries, and subject to and upon the terms and conditions herein set forth the Letter of Credit Issuer agrees to issue from time to time, irrevocable letters of credit in such form as may be approved by the Letter of Credit Issuer and the Administrative Agent (each such letter of credit, a "Letter of Credit" and collectively, the "Letters of Credit"). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings at such time, would exceed either (x) $40,000,000 or (y) when added to the aggregate principal amount of all Tranche A Revolving Loans made by Non-Defaulting Banks and Swingline Loans and the Dollar Equivalent of the aggregate principal amount of Canadian Dollar Loans then outstanding, the Adjusted Total Tranche A Revolving Loan Commitment at such time; (ii) each Letter of Credit shall have an expiry date occurring not later than two years after such Letter of Credit's date of issuance, provided that standby Letters of Credit may provide that, absent notice to the contrary from the Letter of Credit Issuer to the beneficiary thereof, the expiry date shall be automatically extended for successive one year periods and (iii) no Letter of Credit shall have an expiry date occurring later than the Business Day next preceding the Original Final Maturity Date. 2.02 Minimum Stated Amount. The initial Stated Amount of each Letter of Credit shall be not less than $5,000 or such lesser amount acceptable to the Letter of Credit Issuer, provided that no more than 40 Letters of Credit (or such greater number acceptable to the Letter of Credit Issuer) shall be outstanding at any one time. 2.03 Letter of Credit Requests; Notices of Issuance. (a) Whenever it desires that a Letter of Credit be issued, the Company shall give the Administrative Agent and the Letter of Credit Issuer written notice (or telephonic notice confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five Business Days' (or such shorter period as may be acceptable to the Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) (each a "Letter of Credit Request"), which Letter of Credit Request shall include an application for such Letter of Credit and any other documents that the Letter of Credit Issuer customarily requires in connection therewith. The Administrative Agent shall promptly notify each Bank of each Letter of Credit Request. -16- (b) The Letter of Credit Issuer shall, on the date of each issuance of a Letter of Credit by it or amendment thereto, give the Administrative Agent, each Bank and the Company written notice of the issuance or amendment of such Letter of Credit, accompanied by a copy to the Administrative Agent of the Letter of Credit or Letters of Credit issued by it or of the amendment thereto. 2.04 Agreement to Repay Letter of Credit Drawings. (a) The Company hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by the Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") no later than one Business Day following the date of such payment or disbursement, with interest on the amount so paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Applicable Margin for Base Rate Loans plus the Base Rate as in effect from time to time (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), such interest also to be payable on demand. The Letter of Credit Issuer shall provide the Company prompt notice of any payment or disbursement made by it under any Letter of Credit issued by it, although the failure of, or delay in, giving any such notice shall not release or diminish the obligations of the Company under this Section 2.04(a) or under any other Section of this Agreement. (b) The Company's obligation under this Section 2.04 to reimburse the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances, including, without limitation, those set forth in Section 2.05(e)(i) through (v), inclusive, and irrespective of any setoff, counterclaim or defense to payment which the Company may have or have had against the Letter of Credit Issuer, the Administrative Agent or any Bank, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that the Company shall not be obligated to reimburse the Letter of Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. 2.05 Letter of Credit Participations. (a) Immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of Credit Issuer shall be deemed to have sold and transferred to each other Bank with a Tranche A Revolving Loan Commitment, and each such Bank (each a "Participant") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Bank's Adjusted Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Company under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Administrative Agent for the account of the Banks as provided in -17- Section 3.01(b) and the Participants shall have no right to receive any portion of any Facing Fees) and any security therefor or guaranty pertaining thereto. Upon any change in the Tranche A Revolving Loan Commitments or Adjusted Percentages of the Banks pursuant to Section 1.10(c)(ii) or 12.04(b) or otherwise, or upon the occurrence of a Bank Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.05 to reflect the new Adjusted Percentages of the assigning and assignee Banks or of all Non-Defaulting Banks, as the case may be. (b) In determining whether to pay under any Letter of Credit, the Letter of Credit Issuer shall not have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Letter of Credit Issuer any resulting liability. (c) In the event that the Letter of Credit Issuer makes any payment under any Letter of Credit and the Company shall not have reimbursed such amount in full to the Letter of Credit Issuer pursuant to Section 2.04(a), the Letter of Credit Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Administrative Agent for the account of the Letter of Credit Issuer, the amount of such Participant's Adjusted Percentage of such unreimbursed payment in U.S. Dollars and in same day funds; provided, however, that no Participant shall be obligated to pay to the Administrative Agent its Adjusted Percentage of such unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. If the Administrative Agent so notifies any Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent for the account of the Letter of Credit Issuer such Participant's Adjusted Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Adjusted Percentage of the amount of such payment available to the Administrative Agent for the account of the Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of the Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Letter of Credit Issuer at the overnight Federal Funds rate. The failure of any Participant to make available to the Administrative Agent for the account of the Letter of Credit Issuer its Adjusted Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of the Letter of Credit Issuer its Adjusted Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of the Letter of Credit Issuer such other Participant's Adjusted Percentage of any such payment. -18- (d) Whenever the Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of the Letter of Credit Issuer any payments from the Participants pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Adjusted Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to such Participant's Adjusted Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of the Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Company may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Letter of Credit Issuer, any Bank, or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Company and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.06 Increased Costs. If at any time after the Original Effective Date, the adoption of any applicable law, rule or regulation, or any change therein, or any change 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 the Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Letter of Credit Issuer or such Participant's participation therein, or (ii) impose on the Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to the Letter of Credit Issuer or such -19- Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Letter of Credit Issuer or such Participant hereunder, then, upon demand to the Company by the Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), accompanied by the certificate described in the last sentence of this Section 2.06, the Company shall pay to the Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate the Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Company by the Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate the Letter of Credit Issuer or such Participant as aforesaid shall be final and conclusive and binding on the Company absent manifest error, although the failure to deliver any such certificate shall not release or diminish the Company's obligations to pay additional amounts pursuant to this Section 2.06. SECTION 3. Fees; Commitments. 3.01 Fees. (a) The Company agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a commitment fee (the "Commitment Fee") for the period from the Original Effective Date to but not including the date the Total Revolving Loan Commitment has been terminated, computed at a per annum rate equal to the Applicable Commitment Fee Percentage on the daily average Aggregate Unutilized Revolving Loan Commitment of such Non-Defaulting Bank. Accrued Commitment Fees shall be due and payable quarterly in arrears on the last Business Day of March, June, September and December of each year and the date upon which the Total Revolving Loan Commitment is terminated. (b) The Company shall pay to the Administrative Agent for the account of each Non-Defaulting Bank with a Tranche A Revolving Loan Commitment pro rata on the basis of their respective Adjusted Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed at a rate equal to the Applicable Letter of Credit Fee Percentage on the average daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year and on the date upon which the Total Tranche A Revolving Loan Commitment shall be terminated. (c) The Company shall pay to the Administrative Agent for the account of the Letter of Credit Issuer a fee in respect of each Letter of Credit issued by it (the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the average daily Stated Amount of such Letter of Credit. Accrued Facing Fees shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December of each year and on the date upon which the Total Tranche A Revolving Loan Commitment shall be terminated. -20- (d) The Company hereby agrees to pay directly to the Letter of Credit Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of Credit issued by it such amount as shall at the time of such issuance, drawing or amendment be the administrative charge which the Letter of Credit Issuer is customarily charging for issuances of, drawings under or amendments of, letters of credit issued by it. (e) The Company shall pay to the Administrative Agent, for its own account, such other fees as have been agreed to in writing by the Company and the Administrative Agent. (f) All computations of Fees shall be made in accordance with Section 12.07(b). 3.02 Voluntary Reduction of Commitments. Upon at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Company shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Tranche A Revolving Loan Commitment and/or the Total Unutilized Tranche B Revolving Loan Commitment; provided that (v) any such termination or partial reduction shall apply to proportionately and permanently reduce the Tranche A Revolving Loan Commitment or the Tranche B Revolving Loan Commitment, as the case may be, of each of the Banks with such Commitments, (w) any partial reduction pursuant to this Section 3.02 shall be in the amount of at least $2,000,000, (x) the reduction to the Total Unutilized Tranche A Revolving Loan Commitment shall in no case be in an amount which would cause the Tranche A Revolving Loan Commitment of any Bank to be reduced (as required by the preceding clause (v)) by an amount which exceeds the remainder of (i) the Aggregate Unutilized Tranche A Commitment of such Bank as in effect immediately before giving effect to such reduction minus (ii) such Bank's Adjusted Percentage of the sum of (A) the aggregate principal amount of Swingline Loans then outstanding and (B) the Dollar Equivalent of the aggregate principal amount of Canadian Dollar Loans then outstanding, (y) each reduction to the Total Tranche A Revolving Loan Commitment pursuant to this Section 3.02 shall reduce the then remaining Scheduled A Commitment Reductions on a pro rata basis (based upon the then remaining principal amount of each such Scheduled A Commitment Reduction) and (z) each reduction to the Total Tranche B Revolving Loan Commitment pursuant to this Section 3.02 shall reduce the then remaining Scheduled B Commitment Reductions on a pro rata basis (based upon the then remaining principal amount of each such Scheduled B Commitment Reduction). 3.03 Mandatory Reduction of Commitments, etc. (a) Subject to Sections 3.02 and 3.03(g), the Total Tranche A Revolving Loan Commitment (and the Tranche A Revolving Loan Commitment of each Bank with such a Commitment) shall be permanently reduced on each date set forth below (provided that if any date set forth below is not a Business Day then the permanent reduction shall occur on the first Business Day immediately succeeding such date set forth below) (each a "Scheduled A Commitment Reduction Date"), in the amount set forth below opposite such date (each such reduction, as such reduction may have been reduced pursuant to Sections 3.02 and/or 3.03(g), a "Scheduled A Commitment Reduction"): -21- Scheduled A Commitment Reduction Date Amount ---------------------- ------ June 30, 1999 $37,500,000 December 31, 1999 37,500,000 June 30, 2000 75,000,000 December 31, 2000 75,000,000 June 30, 2001 75,000,000 December 31, 2001 75,000,000 June 30, 2002 75,000,000 December 31, 2002 75,000,000 June 30, 2003 75,000,000 December 31, 2003 75,000,000 June 30, 2004 75,000,000 (b) Subject to Sections 3.02 and 3.03(g), the Total Tranche B Revolving Loan Commitment (and the Tranche B Revolving Loan Commitment of each Bank with such a Commitment) shall be permanently reduced on each date set forth below (provided that if any date set forth below is not a Business Day then the permanent reduction shall occur on the first Business Day immediately succeeding such date set forth below) (each a "Scheduled B Commitment Reduction Date"), in an amount equal to the product of (x) the Total Tranche B Revolving Loan Commitment as of June 30, 1999 (immediately prior to giving effect to the Scheduled B Commitment Reduction to occur on such date) multiplied by (y) the percentage set forth below opposite such date (each such reduction, as such reduction may have been reduced pursuant to Sections 3.02 and/or 3.03(g), a "Scheduled B Commitment Reduction"): Scheduled A Commitment Reduction Date Amount ---------------------- ------ June 30, 1999 5% December 31, 1999 5% June 30, 2000 10% December 31, 2000 10% June 30, 2001 10% December 31, 2001 10% June 30, 2002 10% December 31, 2002 10% June 30, 2003 10% December 31, 2003 10% June 30, 2004 10% (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Term Loan Commitment (and the Term Loan Commitment of each Bank with such a Commitment) shall terminate on the Initial Borrowing Date (after giving effect to the making of the Term Loans on such date). -22- (d) The Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall terminate in its entirety on the earlier of (i) the date which is the earlier of (x) 30 days after any date on which a Specified Change of Control Event occurs and (y) the date on which any Senior Notes or any other Indebtedness of the Company or its Restricted Subsidiaries are required to be repurchased, redeemed or prepaid as a result of any such Specified Change of Control Event and (ii) the Original Final Maturity Date. (e) With respect to any Asset Sale, (i) on the earliest of (x) the date occurring one year after the consummation of such Asset Sale, (y) the date, if any, following the date of consummation of such Asset Sale upon which the Administrative Agent, on behalf of the Required Banks, shall have delivered a written reinvestment termination notice to the Company, provided that such notice may only be given while an Event of Default exists, and (z) the date the Company or any of its Subsidiaries shall be required to make an offer to purchase Senior Notes or any other Indebtedness of the Company or its Restricted Subsidiaries (other than Indebtedness specifically relating to the assets sold in such Asset Sale) with the proceeds received in connection with such Asset Sale, and (ii) on any date after the earliest of the dates referred to in clause (i) above of receipt by the Company or any of its Restricted Subsidiaries of additional Net Cash Proceeds from such Asset Sale, in each case, the Total Revolving Loan Commitment shall be reduced and the aggregate principal amount of the Term Loans and the B Term Loans shall be repaid in an aggregate amount equal to 100% of the then Remaining Net Cash Proceeds from such Asset Sale (with the Tranche A Facility Percentage of such Remaining Net Cash Proceeds to be applied to reduce the Total Tranche A Revolving Loan Commitment, the Tranche B Facility Percentage to be applied to reduce the Total Tranche B Revolving Loan Commitment and the Term Loan Facility Percentage to be applied as a repayment of the aggregate principal amount of Term Loans, and with all such Remaining Net Cash Proceeds to be applied as a repayment of the aggregate principal amount of the B Term Loans after the Total Revolving Loan Commitment has terminated, all Term Loans have been paid in full and all loans have been repaid and all commitments terminated under the Additional Credit Agreement). Each reduction to the Total Tranche A Revolving Loan Commitment pursuant to this Section 3.03(e) shall reduce each of the remaining Scheduled A Commitment Reductions on a pro rata basis (based upon the then remaining amount of each such Scheduled A Commitment Reduction), and each reduction to the Total Tranche B Revolving Loan Commitment pursuant to this Section 3.03(e) shall reduce each of the remaining Scheduled B Commitment Reductions on a pro rata basis (based upon the then remaining amount of each such Scheduled B Commitment Reduction). (f) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total B Term Loan Commitment (and the B Term Loan Commitment of each Bank with such a Commitment) shall terminate on the Restatement Effective Date (after giving effect to the making of the B Term Loans on such date). (g) Each reduction to the Total Term Loan Commitment, the Total B Term Loan Commitment, the Total Tranche A Revolving Loan Commitment and the Total Tranche B Revolving Loan Commitment pursuant to this Section 3.03 shall be applied proportionately to reduce the Term Loan Commitment, the B Term Loan Commitment, the Tranche A Revolving -23- Loan Commitment or the Tranche B Revolving Loan Commitment, as the case may be, of each Bank with such a Commitment. SECTION 4. Payments. 4.01 Voluntary Prepayments. Each Borrower shall have the right to prepay the Loans incurred by it (and the Company on behalf of the Canadian Borrower may, at its option, prepay the Canadian Dollar Loans incurred by the Canadian Borrower), in whole or in part, without premium or penalty except as otherwise provided in this Agreement, from time to time on the following terms and conditions: (i) the Company or, in the case of any prepayment of Canadian Dollar Loans, the Company or the Canadian Borrower, shall give the Administrative Agent at the Notice Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are Term Loans, B Term Loans, Tranche A Revolving Loans, Tranche B Revolving Loans, Swingline Loans or Canadian Dollar Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Company or the Canadian Borrower, as the case may be, prior to 12:00 Noon (New York time) (x) at least two Business Days prior to the date of such prepayment in the case of Term Loans, B Term Loans, Revolving Loans or Canadian Dollar Loans, or (y) on the date of such prepayment in the case of Swingline Loans, which notice shall promptly be transmitted by the Administrative Agent to each of the Banks (or to the Canadian Lender in the case of Canadian Dollar Loans); (ii) (x) each partial prepayment of any Borrowing (other than a Borrowing of Swingline Loans and Canadian Dollar Loans) shall be in an aggregate principal amount of at least $1,000,000 and, if greater, in an integral multiple of $500,000, (y) each partial prepayment of any Borrowing of Swingline Loans shall be in an aggregate principal amount of at least $250,000 and, if greater, in an integral multiple of $50,000 and (z) each partial prepayment of any Borrowing of Canadian Dollar Loans shall be in an aggregate principal amount of at least Can. $50,000 and, if greater, in an integral multiple of Can. $50,000, provided that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment of Term Loans or B Term Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled TL Repayments or Scheduled BTL Repayments, as the case may be, on a pro rata basis (based upon the then remaining principal amount of each such Scheduled TL Repayment or Scheduled BTL Repayment, as the case may be); and (iv) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; provided that at the Company's election in connection with any prepayment of Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loans of a Defaulting Bank. 4.02 Mandatory Repayments. (a) (i) If on any date the sum of (x) the aggregate outstanding principal amount of Tranche A Revolving Loans made by Non-Defaulting Banks and Swingline Loans and the Dollar Equivalent of the aggregate outstanding principal amount of Canadian Dollar Loans (in each case after giving effect to all other repayments thereof on such date), plus (y) the Letter of Credit Outstandings on such date exceeds the Adjusted Total Tranche A Commitment as then in effect, the Company shall repay on such date the principal of -24- Swingline Loans, and if no Swingline Loans are or remain outstanding, Tranche A Revolving Loans of Non-Defaulting Banks in an aggregate amount equal to such excess, and if no Tranche A Revolving Loans of Non-Defaulting Banks are or remain outstanding thereafter, the Canadian Borrower shall (or, at its option, the Company, on behalf of the Canadian Borrower, shall) repay on such date the principal of Canadian Dollar Loans, in an aggregate amount equal to such excess. If, after giving effect to the repayment of all outstanding Swingline Loans, Tranche A Revolving Loans and Canadian Dollar Loans, the aggregate amount of Letter of Credit Outstandings exceeds the Adjusted Total Tranche A Commitment then in effect, the Company agrees to pay to the Administrative Agent an amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate amount of Letter of Credit Outstandings) and the Administrative Agent shall hold such payment as security for the obligations of the Company hereunder pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Administrative Agent (which shall permit certain investments in Cash Equivalents satisfactory to the Administrative Agent, until the proceeds are applied to the secured obligations). (ii) If on any date the aggregate outstanding principal amount of Tranche A Revolving Loans made by any Defaulting Bank exceeds the Tranche A Revolving Loan Commitment of such Defaulting Bank, the Company shall repay the Tranche A Revolving Loans of such Defaulting Bank in an amount equal to such excess. (iii) If on any date the aggregate outstanding principal amount of Tranche B Revolving Loans made by any Bank exceeds the Tranche B Revolving Loan Commitment of such Bank, the Company shall repay the Tranche B Revolving Loans of such Bank in an amount equal to such excess. (b) If on any date the Dollar Equivalent of the aggregate outstanding principal amount of Canadian Dollar Loans (after giving effect to all other repayments thereof on such date) exceeds the Maximum Canadian Dollar Amount as then in effect, the Canadian Borrower shall repay on such date the principal of Canadian Dollar Loans in an amount such that after giving effect to such repayment the Dollar Equivalent of the aggregate outstanding principal amount of the Canadian Dollar Loans is equal to or less than the Maximum Canadian Dollar Amount. (c) In addition to any other mandatory repayments pursuant to this Section 4.02, the Company shall repay, on each date set forth below (provided that if any date set forth below is not a Business Day then the repayment shall occur on the first Business Day immediately succeeding such date set forth below) (each a "Scheduled TL Repayment Date"), the Term Loans in an amount equal to the amount set forth below opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01, and 4.02(e), a "Scheduled TL Repayment"): Scheduled TL Repayment Date Amount --------------------------- ------ June 30, 2000 $25,000,000 December 31, 2000 25,000,000 -25- Scheduled TL Repayment Date Amount --------------------------- ------ June 30, 2001 25,000,000 December 31, 2001 25,000,000 June 30, 2002 25,000,000 December 31, 2002 25,000,000 June 30, 2003 25,000,000 December 31, 2003 25,000,000 June 30, 2004 50,000,000 (d) In the event that a Specified Change of Control Event occurs, the Company shall repay all outstanding Term Loans and B Term Loans in their entirety on the date which is the earlier of (i) 30 days after any date on which such Specified Change of Control Event occurs and (ii) the date on which any Senior Notes or any other Indebtedness of the Company or its Restricted Subsidiaries are required to be repurchased, redeemed or prepaid as a result of any such Specified Change of Control Event. (e) The aggregate principal amount of Term Loans and B Term Loans shall be repaid at the times, and in the amounts, provided in Section 3.03(e). The amount of each principal repayment of Term Loans or B Term Loans pursuant to this Section 4.02(e) shall be applied to reduce each of the remaining Scheduled TL Repayments or Scheduled BTL Repayments, as the case may be, on a pro rata basis (based upon the then remaining amount of each such Scheduled TL Repayment or Scheduled BTL Repayment, as the case may be). (f) Notwithstanding anything to the contrary contained in this Agreement, (i) all then outstanding Loans (other than B Term Loans) under this Agreement shall be repaid in full on the Original Final Maturity Date, (ii) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (iii) all then outstanding B Term Loans under this Agreement shall be repaid in full on the Final Maturity Date. (g) In addition to any other mandatory repayments pursuant to this Section 4.02, the Company shall repay, on each date set forth below (provided that if any date set forth below is not a Business Day then the repayment shall occur on the first Business Day immediately succeeding such date set forth below) (each a "Scheduled BTL Repayment Date"), the B Term Loans in an amount equal to the amount set forth below opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01, and 4.02(e), a "Scheduled BTL Repayment"): Scheduled BTL Repayment Date Amount ---------------------------- ------ June 30, 2000 $1,250,000 December 31, 2000 1,250,000 June 30, 2001 1,250,000 December 31, 2001 1,250,000 June 30, 2002 1,250,000 -26- Scheduled BTL Repayment Date Amount ---------------------------- ------ December 31, 2002 1,250,000 June 30, 2003 1,250,000 December 31, 2003 1,250,000 July 31, 2004 240,000,000 (h) With respect to each repayment of Loans required by this Section 4.02, the Company (or, in the case of Canadian Dollar Loans, the Canadian Borrower or the Company on behalf of the Canadian Borrower) may designate the Types of Loans which are to be repaid and the specific Borrowing(s) pursuant to which made; provided that (i) Eurodollar Loans may be designated for repayment pursuant to this Section 4.02 only on the last day of an Interest Period applicable thereto unless all Eurodollar Loans under the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans under the respective Tranche have been paid in full; (ii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; (iii) notwithstanding the provisions of the preceding clause (ii), no repayment of Tranche A Revolving Loans pursuant to Section 4.02(a)(i) shall be applied to the Tranche A Revolving Loans of a Defaulting Bank; and (iv) repayments of Tranche A Revolving Loans of Defaulting Banks pursuant to Section 4.02(a)(ii) shall be applied pro rata among such Tranche A Revolving Loans. In the absence of a designation by a Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. Notwithstanding the foregoing provisions of this Section 4.02, if at any time the mandatory repayment of Loans pursuant to Section 4.02(a) or (b) arising solely as a result of a reduction to the Total Revolving Loan Commitment pursuant to Section 3.03(e) would result, after giving effect to the procedures set forth above in this clause (h), in the Company (or, in the case of Canadian Dollar Loans, the Canadian Borrower) incurring breakage costs under Section 1.11 as a result of Eurodollar Loans being repaid other than on the last day of an Interest Period applicable thereto (the "Affected Eurodollar Loans"), then the Company (or, in the case of Canadian Dollar Loans, the Canadian Borrower or the Company on behalf of the Canadian Borrower) may in its sole discretion initially deposit a portion (up to 100%) of the amounts that otherwise would have been paid in respect of the Affected Eurodollar Loans with the Administrative Agent to be held as security for the obligations of the respective Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance satisfactory to the Administrative Agent, with such cash collateral to be released from such cash collateral account upon the first occurrence (or occurrences) thereafter of the last day of an Interest Period applicable to the relevant Loans that are Eurodollar Loans (or such earlier date or dates as shall be requested by the respective Borrower), to repay an aggregate principal amount of such Loans equal to the Affected Eurodollar Loans not initially repaid pursuant to this sentence. 4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Banks entitled thereto (based on each Bank's Pro Rata Share, if any), no later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately -27- available funds and in lawful money of the United States of America (or Canadian Dollars in the case of Canadian Dollar Loans which have been assigned to the other Banks by the Canadian Lender pursuant to Section 1.01(g)) at the Payment Office, provided that payments in respect of Canadian Dollar Loans owing to the Canadian Lender shall be made to the Canadian Lender no later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in lawful money of Canada at the Canadian Payment Office. Notwithstanding anything to the contrary contained herein, any amounts owing or payments required to be made by the Canadian Borrower hereunder, including, without limitation, pursuant to Section 1.10, 1.11, 4.04 or 12.01, may, at the option of the Company, be paid by the Company on behalf of the Canadian Borrower. Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day; provided, however, that to the extent that the Administrative Agent shall have received any payment under this Agreement after 1:00 P.M. (New York time) on a Business Day, the Administrative Agent shall use its best efforts to distribute such payment as promptly as practicable on such date to the Banks (other than any Bank that has consented in writing to waive its pro rata share of such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received, and to the extent that any such Bank receives its portion of such payment from the Administrative Agent on such same date by a time satisfactory to such Bank, such payment to such Bank shall be deemed to have been made on such date. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.04 Net Payments. All payments made by each Borrower hereunder will be made without setoff, counterclaim or other defense. Promptly upon notice from any Bank to the respective Borrower, the Company (or, in the case of Canadian Dollar Loans, each of the Company and the Canadian Borrower) agrees to pay, prior to the date on which penalties attach thereto, all present and future income, stamp and other taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of any Canadian Dollar Loan of any Type, or in respect of a Loan solely as a result of the interest rate being determined by reference to the Eurodollar Rate, and/or the provisions of this Agreement relating to the Eurodollar Rate, and/or the recording, registration, notarization or other formalization of any thereof and/or any payments of principal, interest or other amounts made on or in respect of a Canadian Dollar Loan of any Type, or a Loan when the interest rate is determined by reference to the Eurodollar Rate (all such taxes, levies, costs and charges being herein collectively called "Taxes"); provided that Taxes shall not include (x) taxes imposed on or measured by the overall net income or receipts of the Administrative Agent or any Bank by the United States of America or any political subdivision or taxing authority thereof or therein or (y) taxes on or measured by the overall net income of any foreign office, branch or subsidiary of the Administrative Agent or that Bank by any foreign country or subdivision thereof in which the Administrative Agent's or that Bank's office, branch or subsidiary is doing business. Each Borrower agrees to also pay such additional amounts equal to increases in taxes payable by that Bank described in the foregoing proviso which increases arise solely from the receipt by that Bank of payments made by such Borrower described in the immediately preceding sentence of this Section 4.04. -28- Promptly after the date on which payment of any such Tax is due pursuant to applicable law, the respective Borrower will, at the request of that Bank, furnish to that Bank evidence, in form and substance satisfactory to that Bank, that the respective Borrower has met its obligation under this Section 4.04. Each Borrower agrees to indemnify each Bank against, and reimburse each Bank on demand for, any Taxes, as reasonably determined by that Bank in its good faith. Such Bank shall provide the respective Borrower with appropriate receipts for any payments or reimbursements made by such Borrower pursuant to this Section 4.04. Notwithstanding the foregoing, each Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold and pay to the appropriate taxing authority within the time prescribed by applicable law (and shall not be required to make payments as otherwise required in this Section on account of such deductions or withholdings) income or other similar taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of the Administrative Agent or any Bank other than the Administrative Agent or any Bank (i) who is a U.S. Person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with the Company for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if a Borrower shall so deduct or withhold any such taxes, it shall provide a statement to the Administrative Agent and such Bank, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which the Administrative Agent or such Bank may reasonably request for assisting the Administrative Agent or such Bank to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which the Administrative Agent or such Bank is subject to tax. Notwithstanding anything to the contrary contained herein, the Company shall compensate each Bank for all losses, expenses, liabilities, taxes (including, without limitation, Taxes) or other costs which any such Bank may incur or sustain as a result of the Company paying any obligations of the Canadian Borrower hereunder or under any other Credit Document, which such Bank would not otherwise incur or sustain if the Canadian Borrower had made any such payments instead of the Company paying such amounts on behalf of the Canadian Borrower. SECTION 5. Conditions Precedent. 5.01 Conditions Precedent to the Restatement Effective Date. The occurrence of the Restatement Effective Date pursuant to Section 12.10 and the obligation of each Bank to make each Loan to the respective Borrower hereunder (including, without limitation, the obligation of the Canadian Lender to make each Canadian Dollar Loan hereunder), and the obligation of the Letter of Credit Issuer to issue each Letter of Credit hereunder, are subject, on the Restatement Effective Date, to the satisfaction of the following conditions: (a) Execution of Agreement. This Agreement shall have been executed and delivered in accordance with Section 12.10. (b) No Default; Representations and Warranties. (i) There shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of -29- such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. (c) Opinions of Counsel. The Administrative Agent shall have received opinions, addressed to each of the Banks and dated the Restatement Effective Date, (i) from Simpson, Thacher & Bartlett, special counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit C-1 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request, (ii) from Beverly C. Chell, Esq., counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit C-2 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request, and (iii) from White & Case LLP, special counsel to the Administrative Agent, which opinion shall cover the matters contained in Exhibit C-3. (d) Corporate Proceedings. (i) The Administrative Agent shall have received from each of the Company, the Canadian Borrower and each Subsidiary Guarantor, a certificate, dated the Restatement Effective Date, signed by the chairman, a vice chairman, the president, any vice-president or the treasurer of such Person, and attested to by the secretary or any assistant secretary of such Person, in the form of Exhibit D with appropriate insertions and, to the extent required, together with copies of the Certificate of Incorporation, By-Laws and the resolutions of such Person referred to in such certificate, and the foregoing shall be satisfactory to the Administrative Agent. (ii) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. (e) Guaranties. (i) Each Subsidiary Guarantor shall have duly authorized, executed and delivered an amended and restated guaranty in the form of Exhibit E-1 hereto (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force and effect. (ii) The Company shall have duly authorized, executed and delivered an amended and restated guaranty in the form of Exhibit E-2 hereto (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, the "Company Guaranty"), and the Company Guaranty shall be in full force and effect. (f) Notice of Borrowing; Letter of Credit Request. The Administrative Agent (and, in the case of any Borrowing of Canadian Dollar Loans, the Canadian Lender) shall have received a Notice of Borrowing satisfying the requirements of Section 1.03 with respect to any Borrowing of Loans on the Restatement Effective Date; and the Administrative Agent and the Letter of Credit Issuer shall have received a Letter of Credit Request satisfying the requirements -30- of Section 2.03 with respect to the issuance of any Letter of Credit on the Restatement Effective Date. (g) Payment of Fees, etc. All costs, fees and expenses, and all other compensation contemplated by this Agreement, due to the Administrative Agent, the Letter of Credit Issuer or the Banks shall have been paid to the extent due. (h) Contribution Agreement. The Subsidiary Guarantors shall have entered into an amended and restated contribution agreement in the form of Exhibit F hereto (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, the "Contribution Agreement"), and the Contribution Agreement shall be in full force and effect. (i) Existing Indebtedness Agreements. There shall have been delivered to (or made available for review by) the Banks copies, certified (in the case of those delivered) as true and correct by an appropriate officer of the Company making such delivery, of all agreements evidencing or relating to the Existing Debt or the Existing Contingent Obligations with respect to Indebtedness for borrowed money (collectively, the "Existing Indebtedness Agreements"). The occurrence of the Restatement Effective Date and the acceptance of the benefits of any Credit Event on the Restatement Effective Date shall constitute a representation and warranty by the Company to each of the Banks that all of the conditions specified above exist as of the Restatement Effective Date. All of the certificates, legal opinions and other documents and papers referred to in this Section 5.01, unless otherwise specified, shall be delivered to the Administrative Agent at its Notice Office for the account of each of the Banks and in sufficient counterparts for each of the Banks and shall be reasonably satisfactory in form and substance to the Administrative Agent. 5.02 Conditions Precedent to each Credit Event. The obligation of each Bank to make each Loan to the respective Borrower hereunder (including, without limitation, the obligation of the Canadian Lender to make each Canadian Dollar Loan hereunder), and the obligation of the Letter of Credit Issuer to issue each Letter of Credit hereunder, are subject, at the time of each such Credit Event, to the satisfaction of the following conditions: (a) No Default; Representations and Warranties. At the time of each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. (b) Notice of Borrowing; Letter of Credit Request. The Administrative Agent (and, in the case of any Borrowing of Canadian Dollar Loans, the Canadian Lender) shall have received a Notice of Borrowing satisfying the requirements of Section 1.03 with respect to any Borrowing of Loans; and the Administrative Agent and the Letter of Credit Issuer shall have -31- received a Letter of Credit Request satisfying the requirements of Section 2.03 with respect to the issuance of any Letter of Credit. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by the Company to each of the Banks that all of the conditions specified above exist as of the date of such Credit Event. All of the documents and papers referred to in this Section 5.02, unless otherwise specified, shall be delivered to the Administrative Agent at its Notice Office for the account of each of the Banks and in sufficient counterparts for each of the Banks and shall be reasonably satisfactory in form and substance to the Administrative Agent. SECTION 6. Representations, Warranties and Agreements. In order to induce the Banks to enter into this Agreement and to make the Loans and issue and/or participate in the Letters of Credit provided for herein, the Company makes the following representations and warranties to, and agreements with, the Banks, all of which shall survive the execution and delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit (with the occurrence of each Credit Event on and after the Initial Borrowing Date being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in all material respects on and as of the Initial Borrowing Date and as of the date of each such Credit Event, unless stated to relate to a specific earlier date): 6.01 Corporate Status. The Company and each of its Restricted Subsidiaries (i) is a duly organized and validly existing corporation under the laws of the jurisdiction of its organization and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage, (ii) is in good standing under the laws of the jurisdiction of its organization and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified, except, in the cases of clauses (ii) and (iii) above, for such failures to be in good standing and failures to be so qualified which, in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. 6.02 Corporate Power and Authority. Each of the Company and each of its Restricted Subsidiaries has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. Each of the Company and each of its Restricted Subsidiaries has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Person enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). -32- 6.03 No Violation. Neither the execution, delivery or performance by the Company or any of its Restricted Subsidiaries of the Credit Documents to which it is a party nor compliance by them with the terms and provisions thereof, nor the consummation of the transactions contemplated therein (i) will contravene in any material respect any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Company or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of the Company or any of its Subsidiaries. 6.04 Litigation. There are no actions, suits or proceedings pending, or, to the best knowledge of the Company, threatened, with respect to the Company or any of its Subsidiaries (i) that are likely to have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or (ii) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Banks, the Letter of Credit Issuer or the Administrative Agent or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder and under the other Credit Documents to which it is or they are, or will be, a party. 6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all Terms Loans shall be utilized (i) to refinance the loans outstanding on the Initial Borrowing Date under the Existing Credit Agreements, and (ii) to pay certain fees and expenses arising in connection with such refinancing. (b) The proceeds of all Revolving Loans, Swingline Loans and Canadian Dollar Loans shall be used for the purposes referred to in Section 6.05(a) above and for general corporate and working capital purposes of the Company and its Subsidiaries (including, without limitation, to finance Permitted Acquisitions and refinance Senior Notes). (c) The proceeds of all B Term Loans shall be used for the general corporate and working capital purposes of the Company and its Subsidiaries (including, without limitation, to finance Permitted Acquisitions and refinance Senior Notes). (d) Neither the making of any Loan hereunder, nor the use of the proceeds thereof, will violate the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock, provided that the Company may use the proceeds of Loans to purchase Margin Stock in compliance with Regulations T, U and X, so long as at the time of the making of such Loan, and -33- after giving effect thereto, not more than 25% of the value of the assets subject to the provisions of Section 8 of the Company, or of the Company and its Restricted Subsidiaries on a consolidated basis, shall constitute Margin Stock. 6.06 Governmental Approvals. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document, except those which have been obtained or made or those the absence of which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on either (x) the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or (y) the rights or remedies of the Banks, the Letter of Credit Issuer or the Administrative Agent or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder and under the other Credit Documents to which it is or they are, or will be, a party. 6.07 Investment Company Act. Neither the Company nor any of its Restricted Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 6.08 Public Utility Holding Company Act. Neither the Company nor any of its Restricted Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.09 True and Complete Disclosure. (a) All factual information (taken as a whole) heretofore or contemporaneously furnished by the Company or any of its Subsidiaries in writing to the Administrative Agent and/or any Bank on or before the Restatement Effective Date (including, without limitation, (i) the Information Memorandum and (ii) all information contained in the Credit Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein is true and complete in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, it being understood and agreed that for purposes of this Section 6.09(a), such factual information shall not include projections and pro forma financial information. (b) The projections and pro forma financial information contained in the factual information referred to in paragraph (a) above were based on good faith estimates and assumptions believed by such Persons to be reasonable at the time made, it being recognized by the Banks 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. -34- 6.10 Financial Statements; Financial Condition. (a) The consolidated balance sheets of the Company and its Subsidiaries as at December 31, 1997 and September 30, 1998 and the related consolidated statements of income and cash flows of the Company and its Subsidiaries for the fiscal year or nine-month period, as the case may be, ended as of said dates, which, in the case of the December 31, 1997 statements, have been examined by Deloitte & Touche, independent certified public accountants, who delivered an unqualified opinion in respect thereof, present fairly the financial position of the Company and its Subsidiaries at the dates of said statements and the results for the period covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements (subject, in the case of the September 30, 1998 statements, to normal year-end audit adjustments). (b) Since December 31, 1997 and after giving effect to the incurrence of Indebtedness hereunder and the other transactions contemplated hereby, there has been no material adverse change in the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole (other than any change in general economic conditions or any change in conditions affecting the Business generally). 6.11 Tax Returns and Payments. Each of the Company and each of its Restricted Subsidiaries has filed all Federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all Federal taxes and assessments shown to be due on such returns and all other material taxes and assessments, domestic and foreign, in each case payable by it which have become due, other than those not yet delinquent and except for those contested in good faith and for which adequate reserves have been provided in accordance with GAAP. 6.12 Compliance with ERISA. As of the Initial Borrowing Date, there are no Plans and neither the Company nor any of its Restricted Subsidiaries nor any ERISA Affiliate has incurred any unpaid material liability or reasonably expects to incur any material liability with respect to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) covered by Title IV of ERISA. As of the date of each subsequent Credit Event, each Plan is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code; neither the Company nor any of its Restricted Subsidiaries nor any ERISA Affiliate has incurred or reasonably expects to incur any liability to or on account of a Plan pursuant to ERISA or the Code; no proceedings have been instituted by the PBGC to terminate any Plan; no condition exists which presents a material risk to the Company, any of its Restricted Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to ERISA or the Code; no lien imposed under the Code or ERISA on the assets of the Company, any of its Restricted Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Company and its Restricted Subsidiaries do not maintain or contribute to any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), which provides benefits to retired -35- employees (other than as required by Section 601 of ERISA) where, with respect to any of the foregoing representations in this Section 6.12, the liability for or the lien which could arise as a result of, the particular circumstance or event which is the subject of the representation, would be reasonably likely to result in a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. Using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Company, its Restricted Subsidiaries and ERISA Affiliates to all Plans which are "multiemployer plans" (as defined in Section 4001(a)(3) of ERISA) (each a "Multiemployer Plan") in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan would not be reasonably likely to be an amount that could result in a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. Notwithstanding anything in this Section 6.12 to the contrary, all representations and warranties made with respect to any Plan which is a Multiemployer Plan shall be made to the best knowledge of the Company. 6.13 Subsidiaries. On the Restatement Effective Date, the corporations listed on Annex III under the name of the Company are the only Subsidiaries of the Company. Annex III correctly sets forth, as of the Restatement Effective Date, the percentage ownership (direct and indirect) of the Company in each class of capital stock of each of its Subsidiaries and also identifies the direct owner thereof. 6.14 Intellectual Property. (a) The Company and each of its Restricted Subsidiaries owns, or is licensed or otherwise authorized to sell, distribute, use or exploit, all material copyrights, literary works, texts and other works of authorship fixed in any tangible medium of expression necessary for the present conduct of its business ("Copyrights"), except to the extent that the failure to own or obtain licenses or authorizations with respect to any of the foregoing, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. (b) The Company and each of its Restricted Subsidiaries owns or is licensed to use all the patents, trademarks, permits, service marks, trade names, technology, know-how and formulas, or rights with respect to the foregoing, necessary for the present conduct of its business, except to the extent that the failure to own or obtain licenses with respect to any of the foregoing, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole (together with the Copyrights, "Intellectual Property"). (c) All Intellectual Property is protected in all material respects under the laws of the United States relating to such Intellectual Property and has been duly and properly registered or filed with or issued by the appropriate governmental offices and jurisdictions for such registrations, filings or issuances, except to the extent that the failure to make or obtain such registrations, filings or issuances would not have a material adverse effect on the condition -36- (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. (d) No material claim has been asserted by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property. The use of such Intellectual Property by the Company or its Restricted Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements as do not, individually or in the aggregate, give rise to any liabilities on the part of the Company and its Restricted Subsidiaries that are material to the Company and its Restricted Subsidiaries taken as a whole. 6.15 Compliance with Statutes, etc. The Company and each of its Restricted Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Property and the requirements of any permits issued under such Environmental Laws with respect to any such Real Property or the operations of the Company or any of its Subsidiaries), except such noncompliances as would not, in the aggregate, have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. SECTION 7. Affirmative Covenants. The Company hereby covenants and agrees that on the Original Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans together with interest, Fees and all other Obligations are paid in full: 7.01 Information Covenants. The Company will furnish to each Bank: (a) Annual Financial Statements. Within 100 days after the close of each fiscal year of the Company, the consolidated balance sheets of each of (A) the Company and its Subsidiaries and of (B) the Company and its Restricted Subsidiaries, as at the end of such fiscal year and, in each case, the related consolidated statements of income and retained earnings and of cash flows for such fiscal year, setting forth for such fiscal year, in comparative form, the corresponding figures for the preceding fiscal year and, in the case of the figures with respect to the Company and its Restricted Subsidiaries the corresponding figures from the budget for such fiscal year delivered pursuant to Section 7.01(c); all of which shall be examined by Deloitte & Touche or such other independent certified public accountants of recognized national standing as shall be acceptable to the Administrative Agent, whose opinion shall not be qualified as to the scope of audit or as to the status of the Company and its Subsidiaries or of the Company and its Restricted Subsidiaries, as the case may be, as a going concern, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Company and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to its attention or, if such a Default or Event of Default has come to its attention a statement as to the -37- nature thereof (provided that in no event shall such accountants be liable as a result of this Agreement by reason of any failure to obtain knowledge of any Default or Event of Default that would not be disclosed in the course of their audit examination). (b) Quarterly Financial Statements. As soon as available and in any event within 50 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Company (beginning with the quarterly accounting period ending June 30, 1996) and, at the sole option of the Company, at any time prior to 100 days after the close of the fourth quarterly accounting period in each fiscal year, the consolidated balance sheet of each of (A) the Company and its Subsidiaries and of (B) the Company and its Restricted Subsidiaries, as at the end of such quarterly period and the related consolidated statements of income and retained earnings and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Company that they fairly present the financial condition of the Company and its Subsidiaries or of the Company and its Restricted Subsidiaries, as the case may be, as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end audit adjustments. (c) Budgets; etc. Not more than 90 days after the commencement of each fiscal year of the Company, budgets of the Company and its Restricted Subsidiaries in reasonable detail for each of the four fiscal quarters of such fiscal year setting forth Consolidated EBITDA and consolidated sales and setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. (d) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 7.01(a) and (b), a certificate of the chief financial officer, controller or chief accounting officer of the Company (i) to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth the calculations required to establish whether the Company and its Subsidiaries were in compliance with the provisions of Sections 8.04(c), 8.05(d), 8.07 and Sections 8.09 through and including 8.11, as at the end of such fiscal quarter or year, as the case may be and (ii) setting forth the calculations demonstrating (A) with respect to each Affected Transaction consummated during the most recently ended fiscal quarter, that the Company was in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 and (B) with respect to each business sold (or deemed sold) pursuant to Section 8.02(c) hereof, compliance by the Company with clause (iii) of such Section 8.02(c). In addition, at the time of the delivery of the financial statements provided for in Section 7.01(a) and (b), a certificate of the chief financial officer, controller or chief accounting officer of the Company setting forth the amount of, and calculations required to establish the amount of, Excess Cash Flow for the respective fiscal year or quarter. (e) Notice of Default or Litigation. Promptly, and in any event within three Business Days after any officer of the Company obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default, which notice shall -38- specify the nature thereof, the period of existence thereof and what action the Company proposes to take with respect thereto and (y) the commencement of, or threat of, or any significant development in, any litigation or governmental proceeding pending against the Company or any of its Subsidiaries which is likely to have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole, or the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder or under any other Credit Document. (f) Auditors' Reports. Promptly upon receipt thereof, a copy of each report or "management letter" submitted to the Company or any of its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any of its Subsidiaries. (g) Other Information. Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the SEC by the Company or any of its Subsidiaries and, with reasonable promptness, such other information or documents (financial or otherwise) as the Administrative Agent on its own behalf or on behalf of the Required Banks may reasonably request from time to time. 7.02 Books, Records and Inspections. The Company will, and will cause each of its Restricted Subsidiaries to, permit, upon notice to the chief financial officer or other Authorized Officer of the Company, officers and designated representatives of the Administrative Agent or the Required Banks to visit and inspect any of the properties or assets of the Company and any of its Restricted Subsidiaries in whomsoever's possession, and to examine the books of account of the Company and any of its Restricted Subsidiaries and discuss the affairs, finances and accounts of the Company and of any of its Restricted Subsidiaries with, and be advised as to the same by, their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or the Required Banks may desire. 7.03 Payment of Taxes. The Company will pay and discharge, and will cause each of its Restricted Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 8.03(a) or charge upon any properties of the Company or any of its Restricted Subsidiaries; provided that neither the Company nor any of its Restricted Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 7.04 Corporate Franchises. The Company will do, and will cause each of its Restricted Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its rights, franchises, licenses, permits and Intellectual -39- Property rights except to the extent its failures to do so would not, in the aggregate, have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole; provided, however, that any transaction permitted by Section 8.02 will not constitute a breach of this Section 7.04. 7.05 Compliance with Statutes, etc. The Company will, and will cause each of its Restricted Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) other than those the non-compliance with which would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their obligations hereunder or under any other Credit Document. 7.06 ERISA. As soon as possible and, in any event, within 30 days after the Company, any of its Restricted Subsidiaries or any ERISA Affiliate knows or could reasonably be expected to know of the occurrence of any of the following and where it could reasonably be expected that a material liability of the Company and its Restricted Subsidiaries and ERISA Affiliates, taken as a whole, could result in connection therewith, the Company will deliver to each of the Banks a certificate of the chief financial officer or other Authorized Officer of the Company setting forth details as to such occurrence and such action, if any, which the Company, such Restricted Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Company, such Restricted Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application is reasonably likely to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Plan has been or is reasonably likely to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings are reasonably likely to be or have been instituted to terminate a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; or that the Company, any of its Restricted Subsidiaries or any ERISA Affiliate will or is reasonably likely to incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(1) of ERISA. At the request of any Bank, the Company will deliver to such Bank a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. 7.07 End of Fiscal Years; Fiscal Quarters. The Company will, for financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years to end on -40- December 31 of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 7.08 Use of Proceeds. All proceeds of the Loans shall be used as provided in Section 6.05. 7.09 Ownership of Subsidiaries. The Company will, at all times, maintain, directly or indirectly, ownership of at least a majority of the capital stock of its Restricted Subsidiaries, except to the extent 100% of the capital stock owned by the Company or any Restricted Subsidiary of any such Restricted Subsidiary is sold, transferred or disposed of in a transaction permitted by Section 8.02(c) or (j) or any such Restricted Subsidiary is merged, consolidated or liquidated in a transaction permitted by Section 8.02(e), provided that the Company shall not be required to own a majority of the capital stock of the Canadian Borrower so long as the Company continues to hold at least as much of such capital stock as is held on the Original Effective Date. 7.10 Maintenance of Corporate Separateness. The Company will, and will cause each of its Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings and the maintenance of corporate offices and records. Neither the Company nor any Restricted Subsidiary shall make any payment to a creditor of any Unrestricted Subsidiary in respect of any liability of such Unrestricted Subsidiary, and no bank account of an Unrestricted Subsidiary shall be commingled with any bank account of the Company or any of its Restricted Subsidiaries. Any financial statements distributed to any creditors of an Unrestricted Subsidiary shall clearly establish the separateness of such Unrestricted Subsidiary from the Company and its Restricted Subsidiaries. Finally, neither the Company nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of any Unrestricted Subsidiary which is a direct Subsidiary of the Company or any Restricted Subsidiary being ignored by any court of competent jurisdiction, or in the assets and liabilities of the Company or any Restricted Subsidiary being substantively consolidated with those of any Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. 7.11 Canadian Borrower Capital Structure. The Company will, or will cause K-III Directory Corporation, or any other domestic Wholly-Owned Restricted Subsidiary of the Company to which all of the equity owned by the Company or any of its Subsidiaries in the Canadian Borrower shall have been transferred (such entity the "Replacement Canadian Parent"), to (i) continue to be the owner of record of at least 25% of the issued and outstanding shares of common stock of the Canadian Borrower, (ii) maintain in full force and effect the Voting Trust Agreement, the Shareholders Agreement and the Canadian Borrower Management Agreement, (iii) continue to own and hold the Convertible Subordinated Debenture or to be the owner of record of all of the shares of common stock of the Canadian Borrower issued upon the conversion thereof and (iv) otherwise maintain the capital structure of the Canadian Borrower as is in effect on the Original Effective Date. -41- SECTION 8. Negative Covenants. The Company hereby covenants and agrees that as of the Original Effective Date, and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans, together with interest, Fees and all other Obligations are paid in full: 8.01 Changes in Business. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any businesses other than Businesses, provided that the Company and its Restricted Subsidiaries may engage in businesses other than a Business so long as the businesses engaged in by the Company and its Restricted Subsidiaries, taken as a whole, consist substantially of Businesses. 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. The Company will not, and will not permit any of its Restricted Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or enter into any partnerships, joint ventures or sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment (and, to the extent consistent with industry practices, other tangible and intangible assets) in the ordinary course of business) of any Person, except that the following shall be permitted: (a) any sale, transfer or other disposition of (x) inventory in the ordinary course of business or (y) any other tangible or intangible asset in the ordinary course of business of the Company and/or its Restricted Subsidiaries; (b) the advances, investments and loans permitted pursuant to Section 8.05; (c) Asset Sales constituting the disposition of a business (including, without limitation, to the extent permitted in this Section 8.02(c), sales of the capital stock of a Restricted Subsidiary but excluding sales of the stock of an Unrestricted Subsidiary); provided that (i) no Default or Event of Default exists at such time or would exist immediately after giving effect thereto; (ii) such sale, transfer or disposition (or deemed sale, transfer or disposition pursuant to any Permitted Restricted Subsidiary Conversion) (x) is for fair market value, as determined in good faith by management of the Company (or, in the case of any Permitted Restricted Subsidiary Conversion or Permitted Restricted Asset Sale, to the extent requested by the Administrative Agent or the Required Banks, as determined by a written opinion of value reasonably satisfactory to the Administrative Agent by an Appraisal Firm) and (y) except in the case of a Permitted Restricted Subsidiary Conversion otherwise permitted pursuant to the terms hereof, results in consideration in the form of cash, promissory notes issued by the respective purchaser and/or other assets, provided that, to the extent any such other assets are received by the Company and/or its Restricted Subsidiaries in connection with any such Asset Sale, (I) the market value of such other assets, when added to the aggregate amount of other consideration received in connection with such Asset Sale, shall equal or exceed the market value of the assets so sold (such value to be set forth, to the extent requested by -42- the Administrative Agent or the Required Banks, in a written opinion of value reasonably satisfactory to the Administrative Agent by an Appraisal Firm) and (II) such assets are permitted to be acquired by the Company or any of its Restricted Subsidiaries pursuant to Section 8.02(g) at the time of consummation of such Asset Sale (both before and after giving effect to such Asset Sale); (iii) the businesses sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) by the Company and/or its Restricted Subsidiaries pursuant to this Section 8.02(c) in any fiscal year of the Company shall not, in the aggregate, have EBITDA in the immediately preceding fiscal year in an amount in excess of 25% of the Consolidated EBITDA of the Company and its Restricted Subsidiaries for such preceding fiscal year, determined on a pro forma basis as if (A) any dispositions (or deemed dispositions pursuant to any Permitted Restricted Subsidiary Conversion) consummated during such preceding fiscal year had been consummated on the first day of such preceding fiscal year and (B) any acquisitions consummated after the beginning of such preceding fiscal year but prior to the date of any proposed Asset Sale pursuant to this Section 8.02(c) had been consummated on the first day of such preceding fiscal year; and (iv) to the extent such sale, transfer or disposition constitutes a sale, transfer or disposition of less than 100% of the capital stock of any Restricted Subsidiary of the Company, after giving effect to such sale, transfer or disposition, the Company shall own at least a majority of the capital stock of such Restricted Subsidiary; (d) Asset Sales constituting the disposition of the capital stock owned by the Company and its Restricted Subsidiaries or Unrestricted Subsidiaries; (e) any Restricted Subsidiary may be merged or consolidated with or into, or be liquidated into, the Company or any other Restricted Subsidiary of the Company, or all or any part of its business, properties and assets may be conveyed, leased, sold or otherwise transferred to the Company or any other Restricted Subsidiary, provided that (v) in any such merger or consolidation involving the Company, the Company shall be the surviving corporation, (w) no Default or Event of Default exists or would exist after giving effect thereto, (x) no Excluded Foreign Restricted Subsidiary or Excluded Domestic Restricted Subsidiary may be the surviving corporation of any such merger or consolidation (other than, in the case of an Excluded Foreign Restricted Subsidiary, a merger or consolidation with another Excluded Foreign Restricted Subsidiary and other than, in the case of an Excluded Domestic Restricted Subsidiary, a merger or consolidation with another Excluded Domestic Restricted Subsidiary), (y) no businesses, properties or assets may be transferred to Excluded Foreign Restricted Subsidiaries if after giving effect to such transfer the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000 and (z) to the extent any business, properties or assets are transferred to Excluded Domestic Restricted Subsidiaries in connection with any such merger or consolidation the Company shall have determined, with respect to such transaction, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement; -43- (f) the Company and/or its Restricted Subsidiaries may lease real or personal property (so long as such lease does not create Capitalized Lease Obligations except as otherwise permitted by Section 8.04); (g) so long as no Default or Event of Default exists or would result therefrom, the Company and its Restricted Subsidiaries may acquire assets, the capital stock of, or other ownership interests in, any Person (any such acquisition permitted by this clause (g), a "Permitted Acquisition"); provided that (A) after giving effect to any such acquisition, the Company and its Restricted Subsidiaries shall be in compliance with Section 8.01 hereof; (B) the Company shall have determined, with respect to such acquisition, that, on a Pro Forma Basis, the Company and its Restricted Subsidiaries would have been in compliance with Sections 8.09, 8.10 and 8.11 of this Agreement; and (C) to the extent that such acquisition is of the capital stock of or other ownership interest in another Person (such Person, the "Acquired Entity"), (I) such acquisition must be of at least a majority of such capital stock or of such ownership interests, such Person shall constitute a Restricted Subsidiary and all of the applicable provisions of Section 8.14 shall have been complied with in respect of such Restricted Subsidiary and (II) the Board of Directors or other governing body of the Acquired Entity shall not have indicated, either publicly or privately to the Company or any of its Restricted Subsidiaries, its opposition to the consummation by the Company or such Subsidiary of such acquisition; (h) the Company and its Restricted Subsidiaries may sell or discount, in each case without recourse, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (i) Capital Expenditures by the Company and/or its Restricted Subsidiaries made in the ordinary course of business; and (j) the Company and its Restricted Subsidiaries may sell assets (and may effect Permitted Restricted Subsidiary Conversions) other than in the ordinary course of business, so long as (x) each such asset is sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) at fair market value, as determined in good faith by management of the Company; (y) each such sale (or deemed sale pursuant to any Permitted Restricted Subsidiary Conversion) results in consideration in the form of cash, promissory notes issued by the respective purchaser and/or other assets, provided that, to the extent any such other assets are received by the Company and/or its Restricted Subsidiaries in connection with any such asset sale, (I) the market value of such other assets, when added to the aggregate amount of other consideration received in connection with such asset sale, shall equal or exceed the market value of the assets so sold and (II) such assets are permitted to be acquired by the Company or any of its Restricted Subsidiaries pursuant to Section 8.02(g) at the time of consummation of such asset sale (both before and after giving effect to such asset sale); and (z) the aggregate value of all assets so sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) by the Company and its Restricted Subsidiaries in any fiscal year shall not exceed $25,000,000. -44- 8.03 Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Company or its Restricted Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Company or any of its Restricted Subsidiaries) or assign any right to receive income, except: (a) Liens for taxes not yet due or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Company or any of its Restricted Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company or its Restricted Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (c) Liens in existence on the Original Effective Date which are listed, and the property subject thereto described, in Annex IV, without giving effect to any extensions or renewal thereof ("Permitted Liens"); (d) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 9.08; (e) 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, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (f) leases or subleases granted to third Persons not interfering in any material respect with the business of the Company or any of its Restricted Subsidiaries; (g) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; -45- (h) Liens arising from UCC financing statements regarding leases permitted by this Agreement; (i) purchase money Liens securing payables arising from the purchase by the Company or any of its Restricted Subsidiaries of any equipment or goods in the normal course of business, provided that such payables shall not constitute Indebtedness; (j) any interest or title of a lessor or sublessor under any lease permitted by this Agreement; (k) Liens created pursuant to Capital Leases permitted pursuant to Section 8.04(c); (l) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods so long as such Liens attach only to the imported goods; (m) Liens on assets acquired (or owned by a Restricted Subsidiary acquired) after the Original Effective Date securing Indebtedness permitted under Section 8.04(g), provided that at the time of such acquisition the value of the assets subject to such Liens does not exceed 10% of the total value of the assets so acquired, or of the assets of the Restricted Subsidiary so acquired, as the case may be; (n) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; (o) Liens created under this Agreement and/or the other Credit Documents; (p) Liens created under the Additional Credit Agreement, the other Additional Facility Documents, the 1999 Additional Credit Agreement and the other 1999 Additional Facility Documents; and (q) Liens not otherwise permitted hereunder which secure Indebtedness, Contingent Obligations or other obligations (in each case permitted hereunder) not exceeding (as to the Company and its Restricted Subsidiaries) $20,000,000 in the aggregate at any time outstanding. 8.04 Indebtedness. The Company will not, and will not permit any of its Restricted Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; -46- (b) (i) Indebtedness incurred pursuant to the Additional Credit Agreement and the other Additional Facility Documents and (ii) Indebtedness incurred pursuant to the 1999 Additional Credit Agreement and the other 1999 Additional Facility Documents; (c) Capitalized Lease Obligations of the Company and its Restricted Subsidiaries; provided that the aggregate Capitalized Lease Obligations under all Capital Leases outstanding at any one time shall not exceed $50,000,000; (d) Existing Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Original Effective Date and listed on Part A of Annex V hereto ("Existing Debt"), without giving effect to any subsequent extension, renewal or refinancing thereof except pursuant to Section 8.04(i); (e) Indebtedness to the extent permitted pursuant to Section 8.05(c); (f) Indebtedness evidenced by the Subordinated Exchange Debentures after the issuance thereof in an aggregate principal amount not to exceed $500,000,000 at any time outstanding; (g) Indebtedness of a Restricted Subsidiary acquired after the Original Effective Date (or Indebtedness assumed at the time of an acquisition of an asset securing such Indebtedness), provided that (i) such Indebtedness was not incurred in connection with or in anticipation of such acquisition and (ii) at the time of such acquisition such Indebtedness does not exceed 10% of the total value of the assets of the Restricted Subsidiary so acquired, or of the asset so acquired, as the case may be; (h) additional Indebtedness of the Company and its Restricted Subsidiaries not otherwise permitted hereunder; provided that (A) in no event shall the final maturity of such Indebtedness occur prior to the Final Maturity Date, (B) in no event shall such Indebtedness have a shorter average life than the Loans hereunder, (C) in no event shall such Indebtedness contain terms and conditions (including, without limitation, with respect to the obligor and guarantors, if any, in respect of such Indebtedness, prepayment and redemption provisions, covenants, defaults, security, remedies and, if applicable, subordination provisions) materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of (I) in the case of Indebtedness issued to the public or in accordance with Rule 144A or similar rule under the Securities Act of 1933, as amended, the Senior Notes, (II) in the case of other senior Indebtedness, this Agreement and the other Credit Documents, and (III) in the case of other Indebtedness, similar Indebtedness of the Company then outstanding or if no similar Indebtedness of the Company is then outstanding, the Senior Notes (in each case excluding the impact of market conditions on the interest rate and other economic terms) and (D) the Company shall have determined, with respect to the incurrence of such Indebtedness, that the Company and its Restricted Subsidiaries would have been in compliance, on Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement (any Indebtedness issued pursuant to this Section 8.04(h), "Additional Indebtedness"), provided further, that, the aggregate principal amount of any such Additional -47- Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole), when added to the aggregate principal amount of Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole) pursuant to Section 8.04(j) shall not exceed $300,000,000 at any time outstanding; (i) Indebtedness of the Company and its Restricted Subsidiaries constituting Permitted Refinancing Debt; and (j) additional Indebtedness of the Company and its Restricted Subsidiaries (including, but not limited to, Non-Facility Letter of Credit Outstandings) not exceeding in an aggregate principal amount at any one time outstanding an amount equal to $150,000,000, provided that the aggregate principal amount of such Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole), when added to the aggregate principal amount of Additional Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole) pursuant to Section 8.04(h), shall not exceed $300,000,000 at any time outstanding. 8.05 Advances, Investments and Loans. The Company will not, and will not permit any of its Restricted Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, except: (a) the Company and its Restricted Subsidiaries may invest in cash and Cash Equivalents; (b) the Company or any of its Restricted Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Company or such Restricted Subsidiary, as the case may be; (c) the Company may make intercompany loans and advances to any Restricted Subsidiary, and any Restricted Subsidiary may make intercompany loans and advances to any other Restricted Subsidiary or the Company (collectively, "Intercompany Loans"), provided that (i) no Intercompany Loan may be made to an Excluded Foreign Restricted Subsidiary at any time if after giving effect to such Intercompany Loan the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000, and (ii) no such Intercompany Loan may be made by the Company or a Wholly-Owned Restricted Subsidiary to an Excluded Domestic Restricted Subsidiary; (d) so long as no Default or Event of Default exists or would result therefrom, the Company and its Restricted Subsidiaries may make loans and advances of cash to, or cash capital contributions in, any Unrestricted Subsidiary of the Company; provided that (i) the sum of (A) the aggregate amount of capital contributions made in, plus the aggregate principal amount of loans or advances outstanding at any one time made to, Unrestricted Subsidiaries after the Original Effective Date pursuant to this clause (d) (such amount, the "Unrestricted Subsidiary Investment Amount") plus (B) the Aggregate -48- Conversion Amount at such time, shall not exceed the Unrestricted Subsidiary Investment Limit then in effect, and (ii) the Unrestricted Subsidiary receiving cash proceeds from such loan, advance or contribution shall utilize the entire amount of cash so received to effectuate an acquisition of assets or capital stock of a Person not an affiliate of the Company and its Subsidiaries (other than pursuant to a Permitted Restricted Subsidiary Conversion or a Permitted Restricted Asset Sale) or to develop the Business and to finance the working capital needs of such Unrestricted Subsidiary; (e) the Company and its Restricted Subsidiaries shall be permitted to (i) make Permitted Acquisitions, (ii) engage in any transaction to the extent permitted by Section 8.02(e) and (iii) acquire and hold promissory notes issued by the purchasers of assets sold in accordance with Section 8.02(c) or 8.02(j); (f) the Company and any of its Restricted Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (g) the Company or any Subsidiary Guarantor may acquire capital stock or other equity securities (or warrants, rights or options with respect thereto) issued by any other Restricted Subsidiary; (h) Interest Rate Protection Agreements permitted by Section 8.06(e) shall be permitted; (i) investments by the Company or Restricted Subsidiaries in (x) Subsidiary Guarantors, provided that if the Subsidiary Guarantor in which such investment is made is a newly-formed Subsidiary or a Partially-Owned Restricted Subsidiary newly designated as a Subsidiary Guarantor pursuant to Section 8.14(b)(x), all of the applicable provisions of Section 8.14 shall have been satisfied with respect to such Restricted Subsidiary, (y) Excluded Domestic Restricted Subsidiaries, provided that, the Company shall have determined, in connection with any such investment, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement and (z) in Excluded Foreign Restricted Subsidiaries, provided that no investment in an Excluded Foreign Restricted Subsidiary may be made at any time if after giving effect to such investment the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000; (j) the Company and its Restricted Subsidiaries may make loans and advances to officers, employees and agents in the ordinary course of business (i) constituting travel advances or (ii) otherwise equal in the aggregate for the Company and its Restricted Subsidiaries, in the case of all loans and advances pursuant to this clause (ii), to no more than $10,000,000 at any one time outstanding less the principal amount of all Contingent Obligations then outstanding pursuant to Section 8.06(i); -49- (k) the Company may acquire obligations of, or make loans or advances to, one or more management investors in connection with such management investors' acquisition of shares of capital stock of the Company, provided that (x) the aggregate amount of cash actually advanced to all such management investors by the Company and its Restricted Subsidiaries shall not exceed $10,000,000 at any time, and (y) the aggregate principal amount of all such obligations, loans and advances shall not exceed $25,000,000 at any one time outstanding; and (l) advances, investments and loans not otherwise permitted hereunder with an aggregate cost or principal amount, as the case may be, not to exceed $25,000,000 at any time outstanding. 8.06 Contingent Obligations. The Company will not, and will not permit any of its Restricted Subsidiaries to, contract, create, incur, assume or suffer to exist any Contingent Obligations, except: (a) any Subsidiary Guarantor may become liable as guarantor with respect to any Indebtedness, obligation or liability of the Company or any other Subsidiary Guarantor to the extent that such Indebtedness, obligation or liability is otherwise permitted by this Agreement, provided that a Subsidiary Guarantor (x) may not guaranty any Subordinated Exchange Debentures and (y) may only guaranty Permitted Refinancing Debt if and to the extent either (A) it guarantied the indebtedness refinanced thereby or (B) such Subsidiary Guarantor would have guarantied the indebtedness refinanced thereby if it had been a Subsidiary of the Company while such indebtedness was outstanding; (b) Contingent Obligations pursuant to the Guaranties; (c) Contingent Obligations pursuant to the Additional Facility Documents and the 1999 Additional Facility Documents; (d) Contingent Obligations in respect of the Letters of Credit; (e) Contingent Obligations under Interest Rate Protection Agreements with respect to the Loans, loans incurred under the Additional Credit Agreement or any other floating rate Indebtedness of the Company and its Restricted Subsidiaries otherwise permitted by this Agreement; (f) Contingent Obligations pursuant to the Contribution Agreement; (g) Contingent Obligations of the Company outstanding on the Original Effective Date and listed on Part B of Annex V hereto ("Existing Contingent Obligations"), without giving effect to any subsequent extension, renewal or refinancing thereof; -50- (h) the Company may become liable as guarantor with respect to any Indebtedness, obligation or liability of any Subsidiary Guarantor to the extent that such Indebtedness, obligation or liability is otherwise permitted by this Agreement; (i) the Company and its Restricted Subsidiaries may guaranty in the ordinary course of business loans and advances to officers, employees and agents so long as the aggregate principal amount of the loans and advances so guaranteed does not exceed $10,000,000 less the principal amount of all loans and advances outstanding pursuant to Section 8.05(j); and (j) additional Contingent Obligations (including, without limitation, Contingent Obligations consisting of Non-Facility Letters of Credit and reimbursement obligations with respect thereto) not otherwise permitted hereunder not exceeding (for the Company and all of its Restricted Subsidiaries) in aggregate principal amount at any time outstanding an amount equal to the lesser of (x) $30,000,000 and (y) when added to the aggregate principal amount of Indebtedness outstanding under Section 8.04(j) at such time, $150,000,000. 8.07 Dividends, etc. The Company will not, and will not permit any of its Restricted Subsidiaries to, declare or pay any dividends (other than dividends payable solely in capital stock of such Person) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and the Company will not permit any of its Restricted Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Company or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: (a) the Company may pay regularly accruing dividends on each issuance of Preferred Stock through the issuance of additional shares of such Preferred Stock, provided that the Company may pay such regularly accruing dividends on its Preferred Stock in cash so long as no Default or Event of Default exists at such time or would result therefrom; (b) any Subsidiary of the Company may pay Dividends to the Company or to any Wholly-Owned Restricted Subsidiary of the Company; (c) any Partially-Owned Restricted Subsidiary may pay cash Dividends to its stockholders, provided that the Company and its Restricted Subsidiaries must receive at least their proportionate share of any Dividends paid by such Subsidiary; (d) so long as no Default or Event of Default exists at such time or would result therefrom (x) the Company may issue its Subordinated Exchange Debentures in -51- exchange for its Senior Preferred Stock in accordance with the terms thereof, (y) the Company may issue its Subordinated Exchange Debentures in exchange for its Series B Preferred Stock in accordance with the terms thereof and (z) the Company may issue its Subordinated Exchange Debentures in exchange for its Series C Preferred Stock in accordance with the terms thereof, provided that in each such case, the Company shall have determined, with respect to such issuance, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement; (e) the Company may exchange shares of its common stock in replacement for shares of outstanding Preferred Stock; (f) the Company may issue Permitted Replacement Preferred Stock so long as either (x) such stock is issued in exchange for or (y) all of the proceeds from such issuance are used to redeem or repurchase, shares of outstanding Preferred Stock; (g) the Company may redeem or repurchase shares of its common stock from management investors; provided that (x) no Default or Event of Default is then in existence or would arise therefrom and (y) the aggregate amount of all cash paid in respect of all such shares and equity interests so redeemed or repurchased does not exceed the sum of (i) $5,000,000 in any fiscal year or $15,000,000 in the aggregate after the Original Effective Date and (ii) the amount of cash proceeds received by the Company in respect of the issuance of common equity to management investors on or after the Original Effective Date; (h) the Company and its Subsidiaries may enter into transactions permitted under Section 8.05(g); (i) the Company and its Restricted Subsidiaries may acquire the capital stock of Unrestricted Subsidiaries in accordance with the provisions of this Agreement; (j) so long as no Default or Event of Default exists at such time or would result therefrom, the Company may redeem or repurchase shares of its Preferred Stock at a price equal to the liquidation preference thereof plus accrued but unpaid dividends thereon and any applicable premium with respect thereto in exchange for, or with the proceeds of, Additional Preferred Stock and/or Indebtedness incurred under Sections 8.04(h) and/or 8.04(j) (it being understood and agreed that such redemption and/or repurchase need not occur contemporaneously with the issuance of such Additional Preferred Stock or Indebtedness); (k) so long as no Default or Event of Default exists at such time or would result therefrom, the Company may declare and pay cash Dividends to the holders of its common stock (including, without limitation, repurchases of shares of its common stock), provided that (x) the aggregate amount of cash Dividends paid pursuant to this clause (k) during any fiscal year of the Company does not exceed $25,000,000 and (y) the Company shall have determined, in connection with such Dividend, that the Company and its -52- Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement; and (l) the Company may pay additional cash Dividends to the holders of its common stock so long as (x) no Default or Event of Default exists at such time or would result therefrom, (y) the Leverage Ratio at such time is less than 4.00:1.00 and (z) the Company shall have determined, in connection with such Dividend, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement. 8.08 Transactions with Affiliates. The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate (other than the Company or any Restricted Subsidiary) other than on terms and conditions substantially as favorable to the Company or such Restricted Subsidiary as would be obtainable by the Company or such Restricted Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided that (i) the Company may pay management and transaction fees to KKR or its affiliates which have been disclosed in writing to the Banks prior to the Original Effective Date; (ii) the payment of transaction fees to KKR for the rendering of financial advice and services in connection with acquisitions, dispositions and financings by the Company and its Restricted Subsidiaries in amounts which are in accordance with past practices shall be permitted; (iii) loans and advances to officers, employees and agents in the ordinary course of business shall be permitted; (iv) customary fees may be paid to non-officer directors of the Company and/or its Restricted Subsidiaries; (v) the loans, advances and contributions made (or deemed made) in Unrestricted Subsidiaries in compliance with Section 8.05(d) shall be permitted; and (vi) transactions specifically permitted by the provisions of this Agreement to occur between the Company, its Restricted Subsidiaries and their respective Affiliates shall be permitted to the extent so otherwise specifically permitted. 8.09 Fixed Charge Coverage Ratio. The Company will not permit the ratio of (i) Consolidated EBITDA of the Company and its Restricted Subsidiaries to (ii) Consolidated Fixed Charges of the Company and its Restricted Subsidiaries, for any Test Period, to be less than 1.05 to 1.0. 8.10 Interest Coverage Ratio. The Company will not permit the ratio of (i) Consolidated EBITDA of the Company and its Restricted Subsidiaries to (ii) Consolidated Interest Expense of the Company and its Restricted Subsidiaries for any Test Period ending during a period listed below to be less than the ratio set forth opposite such period below: Period Ratio ------ ----- Original Effective Date to and including 1.80 to 1.00 December 31, 1999 January 1, 2000 to and including 2.00 to 1.00 -53- Period Ratio ------ ----- December 31, 2000 January 1, 2001 to and including 2.25 to 1.00 December 31, 2001 January 1, 2002 and thereafter 2.50 to 1.00 8.11 Leverage Ratio. The Company will not permit the ratio (the "Leverage Ratio") of (i) Consolidated Debt of the Company and its Restricted Subsidiaries at any date of determination thereof to (ii) Consolidated EBITDA of the Company and its Restricted Subsidiaries for the Test Period then last ended, to exceed, at any time during a period set forth below, the ratio set forth opposite such period below: Period Ratio ------ ----- Original Effective Date to and including 6.00 to 1.00 December 31, 1999 January 1, 2000 to and including 5.50 to 1.00 December 31, 2000 January 1, 2001 to and including 5.00 to 1.00 December 31, 2001 January 1, 2002 and thereafter 4.50 to 1.00 8.12 Issuance of Stock. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, issue, sell, assign, pledge or otherwise encumber or dispose of any shares of its or such Restricted Subsidiary's preferred or preference stock or other redeemable equity securities (or warrants, rights or options to acquire shares of any of the foregoing) except: (a) in the case of shares of capital stock of the Company and its Restricted Subsidiaries, to the extent permitted by Section 8.02, 8.03, 8.05, 8.07 or 8.13(b); (b) issuances by Restricted Subsidiaries to the Company or to Wholly-Owned Restricted Subsidiaries; and (c) issuances by the Company of additional preferred stock not otherwise permitted hereunder; provided that (A) in no event shall such preferred stock contain any provision requiring mandatory redemption or permitting any put with respect to all or any -54- portion of such stock prior to the Final Maturity Date, (B) in no event shall such preferred stock contain terms and conditions (including, without limitation, pay-in-kind features, liquidation preferences, voting rights and exchange rights) materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of the Existing Preferred Stock (excluding the impact of market conditions on the dividend rate and other economic terms) and (C) the Company shall have determined, in connection with such issuance, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement, provided that, for purposes of the calculation of compliance with Section 8.09, the ratio set forth in Section 8.09 shall be deemed to equal 1.25 to 1.0 (any Preferred Stock issued pursuant to this Section 8.12(c), "Additional Preferred Stock"). 8.13 Modifications of Certain Agreements, etc. The Company will not, and will not permit any of its Subsidiaries to: (a) after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms or provisions of the Senior Notes, the Additional Facility Documents, the 1999 Additional Facility Documents, the Preferred Stock, the Subordinated Exchange Debentures, any Additional Indebtedness, any Permitted Refinancing Debt, the Convertible Subordinated Debenture, the Canadian Borrower Management Agreement, the Voting Trust Agreement, the Shareholders Agreement, or any agreement related to any of the foregoing, provided that (i) Permitted Amendments may be made to the Senior Notes, the Additional Facility Documents, the 1999 Additional Facility Documents, the Preferred Stock, any Permitted Refinancing Debt, any Additional Indebtedness, any Subordinated Exchange Debenture, and the documents governing the terms of any of the foregoing and (ii) amendments or modifications may be made to the Canadian Borrower Management Agreement which, in the aggregate or individually, would not adversely affect the interests of any Bank under this Agreement or the other Credit Documents (it being understood and agreed that the annual fee payable to K-III Directory Corporation or the Replacement Canadian Parent, if any, pursuant thereto may be amended or modified); or (b) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or exchange of any Subordinated Exchange Debentures, or any Permitted Refinancing Debt (to the extent issued to refinance Subordinated Exchange Debentures), provided that the Subordinated Exchange Debentures and any Permitted Refinancing Debt previously issued to refinance same may be (i) refinanced with (A) Additional Indebtedness (to the extent that such Additional Indebtedness would have qualified as Permitted Refinancing Debt in respect thereof if it had been issued contemporaneously with such refinancing) and/or Permitted Refinancing Debt or (B) the proceeds from a common equity issuance by the Company or an issuance by the Company of Additional Preferred Stock, in each case, after the Original Effective Date or (ii) exchanged for Additional Preferred Stock or non-redeemable common equity of the Company (it being understood and agreed that any refinancing of such Indebtedness need not occur contemporaneously with the issuance of such Additional Indebtedness, Additional Preferred Stock and/or common equity). In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, agree to modify, supplement, amend, rescind or otherwise alter the terms, conditions or provisions of its Certificate of Incorporation (including, without limitation, -55- by the filing of any certificate of designation) or its By-Laws in any material respect, other than such modifications, supplements or amendments that would not materially adversely affect the interests of the Banks under this Agreement or the other Credit Documents. 8.14 Limitation on the Creation of Subsidiaries; Redesignation of Partially-Owned Restricted Subsidiaries. (a) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not, and shall not permit any Subsidiary to, establish, create or acquire after the Original Effective Date any Subsidiary unless (w) such Subsidiary is an Unrestricted Subsidiary; (x) such Subsidiary is an Excluded Foreign Restricted Subsidiary; (y) such Subsidiary is a Partially-Owned Restricted Subsidiary and at the time of creation or acquisition thereof, the Company shall have made a Non-Guarantor Designation with respect to such Partially-Owned Restricted Subsidiary in accordance with the terms hereof or (z) such Subsidiary is a Restricted Subsidiary (other than a Restricted Subsidiary of the type described in clauses (x) or (y) above) and each such new Restricted Subsidiary becomes a party to the Subsidiary Guaranty by executing a Subsidiary Assumption Agreement in the form of Exhibit H hereto. (b) At any time and from time to time, (x) the Company may redesignate any Excluded Domestic Restricted Subsidiary as a Subsidiary Guarantor by giving notice thereof to the Administrative Agent and by causing such Subsidiary to become a party to the Subsidiary Guaranty by executing a Subsidiary Assumption Agreement in the form of Exhibit H hereto, and (y) the Company may redesignate any Subsidiary Guarantor which is a Partially-Owned Restricted Subsidiary as an Excluded Domestic Restricted Subsidiary by making a Non-Guarantor Designation with respect to such Subsidiary in accordance with the terms hereof. (c) At the time of the creation of any Subsidiary described in clause (z) of Section 8.14(a) and at the time of any redesignation pursuant to clause (x) of Section 8.14(b), each such new Subsidiary Guarantor shall execute and deliver, or cause to be executed and delivered, in each case to the extent not previously executed and delivered, all other relevant documentation of the type described in Section 5 as such new Subsidiary Guarantor would have had to deliver if such new Restricted Subsidiary had been a Restricted Subsidiary and a Subsidiary Guarantor on the Initial Borrowing Date. (d) Notwithstanding anything to the contrary contained in this Section 8.14 or elsewhere in this Agreement, in no event shall any Subsidiary of the Company guaranty any Indebtedness of the Company or any Wholly-Owned Subsidiary unless such Subsidiary is a party to the Subsidiary Guaranty; provided that, to the extent not prohibited by Section 8.04 hereof, (x) Excluded Foreign Restricted Subsidiaries may guaranty Indebtedness of other Excluded Foreign Restricted Subsidiaries and (y) Unrestricted Subsidiaries may guaranty Indebtedness of other Unrestricted Subsidiaries. 8.15 Limitation on Payments Under the Non-Compete Notes. The Company will not, and will not permit any of its Subsidiaries to, make any payment representing the principal of, or interest on, any Non-Compete Note at any time when any Default or Event of Default exists or would exist immediately after giving effect to such payment. -56- SECTION 9. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): 9.01 Payments. (a) Either Borrower shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for five or more days, in the payment when due of any Unpaid Drawing, any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document or (b) any Guarantor shall default in the payment when due of any amount in respect of any payment of the type described in clause (a)(ii) above pursuant to its Guaranty, and such default shall continue for five or more days; or 9.02 Representations, etc. Any representation, warranty or statement made by either Borrower or any Subsidiary Guarantor herein or in any other Credit Document or in any statement or certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 Covenants. The Company shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.08, 7.11(i), (iii) or (iv) or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by the Administrative Agent or the Required Banks; or 9.04 Default Under Other Agreements. (a) The Company or any of its Restricted Subsidiaries shall (i) default in any payment with respect to any Indebtedness or Contingent Obligation (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or Contingent Obligation (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness or Contingent Obligation to become due prior to its stated maturity; or (b) any Indebtedness or Contingent Obligation (other than the Obligations) of the Company or any of its Restricted Subsidiaries shall be declared to be due and payable, or shall be required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof, provided that it shall not constitute an Event of Default pursuant to clause (a) or (b) of this Section 9.04 unless the principal amount of any one issue of such Indebtedness or Contingent Obligation exceeds $7,500,000 or the aggregate amount of all such Indebtedness and Contingent Obligations referred to in clauses (a) and (b) above exceeds $15,000,000 at any one time; or -57- 9.05 Bankruptcy, etc. The Company or any of its Restricted Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Company or any of its Restricted Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Company or any of its Restricted Subsidiaries; or the Company or any of its Restricted Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any of its Restricted Subsidiaries; or there is commenced against the Company or any of its Restricted Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Company or any of its Restricted Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any of its Restricted Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Company or any of its Restricted Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Company or any of its Restricted Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code; any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA; any Plan shall have an Unfunded Current Liability; or the Company, any Restricted Subsidiary or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code; or the Company or any Restricted Subsidiary has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees (other than as required by Section 601 of ERISA); and (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability, on the part of the Company, any of its Restricted Subsidiaries or any ERISA Affiliate, which lien, security interest or liability will have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole; or 9.07 Guaranty. (a) Any Guaranty or any provision thereof shall cease to be in full force and effect, or any Guarantor thereunder or any Person acting on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such Guaranty or (b) except as otherwise provided in Section 9.01(b), any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the respective Guaranty, provided that in the case of Section 13 of the Subsidiary Guaranty, if the default constitutes a failure to perform or comply with any provision, -58- covenant or agreement contained in Section 7 (other than Section 7.08) of this Agreement, such default shall continue unremedied for a period of at least 30 days after notice to the defaulting Guarantor by the Administrative Agent or the Required Banks; or 9.08 Judgments. One or more judgments or decrees shall be entered against the Company or any of its Restricted Subsidiaries involving a liability of $8,000,000 or more in the case of any one such judgment or decree or $20,000,000 or more in the aggregate for all such judgments and decrees for the Company and its Restricted Subsidiaries (not paid or to the extent not covered by insurance) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 9.09 Ownership. A Change of Control Event shall have occurred; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Banks, by written notice to the Company, take any or all of the following actions, without prejudice to the rights of the Administrative Agent, the Letter of Credit Issuer or any Bank to enforce its claims against the Company, except as otherwise specifically provided for in this Agreement (provided that if an Event of Default specified in Section 9.05 shall occur with respect to the Company, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment (or the unutilized portion thereof) terminated, whereupon the Commitment of each Bank (or the unutilized portion thereof) shall forthwith terminate immediately and any Commitment Fees shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; (iii) terminate any Letter of Credit which may be terminated in accordance with its terms; and (iv) direct the Company to pay (and the Company hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.05, to pay) to the Administrative Agent at the Payment Office such additional amounts of cash, to be held as security for the Company's reimbursement obligations in respect of Letters of Credit then outstanding, equal to the aggregate Stated Amount of all Letters of Credit then outstanding. SECTION 10. Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Additional Credit Agreement" shall mean the credit agreement, dated as of the date hereof, among the Company, various lending institutions, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, as amended, modified, supplemented or extended from time to time in accordance with the terms thereof and hereof. -59- "Additional Facility Amount" shall mean at any time, the aggregate commitments then outstanding under the Additional Credit Agreement, provided that, if at such time, the commitments under the Additional Credit Agreement shall have terminated "Additional Facility Amount" shall mean, at such time, the aggregate principal amount of loans outstanding under the Additional Credit Facility at such time. "Additional Facility Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries in connection with the Additional Credit Agreement (including, without limitation, the Additional Credit Agreement and any guaranty or guaranties relating thereto), as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Additional Indebtedness" shall have the meaning provided in Section 8.04(h). "Additional Preferred Stock" shall have the meaning provided in Section 8.12(c). "Additional Tranche B Assumption Date" shall mean the date on which each Tranche B Assumption Agreement is delivered to the Administrative Agent after the Initial Tranche B Assumption Date pursuant to Section 1.13 of this Agreement. "Adjusted Percentage" shall mean (x) at a time when no Bank Default exists, for each Bank such Bank's Tranche A Percentage and (y) at a time when a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for each Bank that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's Tranche A Revolving Loan Commitment at such time by the Adjusted Total Tranche A Commitment at such time, it being understood that all references herein to Tranche A Revolving Loan Commitments and the Adjusted Total Tranche A Commitment at a time when the Total Tranche A Revolving Loan Commitment or Adjusted Total Tranche A Commitment, as the case may be, has been terminated shall be references to the Tranche A Revolving Loan Commitments or Adjusted Total Tranche A Commitment, as the case may be, in effect immediately prior to such termination, provided that (A) no Bank's Adjusted Percentage shall change upon the occurrence of a Bank Default from that in effect immediately prior to such Bank Default if, after giving effect to such Bank Default and any repayment of Tranche A Revolving Loans, Swingline Loans and Canadian Dollar Loans at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Tranche A Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of Swingline Loans plus (iii) the Dollar Equivalent of the aggregate outstanding principal amount of Canadian Dollar -60- Loans plus (iv) the Letter of Credit Outstandings, exceeds the Adjusted Total Tranche A Commitment; (B) the changes to the Adjusted Percentage that would have become effective upon the occurrence of a Bank Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Bank Default on which the sum of (i) the aggregate outstanding principal amount of the Tranche A Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of Swingline Loans plus (iii) the Dollar Equivalent of the aggregate outstanding principal amount of Canadian Dollar Loans plus (iv) the Letter of Credit Outstandings is equal to or less than the Adjusted Total Tranche A Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and (ii) any repayment of such Bank's Tranche A Revolving Loans, or of Unpaid Drawings with respect to Letters of Credit or of Swingline Loans or Canadian Dollar Loans, that was made during the period commencing after the date of the relevant Bank Default and ending on the date of such change to its Adjusted Percentage must be returned to either Borrower as a preferential or similar payment in any bankruptcy or similar proceeding of such Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage effected pursuant to said clause (B) shall be reduced to that positive change, if any, as would have been made to its Adjusted Percentage if (x) such repayments had not been made and (y) the maximum change to its Adjusted Percentage would have resulted in the sum of the outstanding principal of Tranche A Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of the outstanding principal amount of Swingline Loans and Dollar Equivalent of Canadian Dollar Loans and of Letter of Credit Outstandings equaling such Bank's Tranche A Revolving Loan Commitment at such time. "Adjusted Total Tranche A Commitment" shall mean at any time the Total Tranche A Revolving Loan Commitment less the aggregate Tranche A Revolving Loan Commitments of all Defaulting Banks. "Adjusted Tranche A Commitment" for each Non-Defaulting Bank shall mean at any time the product of such Bank's Adjusted Percentage and the Adjusted Total Tranche A Commitment. "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to Section 11.10. "Affected Eurodollar Loan" shall have the meaning provided in Section 4.02(h). "Affected Period" shall mean, with respect to each Affected Transaction, the period commencing on the date occurring twelve months prior to the last day of the then most recently ended fiscal quarter of the Company and ending on the date such Affected Transaction is consummated. "Affected Transaction" shall mean and include each of the following: (i) any transfer of assets to an Excluded Domestic Restricted Subsidiary in connection with a transaction permitted pursuant to Section 8.02(e), (ii) any Permitted Acquisition, (iii) any incurrence of Additional Indebtedness, (iv) any investment in an Excluded Domestic Restricted Subsidiary pursuant to Section 8.05(d), (v) any issuance of Subordinated Exchange Debentures, (vi) the payment of any Dividend as permitted by Section 8.07(k) or (l), (vii) any issuance of Additional Preferred Stock, (viii) any Permitted Restricted Subsidiary Conversion or Non-Guarantor Designation and (ix) any designation of an Unrestricted Subsidiary as a Restricted Subsidiary pursuant to the definition of "Restricted Subsidiaries." -61- "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Conversion Amount" shall mean, at any time, the sum of the Conversion Value Amount with respect to each Permitted Restricted Subsidiary Conversion consummated after the Original Effective Date but on or prior to the date of determination thereof. "Aggregate Unutilized Revolving Loan Commitment" with respect to any Bank at any time shall mean the sum of (x) such Bank's Tranche A Revolving Loan Commitment at such time less the sum of (i) the aggregate outstanding principal amount of all Tranche A Revolving Loans made by such Bank and (ii) such Bank's Adjusted Percentage of the Letter of Credit Outstandings at such time and (y) such Bank's Tranche B Revolving Loan Commitment at such time less the aggregate outstanding principal amount of all Tranche B Revolving Loans made by such Bank. "Aggregate Unutilized Tranche A Commitment" of any Bank at any time shall mean the Aggregate Unutilized Revolving Loan Commitment of such Bank at such time without giving effect to clause (y) of the definition of Aggregate Unutilized Revolving Loan Commitment. "Agreement" shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "Applicable B Term Loan Margin" shall mean, at any time, (a) with respect to Base Rate Loans, the margin set forth below under the heading Applicable B Term Loan Base Rate Margin and (b) with respect to Eurodollar Loans, the margin set forth below under the heading Applicable B Term Loan Eurodollar Margin, in each case, opposite the ratio of (i) Consolidated Debt as of the last day of the most recent fiscal year or fiscal quarter in respect of which the Banks shall have received Section 7.01 Financials to (ii) Consolidated EBITDA for the Test Period ending on the last day of such fiscal year or fiscal quarter (it being understood that each Applicable B Term Loan Margin shall be in effect from the date the respective Section 7.01 Financials are required to be delivered to the Banks until the date the next such Section 7.01 Financials are required to be delivered to the Banks at which time the Applicable B Term Loan Margin shall be reset in accordance with the foregoing provisions of this definition): Applicable B Term Loan Applicable B Term Loan Base Eurodollar Rate Debt/EBITDA Ratio Margin Margin - ----------------- ------ ------ -62- 5.00:1 or Greater 2.75% 1.75% Less than 5.00:1 2.375% 1.375% ; provided that (I) until delivery of the Section 7.01 Financials for the fiscal quarter ending September 30, 1999 the Applicable B Term Loan Margin shall be 2.75% for Eurodollar Loans and 1.75% for Base Rate Loans and (II) if (A) any Section 7.01 Financials are not delivered when required (the "Late Section 7.01 Financials") and such Late Section 7.01 Financials establish that any Applicable B Term Loan Margin would have been increased or reduced to an amount set forth in the table above on the date that such Late Section 7.01 Financials were required to have been delivered (the "Required Delivery Date") and (B) a Borrower shall have made any interest payment during the period from the Required Delivery Date to the actual date of delivery of such Late Section 7.01 Financials based upon any such lower or higher Applicable B Term Loan Margin, then (x) in the case of actual payments based on any such lower Applicable B Term Loan Margin, the respective Borrower shall pay in the form of a supplemental interest payment, an amount which equals the difference between the amount of interest which would otherwise have been paid determined as if the Late Section 7.01 Financials were delivered on the Required Delivery Date and the amount of such interest so paid, which supplemental interest payment shall be due and payable on the date of delivery of the Late Section 7.01 Financials and (y) in the case of actual payments made based on such higher Applicable B Term Loan Margin, the Banks shall retain all such amounts so paid. "Applicable Commitment Fee Percentage" shall mean 3/8 of 1%, provided that in the event that and for so long as the ratio of (i) Consolidated Debt as of the last day of the most recent fiscal year or fiscal quarter in respect of which the Banks shall have received Section 7.01 Financials to (ii) Consolidated EBITDA for the Test Period ending on the last day of such fiscal year or fiscal quarter is less than 4.50:1, then the Applicable Commitment Fee Percentage shall be 1/4 of 1% (it being understood that each Applicable Commitment Fee Percentage shall be in effect from the date the respective Section 7.01 Financials are required to be delivered to the Banks until the date the next such Section 7.01 Financials are required to be delivered to the Banks at which time the Applicable Commitment Fee Percentage shall be reset in accordance with the foregoing provisions of this definition), provided further, that if (A) any Section 7.01 Financials are not delivered when required (the "Late Section 7.01 Financials") and such Late Section 7.01 Financials establish that the Applicable Commitment Fee Percentage would have been increased or reduced to a percentage set forth above on the date that such Late Section 7.01 Financials were required to have been delivered (the "Required Delivery Date") and (B) the Company shall have made any payment of Commitment Fees during the period from the Required Delivery Date to the actual date of delivery of such Late Section 7.01 Financials based upon any such lower or higher Applicable Commitment Fee Percentage, then (x) in the case of actual payments made based on any such lower Applicable Commitment Fee Percentage, the Company shall pay in the form of a supplemental Commitment Fee payment an amount which equals the difference between the amount of Commitment Fees which would otherwise have been paid determined as if the Late Section 7.01 Financials were delivered on the Required Delivery Date and the amount of such Commitment Fees so paid, which supplemental Commitment Fee payment shall be due and payable on the date of delivery of such Late Section -63- 7.01 Financials and (y) in the case of actual payments made based on such higher Applicable Commitment Fee Percentage, the Banks shall retain all amounts so paid. "Applicable Letter of Credit Fee Percentage" shall mean, at any time, the Applicable Margin then in effect for Eurodollar Loans less 1/4 of 1%. "Applicable Margin" shall mean, at any time, (a) with respect to Base Rate Loans, the margin set forth below under the heading Applicable Base Rate Margin and (b) with respect to Eurodollar Loans, the margin set forth below under the heading Applicable Eurodollar Margin, in each case, opposite the ratio of (i) Consolidated Debt as of the last day of the most recent fiscal year or fiscal quarter in respect of which the Banks shall have received Section 7.01 Financials to (ii) Consolidated EBITDA for the Test Period ending on the last day of such fiscal year or fiscal quarter (it being understood that each Applicable Margin shall be in effect from the date the respective Section 7.01 Financials are required to be delivered to the Banks until the date the next such Section 7.01 Financials are required to be delivered to the Banks at which time the Applicable Margin shall be reset in accordance with the foregoing provisions of this definition): Applicable Applicable Base Eurodollar Rate Debt/EBITDA Ratio Margin Margin ----------------- ------ ------ 5.50:1 or Greater 1-1/2% 1/8 of 1% Less than 5.50:1 but equal 1-1/8% 0% to or greater than 5.00:1 Less than 5.00:1 but equal to or 7/8 of 1% 0% greater than 4.50:1 Less than 4.50:1 but equal to or 5/8 of 1% 0% greater than 4.00:1 Less than 4.00:1 1/2 of 1% 0% ; provided that if (A) any Section 7.01 Financials are not delivered when required (the "Late Section 7.01 Financials") and such Late Section 7.01 Financials establish that any Applicable Margin would have been increased or reduced to an amount set forth in the table above on the date that such Late Section 7.01 Financials were required to have been delivered (the "Required Delivery Date") and (B) a Borrower shall have made any interest payment during the period from the Required Delivery Date to the actual date of delivery of such Late Section 7.01 Financials based upon any such lower or higher Applicable Margin, then (x) in the case of actual payments based on any such lower Applicable Margin, the respective Borrower shall pay in the form of a supplemental interest payment, an amount which equals the difference between the amount of interest which would otherwise have been paid determined as if the Late Section 7.01 Financials were delivered on the Required Delivery Date and the amount of such interest so paid, which supplemental interest payment shall be due and payable on the date of delivery of the Late Section 7.01 Financials and (y) in the case of actual payments made based on such higher Applicable Margin, the Banks shall retain all such amounts so paid. -64- "Appraisal Firm" shall mean an independent appraisal firm (which may be an investment banking firm of national recognition) selected by, and at the expense of, the Company and reasonably satisfactory to the Administrative Agent. "Approved Fund" shall mean, with respect to any Bank, any fund or commingled investment vehicle that invests in loans and is managed or advised by the same investment advisor (or an affiliate of such investment advisor) as such Bank or an affiliate of such Bank. "Asset Sale" shall mean any sale, transfer or other disposition by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any Restricted Subsidiary of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding any sale, transfer or other disposition by the Company of its capital stock) of the Company or such Restricted Subsidiary, including, without limitation, a Permitted Restricted Asset Sale and any sale, transfer or other disposition deemed made pursuant to a Permitted Restricted Subsidiary Conversion (other than (x) any sale, transfer or disposition of Cash Equivalents; (y) any sale, transfer or disposition permitted by Section 8.02(a), (e) or (h); and (z) for purposes of Sections 3.03(e), any sale, transfer or disposition of assets (other than capital stock or other securities of any Subsidiary) that results in Available Cash Proceeds (including Available Cash Proceeds of any related sale, transfer or disposition) of not in excess of $10,000,000). "Authorized Officer" shall mean any officer of the Company designated as such in writing to the Administrative Agent by the Company, in each case to the extent reasonably acceptable to the Administrative Agent. "Available Cash Proceeds" shall mean, with respect to any sale, lease, transfer or other disposition of assets, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such sale, lease, transfer or other disposition, other than the portion of such deferred payment constituting interest, and including any amounts received as disbursement or withdrawals from any escrow or similar account established in connection with any such sale, lease, transfer or other disposition, but, in either such case, only as and when so received; but excluding any portion of cash payments which the Company determines in good faith (x) should be reserved for post-closing adjustments (to the extent the Company delivers to the Banks a certificate signed by its chief financial officer, controller or chief accounting officer as to such determination) or (y) must be applied to repurchase Senior Notes pursuant to the Senior Note Documents (to the extent the Company delivers to the Banks a certificate signed by its chief financial officer, controller or chief accounting officer as to such determination), it being understood and agreed that on the date that all such post-closing adjustments have been determined and/or the date such repurchases shall be required to be effected, as the case may be, the amount (if any) by which the reserved amount in respect of such sale or disposition exceeds the actual post-closing adjustments payable by the Company or any of its Subsidiaries or actual amount expended in connection with such repurchases, as the case may be, shall constitute Available Cash Proceeds on such date) received by the Company and/or any of its Subsidiaries from such sale, lease, transfer or other disposition. -65- "Bank" shall have the meaning provided in the first paragraph of this Agreement; provided that for purposes of references in this Agreement to Canadian Dollar Loans, "Bank" shall include the Canadian Lender. "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing or to fund its portion of any assignment of Canadian Dollar Loans under Section 1.01(g) or to fund its portion of any unreimbursed payment under Section 2.05(c) or (ii) a Bank having notified the Administrative Agent and/or the Company that it does not intend to comply with the obligations under Section 1.01(b), 1.01(c), 1.01(e), 1.01(g) or 2.05(c), in the case of either (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" at any time shall mean (i) in the case of Canadian Dollar Loans, the Canadian Lender Prime Lending Rate as in effect from time to time and (ii) in the case of Loans other than Canadian Dollar Loans, the higher of (x) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (y) the Prime Lending Rate as in effect from time to time. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). "BONY Term Loan Facility" shall mean the credit facility among the Company, various lending institutions and The Bank of New York, as Agent, providing for the making of term loans to the Company in an aggregate amount not to exceed $150,000,000 outstanding at any time, as same may have been modified, supplemented or amended from time to time pursuant to the terms thereof. "Borrower" shall mean each of the Company and the Canadian Borrower. "Borrowing" shall mean a borrowing of Loans under a single Tranche from all Banks having Commitments with respect to such Tranche (or (x) from Chase in the case of Swingline Loans and (y) from the Canadian Lender in the case of Canadian Dollar Loans) on a given date (or resulting from conversions on a given date), in each case, as required by the provisions of this Agreement, being of a single Type of Loans and having, in the case of Eurodollar Loans, the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "B Term Loan" shall have the meaning provided in Section 1.01(h). "B Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I hereto directly below the column entitled "B Term Loan Commitment," as same may be reduced from time to time pursuant to Sections 3.03 and/or 9. -66- "Business" shall mean and include the communications, information, education, publishing and/or media businesses. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) or (iii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close, (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market and (iii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Canadian Dollar Loans, any day which is a Business Day described in clause (i) and which is also a day which is not in Toronto, Canada a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close. "Canadian Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Canadian Borrower Management Agreement" shall mean the Management Agreement, dated as of March 9, 1994 between the Canadian Borrower and K-III Directory Corporation, as amended to the Original Effective Date and as further amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Canadian Dollar" and "Can.$" shall mean freely transferable lawful money of Canada. "Canadian Dollar Loan" shall have the meaning provided in Section 1.01(f). "Canadian Lender" shall mean The Bank of Nova Scotia. "Canadian Lender Prime Lending Rate" at any time shall mean the higher of (i) the rate per annum designated by the Canadian Lender from time to time (and in effect on such day) as its prime rate for Canadian Dollar commercial loans made in Canada and (ii) one-half of one percent (1/2%) plus the CDOR Rate from time to time (and in effect on such day), as advised by the Canadian Lender to the Canadian Borrower and the Administrative Agent from time to time. The Canadian Lender Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Canadian Lender may make commercial loans or other loans at rates of interest at, above or below the Canadian Lender Prime Lending Rate. "Canadian Notice Office" shall mean the office of the Canadian Lender set forth as the Canadian Notice Office on Annex II hereto, or such other office as the Canadian Lender may designate to the Company, the Administrative Agent and the Banks from time to time. -67- "Canadian Payment Office" shall mean the office of the Canadian Lender set forth as the Canadian Payment Office on Annex II hereto, or such other office as the Canadian Lender may designate to the Company, the Administrative Agent and the Banks from time to time. "Capital Expenditures" shall mean, for any period, any expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capital Leases) by any Person during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the balance sheet of such Person. "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Company or any of its Restricted Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank, (y) any commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (z) any bank whose short-term commercial paper rating from Standard & Poor's Ratings Group ("S&P") is at least A-2 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-2 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within one year after the date of acquisition, (iv) 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 S&P or Moody's and (v) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "CDOR Rate" shall mean that annual rate of interest equal to the average "BA 1 Month" interest rates for Canadian Dollar denominated bankers' acceptances displayed and identified as such on the "Reuters Screen CDOR Page" (as defined in the International Swap and Derivatives Association, Inc. definitions, as modified and amended from time to time) as of -68- 10:00 A.M., Toronto, Ontario local time on any particular day and, if such day is not a Business Day, then on the immediately preceding Business Day (as adjusted by the Canadian Lender after 10:00 A.M., Toronto, Ontario local time to reflect any error in a posted rate of interest or in the posted average annual rate of interest). If such rates are not available on the Reuters Screen CDOR Page on any particular day, then the CDOR Rate on that day shall be calculated as the arithmetic mean of the 30 day rates applicable to Canadian dollar denominated banker's acceptances quoted by four major Canadian Schedule I chartered banks as of 10:00 A.M., Toronto, Ontario local time on such day, or if such day is not a Business Day, then on the immediately preceding Business Day. The four major Canadian Schedule I chartered banks shall, unless the Canadian Borrower and the Canadian Lender otherwise agree, be The Toronto-Dominion Bank, The Bank of Nova Scotia, Royal Bank of Canada and Canadian Imperial Bank of Commerce. The arithmetic average of any rates or quotations to be calculated hereunder shall be rounded, if necessary, to the nearest 1/100,000 of one percent (.00001%), with five one millionths of a percentage point rounded upwards. All dollar amounts used in or resulting from any calculation based on the CDOR Rate will be rounded to the nearest cent (with one-half of one cent rounded upwards). "Change of Control Event" shall mean (a) any "Change of Control" or similar term as defined in the indentures governing the terms of the Senior Notes as in effect on the Initial Borrowing Date or in any agreement governing any Indebtedness incurred pursuant to Section 8.04(f), (h), (i) or (j), (b) KKR or one or more Affiliates of KKR shall cease to own (directly or indirectly) at least 25% on a fully diluted basis of the economic and voting interest in the Company's common stock or (c) any Person or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 , as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of more of the voting common stock of the Company than that owned (directly or indirectly) by KKR and its Affiliates. "Chase" shall mean The Chase Manhattan Bank or any successor thereto by merger. "Chase Revolving Credit Facility" shall mean the amended and restated credit facility among the Company, the Canadian Borrower, various lending institutions, Bank of America NT&SA, The Bank of New York, The Bank of Nova Scotia, Bankers Trust Company, Canadian Imperial Bank of Commerce and Societe Generale, as Co-Agents, and Chase, as Administrative Agent, providing for the making of revolving loans and the issuance of, and participation in, letters of credit in an aggregate amount not to exceed $670,000,000 outstanding at any time, as same may have been modified, supplemented or amended from time to time pursuant to the terms thereof. "Chase Term Loan Facility" shall mean the credit facility among the Company, various lending institutions, Bank of America Illinois, The Bank of Nova Scotia, Chemical Bank, Midland Bank plc and The Industrial Bank of Japan, Limited, as Co-Agents, and Chase, as Administrative Agent, providing for the making of term loans in an aggregate amount not to -69- exceed $150,000,000 outstanding at any time, as same may have been modified, supplemented or amended from time to time pursuant to the terms thereof. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Commitment" shall mean, at any time, for any Bank the sum of the Term Loan Commitment, B Term Loan Commitment, Tranche A Revolving Loan Commitment, and Tranche B Revolving Loan Commitment of such Bank at such time. "Commitment Fee" shall have the meaning provided in Section 3.01(a). "Company" shall have the meaning provided in the first paragraph of this Agreement. "Company Guaranty" have the meaning provided in Section 5.01(e)(ii). "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all Capital Expenditures by the Company and its Restricted Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Assets" shall mean, at any time, the current assets (other than cash and Cash Equivalents, and deferred income taxes to the extent included in current assets) of the Company and its Restricted Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities of the Company and its Restricted Subsidiaries determined on a consolidated basis, but excluding (i) all short-term Indebtedness for borrowed money, (ii) the current portion of any long-term Indebtedness of the Company or its Restricted Subsidiaries, (iii) deferred income taxes, (iv) liabilities arising from cash overdrafts, and (v) liabilities arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such liabilities are extinguished within three Business Days of their incurrence; in each case to the extent included in current liabilities. "Consolidated Debt" shall mean all Indebtedness of the Company and its Restricted Subsidiaries, determined on a consolidated basis, other than Indebtedness owing by the Company to any of its Restricted Subsidiaries or by any of the Company's Restricted Subsidiaries to the Company or any other Restricted Subsidiary of the Company, provided that, for purposes of this definition, (x) only the principal amount of Indebtedness outstanding under the Non-Compete Notes issued as of the date of determination (net of the amount of any reduction to the amounts owed under such Non-Compete Notes made in accordance with the terms of the Non-Competition Agreement referred to in the definition of Non-Compete Notes) -70- shall be included and (y) Indebtedness of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Debt in an aggregate amount equal to the percentage equity ownership of the Company in such Partially-Owned Restricted Subsidiary multiplied by the aggregate Indebtedness of such Partially-Owned Restricted Subsidiary. "Consolidated EBITDA" shall mean, for any period, (A) the sum (without duplication) of the amounts for such period of (i) the net income (or loss) of the Company and its Restricted Subsidiaries on a consolidated basis for such period taken as a single accounting period, provided that, except as provided in clauses (I) through (III) below, there shall be excluded from Consolidated EBITDA (x) the net income (or loss) of all Unrestricted Subsidiaries and all Partially-Owned Restricted Subsidiaries for such period and (y) all cash or other payments received during such period by the Company and its Restricted Subsidiaries from any Unrestricted Subsidiaries from dividends or distributions (including tax sharing payments), in each case to the extent otherwise included, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or write-off of deferred financing costs, (v) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses, (vi) non-cash amounts charged as compensation for "phantom stock" arrangements, (vii) all non-cash interest expense not included in the foregoing clause (vi), (viii) depreciation expense and (ix) amortization expense, in the case of each of clauses (ii) through (ix) above to the extent deducted in determining net income (or loss) pursuant to clause (i) above for such period, less (B) the amount for such period of gains on sales of assets (excluding sales in the ordinary course of business) and other extraordinary gains, in each case, to the extent included in determining net income (or loss) pursuant to clause (A)(i) above for such period, all as determined on a consolidated basis; provided, however, that (I) for purposes of Section 8.11 and the definitions of Applicable Margin and Applicable Commitment Fee Percentage, (1) there shall be included in determining Consolidated EBITDA for any period (x) the net income (or loss) of any person, business, property or asset (other than an Unrestricted Subsidiary) acquired and not subsequently sold or otherwise disposed of (but not including the net income (or loss) of any related person, business, property or assets to the extent not so acquired) by the Company or one of its Restricted Subsidiaries during such period (each such person, business, property or asset acquired and not subsequently disposed of, an "Acquired Entity or Business"), and the net income (or loss) of any Unrestricted Subsidiary that is converted into a Restricted Subsidiary during such period (each, a "Converted Restricted Subsidiary"), in each case based on the actual net income (or loss) of such Acquired Entity or Business or Converted Restricted Subsidiary for the entire period (including the portion thereof occurring prior to such acquisition or conversion) and (y) an increase in respect of each Acquired Entity or Business acquired during such period equal to the cost adjustment amount applicable to the relevant period determined by the Company to represent the savings secured by the Company in connection with its reduction of salary and other employment expenses and lease and other contractual expenses with respect to such Acquired Entity or Business and (2) there shall be excluded in determining Consolidated EBITDA for any period the net income (or loss) of any person, business, property or asset (other than an Unrestricted Subsidiary) sold or disposed of by the Company or one of its Restricted Subsidiaries during such period (each such person, business, property or asset so sold or disposed of, a "Sold Entity or Business"), and the net income (or loss) of any Restricted Subsidiary that is converted into an Unrestricted Subsidiary during such period (each, a "Converted Unrestricted -71- Subsidiary"), in each case based on the actual net income (or loss) of such Sold Entity or Business or Converted Unrestricted Subsidiary for the entire period (including the portion thereof occurring prior to such sale, disposition or conversion), (II) for purposes of this definition, subject to clause (III) below, there shall be included or excluded any of the items described in the above clauses (A) and (B) attributable to a Partially-Owned Restricted Subsidiary, but only to the extent of the equity percentage ownership of the Company in such Partially-Owned Restricted Subsidiary and (III) in the event the aggregate portion of Consolidated EBITDA for any period attributable to Partially-Owned Restricted Subsidiaries (the "Limited EBITDA Component") exceeds an amount equal to 15% of the aggregate amount of Consolidated EBITDA of the Company and its Restricted Subsidiaries for such period, the Limited EBITDA Component (and accordingly Consolidated EBITDA), in each case, for such period, shall be reduced such that the Limited EBITDA Component for such period equals 15% of the aggregate amount of such Consolidated EBITDA for such period. "Consolidated Fixed Charges" shall mean, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated Interest Expense, plus consolidated cash Dividend expense payable in respect of all Preferred Stock and common stock of the Company, (ii) provisions for taxes based on income other than (x) changes in deferred taxes, (y) taxes on gains resulting from sales of assets (other than sales in the ordinary course of business) and (z) taxes on gains on extraordinary items, (iii) Consolidated Capital Expenditures paid in cash, (iv) scheduled payments on Indebtedness for borrowed money (including the Term Loans, the B Term Loans and the loans outstanding under the Additional Credit Agreement and the 1999 Additional Credit Agreement but excluding the Revolving Loans) and on the Non-Compete Notes (other than, in the case of any payments referred to in this clause (iv), any interest payments to the extent included in Consolidated Interest Expense), and (v) the Net Maximum Exposure Reduction, if positive, for such period; all as determined on a consolidated basis for the Company and its Restricted Subsidiaries; provided that for purposes of this definition, fixed charges of the type referred to in clauses (i)-(v) above of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Fixed Charges in an aggregate amount equal to the percentage equity ownership of the Company in such Partially-Owned Restricted Subsidiary multiplied by the fixed charges of the type referred to above of such Partially-Owned Restricted Subsidiary for the respective period. "Consolidated Interest Expense" shall mean, for any period, total interest expense (including that attributable to Capital Leases in accordance with GAAP but excluding non-cash interest expenses) of the Company and its Restricted Subsidiaries determined on a consolidated basis with respect to all outstanding Indebtedness of the Company and its Restricted Subsidiaries, 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 (i.e., costs minus benefits) under Interest Rate Protection Agreements, but excluding, however, amortization of deferred financing costs to the extent included in total interest expense, all as determined on a consolidated basis; provided that for purposes of this definition, interest expense of the type referred to above of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Interest Expense in an aggregate amount equal to the percentage equity ownership of the -72- Company in such Partially-Owned Restricted Subsidiary multiplied by the interest expense of the type referred to above of such Partially-Owned Restricted Subsidiary for the respective period. "Contingent Obligations" shall mean as to any Person (i) any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof and (ii) any Interest Rate Protection Agreement; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Contribution Agreement" shall have the meaning provided in Section 5.01(h). "Conversion Value Amount" shall have the meaning set forth in the definition of Permitted Restricted Subsidiary Conversion. "Convertible Subordinated Debenture" shall mean the debenture issued by the Canadian Borrower to K-III Directory Corporation, convertible into shares of the Canadian Borrower's common stock at the option of K-III Directory Corporation, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Copyrights" shall have the meaning provided in Section 6.14(a). "Credit Documents" shall mean this Agreement, any Notes to the extent issued, the Guaranties and the Contribution Agreement. "Credit Event" shall mean the making of a Loan or the issuance of a Letter of Credit. "Credit Party" shall mean the Company, the Canadian Borrower and each Subsidiary Guarantor. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. -73- "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Dividends" shall have the meaning provided in Section 8.07. "Dollar Equivalent" shall mean, at any time of determination thereof, the amount of U.S. Dollars which could be purchased with the same amount of Canadian Dollars involved in such computation at the spot exchange rate therefor as published in the New York edition of The Financial Times on the date two Business Days prior to the date of any determination thereof for purchase on such date, provided that if the New York edition of The Financial Times is not published on such date, reference shall be made to such rate as set forth in the most recently published New York edition of The Financial Times, provided further, that if at any time the New York edition of The Financial Times ceases to publish such exchange rates, the Dollar Equivalent shall be the amount of U.S. Dollars which could be purchased with the amount of Canadian Dollars involved in such computation at the spot rate therefor as quoted by the Administrative Agent at approximately 11:00 A.M. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date. "EBITDA" shall mean, for any Restricted Subsidiary or business, for any period, the portion of Consolidated EBITDA attributable to such Restricted Subsidiary or business. "Environmental Law" shall mean any federal, state, provincial or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to the environment, health, safety or Hazardous Materials. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Company or any Subsidiary of the Company would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of 1%) of the offered quotation to first-class banks in the interbank Eurodollar market by each Reference Bank (or by the Canadian Lender in the case of Canadian Dollar Loans) for U.S. dollar deposits (or Canadian Dollar deposits in the case of Canadian Dollar Loans) of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of such Reference Bank (or the Canadian -74- Lender, as the case may be) for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D); provided that if one or more of the Reference Banks fails to provide the Administrative Agent with its aforesaid rate, then the Eurodollar Rate in respect of Loans shall be determined based on the rate or rates provided to the Administrative Agent by the other Reference Banks or Bank. "Event of Default" shall have the meaning provided in Section 9. "Excess Cash Flow" shall mean, for any period, the remainder of (x) the sum of (i) Consolidated EBITDA for such period and (ii) the decrease, if any, in Working Capital from the first day to the last day of such period, minus (y) the sum of (i) the amount of Consolidated Fixed Charges for such period (but in the case of Consolidated Capital Expenditures included therein, only to the extent such expenditures are not financed by Indebtedness (other than Loans hereunder)) and (ii) the increase, if any, in Working Capital from the first day to the last day of such period, provided that in calculating the amount referred to in clause (x)(ii) or (y)(ii) above, as the case may be, (A) for any period during which the Company and/or any of its Restricted Subsidiaries have consummated an Asset Sale pursuant to Section 8.02(c) or a Permitted Acquisition, the portion of the change in Working Capital for such period attributable to the entity or business sold or purchased shall be based (x) in the case of an Asset Sale, on the change in Working Capital attributable to the entity or business sold from the first day of such period to the date of the consummation of such sale and (y) in the case of an acquisition, on the change in Working Capital attributable to the entity or business acquired from the date of consummation of such acquisition to the last day of such period and (B) Working Capital shall only include the assets and liabilities of a Partially-Owned Restricted Subsidiary to the extent of the percentage equity interest of the Company in such Partially-Owned Restricted Subsidiary. "Excess Cash Flow Amount" shall mean an amount which initially shall be zero and which shall be (i) increased on the date of delivery of Section 7.01 Financials in respect of the first three fiscal quarters in each year of the Company (commencing with the fiscal quarter ended June 30, 1996) by an amount (if positive) equal to 75% of Excess Cash Flow for the fiscal quarter in respect of which such Section 7.01 Financials are delivered, provided that in the event that Excess Cash Flow for the first and/or second fiscal quarter in any fiscal year is negative, then for purposes of this clause (i) the Excess Cash Flow for the third fiscal quarter in such fiscal year shall be deemed to be reduced by the amount of such negative Excess Cash Flow for such first and/or second quarter, and (ii) increased on the date of delivery of Section 7.01 Financials in respect of each fiscal year of the Company by an amount (if positive) equal to 75% of the Excess Cash Flow for such fiscal year less an amount (if any) equal to the aggregate amount by which -75- the Excess Cash Flow Amount was increased pursuant to clause (i) above in respect of the first, second and third quarters in such fiscal year. "Excluded Domestic Restricted Subsidiary" shall mean any Partially-Owned Restricted Subsidiary with respect to which the Company shall have made a Non-Guarantor Designation in accordance with the provisions hereof. "Excluded Foreign Restricted Subsidiaries" shall mean (i) Daily Racing Form of Canada Ltd., a Canada corporation, (ii) Admirefruit Limited, a U.K. corporation, (iii) Canadian Red Book, Inc., a Canada corporation, (iv) the Canadian Borrower and (v) each Restricted Subsidiary of the Company established, created or acquired after the Original Effective Date which is incorporated in a jurisdiction outside the United States, except to the extent the requirements set forth in clause (z) of 8.14(a), and Section 8.14(c), are satisfied with respect to such Subsidiary. "Existing Contingent Obligations" shall have the meaning provided in Section 8.06(g). "Existing Credit Agreements" shall mean and include each of the Chase Revolving Credit Facility, the Chase Term Loan Facility and the BONY Term Loan Facility. "Existing Debt" shall have the meaning provided in Section 8.04(d). "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.01(i). "Existing Preferred Stock" shall include preferred stock of the Company issued prior to the Restatement Effective Date and listed on Annex VI hereto, without giving effect to any extension or replacement thereof, as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean (i) all amounts payable pursuant to, or referred to in, Section 3.01 and (ii) all other fees payable to the Administrative Agent or any Bank as may be agreed to from time to time between the Company and the Administrative Agent or such Bank, as the case may be. -76- "Final Maturity Date" shall mean July 31, 2004. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, are subject (to the extent provided therein) to Section 12.07(a). "Guarantor" shall mean the Company and each Subsidiary Guarantor. "Guaranty" shall mean the Company Guaranty and the Subsidiary Guaranty. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any applicable Environmental Law. "Indebtedness" of any Person shall mean without duplication (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person and (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, provided that Indebtedness shall not include (x) trade payables and accrued expenses, in each case arising in the ordinary course of business and (y) any obligations under Interest Rate Protection Agreements. "Information Memorandum" shall mean the Confidential Information Memorandum dated February, 1999 and distributed to the Banks prior to the Restatement Effective Date. "Initial Borrowing Date" shall mean May 31, 1996. "Initial Tranche B Assumption Date" shall mean the date on which the first Tranche B Assumption Agreement is delivered to the Administrative Agent pursuant to Section 1.13 of this Agreement. "Intellectual Property" shall have the meaning provided in Section 6.14(b). "Intercompany Loan" shall have the meaning provided in Section 8.05(c). -77- "Interest Period" with respect to any Eurodollar Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in interest rates. "KKR" shall mean Kohlberg Kravis Roberts & Co., a Delaware limited partnership. "Leasehold" of any Person means all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Issuer" shall mean Chase. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.03(a). "Leverage Ratio" shall have the meaning provided in Section 8.11. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any similar recording or notice statute, and any lease having substantially the same effect as the foregoing). "Loan" shall mean each and every Loan made by any Bank hereunder, including Term Loans, B Term Loans, Tranche A Revolving Loans, Tranche B Revolving Loans, Canadian Dollar Loans and Swingline Loans. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(e). "Margin Stock" shall have the meaning provided in Regulation U. "Maximum Canadian Dollar Amount" shall mean $40,000,000. "Maximum Exposure" shall mean, for any period, an amount equal to the maximum amount of the sum of (i) the principal amount of all outstanding Revolving Loans, (ii) the principal amount of all outstanding Swingline Loans, (iii) the Dollar Equivalent of the principal -78- amount of all outstanding Canadian Dollar Loans and (iv) the Letter of Credit Outstandings, at any one time during such period. "Maximum Swingline Amount" shall mean $40,000,000. "Minimum Borrowing Amount" shall mean (i) for Term Loans, $3,000,000; (ii) for B Term Loans, $3,000,000; (iii) for Revolving Loans, $3,000,000; (iv) for Canadian Dollar Loans, Can. $50,000; and (v) for Swingline Loans, $500,000. "Minimum Retention Amount" shall mean, at any time, $10,000,000 multiplied by a fraction (i) the numerator of which shall be the sum of the outstanding Term Loans, and B Term Loans plus the Total Revolving Loan Commitment at such time and (ii) the denominator of which shall be the sum of $1,250,000,000 plus the Total Tranche B Revolving Loan Commitment at such time. "Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Available Cash Proceeds resulting therefrom net of (a) cash expenses of sale (including payment of principal, premium and interest of Indebtedness specifically relating to the assets sold in such Asset Sale, relocation expenses and severance and shutdown costs) and (b) taxes paid or payable as a result thereof over and above the taxes which would otherwise have been payable in the absence of such Asset Sale, provided that in the case of an Asset Sale by a Partially-Owned Restricted Subsidiary, "Net Cash Proceeds" shall be the amount as determined above in this definition multiplied by the percentage of the capital stock of such Subsidiary owned, directly or indirectly, by the Company. "Net Investments in Excluded Foreign Restricted Subsidiaries" shall mean the remainder of (i) the sum of (x) the aggregate value of all businesses, properties and assets transferred by the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) to Excluded Foreign Restricted Subsidiaries after the Original Effective Date, (y) the aggregate outstanding principal amount of all Intercompany Loans made to Excluded Foreign Restricted Subsidiaries by the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the Original Effective Date and (z) the aggregate amount of all investments by the Company and its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) in Excluded Foreign Restricted Subsidiaries after the Original Effective Date, minus (ii) the sum of (x) the aggregate value of all businesses, properties and assets transferred by Excluded Foreign Restricted Subsidiaries to the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the Original Effective Date and (y) the aggregate amount of all cash dividends and other cash distributions on common stock paid by Excluded Foreign Restricted Subsidiaries to the Company and its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the Original Effective Date. "Net Maximum Exposure Reduction" shall mean, for any period, the Maximum Exposure during such period less the sum of (i) the Total Revolving Loan Commitment on the last day of such period, and (ii) an amount equal to the aggregate amount of reductions to the -79- Total Tranche A Revolving Loan Commitment and the Total Tranche B Revolving Loan Commitment during such period pursuant to Section 3.03(e). "1999 Additional Credit Agreement" shall mean the credit agreement, dated as of March 11, 1999, among the Company, various lending institutions, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, as amended, modified, supplemented or extended from time to time in accordance with the terms thereof and hereof. "1999 Additional Facility Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries in connection with the 1999 Additional Credit Agreement (including, without limitation, the 1999 Additional Credit Agreement and any guaranty or guaranties relating thereto), as in effect on the Restatement Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Non-Compete Notes" shall mean the promissory notes issued by K-III Holdings Corporation III pursuant to the Non-Competition Agreement, dated as of June 17, 1991, among PRIMEDIA Holdings, Inc. (f/k/a K-III Holdings Corporation III), News America Holdings Incorporated and the other parties thereto in an aggregate principal amount not to exceed $50,000,000, as such notes may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank. "Non-Facility Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate maximum amount available to be drawn (regardless of whether any conditions for drawing could then be met) under all outstanding Non-Facility Letters of Credit and (ii) the aggregate amount of all Non-Facility Unpaid Drawings. "Non-Facility Letters of Credit" shall mean each letter of credit (other than any Letter of Credit issued pursuant to this Agreement) issued for the account of the Company or any of its Restricted Subsidiaries, provided that the reimbursement obligations of the Company or such Restricted Subsidiary with respect to such letter of credit may be secured only to the extent permitted by Section 8.03(q). "Non-Facility Unpaid Drawings" shall mean all amounts paid or disbursed by the issuers of Non-Facility Letters of Credit which have not been reimbursed. "Non-Guarantor Designation" shall mean and include each of (x) the designation by the Company of any newly created or acquired Partially-Owned Restricted Subsidiary and (y) the redesignation of any existing Partially-Owned Restricted Subsidiary which is a Subsidiary Guarantor, in each case, as an Excluded Domestic Restricted Subsidiary by delivery of a written notice to the Administrative Agent of such designation or redesignation, as the case may be; provided that the Company may only make a Non-Guarantor Designation hereunder if, at the -80- time of such designation (i) no Default or Event of Default exists or would result therefrom and (ii) the Company shall have determined, with respect to such designation, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement. "Note" shall mean and include each promissory note, in the form agreed by the Company and the Administrative Agent prior to the Original Effective Date (or, in the case of B Term Loans, prior to the Restatement Effective Date), to the extent issued pursuant to Section 1.05(b) hereof. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, or such other office as the Administrative Agent may designate to the Company and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Original Credit Agreement" shall have the meaning provided in the first Whereas clause of this Agreement. "Original Effective Date" shall mean May 28, 1996. "Original Final Maturity Date" shall mean June 30, 2004. "Partially-Owned Restricted Subsidiary" shall mean any Restricted Subsidiary of the Company to the extent that the Company and its Wholly-Owned Restricted Subsidiaries shall own less than 100% of the capital stock of such Restricted Subsidiary. "Participant" shall have the meaning provided in Section 2.05(a). "Payment Office" shall mean the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, or such other office as the Administrative Agent may designate to the Company and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" shall have the meaning provided in Section 8.02(g). "Permitted Amendments" shall mean, to any amendment or supplement to or waiver of the documents governing or evidencing (x) any issue of Indebtedness which does not (i) add, directly or indirectly, any new covenant, event of default, collateral requirement or repay- -81- ment requirement (including pursuant to any put arrangement), (ii) modify in any manner materially adverse to the issuer or guarantors thereof any existing covenant, event of default, collateral requirement or repayment requirement (including any shortening or any amortization requirements), (iii) increase the interest rate thereon or modify in any manner the time or manner of payment of such interest (including any option or right to pay such interest in kind), (iv) modify any of the subordination provisions or (v) contain any provision which, in the opinion of the Administrative Agent, is materially adverse to the interests of the Banks, (y) any issue of Preferred Stock which does not (i) add, directly or indirectly, any new covenant, default, voting, redemption, exchange or put provision, (ii) modify in any manner adverse to the issuer thereof any existing covenant, default, voting, redemption, exchange or put provision, (iii) increase the dividend rate thereon or modify in any manner the time or manner of payment of such dividends (including any option or right to pay such dividends in kind) or (iv) contain any provision which, in the opinion of the Administrative Agent, is materially adverse to the interests of the Banks or (z) the sole effect of which is to (i) delete covenants or events of default and/or (ii) add to, or increase existing, exceptions to the covenants contained therein, or waive any of the covenants contained therein or any rights of the holders of such Indebtedness or Preferred Stock, as the case may be, set forth therein. "Permitted Liens" shall have the meaning provided in Section 8.03(c). "Permitted Refinancing Debt" shall mean Indebtedness issued in connection with a refinancing of any or all of the Existing Debt, the Subordinated Exchange Debentures, any Additional Indebtedness or any other Permitted Refinancing Debt; provided that (i) such Indebtedness has a longer average life than the Indebtedness being refinanced and (ii) such Indebtedness, and the agreements and other documents entered into by the Company and/or any of its Restricted Subsidiaries in connection therewith shall contain terms and conditions (including, without limitation, with respect to the obligor and guarantors, if any, in respect of such Indebtedness, amortization schedules, interest rates, redemption provisions, covenants, defaults, security, remedies and, if the Indebtedness so refinanced is subordinated to any other Indebtedness of the Company or its Restricted Subsidiaries, subordination provisions) not materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of the Indebtedness so refinanced (excluding, for purposes of this clause (ii), the impact of market conditions on the interest rate and other economic terms). "Permitted Replacement Preferred Stock" shall mean preferred stock of the Company issued in connection with the replacement and cancellation of any outstanding Preferred Stock; provided that such preferred stock and the agreements, certificates of designation and other documents entered into by the Company in connection therewith shall contain terms and conditions (including, without limitation, dividend rates, pay-in-kind features, redemption provisions, put rights, liquidation preferences, voting rights and exchange rights) not materially less favorable to the Company or to the Banks than the terms and conditions of the preferred stock being replaced (excluding the impact of market conditions on the dividend rate and other economic terms), as such preferred stock may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. -82- "Permitted Restricted Asset Sale" shall mean any sale, transfer or other disposition by the Company or any of its Restricted Subsidiaries (other than the Canadian Borrower) to any Unrestricted Subsidiary of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding any sale, transfer or other disposition by the Company of its capital stock) of the Company or such Restricted Subsidiary; provided that the Company or such Restricted Subsidiary shall only be permitted to effectuate a Permitted Restricted Asset Sale so long as (i) no Default or Event of Default exists or would result therefrom, (ii) the Company shall have delivered to the Administrative Agent the opinion of value of an Appraisal Firm to the extent required by Section 8.02(c) and (iii) the Company shall have, or shall have caused such Restricted Subsidiary to have, complied with the other terms and conditions of Section 8.02(c) or (j), as the case may be. "Permitted Restricted Subsidiary Conversion" shall mean the redesignation by the Company of a Restricted Subsidiary (other than the Canadian Borrower) of the Company as an Unrestricted Subsidiary of the Company pursuant to a written notice to the Administrative Agent and the Banks; provided that any such redesignation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed to constitute a sale of all of the assets of the respective Restricted Subsidiary for all purposes of this Agreement; provided further, that the Company shall only be permitted to effectuate a Permitted Restricted Subsidiary Conversion so long as (i) no Default or Event of Default exists or would result therefrom, (ii) the Company shall have delivered to the Administrative Agent the opinion of value of management of the Company or, to the extent required by Section 8.02(c), the Appraisal Firm required by such Section (the value set forth in any such opinion, the "Conversion Value Amount"), (iii) the Company shall have complied with the other terms and conditions of Section 8.02(c) or (j), as the case may be, (iv) the Aggregate Conversion Amount at such time, when added to the Unrestricted Subsidiary Investment Amount at such time shall not exceed the Unrestricted Subsidiary Investment Limit then in effect, and (v) the Company shall have determined, with respect to such conversion, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan, as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Company, any Restricted Subsidiary or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Company, any Restricted Subsidiary or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Preferred Stock" shall mean and include the Existing Preferred Stock and, once issued, any Additional Preferred Stock and any Permitted Replacement Preferred Stock. -83- "Prescribed Forms" shall mean such duly executed form(s) or statement(s), and in such number of copies, which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of (a) an income tax treaty between the United States and the country of residence of the Bank providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule or regulation under the Code, permit the Company to make payments hereunder for the account of such Bank free of deduction or withholding of income or similar taxes. "Prime Lending Rate" shall mean the rate which the Administrative Agent announces from time to time as its prime commercial lending rate, the Prime Lending Rate to change when and as such prime commercial lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Pro Forma Basis" shall mean, with respect to each Affected Transaction in connection with which any calculation of compliance with any financial covenant or financial term is required, the calculation thereof on a pro forma basis, for the Test Period ended on the last day of the most recently ended fiscal quarter, determined as if (x) such Affected Transaction, each other Affected Transaction effected by Company during the Affected Period and any reduction of Consolidated Debt during such Affected Period effected with the proceeds received by the Company and/or its Restricted Subsidiaries of (A) the issuance of common equity by the Company or (B) the sale of the capital stock or other ownership interest of the Company in an Unrestricted Subsidiary (to the extent not otherwise included in Consolidated EBITDA), in each case, had occurred on the first day of such Affected Period, and (y) with respect to any Affected Transaction involving the issuance of Indebtedness or Preferred Stock, such Indebtedness and/or Preferred Stock had remained outstanding at all times during such Affected Period. "Pro Rata Share" shall mean, for each Bank, (i) with respect to Term Loans, the percentage obtained by dividing such Bank's outstanding Term Loans (if any) by the aggregate of all outstanding Term Loans, (ii) with respect to B Term Loans, the percentage obtained by dividing such Bank's outstanding B Term Loans (if any) by the aggregate of all outstanding B Term Loans, (iii) with respect to Tranche A Revolving Loans, the percentage obtained by dividing such Bank's Tranche A Revolving Loan Commitment (if any) by the Total Tranche A Revolving Loan Commitment and (iv) with respect to Tranche B Revolving Loans, the percentage obtained by dividing such Bank's Tranche B Revolving Loan Commitment (if any) by the Total Tranche B Revolving Loan Commitment; provided that, if at any time of the determination of a Bank's "Pro Rata Share," any Commitments under a Tranche under this Agreement shall have been terminated, Pro Rata Share shall be calculated with reference to the amount of Loans outstanding under such Tranche rather than such Commitments. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Reference Banks" shall mean Chase, The Bank of New York and Bankers Trust Company. -84- "Register" shall have the meaning provided in Section 1.05(a). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Remaining Net Cash Proceeds" shall mean, with respect to any Asset Sale, at any time, an amount equal to the Net Cash Proceeds from such Asset Sale theretofore received by the Company and/or its Restricted Subsidiaries minus the portion, if any, of such Net Cash Proceeds theretofore expended by the Company or any of its Restricted Subsidiaries in furtherance of the purchase, construction or other acquisition of assets to be employed in, and/or the capital stock of any Person engaged in, the Business. "Replaced Bank" shall have the meaning provided in Section 1.10(c)(ii). "Replacement Bank" shall have the meaning provided in Section 1.10(c)(ii). "Replacement Canadian Parent" shall have the meaning provided in Section 7.11. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan other than those events as to which the 30-day notice is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 2615. "Required Banks" shall mean Non-Defaulting Banks whose outstanding (a) Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments), (b) B Term Loans and (c) outstanding Revolving Loan Commitments (or, if after the Total Revolving Loan Commitment has been terminated, outstanding Revolving Loans and Adjusted Percentages of Swingline Loans, Dollar Equivalent of Canadian Dollar Loans and Letter of Credit Outstandings) constitute at least 51% of the sum of (i) all outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments) of Non-Defaulting Banks plus (ii) all outstanding B Term Loans of Non-Defaulting Banks plus (iii) the Adjusted Total Tranche A Commitment plus (iv) the Total Tranche B Revolving Loan Commitment less the Tranche B Revolving Loan Commitments of all Defaulting Banks (or, if after the Total Revolving Loan Commitment has been terminated, the total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Adjusted Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans, Dollar Equivalent of Canadian Dollar Loans and Letter of Credit Outstandings at such time). "Restatement Effective Date" shall have the meaning provided in Section 12.10. "Restricted Subsidiaries" shall mean (x) all of the Subsidiaries of the Company in existence on the Original Effective Date, including, without limitation, the Canadian Borrower, (y) any Subsidiary owned (directly or indirectly) by the Company that is created, established or -85- acquired after the Original Effective Date and which does not constitute an Unrestricted Subsidiary on the date of the creation, establishment and/or acquisition thereof and (z) any Unrestricted Subsidiary of the Company to the extent designated by the Company as a Restricted Subsidiary hereunder by written notice to the Administrative Agent; provided that the Company shall only be permitted to so designate a new Restricted Subsidiary so long as (i) no Default or Event of Default exists or would result therefrom, (ii) at least 51% of the capital stock of such newly-designated Restricted Subsidiary is owned by the Company or one or more Wholly-Owned Restricted Subsidiaries and all of the applicable provisions of Section 8.14 shall have been complied with in respect of such newly-designated Restricted Subsidiary, (iii) the Company shall have determined, with respect to such designation, that the Company and its Restricted Subsidiaries would have been in compliance, on a Pro Forma Basis, with Sections 8.09, 8.10 and 8.11 of this Agreement and (iv) such Unrestricted Subsidiary is permitted to be designated a Restricted Subsidiary pursuant to the Senior Note Documents; provided further, that, at the time of any Permitted Restricted Subsidiary Conversion or the sale of 100% of the capital stock owned by the Company or any Restricted Subsidiary of a Restricted Subsidiary to an Unrestricted Subsidiary pursuant to a Permitted Restricted Asset Sale, the Restricted Subsidiary so converted or sold shall no longer constitute a Restricted Subsidiary hereunder. "Revolving Loan" shall have the meaning provided in Section 1.01(c). "Revolving Loan Commitment" shall mean each Tranche A Revolving Loan Commitment and each Tranche B Revolving Loan Commitment with the Revolving Loan Commitment of any Bank at any time to equal the sum of its Tranche A Revolving Loan Commitment and Tranche B Revolving Loan Commitment at such time. "Scheduled A Commitment Reduction" shall have the meaning provided in Section 3.03(b). "Scheduled A Commitment Reduction Date" shall have the meaning provided in Section 3.03(b). "Scheduled B Commitment Reduction" shall have the meaning provided in Section 3.03(c). "Scheduled B Commitment Reduction Date" shall have the meaning provided in Section 3.03(c). "Scheduled BTL Repayment" shall have the meaning provided in Section 4.02(g). "Scheduled BTL Repayment Date" shall have the meaning provided in Section 4.02(g). "Scheduled TL Repayment" shall have the meaning provided in Section 4.02(c). "Scheduled TL Repayment Date" shall have the meaning provided in Section 4.02(c). -86- "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Section 7.01 Financials" shall mean the financial statements delivered, or to be delivered, pursuant to Section 7.01(a) or (b). "Senior Note Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries (including, without limitation, the indentures pursuant to which each issuance of the Senior Notes are issued and any guaranty or guaranties relating thereto) relating to the issuance by the Company of any Senior Notes, as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Notes" shall mean and include the Company's (x) 7-5/8% Senior Secured Notes due 2008, (y) 10-1/4% Senior Notes due 2004 and (z) 8-1/2% Senior Notes due 2006, in each case, as in effect on the Restatement Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Preferred Stock" shall mean the Company's $2.875 Senior Exchangeable Preferred Stock, as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Series B Preferred Stock" shall mean the Company's $11.625 Series B Exchangeable Preferred Stock, as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Series C Preferred Stock" shall mean the Company's Series C Exchangeable Preferred Stock, as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Shareholders Agreement" shall mean the Shareholders Agreement, dated as of March 9, 1994 among all holders of the capital stock of the Canadian Borrower, as amended to the Initial Borrowing Date and as further amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Specified Change of Control Event" shall mean a Change of Control Event of the type described in clause (a) of the definition thereof. "Stated Amount" of each Letter of Credit shall mean the maximum amount available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Subordinated Exchange Debentures" shall mean and include the Company's (x) 11-1/2% Subordinated Debentures due 2004, (y) 11-5/8% Class B Subordinated Exchange Debentures due 2005 and (z) 10% Subordinated Exchange Debentures due 2008, in each case, in -87- the form delivered to the Banks on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time, provided that the Canadian Borrower shall be deemed to be a Subsidiary of the Company for all purposes. "Subsidiary Guarantor" shall mean (i) each Restricted Subsidiary in existence on the Initial Borrowing Date (other than Excluded Foreign Restricted Subsidiaries) and (ii) each Restricted Subsidiary of the Company formed after the Initial Borrowing Date and each Excluded Domestic Restricted Subsidiary designated as such by the Company, in each case, which has executed and delivered a counterpart of the Subsidiary Guaranty to the Administrative Agent on behalf of the Banks, provided that any such Restricted Subsidiary which is a Partially-Owned Restricted Subsidiary shall cease to constitute a Subsidiary Guarantor to the extent the Company shall have made a Non-Guarantor Designation with respect to such Subsidiary in accordance with the terms hereof. "Subsidiary Guaranty" shall have the meaning provided in Section 5.01(e)(i). "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Original Final Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(d). "Taxes" shall have the meaning provided in Section 4.04. "Term Loan" shall have the meaning provided in Section 1.01(a). "Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I hereto directly below the column entitled "Term Loan Commitment," as same may be reduced from time to time pursuant to Sections 3.03 and/or 9. "Term Loan Facility Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time and the denominator of which is equal to the sum of (w) the Total Tranche A Revolving Loan Commitment at such time, (x) the Total Tranche B Revolving Loan Commitment at such time, (y) the aggregate principal amount of Term Loans then outstanding and (z) the Additional Facility Amount at such time; provided that if at any time of the determination of Term Loan Facility Percentage, the Total Tranche A Revolving Loan Commitment -88- and/or the Total Tranche B Revolving Loan Commitment shall have terminated, the Term Loan Facility Percentage shall be calculated based upon the aggregate principal amount of Tranche A Revolving Loans or Tranche B Revolving Loans, as the case may be, then outstanding. "Test Period" shall mean the four consecutive fiscal quarters of the Company then last ended. "Total B Term Loan Commitment" shall mean, at any time, the sum of the B Term Loan Commitments of each of the Banks. "Total Commitment" shall mean, at any time, the sum of the Commitments of each of the Banks. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the Total Tranche A Revolving Loan Commitment and the Total Tranche B Revolving Loan Commitment. "Total Term Loan Commitment" shall mean, at any time, the sum of the Term Loan Commitments of each of the Banks. "Total Tranche A Revolving Loan Commitment" shall mean, at any time, the sum of the Tranche A Revolving Loan Commitments of each of the Banks. "Total Tranche B Revolving Loan Commitment" shall mean, at any time, the sum of the Tranche B Revolving Loan Commitments of each of the Banks. "Total Unutilized Tranche A Revolving Loan Commitment" shall mean, at any time, (i) the Total Tranche A Revolving Loan Commitment at such time less (ii) the sum of the aggregate principal amount of all Tranche A Revolving Loans and Swingline Loans at such time, the Dollar Equivalent of the aggregate principal amount of Canadian Dollar Loans at such time plus the Letter of Credit Outstandings at such time. "Total Unutilized Tranche B Revolving Loan Commitment" shall mean, at any time, the Total Tranche B Revolving Loan Commitment at such time less the aggregate principal amount of all Tranche B Revolving Loans at such time. "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being six separate Tranches, i.e., the Term Loans, the B Term Loans, the Tranche A Revolving Loans, the Tranche B Revolving Loans, the Swingline Loans and the Canadian Dollar Loans. 0 "Tranche A Facility Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is the Total Tranche A Revolving Loan Commitment at such time and the denominator of which is equal to the sum of (w) the Total Tranche A Revolving Loan Commitment at such time, (x) the Total Tranche B Revolving Loan Commitment at such time, (y) the aggregate principal amount of Term Loans then outstanding -89- and (z) the Additional Facility Amount at such time; provided that if at any time of the determination of Tranche A Facility Percentage, the Total Tranche A Revolving Loan Commitment and/or the Total Tranche B Revolving Loan Commitment shall have terminated, Tranche A Facility Percentage shall be calculated based upon the aggregate principal amount of Tranche A Revolving Loans or Tranche B Revolving Loans, as the case may be, then outstanding. "Tranche A Percentage" shall mean at any time for each Bank the percentage obtained by dividing such Bank's Tranche A Revolving Loan Commitment (if any) by the Total Tranche A Revolving Loan Commitment; provided that at any time when the Total Tranche A Revolving Loan Commitment shall have been terminated, each Bank's Tranche A Percentage shall be the percentage obtained by dividing such Bank's Tranche A Revolving Loan Commitment (if any) immediately prior to such termination by the Total Tranche A Revolving Loan Commitment immediately prior to such termination. "Tranche A Revolving Loan" shall have the meaning provided in Section 1.01(b). "Tranche B Assumption Agreement" shall mean and include each Tranche B Assumption Agreement in the form of Exhibit B attached hereto executed in accordance with Section 1.13 hereof. "Tranche A Revolving Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I hereto directly below the column entitled "Tranche A Revolving Loan Commitment", as same may be reduced from time to time pursuant to Sections 3.02, 3.03 and/or 9. "Tranche B Assumption Date" shall mean and include the Initial Tranche B Assumption Date and each Additional Tranche B Assumption Date. "Tranche B Facility Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is the Total Tranche B Revolving Loan Commitment at such time and the denominator of which is equal to the sum of (w) the Total Tranche A Revolving Loan Commitment at such time, (x) the Total Tranche B Revolving Loan Commitment at such time, (y) the aggregate principal amount of Term Loans then outstanding and (z) the Additional Facility Amount at such time; provided that if at any time of the determination of Tranche B Facility Percentage, the Total Tranche A Revolving Loan Commitment and/or the Total Tranche B Revolving Loan Commitment shall have terminated, Tranche B Facility Percentage shall be calculated based upon the aggregate principal amount of Tranche A Revolving Loans or Tranche B Revolving Loans, as the case may be, then outstanding. "Tranche B Revolving Loan" shall have the meaning provided in Section 1.01(c). "Tranche B Revolving Loan Commitment" shall mean, with respect to each Bank, initially zero, as same may be increased from time to time pursuant to Section 1.13 and reduced from time to time pursuant to Sections 3.02, 3.03 and/or 9. -90- "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under such 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 the Plan's actuary in the most recent annual valuation of the Plan. "Unpaid Drawing" shall have the meaning provided in Section 2.04(a). "Unrestricted Subsidiary" shall mean (i) any Subsidiary of the Company that is formed or acquired after the Original Effective Date, which is funded through loans, advances and/ or capital contributions as permitted by, and in compliance with, Section 8.05(d), provided that at the time of the initial loan, advance or capital contribution by the Company or any Restricted Subsidiary to such Subsidiary (x) the Company designates such Subsidiary as an Unrestricted Subsidiary in a written notice to the Administrative Agent and (y) such Subsidiary and the Company shall have entered into a tax sharing agreement in form and substance reasonably satisfactory to the Required Banks, (ii) any Restricted Subsidiary of the Company redesignated as an Unrestricted Subsidiary pursuant to a Permitted Restricted Subsidiary Conversion and any Restricted Subsidiary sold to an Unrestricted Subsidiary pursuant to a Permitted Restricted Asset Sale, in each case to the extent consummated in accordance with the terms of the respective definitions thereof and Section 8.02(c) or 8.02(j), as the case may be, and (iii) each Subsidiary of an Unrestricted Subsidiary; provided that, at the time of any designation of the type described in clause (z) of the definition of "Restricted Subsidiary," the Subsidiary so designated shall no longer constitute an Unrestricted Subsidiary hereunder. -91- "Unrestricted Subsidiary Investment Amount" shall have the meaning provided in Section 8.05(d). "Unrestricted Subsidiary Investment Limit" shall mean, at any time, the sum of (i) $200,000,000, (ii) the Excess Cash Flow Amount at such time, (iii) an amount equal to all cash or other payments received by the Company and its Restricted Subsidiaries from Unrestricted Subsidiaries from dividends or distributions after the Original Effective Date (provided that for purposes of this clause (iii), cash and other payments received by a Partially-Owned Restricted Subsidiary shall be added to the Unrestricted Subsidiary Investment Limit only to the extent of the equity percentage ownership of the Company in such Partially-Owned Restricted Subsidiary), plus (iv) an amount equal to the aggregate net proceeds received by the Company from the issuance of equity securities of the Company after the Original Effective Date, provided that if the net proceeds from any such equity issuance are not utilized to make a loan or advance to, or a cash capital contribution in, an Unrestricted Subsidiary pursuant to Section 8.05(d) within 30 days following the date of such equity issuance, then the net proceeds from such equity issuance shall no longer be added to the Unrestricted Subsidiary Investment Limit. "U.S. Dollars" and "$" shall mean freely transferable lawful money of the United States of America. "Voting Trust Agreement" shall mean the Voting Trust Agreement, dated as of March 9, 1994 among all holders of the capital stock of the Canadian Borrower, as amended to the Initial Borrowing Date and as further amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Wholly-Owned Restricted Subsidiary" shall mean any Restricted Subsidiary of the Company which is not a Partially-Owned Restricted Subsidiary. "Working Capital" shall mean the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Written" or "in writing" shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. SECTION 11. The Administrative Agent. 11.01 Appointment. Each Bank hereby irrevocably designates and appoints Chase as Administrative Agent of such Bank and to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes Chase as the Administrative Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent agrees to act as such upon the express conditions contained in this Section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. The provisions of this Section 11 are solely for the benefit of the Administrative Agent and the Banks, and neither the Company nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Banks and the Administrative Agent neither assumes and nor shall it be deemed to have assumed any obligation or relationship of agency or trust with or for the Company or any of its Subsidiaries. 11.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 11.03. -92- 11.03 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company, any of its Subsidiaries or any of their respective officers contained in this Agreement or the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document or for any failure of the Company or any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Credit Documents, or to inspect the properties, books or records of the Company or any of its Subsidiaries. The Administrative Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Banks or by or on behalf of either Borrower to the Administrative Agent, or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 11.05 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has actually received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice -93- of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 11.06 Non-Reliance on Administrative Agent and Other Banks. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries. The Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other condition, prospects or creditworthiness of the Company or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 11.07 Indemnification. The Banks agree to indemnify the Administrative Agent in its capacity as such ratably according to their respective "percentages" (which shall equal, for each Non-Defaulting Bank, that percentage determined by dividing (i) the sum of (x) such Bank's Tranche A Revolving Loan Commitment, (y) such Bank's Tranche B Revolving Loan Commitment and (z) the outstanding principal amount of such Bank's Term Loans and B Term Loans by (ii) the sum of (x) the Adjusted Total Tranche A Commitment, (y) the Total Tranche B Revolving Loan Commitment less the Tranche B Revolving Loan Commitment of each Defaulting Bank and (z) the total aggregate principal amount of Term Loans and B Term Loans less any outstanding Term Loans and B Term Loans of Defaulting Banks, it being understood and agreed that references herein to Tranche A Revolving Loan Commitments and Tranche B Revolving Loan Commitments (as well as to the Adjusted Total Tranche A Commitment and Total Tranche B Revolving Loan Commitment) at a time when any such Commitment has been terminated shall be references to such terminated Commitment as in effect immediately prior to such termination), from and against any and all liabilities, obligations, losses, damages, penalties, -94- actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Administrative Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Company or any of its Subsidiaries; provided that no Bank shall be liable to the Administrative Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent. If and to the extent any amount paid to the Administrative Agent is subsequently recovered by the Administrative Agent against the Company or any of its Subsidiaries, the Administrative Agent shall promptly pay to each Bank to the extent such Bank paid the Administrative Agent, its "percentage" of the amount so recovered. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 11.07 shall survive the payment of all Obligations. 11.08 Administrative Agent in Its Individual Capacity. The Administrative Agent and its respective affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and its Subsidiaries as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. 11.09 Holders. The Administrative Agent may deem and treat the payee of any Note which has been issued hereunder as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any such Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 11.10 Resignation of the Administrative Agent; Successor Agent. The Administrative Agent may resign as the Administrative Agent upon 20 days' notice to the Banks. Upon the resignation of the Administrative Agent, the Required Banks shall appoint from among the Banks a successor Administrative Agent for the Banks subject to prior approval by the Company (such approval not to be unreasonably withheld), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall include such successor agent effective upon its appointment, and the resigning -95- Administrative Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the resignation of the Administrative Agent hereunder, the provisions of this Section 11 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. SECTION 12. Miscellaneous. 12.01 Payment of Expenses, etc. The Company agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and disbursements of White & Case LLP) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and in connection with the Administrative Agent's syndication efforts with respect to this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent, the Letter of Credit Issuer and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein and, after an Event of Default shall have occurred and be continuing, the protection of the rights of the Administrative Agent, the Letter of Credit Issuer and each of the Banks thereunder (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for the Administrative Agent, the Letter of Credit Issuer and for each of the Banks); (iii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify the Administrative Agent, the Letter of Credit Issuer and each Bank, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Administrative Agent, the Letter of Credit Issuer or any Bank is a party thereto) related to the entering into and/or performance of any Credit Document or the use of the proceeds of any Loans or Letter of Credit hereunder or the consummation of any other transactions contemplated in any Credit Document including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). 12.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank (including to the extent such Bank is, or is deemed to be, the holder of a funded participation in any Swingline Loan, Canadian Dollar Loan, and/or Letter of Credit) is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Company or any of its Subsidiaries or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply -96- any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of any Credit Party against and on account of the Obligations and liabilities of such Credit Party to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of such Credit Party purchased by such Bank pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 12.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed, facsimilied or delivered, if to a Borrower, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Bank, at its address specified for such Bank on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, facsimilied or cabled or sent by overnight courier, and shall be effective when received. 12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided that neither Borrower may assign or transfer any of its respective rights or obligations hereunder without the prior written consent of the Banks. Each Bank may at any time grant participations in any of its rights hereunder to another financial institution; provided further, that, in the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by either Borrower hereunder shall be determined as if such Bank had not sold such participation, except that the participant shall be entitled to receive the additional amounts under Sections 1.10, 1.11, 2.06 and 4.04 of this Agreement to, and only to, the extent that such Bank would be entitled to such benefits if the participation had not been entered into or sold; and provided further, that no Bank shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan in which such participant is participating (it being understood that any waiver of an installment on, or the application of any prepayment or the method of application of any prepayment to the amortization of the Loans shall not constitute an extension of the final scheduled maturity date), or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of any Commitment and that an increase in any Commitment shall be permitted without the consent of any participant if such participant's participation is not increased as a -97- result thereof), (ii) release the Company from the Company Guaranty or release all or substantially all of the Subsidiary Guarantors from the Subsidiary Guaranty (in each case except as expressly provided in the Credit Documents) or (iii) in each case consent to the assignment or transfer by the Company, the Canadian Borrower or any other Subsidiaries of the Company of any of its rights and obligations under this Agreement or any other Credit Document except in accordance with the terms hereof and thereof. (b) Notwithstanding the foregoing, (x) any Bank may assign all or a portion of its Loans and/or Commitment and its rights and obligations hereunder to its parent corporation and/or any affiliate of such Bank which is at least 50% owned by such Bank and/or its parent company and/or, in the case of B Term Loans, an "Approved Fund" and (y) with the consent of the Administrative Agent and the Company, and, in the case of any assignment of Tranche A Revolving Loans and/or Tranche A Revolving Loan Commitments, of the Canadian Lender and the Letter of Credit Issuer (which consents in each case shall not be unreasonably withheld or delayed, it being understood that the Company may withhold its consent if the result of any such assignment is that the assigning Bank and/or the assignee Bank will not have a pro rata exposure in this Agreement and the Additional Credit Agreement), any Bank may assign all or a portion of its Loans and/or Commitments and its rights and obligations hereunder to one or more commercial banks, other Persons who invest in commercial loan facilities or other financial institutions (including one or more Banks). No assignment pursuant to the immediately preceding sentence shall (x) to the extent such transaction represents an assignment pursuant to clause (y) of the preceding sentence (other than an assignment to a Bank), be in an aggregate amount less than the minimum of $10,000,000 (or such lesser amount than $10,000,000 as constitutes the assigning Bank's entire Commitment and outstanding Loans or such lesser amount than $10,000,000 as may be approved by the Administrative Agent and the Borrower ) or (y) so long as no Default or Event of Default then exists, reduce the Loans and Commitments of the assigning Bank to an aggregate amount less than the Minimum Retention Amount unless the same are reduced to $0. If any Bank so sells or assigns all or a part of its rights hereunder, any reference in this Agreement or the other Credit Documents to such assigning Bank shall thereafter refer to such Bank and to the respective assignee Bank to the extent of their respective interests and the respective assignee Bank shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would if it were such assigning Bank. Each assignment pursuant to this Section 12.04(b) shall be effected by the assigning Bank and the assignee Bank executing an Assignment and Assumption Agreement substantially in the form of Exhibit G (appropriately completed). At the time of any such assignment, (i) Annex I shall be deemed to be amended to reflect the Commitments and outstanding Loans of the respective assignee Bank (which shall result in a direct reduction to the respective Commitments of the assigning Bank) and of the other Banks, (ii) the Administrative Agent shall record such assignment and the resultant effects thereof on the Loans and/or Commitments of the assigning Bank and the assignee Bank in the Register and (iii) the Administrative Agent shall receive from the assigning Bank and/or the assignee Bank at the time of each assignment (other than an assignment pursuant to clause (x) of the first sentence of this Section 12.04(b)) the payment of a nonrefundable assignment fee in an aggregate amount of $3,000 with respect to each such assignment (provided that in the event of simultaneous assignments relating to this Agreement and the Additional Credit Agreement, the fees for such assignments shall total $3,000). Each -98- Bank and the Company agree to execute such documents (including, without limitation, amendments to this Agreement and the other Credit Documents) as shall be necessary to effect the foregoing. Promptly following any assignment pursuant to this Section 12.04(b), the assigning Bank shall promptly notify the Company thereof. Nothing in this Section 12.04(b) shall prevent or prohibit any Bank from pledging its Loans or, if issued, Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank or prevent any Bank which is an Approved Fund from, at any time, pledging all or any portion of its Loans to its trustee or representative; provided, however, that no such pledge shall release any Bank from its obligations hereunder or substitute such Federal Reserve Bank, trustee or representative for such Bank as a party hereto. Notwithstanding anything to the contrary contained herein, the Canadian Dollar Loans may be assigned to the Banks as contemplated by Section 1.01(g). Except as specifically provided in the immediately preceding sentence and in Section 1.01(g), the Canadian Lender shall not assign any portion of its rights or obligations hereunder in respect of the Canadian Dollar Loans, except an assignment of all of its rights and obligations in respect of such Canadian Dollar Loans to one commercial bank or other financial institution acceptable to the Administrative Agent, the Company and the Canadian Borrower. (c) Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Bank hereunder or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Company to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. 12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of the Administrative Agent, the Letter of Credit Issuer or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between either Borrower and the Administrative Agent, the Letter of Credit Issuer or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent, the Letter of Credit Issuer or any Bank would otherwise have. No notice to or demand on either Borrower in any case shall entitle such Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent, the Letter of Credit Issuer or the Banks to any other or further action in any circumstances without notice or demand. 12.06 Payments Pro Rata. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of a Borrower in respect of any Obligations of such Borrower hereunder, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. -99- (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Borrower to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 12.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks. 12.07 Calculations; Computations. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Company to the Banks); provided that except as otherwise specifically provided herein, all computations determining compliance with Section 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1997 historical financial statements delivered to the Banks pursuant to Section 6.10(a); provided further, that in the event that the Accounting Standards Executive Committee of the AICPA adopts the statement of position (substantially in the proposed form as of the Original Effective Date) relating to computer software developed or obtained for internal use, and the Company's independent auditors concur with such accounting change as it relates to the presentation of the Company's financial statements, then compliance with Section 8 will thereafter be determined giving effect to such statement of position. (b) All computations of interest (other than interest on Base Rate Loans) and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. All computations of interest on Base Rate Loans hereunder shall be made on the actual number of days elapsed over a year of 365 days. 12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the -100- Southern District of New York, and, by execution and delivery of this Agreement, each Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Borrower hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Borrower, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or any other Credit Document brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Borrower. Each Borrower irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Borrower, at its address for notices pursuant to Section 12.03, such service to become effective 30 days after such mailing. Each Borrower hereby irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. The Company hereby represents and warrants that its chief executive office is located at 745 Fifth Avenue, New York, New York 10151, and the Company hereby further agrees that it shall not move its chief executive office unless it shall give the Administrative Agent not less than 30 days' prior written notice of its intention so to do. The Company agrees that (x) prior to moving its chief executive office outside New York City and (y) and if for any reason any designee, appointee and agent previously appointed pursuant to this sentence shall cease to be available to act as such, the Company shall designate a designee, appointee and agent or replacement designee, appointee and agent, as the case may be, in New York City on the terms and for the purposes of this provision satisfactory to the Administrative Agent. Nothing herein shall affect the right of the Administrative Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against either Borrower in any other jurisdiction. (b) Each Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 12.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with the Company and the Administrative Agent. 12.10 Effectiveness. This Agreement shall become effective on the date (the "Restatement Effective Date") on which (i) each Borrower, the Administrative Agent, the Required Banks (as defined in the Original Credit Agreement) and each Bank that has a B Term Loan Commitment shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at its Notice Office or, in the case of the Banks, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such office that the same has been signed and mailed to it and (ii) the conditions contained in Section 5.01 are met to the satisfaction of the -101- Administrative Agent and the Required Banks (determined immediately after the occurrence of the Restatement Effective Date). Unless the Administrative Agent has received actual notice from any Bank that the conditions contained in Section 5.01 have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Administrative Agent's good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Restatement Effective Date shall have been deemed to have occurred, regardless of any subsequent determination that one or more of the conditions thereto have not been met (although the occurrence of the Restatement Effective Date shall not release the Company from any liability for failure to satisfy one or more the applicable conditions contained in Section 5.01). The Administrative Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Restatement Effective Date. 12.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 Amendment or Waiver. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by each Borrower and the Required Banks; provided that no such change, waiver, discharge or termination shall, without the consent of each Bank (other than a Defaulting Bank) affected thereby, (i) extend any Scheduled A Commitment Reduction Date, any Scheduled B Commitment Reduction Date, any Scheduled TL Repayment Date, any Scheduled BTL Repayment Date or reduce the amount of any Scheduled A Commitment Reduction, any Scheduled B Commitment Reduction, any Scheduled TL Repayment or Scheduled BTL Repayment (or any mandatory repayment arising as a result of any such Scheduled A Commitment Reduction or any such Scheduled B Commitment Reduction) or extend the final scheduled maturity of any Loan (it being understood that any waiver of the application of any prepayment of or the method of application of any prepayment to the amortization of the Loans shall not constitute any such extension), or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the principal amount thereof, or increase the Commitments of any Bank over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory repayment or reduction in the Total Commitment shall not constitute a change in the terms of any Commitment of any Bank), (ii) release the Company from the Company Guaranty or release all or substantially all of the Subsidiary Guarantors from the Subsidiary Guaranty (in each case except as expressly provided in the Credit Documents), (iii) amend, modify or waive any provision of this Section, or Section 1.10, 1.11, 2.06, 4.04, 9.01, 11.07, 12.01, 12.02, 12.04, 12.06 or 12.07(b), (iv) reduce the percentage specified in, or otherwise modify, the definition of, Required Banks, (v) increase the Maximum Canadian Dollar Amount or (vi) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or any other Credit Document except in accordance with the terms hereof or thereof. No provision of Section 2 or 11 may be amended without the consent of the Letter of Credit Issuer or the Administrative -102- Agent. No provision relating to Canadian Dollar Loans may be amended without the consent of the Canadian Lender. 12.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 2.06, 4.04, 11.07 or 12.01, shall survive the execution and delivery of this Agreement and the making and repayment of the Loans and the satisfaction of all other Obligations. 12.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank, provided, that the Borrowers shall not be responsible for costs arising under Sections 1.10, 1.11, 2.06 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent such costs would not otherwise be applicable to such Bank in the absence of such transfer. 12.15 Confidentiality. Each of the Banks agrees that it will use its best efforts not to disclose without the prior consent of the Company (other than to its employees, auditors, counsel or other professional advisors and to affiliates or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to the Company or any of its Subsidiaries which is furnished pursuant to this Agreement and which is designated by the Company to the Banks in writing as confidential, provided that any Bank may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state, provincial or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation, the National Association of Insurance Commissioners or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, and (e) to any prospective transferee in connection with any contemplated transfer of any of the Loans and/or Commitments or any interest herein by such Bank, provided that such prospective transferee agrees to be bound by the provisions of this Section. 12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. * * * -103- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. Address: 745 Fifth Avenue PRIMEDIA INC. New York, NY 10151 Telephone No.: (212) 745-0101 By:__________________________ Telecopier No.: (212) 745-0199 Douglas B. Smith Attention: Beverly Chell, Esq. Title: VP, Treasurer c/o PRIMEDIA Inc. CANADIAN SAILINGS INC. 745 Fifth Avenue New York, NY 10151 Telephone No.: (212) 745-0101 By:______________________ Telecopier No.: (212) 745-0199 Douglas B. Smith Attention: Beverly Chell, Esq. Title: VP, Treasurer THE CHASE MANHATTAN BANK Individually and as Administrative Agent By:______________________ Title: BANKERS TRUST COMPANY, Individually and as Co-Syndication Agent By:______________________ Title: -104- THE BANK OF NEW YORK, Individually and as Co-Syndication Agent By:______________________ Title: THE BANK OF NOVA SCOTIA, Individually, as Canadian Lender and as Documentation Agent By:______________________ Title: BANK OF AMERICA NT&SA By:______________________ Title: NATIONSBANK OF TEXAS, N.A. By:______________________ Title: FLEET NATIONAL BANK By:______________________ Title: MARINE MIDLAND BANK By:______________________ Title: -105- SOCIETE GENERALE, NEW YORK BRANCH By:______________________ Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By:______________________ Title: ROYAL BANK OF CANADA By:______________________ Title: CIBC INC. By:______________________ Title: LTCB TRUST COMPANY By:______________________ Title: MELLON BANK, N.A. By:______________________ Title: -106- THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH By:______________________ Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By:______________________ Title: THE SAKURA BANK, LIMITED, NEW YORK BRANCH By:______________________ Title: TORONTO DOMINION (NEW YORK), INC. By:______________________ Title: CREDIT LYONNAIS NEW YORK BRANCH By:______________________ Title: BANK OF MONTREAL, CHICAGO BRANCH By:______________________ Title: -107- CREDIT AGRICOLE INDOSUEZ By:______________________ Title: By:______________________ Title: STB DELAWARE FUNDING TRUST I By:______________________ Title: UNION BANK OF CALIFORNIA, N.A. By:______________________ Title: SUMMIT BANK By:______________________ Title: MERRILL LYNCH SENIOR FLOATING RATE FUND By:______________________ Title: DEBT STRATEGIES FUND II, INC. By:______________________ Title: DEBT STRATEGIES FUND III, INC. By:______________________ Title: -108- BANK OF HAWAII By:______________________ Title: PARIBAS By:______________________ Title: NATEXIS BANQUE BFCE By:______________________ Title: CREDIT SUISSE FIRST BOSTON By:______________________ Title: By:______________________ Title: MERITA BANK, Plc By:______________________ Title: FIRST UNION NATIONAL BANK By:______________________ Title: -109- THE SANWA BANK, LIMITED, NEW YORK BRANCH By:______________________ Title: ALLSTATE INSURANCE COMPANY By:______________________ Title: By:______________________ Title: ALLSTATE LIFE INSURANCE COMPANY By:______________________ Title: By:______________________ Title: DLJ CAPITAL FUNDING, INC. By:______________________ Title: FRANKLIN FLOATING RATE TRUST By:______________________ Title: GENERAL ELECTRIC CAPITAL CORP. By:______________________ Title: -110- KZH HIGHLAND-2 LLC By:______________________ Title: KZH CYPRESSTREE-1 LLC By:______________________ Title: KZH SOLEIL-2 LLC By:______________________ Title: KZH III LLC By:______________________ Title: KZH IV LLC By:______________________ Title: METROPOLITAN LIFE INSURANCE COMPANY By:______________________ Title: NEW YORK LIFE INSURANCE COMPANY By:______________________ Title: -111- OCTAGON LOAN TRUST by Octagon Credit Investors, as Manager By:______________________ Title: KZH LANGDALE LLC By:______________________ Title: RIGGS BANK, N.A. By:______________________ Title: SENIOR DEBT PORTFOLIO by Boston Management & Research as Investment Advisor By:______________________ Title: CRESCENT/MACH I PARTNERS, L.P. By:______________________ Title: KZH CRESCENT LLC By:______________________ Title: KZH CRESCENT-2 LLC By:______________________ Title: -112- KZH CRESCENT-3 LLC By:______________________ Title: VAN KAMPEN PRIME RATE INCOME TRUST By:______________________ Title: -113- ANNEX I LIST OF BANKS -------------
Tranche A Tranche B Revolving Loan Revolving Loan Term Loan B Term Loan Bank Commitment Commitment Commitment Commitment ---- ---------- ---------- ---------- ---------- The Chase Manhattan Bank $60,000,000 $26,500,000* $2,500,000 $63,000,000 Bank of America NT&SA 36,000,000 10,000,000* 2,000,000 10,000,000 Nationsbank of Texas, N.A. 24,000,000 10,000,000* 8,000,000 The Bank of New York 45,000,000 15,000,000* 15,000,000 10,000,000 The Bank of Nova Scotia 33,000,000 17,000,000* 11,000,000 5,000,000 Bankers Trust Company 33,666,667 19,833,333* 6,000,000 Fleet National Bank 30,000,000 15,000,000* 10,000,000 General Electric 32,000,000 13,000,000 Royal Bank of Canada 30,000,000 10,000,000 The Industrial Bank of Japan, Ltd. 36,000,000 2,000,000 Union Bank of California, N.A. 27,000,000 11,500,000 5,000,000 Societe Generale, 27,000,000 9,000,000 New York Branch CIBC, Inc. 24,000,000 8,000,000 Marine Midland Bank 24,000,000 8,000,000 The Long-Term Credit Bank of Japan, Ltd. 24,000,000 8,000,000 The Mitsubishi Trust and Banking 24,000,000 8,000,000 Corporation
-114-
Tranche A Tranche B Revolving Loan Revolving Loan Term Loan B Term Loan Bank Commitment Commitment Commitment Commitment ---- ---------- ---------- ---------- ---------- Toronto Dominion Bank, 13,000,000 15,000,000* 2,000,000 15,000,000 New York Branch Bank of Montreal, 15,000,000 10,000,000* 5,000,000 Chicago Branch Credit Lyonnais 21,000,000 7,000,000 The Sakura Bank, Ltd. 18,000,000 6,000,000 Credit Agricole Indosuez 15,000,000 5,000,000 Credit Suisse First Boston 9,000,000 10,000,000* 3,000,000 Mellon Bank 15,000,000 5,000,000 The Dai-Ichi Kangyo Bank, Ltd. 13,500,000 4,500,000 STB Delaware Funding 15,000,000 5,000,000 Trust I Summit Bank 15,000,000 5,000,000 Merrill Lynch Senior Floating Rate Fund 12,000,000 4,000,000 10,000,000 Debt Strategies Fund II 4,000,000 Debt Strategies Fund III 1,000,000 Bank of Hawaii 9,000,000 3,000,000 Paribas 9,000,000 3,000,000 Merita Bank, Plc . 9,000,000 3,000,000 Natexis Banque BFCE 8,333,333 1,666,667* Riggs Bank, N.A. 9,000,000 3,000,000
Tranche A Tranche B Revolving Loan Revolving Loan Term Loan B Term Loan Bank Commitment Commitment Commitment Commitment ---- ---------- ---------- ---------- ---------- First Union National Bank 9,000,000 3,000,000 The Sanwa Bank Ltd. 9,000,000 3,000,000 Van Kampen Prime Rate 15,000,000 Income Trust Donaldson, Lufkin & Jenrette Capital 6,000,000 2,000,000 Funding KZH III LLC 4,000,000 KZH IV LLC 3,000,000 Octagon Loan Trust 25,000,000 Crescent / Mach I Partners, L.P. 3,000,000 KZH Crescent LLC 3,500,000 KZH Crescent-2 LLC 5,000,000 KZH Crescent-3 LLC 3,500,000 KZH Highland-2 LLC 10,000,000 Metropolitan Life Insurance Company 10,000,000 KZH-Soleil-2 LLC 20,000,000 Allstate Insurance Company 4,500,000 Allstate Life Insurance Company 5,500,000 Franklin Floating Rate Trust 10,000,000 New York Life Insurance Company 10,000,000
Tranche A Tranche B Revolving Loan Revolving Loan Term Loan B Term Loan Bank Commitment Commitment Commitment Commitment ---- ---------- ---------- ---------- ---------- KZH Langdale LLC 5,000,000 KZH-CypressTree-1 LLC 5,000,000 Total $750,000,000 $150,000,000* $250,000,000 $250,000,000 ============ ============ ============ ============
* Pursuant to Tranch B Assumption Agreements, dated May 20, 1997. ANNEX II -------- BANK ADDRESSES -------------- Bank Address ---- ------- The Chase Manhattan Bank. 270 Park Avenue New York, New York 10017 Telephone No.: (212) 270-3116 Telecopier No.: (212) 270-1063 Attention: Ayman Zameli Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Telephone No.: (212) 250-1724 Telecopier No.: (212) 250-7218 Attention: Gregory Shefrin The Bank of New York 1 Wall Street 16th Floor New York, New York 10286 Telephone No.: (212) 635-8608 Telecopier No.: (212) 635-8595 Attention: Ted Ryan Bank of Nova Scotia One Liberty Plaza, 26th Floor New York, New York 10006 Telephone No.: (212) 225-5042 Telecopier No.: (212) 225-5090 Attention: Vincent Fitzgerald Canadian Notice Office and Canadian Payment Office: International Banking Division Loan Administration and Agency Services 44 Kings Street West, 14th Floor Toronto, Ontario Canada M5H 1H1 Telephone No.: (416) 866-5901/2816/4089 Telecopier No.: (416) 866-5991 Attention: Wallace Yeung/ Nancy Buccat/Nancy Tong Annex II Page 2 Bank of America NT&SA 335 Madison Avenue 5th Floor New York, New York 10017 Telephone No.: (212) 503-7980 Telecopier No.: (212) 503-7173 Attention: Thomas J. Kane NationsBank of Texas, N.A. Bank of America Entertainment/Media Group 335 Madison Avenue New York, NY 10017 Telephone No.: (212) 503-7980 Telecopier No.: (212) 503-7173 Attention: Thomas J. Kane Fleet National Bank 75 State Street Boston, Massachusetts 02109 Telephone No.: (617) 346-5579 Telecopier No.: (617) 346-4346 Attention: Chris Swindell General Electric Capital Corp. 201 High Ridge Road Stamford, CT 06927 Telephone No.: (203) 961-2993 Telecopier No.: (203) 316-7978 Attention: David Rich Royal Bank of Canada One Financial Square New York, New York 10005-3531 Telephone No.: (212) 428-6288 Telecopier No.: (212) 428-6460 Attention: Barbara Meijer The Industrial Bank of 1251 Avenue of the Americas Japan, Limited 32nd Floor New York, New York 10020-1104 Telephone No.: (212) 282-3514 Telecopier No.: (212) 282-4486 Attention: Jonathan Rabinowitz Annex II Page 3 Union Bank of California, N.A. 445 South Figueroa Street 15th Floor Los Angeles, California 90071 Telephone No.: (213) 236-5812 Telecopier No.: (213) 236-5747 Attention: Michael K. McShane Societe Generale, New York 1221 Avenue of the Americas Branch New York, New York 10020 Telephone No.: (212) 278-6852 Telecopier No.: (212) 278-6240 Attention: Elaine Khalil Senior Debt Portfolio 24 Federal Street by Boston Management & 6th Floor Research as Investment Manager Boston, Massachusetts 02110 Telephone No.: (617) 348 0193 Telecopier No.: (617) 695-9594 Attention: Craig P. Russ CIBC Inc. 425 Lexington Avenue 8th Floor New York, New York 10017 Telephone No.: (212) 856-3676 Telecopier No.: (212) 856-3558 Attention: Karen Kiskorna Marine Midland Bank, 140 Broadway c/o HSBC Securities, Inc. 5th Floor New York, New York 10005 Telephone No.: (212) 658-2200 Telecopier No.: (212) 658-2586 Attention: Susan Lefevre LTCB Trust Company 165 Broadway 49th Floor New York, New York 10006 Telephone No.: (212) 335-4453 Telecopier No.: (212) 608-2371 Attention: Hisao Inagawa Annex II Page 4 The Mitsubishi Trust and 520 Madison Avenue Banking Corporation 26th Floor New York, New York 10022 Telephone No.: (212) 891-8425 Telecopier No.: (212) 644-6825 Attention: Paul Arzouian Toronto Dominion (New York), 31 West 52nd Street Inc. New York, New York 10019 Telephone No.: (212) 827-6928 Telecopier No.: (212) 262-1928 Attention: Christina Bau with a copy to: 909 Fannin Suite 1700 Houston, Texas 77010 Telephone No.: (713) 653-8234 Telecopier No.: (713) 951-9921 Attention: Lynn Chasin Bank of Montreal, 430 Park Avenue Chicago Branch New York, New York 10022 Telephone No.: (212) 605-1438 Telecopier No.: (212) 605-1648 Attention: Naghmeh Hashemifard Credit Lyonnais 1301 Avenue of the Americas New York Branch New York, New York 10019 Telephone No.: (212) 261-7896 Telecopier No.: (212) 459-3176 Attention: Anne Legoulven The Sakura Bank, Limited, 101 Park Avenue New York Branch New York, New York 10017 Telephone No.: (212) 909-4552 Telecopier No.: (212) 909-4599 Attention: Arifumi Hirata Credit Agricole Indosuez 520 Madison Avenue New York, New York 10022 Telephone No.: (212) 418-7077 Telecopier No.: (212) 418-2288 Attention: Janet Alexander Annex II Page 5 Credit Suisse First Boston 5 World Trade Center 8th Floor New York, New York 10048 Telephone No.: (212) 322-1634 Telecopier No.: (212) 335-0593 Attention: Patti Matos Mellon Bank, N.A. One Mellon Bank Center Room 4440 Pittsburgh, Pennsylvania 15258-0001 Telephone No.: (412) 234-3753 Telecopier No.: (412) 234-6375 Attention: Paul F. Noel The Dai-Ichi Kangyo Bank, Ltd., One World Trade Center New York Branch Suite 4911 New York, New York 10048 Telephone No.: (212) 432-6648 Telecopier No.: (212) 488-8955 Attention: Christopher Fahey STB Delaware Funding Trust I 527 Madison Avenue New York, New York 10022 Telephone No.: (212) 326-0537 Telecopier No.: (212) 326-0564 Attention: Suraj Bhatia Summit Bank 25 East Salem Street Hackensack, New Jersey 07602 Telephone No.: (201) 646-6189 Telecopier No.: (201) 343-6723 Attention: Bruce Gray Merrill Lynch Senior Floating 800 Scudders Mill Road Rate Fund Area 2C Plainsboro, New Jersey 08536 Telephone No.: (609) 282-3102 Telecopier No.: (609) 282-3542 Attention: Jill Montanye Annex II Page 6 Debt Strategies Fund II, Inc. 800 Scudders Mill Road Area 1B Plainsboro, New Jersey 08536 Telephone No.: (609) 282-2055 Telecopier No.: (609) 282-2756 Attention: Joseph Matteo / Janet S. Hansen Debt Strategies Fund III, Inc. 800 Scudders Mill Road Area 1B Plainsboro, New Jersey 08536 Telephone No.: (609) 282-2055 Telecopier No.: (609) 282-2756 Attention: Joseph Matteo / Janet S. Hansen Bank of Hawaii 1850 North Central Avenue Suite 400 Phoenix, Arizona 85004 Telephone No.: (602) 257-2485 Telecopier No.: (602) 257-2235 Attention: Eric Pelletier Paribas 787 Seventh Avenue New York, New York 10019 Telephone No.: (212) 841-2389 Telecopier No.: (212) 841-2369 Attention: William Schink Merita Bank Plc. 437 Madison Avenue New York, New York 10022 Telephone No.: (212) 318-9561 Telecopier No.: (212) 421-4420 Attention: Frank Maffei Natexis Banque BFCE 645 5th Avenue New York, New York 10022 Telephone No.: (212) 872-5029 Telecopier No.: (212) 872-5045 Attention: Cynthia Sachs Riggs Bank, N.A. 808 17th Street N.W. 10th Floor Washington, D.C. 20006 Telephone No.: (202) 835-5918 Telecopier No.: (202) 835-5977 Attention: Perry DeLuca Annex II Page 7 First Union National Bank 1339 Chestnut Street PA 4829 Philadelphia, PA 19107 Telephone No.: (215) 786-7668 Telecopier No.: (215) 786-7721 Attention: James Brooks The Sanwa Bank, Limited, Park Avenue Plaza New York Branch 55 East 52nd Street New York, New York 10055 Telephone No.: (212) 339-6201 Telecopier No.: (212) 754-1304 Attention: Stephen C. Small Van Kampen Prime Rate One Parkview Plaza Income Trust 5th Floor Oakbrook Terrace, Illinois 60181 Telephone No.: (630) 684-6438 Telecopier No.: (630) 684-6741 Attention: Jeffrey Maillet DLJ Capital Funding, Inc. 277 Park Avenue 9th Floor New York, New York 10172 Telephone No.: (212) 892-5475 Telecopier No.: (212) 892-5286 Attention: Don Pollard KZH III LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway KZH IV LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway Annex II Page 8 Octagon Credit Investors 380 Madison Avenue New York, New York 10017 Telephone No.: (212) 622-3064 Telecopier No.: (212) 622-3797 Attention: Andrew Gordon Crescent/Mach I Partners, L.P. TCW Asset Management Company 200 Park Avenue Suite 2200 New York, New York 10166 Telephone No.: (212) 771-4000 Telecopier No.: (212) 771-4159 Attention: Mark L. Gold With copies to: Crescent/Mach I Partners, L.P. c/o State Street Bank & Trust Co. Two International Place Boston, Massachusetts 02110 Telephone No.: (617) 664-5015 Telecopier No.: (617) 664-5368 Attention: Elizabeth Kennedy KZH Crescent LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway KZH Crescent-2 LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway Annex II Page 9 KZH Crescent-3 LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway KZH Highland-2 LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway Metropolitan Life Insurance 334 Madison Avenue Company Convent Station, New Jersey 07961 Telephone No.: (973) 254-3206 Telecopier No.: (973) 254-3032 Attention: Jim Dingler KZH Soleil-2 LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway Allstate Insurance Company 3075 Sanders Road Suite G3A Northbrook, Illinois 60062 Telephone No.: (847) 402-2370 Telecopier No.: (847) 402-3092 Attention: Mary Ann Hawley Allstate Life Insurance Company 3075 Sanders Road Suite G3A Northbrook, Illinois 60062 Telephone No.: (847) 402-2370 Telecopier No.: (847) 402-3092 Attention: Mary Ann Hawley Annex II Page 10 Franklin Floating Rate Trust 777 Mariners Island Boulevard San Mateo, California 94404 Telephone No.: (650) 312-3091 Telecopier No.: (650) 312-3346 Attention: Chauncey Lufkin New York Life Insurance 51 Madison Avenue Company Room 206 New York, New York 10010 Telephone No.: (212) 576-7628 Telecopier No.: (212) 576-6752 Attention: Tom Knoff KZH Langdale LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway KZH CypressTree-1 LLC c/o The Chase Manhattan Bank 450 West 33rd St. 15th Floor New York, New York 10001 Telephone No.: (212) 946-7575 Telecopier No.: (212) 946-7776 Attention: Virginia Conway ANNEX III --------- SUBSIDIARIES ------------ ANNEX IV -------- LIENS ----- ANNEX V ------- PART A. EXISTING DEBT ------------- [To include existing Senior Notes and Non-Compete Notes] PART B. EXISTING CONTINGENT OBLIGATIONS ------------------------------- ANNEX VI -------- EXISTING PREFERRED STOCK ANNEX C-1 --------- FORM OF NOTICE OF BORROWING --------------------------- [Date] The Chase Manhattan Bank, as Administrative Agent for the Banks party to the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Attention: ____________________ Ladies and Gentlemen: The undersigned refers to the Credit Agreement, dated as of May 24, 1996, as amended and restated as of March ___, 1999 (as further amended, modified or supplemented from time to time, the "Credit Agreement," the terms defined therein being used herein as therein defined), among PRIMEDIA Inc., certain Banks from time to time party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and you, as Administrative Agent for such Banks, and hereby gives you irrevocable notice, pursuant to Section 1.03 of the Credit Agreement, that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 1.03 of the Credit Agreement: (xvii) The Business Day of the Proposed Borrowing is ________, 19__.1 (xviii) The aggregate principal amount of the Proposed Borrowing is $________. (xix) The Proposed Borrowing is to consist of [Term Loans][B Term Loans][Tranche A Revolving Loans][Tranche B Revolving Loans][Swingline Loans][Canadian Dollar Loans]. (xx) The Proposed Borrowing is to consist of [Base Rate Loans] [Eurodollar Loans]. - -------- 1 A Notice of Borrowing must be given at least one Business Day prior to the date of the Proposed Borrowing in the case of Base Rate Loans and three Business Days prior to the date of the Proposed Borrowing in the case of Eurodollar Loans. Annex C-1 Page2 [(xxi) The initial Interest Period for the Proposed Borrowing is ___ months.]2 The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in the Credit Agreement or the other Credit Documents are and will be true and correct in all material respects, before and after giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; and (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof. Very truly yours, PRIMEDIA INC. By ________________________________ Title: FORM OF TRANCHE B ASSUMPTION AGREEMENT [Letterhead of Bank] _____________, 199__ PRIMEDIA Inc. 745 Fifth Avenue New York, New York 10151 re Tranche B Revolving Loan Commitment ---------------------------------------- - -------- 2 To be included for a Proposed Borrowing of Eurodollar Loans. EX-10.4 22 EXHIBIT 10.4 Exhibit 10.4 AMENDMENT AMENDMENT (this "Amendment"), dated as of March 11, 1999, among PRIMEDIA Inc., a Delaware corporation (f/k/a K-III Communications Corporation and hereinafter called the "Company"), the financial institutions listed on the signature pages hereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent and The Chase Manhattan Bank, as Administrative Agent under the $250,000,000 Credit Agreement referred to below. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the $250,000,000 Credit Agreement referred to below. W I T N E S S E T H: WHEREAS, the Company, various lending institutions (the "Banks") party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent and The Chase Manhattan Bank, as Administrative Agent, are parties to a Credit Agreement, dated as of May 24, 1996 (as amended, modified or supplemented through the date hereof, the "$250,000,000 Credit Agreement"); WHEREAS, the Company has requested, and the Banks party hereto are willing (subject to the terms and conditions hereof), to amend the $250,000,000 Credit Agreement as provided herein; NOW, THEREFORE, in consideration of the foregoing, the agreements contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, it is agreed: 1. Section 7.03(p) of the $250,000,000 Credit Agreement is hereby deleted in its entirety, and the following shall be inserted in lieu thereof: "(p) (i) Liens created under the Additional Credit Agreement and the other Additional Facility Documents, and (ii) Liens created under the 1999 Additional Credit Agreement and the other 1999 Additional Facility Documents; and" 2. Section 7.04(b) of the $250,000,000 Credit Agreement is hereby deleted in its entirety, and the following shall be inserted in lieu thereof: "(b) (i) Indebtedness incurred pursuant to the Additional Credit Agreement and the other Additional Facility Documents and (ii) Indebtedness incurred pursuant to the 1999 Additional Credit Agreement and the other 1999 Additional Facility Documents;". 3. Section 7.04(j) of the $250,000,000 Credit Agreement is hereby amended by inserting immediately after the word "incurred" appearing in the fifth line thereof, and immediately after the word "incurred" appearing in the seventh line thereof, the word "directly". 4. Section 7.06(c) of the $250,000,000 Credit Agreement is hereby deleted in its entirety, and the following shall be inserted in lieu thereof: "(c) Contingent Obligations pursuant to the Additional Facility Documents and the 1999 Additional Facility Documents;". 5. Section 7.10 of the $250,000,000 Credit Agreement, entitled "Interest Coverage Ratio", is hereby amended by deleting the table contained in such Section and inserting the following table in lieu thereof: Period Ratio ------ ----- Effective Date to and including 1.80 to 1.00 December 31, 1999 January 1, 2000 to and including 2.00 to 1.00 December 31, 2000 January 1, 2001 to and including 2.25 to 1.00 December 31, 2001 January 1, 2002 and thereafter 2.50 to 1.00 6. Section 7.11 of the $250,000,000 Credit Agreement, entitled "Leverage Ratio", is hereby amended by deleting the table contained in such Section and inserting the following table in lieu thereof: Period Ratio ------ ----- Effective Date to and including 6.00 to 1.00 December 31, 1999 January 1, 2000 to and including 5.50 to 1.00 December 31, 2000 January 1, 2001 to and including 5.00 to 1.00 December 31, 2001 January 1, 2002 and thereafter 4.50 to 1.00 -2- 7. Section 9 of the $250,000,000 Credit Agreement, entitled "Definitions", is hereby amended by (i) adding, in the appropriate alphabetical order, the following definitions: "1999 Additional Credit Agreement" shall mean the Credit Agreement, dated as of March 11, 1999, among the Company, various lending institutions, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, as amended, modified, supplemented or extended from time to time. "1999 Additional Facility Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries in connection with the 1999 Additional Credit Agreement (including, without limitation, the 1999 Additional Credit Agreement and any guaranty or guaranties relating thereto), as modified, supplemented or amended from time to time; and (ii) inserting in the ninth line of the definition of "Consolidated Fixed Charges", after the words "outstanding under the Additional Credit Agreement", the words "and the 1999 Additional Credit Agreement". 8. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 9. This Amendment shall become effective on the date (the "Amendment Effective Date") when the Company and the Required Banks shall have signed a copy of this Amendment (whether the same or different copies) and shall have delivered (including by way of facsimile transmission) the same to the Administrative Agent. 10. From and after the Amendment Effective Date, all references in the $250,000,000 Credit Agreement and each of the Credit Documents to the Agreement, Credit Agreement and/or $250,000,000 Credit Agreement shall be deemed to be references to the $250,000,000 Credit Agreement after giving effect to this Amendment. 11. In order to induce the Banks to enter into this Consent, the Company hereby (i) represents and warrants that each of the representations and warranties contained in Section 5 of the $250,000,000 Credit Agreement will be true and correct in all material respects on the Amendment Effective Date and (ii) represents and warrants that there exists no Default or Event of Default on the Amendment Effective Date. 12. This Amendment is limited as specified and shall not constitute a consent to, modification, acceptance or waiver of any other provision of the $250,000,000 Credit Agreement or any other Credit Document. 13. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts shall be lodged with the Company and the Administrative Agent. -3- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Amendment to be duly executed and delivered as of the date first above written. PRIMEDIA INC. By ----------------------------------- Douglas B. Smith Title: VP, Treasurer THE CHASE MANHATTAN BANK, Individually and as Administrative Agent By ----------------------------------- Title: BANKERS TRUST COMPANY, Individually and as Co-Syndication Agent By ----------------------------------- Title: THE BANK OF NEW YORK, Individually and as Co-Syndication Agent By ----------------------------------- Title: THE BANK OF NOVA SCOTIA, Individually and as Documentation Agent By ----------------------------------- Title: BANK OF AMERICA NT & SA By ----------------------------------- Title: NATIONSBANK OF TEXAS, N.A. By ----------------------------------- Title: FLEET NATIONAL BANK By ----------------------------------- Title: GENERAL ELECTRIC CAPITAL CORP. By ----------------------------------- Title: ROYAL BANK OF CANADA By ----------------------------------- Title: THE INDUSTRIAL BANK OF JAPAN, LIMITED By ----------------------------------- Title: UNION BANK OF CALIFORNIA, N.A. By ----------------------------------- Title: SOCIETE GENERALE, NEW YORK BRANCH By ----------------------------------- Title: SENIOR DEBT PORTFOLIO, by Boston Management & Research as Investment Advisor By ----------------------------------- Title: CIBC INC. By ----------------------------------- Title: MARINE MIDLAND BANK By ----------------------------------- Title: LTCB TRUST COMPANY By ----------------------------------- Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By ----------------------------------- Title: TORONTO DOMINION (NEW YORK), INC. By ----------------------------------- Title: BANK OF MONTREAL, CHICAGO BRANCH By ----------------------------------- Title: CREDIT LYONNAIS NEW YORK BRANCH By ----------------------------------- Title: THE SAKURA BANK, LIMITED, NEW YORK BRANCH By ----------------------------------- Title: CREDIT AGRICOLE INDOSUEZ By ----------------------------------- Title: By ----------------------------------- Title: CREDIT SUISSE FIRST BOSTON By ----------------------------------- Title: By ----------------------------------- Title: MELLON BANK, N.A. By ----------------------------------- Title: THE DAI-ICHI KANGYO BANK, LTD., NEW YORK BRANCH By ----------------------------------- Title: STB DELAWARE FUNDING TRUST I By ----------------------------------- Title: SUMMIT BANK By ----------------------------------- Title: MERRILL LYNCH SENIOR FLOATING RATE FUND By ----------------------------------- Title: BANK OF HAWAII By ----------------------------------- Title: PARIBAS By ----------------------------------- Title: By ----------------------------------- Title: MERITA BANK, Plc By ----------------------------------- Title: NATEXIS BANQUE BFCE By ----------------------------------- Title: RIGGS BANK, N.A. By ----------------------------------- Title: FIRST UNION NATIONAL BANK By ----------------------------------- Title: THE SANWA BANK, LIMITED, NEW YORK BRANCH By ----------------------------------- Title: DLJ CAPITAL FUNDING By ----------------------------------- Title: EX-10.5 23 EXHIBIT 10.5 Exhibit 10.5 ================================================================================ CREDIT AGREEMENT among PRIMEDIA INC., VARIOUS LENDING INSTITUTIONS, THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent and THE CHASE MANHATTAN BANK, as Administrative Agent ------------------------------------------ Dated as of March 11, 1999 ------------------------------------------ $150,000,000 ================================================================================ CHASE SECURITIES INC., as Lead Arranger and Book Manager TABLE OF CONTENTS -----------------
PAGE SECTION 1. Amount and Terms of Credit........................................................................1 1.01 Commitments........................................................................................1 1.02 Minimum Borrowing Amounts, etc.....................................................................1 1.03 Notice of Borrowing................................................................................1 1.04 Disbursement of Funds..............................................................................2 1.05 Register...........................................................................................2 1.06 Conversions........................................................................................3 1.07 Pro Rata Borrowings................................................................................3 1.08 Interest...........................................................................................3 1.09 Interest Periods...................................................................................4 1.10 Increased Costs, Illegality, etc...................................................................5 1.11 Compensation.......................................................................................7 1.12 Change of Lending Office...........................................................................8 SECTION 2. Fees; Commitments.................................................................................8 2.01 Fees...............................................................................................8 2.02 Voluntary Reduction of Commitments.................................................................8 2.03 Termination of Commitments.........................................................................9 SECTION 3. Payments..........................................................................................9 3.01 Voluntary Prepayments..............................................................................9 3.02 Mandatory Repayments...............................................................................9 3.03 Method and Place of Payment.......................................................................10 3.04 Net Payments......................................................................................10 SECTION 4. Conditions Precedent.............................................................................11 4.01 Execution of Agreement............................................................................11 4.02 No Default; Representations and Warranties........................................................11 4.03 Opinions of Counsel...............................................................................12 4.04 Corporate Proceedings.............................................................................12 4.05 Subsidiary Guaranty...............................................................................12 4.06 Notice of Borrowing...............................................................................12 4.07 Payment of Fees, etc..............................................................................12 4.08 Contribution Agreement............................................................................12 4.09 Existing Indebtedness Agreements..................................................................13 4.10 The Amended and Restated Credit Agreement.........................................................13 SECTION 5. Representations, Warranties and Agreements.......................................................13 5.01 Corporate Status..................................................................................13 5.02 Corporate Power and Authority.....................................................................13 5.03 No Violation......................................................................................14 5.04 Litigation........................................................................................14 5.05 Use of Proceeds; Margin Regulations...............................................................14 5.06 Governmental Approvals............................................................................14 5.07 Investment Company Act............................................................................15 5.08 Public Utility Holding Company Act................................................................15 5.09 True and Complete Disclosure......................................................................15 5.10 Financial Statements; Financial Condition.........................................................15 5.11 Tax Returns and Payments..........................................................................16 5.12 Compliance with ERISA.............................................................................16 5.13 Subsidiaries......................................................................................17 5.14 Intellectual Property.............................................................................17 5.15 Compliance with Statutes, etc.....................................................................18 SECTION 6. Affirmative Covenants............................................................................18 6.01 Information Covenants.............................................................................18 6.02 Books, Records and Inspections....................................................................20 6.03 Payment of Taxes..................................................................................20 6.04 Corporate Franchises..............................................................................20 6.05 Compliance with Statutes, etc.....................................................................20 6.06 ERISA.............................................................................................21 6.07 End of Fiscal Years; Fiscal Quarters..............................................................21 6.08 Use of Proceeds...................................................................................21 6.09 Ownership of Subsidiaries.........................................................................21 6.10 Maintenance of Corporate Separateness.............................................................21 SECTION 7. Negative Covenants..............................................................................22 7.01 Changes in Business...............................................................................22 7.02 Consolidation, Merger, Sale or Purchase of Assets, etc............................................22 7.03 Liens.............................................................................................25 7.04 Indebtedness......................................................................................26 7.05 Advances, Investments and Loans...................................................................28 7.06 Contingent Obligations............................................................................30 7.07 Dividends, etc....................................................................................30 7.08 Transactions with Affiliates......................................................................32 7.09 Fixed Charge Coverage Ratio.......................................................................33 7.10 Interest Coverage Ratio...........................................................................33 7.11 Leverage Ratio....................................................................................33 7.12 Issuance of Stock.................................................................................33 7.13 Modifications of Certain Agreements, etc..........................................................33 7.14 Limitation on the Creation of Subsidiaries; Redesignation of Partially-Owned Restricted Subsidiaries....................................................................................34 SECTION 8. Events of Default...............................................................................35 8.01 Payments..........................................................................................35 8.02 Representations, etc..............................................................................35 8.03 Covenants.........................................................................................35 8.04 Default Under Other Agreements....................................................................35 8.05 Bankruptcy, etc...................................................................................36 8.06 ERISA.............................................................................................36 8.07 Subsidiary Guaranty...............................................................................37 8.08 Judgments.........................................................................................37 8.09 Ownership.........................................................................................37 SECTION 9. Definitions.....................................................................................38 SECTION 10. The Administrative Agent.......................................................................58 10.01 Appointment......................................................................................58 10.02 Delegation of Duties.............................................................................58 10.03 Exculpatory Provisions...........................................................................58 10.04 Reliance by Administrative Agent.................................................................59 10.05 Notice of Default................................................................................59 10.06 Non-Reliance on Administrative Agent and Other Banks.............................................60 10.07 Indemnification..................................................................................60 10.08 Administrative Agent in Its Individual Capacity..................................................61 10.09 Holders..........................................................................................61 10.10 Resignation of the Administrative Agent; Successor Agent.........................................61 SECTION 11. Miscellaneous..................................................................................61 11.01 Payment of Expenses, etc..........................................................................61 11.02 Right of Setoff...................................................................................62 11.03 Notices...........................................................................................62 11.04 Benefit of Agreement..............................................................................63 11.05 No Waiver; Remedies Cumulative....................................................................64 11.06 Payments Pro Rata.................................................................................64 11.07 Calculations; Computations........................................................................65 11.08 Governing Law; Submission to Jurisdiction; Venue..................................................65 11.09 Counterparts......................................................................................66 11.10 Effectiveness.....................................................................................66 11.11 Headings Descriptive..............................................................................67 11.12 Amendment or Waiver...............................................................................67 11.13 Survival..........................................................................................67 11.14 Domicile of Loans.................................................................................67 11.15 Confidentiality...................................................................................67 11.16 Waiver of Jury Trial..............................................................................68
ANNEX I List of Banks ANNEX II Bank Addresses ANNEX III Subsidiaries ANNEX IV Liens ANNEX V Existing Debt/Existing Contingent Obligations ANNEX VI Existing Preferred Stock EXHIBIT A Form of Notice of Borrowing EXHIBIT B-1 Form of Opinion of Simpson, Thacher & Bartlett EXHIBIT B-2 Form of Opinion of Beverly C. Chell, Esq. EXHIBIT B-3 Form of Opinion of White & Case LLP EXHIBIT C Form of Officer's Certificate EXHIBIT D Form of Subsidiary Guaranty EXHIBIT E Form of Contribution Agreement EXHIBIT F Form of Assignment and Assumption Agreement EXHIBIT G Form of Subsidiary Assumption Agreement CREDIT AGREEMENT, dated as of March 11, 1999, among PRIMEDIA INC., a Delaware corporation (the "Company"), the lending institutions listed from time to time on Annex I hereto (each a "Bank" and, collectively, the "Banks"), THE BANK OF NEW YORK and BANKERS TRUST COMPANY, as Co-Syndication Agents, THE BANK OF NOVA SCOTIA, as Documentation Agent and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 9 are used herein as so defined. W I T N E S S E T H : WHEREAS, subject to and upon the terms and conditions herein set forth, the Banks are willing to make available the credit facility provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. AMOUNT AND TERMS OF CREDIT. 1.01 COMMITMENTS. Subject to and upon the terms and conditions herein set forth, each Bank severally agrees at any time and from time to time on and after the Effective Date and prior to the Final Maturity Date, to make a revolving loan or revolving loans (each a "Loan" and, collectively, the "Loans") to the Company, which Loans (i) shall, at the option of the Company, be Base Rate Loans or Eurodollar Loans, PROVIDED that all Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Loans of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which equals the Revolving Loan Commitment of such Bank at such time. 1.02 MINIMUM BORROWING AMOUNTS, ETC. The aggregate principal amount of each Borrowing shall not be less than the Minimum Borrowing Amount. More than one Borrowing may be incurred on any day, PROVIDED that at no time shall there be outstanding more than 5 Borrowings of Eurodollar Loans. 1.03 NOTICE OF BORROWING. (a) Whenever the Company desires to incur Loans hereunder, it shall give the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be incurred hereunder. Each such notice (each a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable, and, in the case of each written notice and each confirmation of telephonic notice, shall be in the form of Exhibit A, appropriately completed to specify (i) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (ii) the date of such Borrowing (which shall be a Business Day) and (iii) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Bank which is required to make Loans pursuant to the Borrowing specified in the respective Notice of Borrowing written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof, if any, and of the other matters covered by the Notice of Borrowing. (a) Without in any way limiting the obligation of the Company to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Administrative Agent, in good faith to be from the chairman, a vice chairman, the president, a vice president, a treasurer, an assistant treasurer or the director of treasury operations of the Company. In each such case, the Company hereby waives the right to dispute the Administrative Agent's record of the terms of such telephonic notice. 1.04 DISBURSEMENT OF FUNDS. No later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing, each Bank will make available its Pro Rata Share of each Borrowing requested to be made on such date in the manner provided below. All such amounts shall be made available to the Administrative Agent in U.S. Dollars and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Company by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Company a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank and the Administrative Agent has made available same to the Company, the Administrative Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Company, and the Company shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Bank or the Company, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Company to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds rate or (y) if paid by the Company, the then applicable rate of interest, calculated in accordance with Section 1.08, for the Loans. Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Company may have against any Bank as a result of any failure by such Bank to make Loans hereunder. 1.05 REGISTER. (a) The Administrative Agent shall maintain a register for the recordation of the Revolving Loan Commitments of the Banks from time to time and the -2- principal amount of the Loans owing to each Bank (the "Register"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error. The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. (b) The Company hereby agrees to provide a Note, promptly upon the request of any Bank, to the extent such Bank has requested such Note in connection with any pledge or assignment by such Bank of any or all of its Loans hereunder to a Federal Reserve Bank. 1.06 CONVERSIONS. The Company shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans into a Borrowing or Borrowings of another Type of Loan; PROVIDED that (i) no such partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may not be converted into Eurodollar Loans if a Default or Event of Default is in existence and the Administrative Agent and/or the Required Banks have notified the Company that such a conversion will not be permitted as a result thereof and (iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Company by giving the Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three Business Days (or one Business Day in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each a "Notice of Conversion") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 PRO RATA BORROWINGS. All Borrowings of Loans under this Agreement shall be made by the Banks PRO RATA on the basis of their Revolving Loan Commitments. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans to be made by it hereunder, regardless of the failure of any other Bank to make its Loans hereunder. 1.08 INTEREST. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Margin plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate per annum which shall at all times be the Applicable Margin plus the relevant Eurodollar Rate. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the Applicable Margin for Base Rate Loans; PROVIDED -3- that principal in respect of Eurodollar Loans shall bear interest after the same becomes due (whether by acceleration or otherwise) until the end of the applicable Interest Period for such Eurodollar Loan at a per annum rate equal to 2% in excess of the rate of interest applicable on the due date therefor. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each March, June, September and December, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any prepayment or conversion (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 11.07(b). (f) The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Company and the Banks thereof. 1.09 INTEREST PERIODS. At the time the Company gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Company, be a one, two, three, six or, if available to each of the Banks (as determined by each such Bank in good faith based on prevailing conditions in the interbank Eurodollar market on any date of determination thereof), nine or twelve month period. Notwithstanding anything to the contrary contained above: (i) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period applicable thereto expires; (ii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iii) if any Interest Period would otherwise expire on a day which 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 which is not a Business Day but is a -4- 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) no Interest Period shall extend beyond the Final Maturity Date; and (v) no Interest Period may be elected at any time when a Default or Event of Default is then in existence and the Administrative Agent and/or the Required Banks have notified the Company that such an election will not be permitted as a result thereof. If upon the expiration of any Interest Period, the Company has failed to elect a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, or a Default or an Event of Default then exists and the Administrative Agent and/or the Required Banks have given the notice referred to in clause (v) above, the Company shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Bank, shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans because of (x) any change since the date of this Agreement in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request such as, for example, but not limited to, (A) a change since the Effective Date in the basis of taxation of payment to any Bank of the principal of or interest on the Loans or any other amounts payable hereunder (except for changes with respect to Taxes and those taxes described in clauses (x) and (y) of the proviso in the second sentence of Section 4.04) or (B) a change since the Effective Date in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances affecting such Bank, the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time since the Effective Date, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has -5- become impracticable as a result of a contingency occurring after the Effective Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within 10 Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Company and (except in the case of clause (i)) to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Company and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Company with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Company, (y) in the case of clause (ii) above, the Company agrees to pay to such Bank, upon written demand therefor (accompanied by the written notice referred to below), such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the Company by such Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Company shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Company may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the Company shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof promptly (but in any event no later than the later of (x) the Business Day next preceding the date of such Borrowing and (y) one Business Day after the Company was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); PROVIDED that if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) (i) If any Bank shall have determined that after the Effective Date, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change 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 such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's capital or -6- assets as a consequence of its commitments or obligations hereunder to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's policies with respect to capital adequacy), then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), accompanied by the notice referred to in the last sentence of this clause (i), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Company, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Company's obligations to pay additional amounts pursuant to this Section 1.10(c). (ii) If (x) any Bank becomes a Defaulting Bank or otherwise defaults in its obligations to make Loans, (y) any Bank has notified the Company that one of its Eurodollar Loans is affected by the circumstances described in Section 1.10(a)(ii) or (iii), or (z) any Bank is owed increased costs or other amounts under Section 1.10(c)(i) or 3.04 and, in the case of such clause (y) or (z), compensation or other action with respect to such event is not otherwise requested generally by the other Banks, the Company shall have the right, if no Default or Event of Default then exists and, in the case of a Bank described in clause (y) or (z) above, such Bank has not changed its applicable lending office with the effect of eliminating such increased cost, to replace such Bank (the "Replaced Bank") with another commercial bank or banks or other financial institutions (collectively, the "Replacement Bank") reasonably acceptable to the Administrative Agent, PROVIDED that (i) at the time of any replacement pursuant to this Section 1.10(c)(ii), the Replacement Bank shall enter into one or more assignment agreements pursuant to Section 11.04(b) hereof (and with all fees payable pursuant to said Section 11.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Revolving Loan Commitments and outstanding Loans of the Replaced Bank and, in connection therewith, shall pay to the Replaced Bank in respect thereof an amount equal to the sum of (a) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank and (b) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 2.01 hereof and (ii) all obligations of the Company owing to the Replaced Bank (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective assignment documentation pursuant to clause (i) above and the payment of amounts referred to in clauses (i) above and (ii) above, the Replacement Bank shall become a Bank or Banks hereunder, as the case may be, and the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions (including, without limitation, Sections 1.10, 1.11, 3.04, 10.07 and 11.01 of this Agreement) under this Agreement, which shall survive as to such Replaced Bank. 1.11 COMPENSATION. The Company agrees to compensate each Bank, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds -7- required by such Bank to fund its Eurodollar Loans but excluding loss of anticipated profit with respect to any Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Company or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment, prepayment or conversion of any Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Company; or (iv) as a consequence of (x) any other default by the Company to repay its Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; PROVIDED, HOWEVER, that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. 1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c)(i) or 3.04 with respect to such Bank, it will, if requested by the Company, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans affected by such event; PROVIDED that such designation is made on such terms that in the sole judgment of such Bank, such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequences of the event giving rise to the operation of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Company or the right of any Bank provided in Sections 1.10 or 3.04. SECTION 2. FEES; COMMITMENTS. 2.01 FEES. (a) The Company agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a commitment fee (the "Commitment Fee") for the period from the Effective Date to but not including the date the Total Revolving Loan Commitment has been terminated, computed at a per annum rate equal to the Applicable Commitment Fee Percentage on the daily average Aggregate Unutilized Revolving Loan Commitment of such Non-Defaulting Bank. Accrued Commitment Fees shall be due and payable quarterly in arrears on the last Business Day of March, June, September and December of the year following the Effective Date and the date upon which the Total Revolving Loan Commitment is terminated. (b) The Company shall pay to the Administrative Agent, for its own account, such other fees as have been agreed to in writing by the Company and the Administrative Agent. (c) All computations of Fees shall be made in accordance with Section 11.07(b). -8- 2.02 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Company shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Loan Commitment; PROVIDED that (x) any such termination or partial reduction shall apply to proportionately and permanently reduce the Revolving Loan Commitment of each of the Banks, (y) any partial reduction pursuant to this Section 2.02 shall be in the amount of at least $2,000,000, (z) the reduction to the Total Unutilized Revolving Loan Commitment shall in no case be in an amount which would cause the Revolving Loan Commitment of any Bank to be reduced (as required by the preceding clause (x)) by an amount which exceeds the remainder of the Aggregate Unutilized Revolving Loan Commitment of such Bank as in effect immediately before giving effect to such reduction. 2.03 TERMINATION OF COMMITMENTS. The Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall terminate in its entirety on the earlier of (i) the date which is the earlier of (x) 30 days after any date on which a Specified Change of Control Event occurs and (y) the date on which any Senior Notes or any other Indebtedness of the Company or its Restricted Subsidiaries are required to be repurchased, redeemed or prepaid as a result of any such Specified Change of Control Event and (ii) the Final Maturity Date. SECTION 3. PAYMENTS. 3.01 VOLUNTARY PREPAYMENTS. The Company shall have the right to prepay the Loans incurred by it, in whole or in part, without premium or penalty except as otherwise provided in this Agreement, from time to time on the following terms and conditions: (i) the Company shall give the Administrative Agent at the Notice Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Company prior to 12:00 Noon (New York time) at least two Business Days prior to the date of such prepayment, which notice shall promptly be transmitted by the Administrative Agent to each of the Banks; (ii) each partial prepayment of any Borrowing shall be in an aggregate principal amount of at least $1,000,000 and, if greater, in an integral multiple of $500,000, PROVIDED that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; and (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied PRO RATA among such Loans; PROVIDED that at the Company's election in connection with any prepayment of Loans pursuant to this Section 3.01, such prepayment shall not be applied to any Loans of a Defaulting Bank. 3.02 MANDATORY REPAYMENTS. (a) If on any date the aggregate outstanding principal amount of Loans made by Non-Defaulting Banks (in each case after giving effect to all other repayments thereof on such date) exceeds the Adjusted Total Commitment as then in effect, the Company shall repay on such date the principal of Loans of Non-Defaulting Banks in an aggregate amount equal to such excess. -9- (b) If on any date the aggregate outstanding principal amount of Loans made by any Defaulting Bank exceeds the Revolving Loan Commitment of such Defaulting Bank, the Company shall repay the Loans of such Defaulting Bank in an amount equal to such excess. (c) Notwithstanding anything to the contrary contained in this Agreement, all then outstanding Loans under this Agreement shall be repaid in full on the Final Maturity Date. (d) With respect to each repayment of Loans required by this Section 3.02, the Company may designate the Types of Loans which are to be repaid and the specific Borrowing(s) pursuant to which made; provided that (i) Eurodollar Loans may be designated for repayment pursuant to this Section 3.02 only on the last day of an Interest Period applicable thereto unless all Eurodollar Loans with Interest Periods ending on such date of required repayment and all Base Rate Loans have been paid in full; (ii) each repayment of any Loans made pursuant to a Borrowing shall be applied PRO RATA among such Loans; (iii) notwithstanding the provisions of the preceding clause (ii), no repayment of Revolving Loans pursuant to Section 3.02(a) shall be applied to the Revolving Loans of a Defaulting Bank; and (iv) repayments of Revolving Loans of Defaulting Banks pursuant to Section 3.02(b) shall be applied PRO RATA among such Revolving Loans. In the absence of a designation by the Company as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. 3.03 METHOD AND PLACE OF PAYMENT. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Banks entitled thereto (based on each Bank's Pro Rata Share, if any), no later than 1:00 P.M. (New York time) on the date when due and shall be made in immediately available funds and in lawful money of the United States of America at the Payment Office. Any payments under this Agreement which are made later than 1:00 P.M. (New York time) shall be deemed to have been made on the next succeeding Business Day; PROVIDED, HOWEVER, that to the extent that the Administrative Agent shall have received any payment under this Agreement after 1:00 P.M. (New York time) on a Business Day, the Administrative Agent shall use its best efforts to distribute such payment as promptly as practicable on such date to the Banks (other than any Bank that has consented in writing to waive its PRO RATA share of such payment) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was received, and to the extent that any such Bank receives its portion of such payment from the Administrative Agent on such same date by a time satisfactory to such Bank, such payment to such Bank shall be deemed to have been made on such date. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 3.04 NET PAYMENTS. All payments made by the Company hereunder will be made without setoff, counterclaim or other defense. Promptly upon notice from any Bank to the Company, the Company agrees to pay, prior to the date on which penalties attach thereto, all -10- present and future income, stamp and other taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of a Loan solely as a result of the interest rate being determined by reference to the Eurodollar Rate, and/or the provisions of this Agreement relating to the Eurodollar Rate, and/or the recording, registration, notarization or other formalization of any thereof and/or any payments of principal, interest or other amounts made on a Loan when the interest rate is determined by reference to the Eurodollar Rate (all such taxes, levies, costs and charges being herein collectively called "Taxes"); PROVIDED that Taxes shall not include (x) taxes imposed on or measured by the overall net income or receipts of the Administrative Agent or any Bank by the United States of America or any political subdivision or taxing authority thereof or therein or (y) taxes on or measured by the overall net income of any foreign office, branch or subsidiary of the Administrative Agent or that Bank by any foreign country or subdivision thereof in which the Administrative Agent's or that Bank's office, branch or subsidiary is doing business. The Company agrees to also pay such additional amounts equal to increases in taxes payable by that Bank described in the foregoing proviso which increases arise solely from the receipt by that Bank of payments made by the Company described in the immediately preceding sentence of this Section 3.04. Promptly after the date on which payment of any such Tax is due pursuant to applicable law, the Company will, at the request of that Bank, furnish to that Bank evidence, in form and substance satisfactory to that Bank, that the Company has met its obligation under this Section 3.04. The Company agrees to indemnify each Bank against, and reimburse each Bank on demand for, any Taxes, as reasonably determined by that Bank in its good faith. Such Bank shall provide the Company with appropriate receipts for any payments or reimbursements made by the Company pursuant to this Section 3.04. Notwithstanding the foregoing, the Company shall be entitled, to the extent it is required to do so by law, to deduct or withhold and pay to the appropriate taxing authority within the time prescribed by applicable law (and shall not be required to make payments as otherwise required in this Section on account of such deductions or withholdings) income or other similar taxes imposed by the United States of America from interest, fees or other amounts payable hereunder for the account of the Administrative Agent or any Bank other than the Administrative Agent or any Bank (i) who is a U.S. Person for Federal income tax purposes or (ii) who has the Prescribed Forms on file with the Company for the applicable year to the extent deduction or withholding of such taxes is not required as a result of the filing of such Prescribed Forms, provided that if the Company shall so deduct or withhold any such taxes, it shall provide a statement to the Administrative Agent and such Bank, setting forth the amount of such taxes so deducted or withheld, the applicable rate and any other information or documentation which the Administrative Agent or such Bank may reasonably request for assisting the Administrative Agent or such Bank to obtain any allowable credits or deductions for the taxes so deducted or withheld in the jurisdiction or jurisdictions in which the Administrative Agent or such Bank is subject to tax. SECTION 4. CONDITIONS PRECEDENT. The obligation of each Bank to make each Loan to the Company hereunder is subject, at the time of the making of each such Loan (except as otherwise hereinafter indicated), to the satisfaction of the following conditions: 4.01 EXECUTION OF AGREEMENT. On or prior to the Initial Borrowing Date, this Agreement shall have been executed and delivered in accordance with Section 11.10. -11- 4.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of the making of each Loan and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Loan, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. 4.03 OPINIONS OF COUNSEL. On the Effective Date, the Administrative Agent shall have received opinions, addressed to each of the Banks and dated the Effective Date, (i) from Simpson, Thacher & Bartlett, special counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit B-1 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request, (ii) from Beverly C. Chell, Esq., counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit B-2 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request, and (iii) from White & Case LLP, special counsel to the Administrative Agent, which opinion shall cover the matters contained in Exhibit B-3. 4.04 CORPORATE PROCEEDINGS. (a) On the Effective Date, the Administrative Agent shall have received from the Company and each Subsidiary Guarantor, a certificate, dated the Effective Date, signed by the chairman, a vice chairman, the president, any vice-president or the treasurer of such Person, and attested to by the secretary or any assistant secretary of such Person, in the form of Exhibit C with appropriate insertions and, to the extent required, together with copies of the Certificate of Incorporation, By-Laws and the resolutions of such Person referred to in such certificate, and the foregoing shall be satisfactory to the Administrative Agent. (b) On the Effective Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. 4.05 SUBSIDIARY GUARANTY. On the Effective Date, each Subsidiary Guarantor shall have duly authorized, executed and delivered a guaranty in the form of Exhibit D hereto (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force and effect. 4.06 NOTICE OF BORROWING. The Administrative Agent shall have received a Notice of Borrowing satisfying the requirements of Section 1.03 with respect to any Borrowing of Revolving Loans. -12- 4.07 PAYMENT OF FEES, ETC. On the Effective Date, all costs, fees and expenses, and all other compensation contemplated by this Agreement, due to the Administrative Agent or the Banks shall have been paid to the extent due. 4.08 CONTRIBUTION AGREEMENT. On the Effective Date, the Subsidiary Guarantors shall have entered into a contribution agreement in the form of Exhibit E hereto (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, the "Contribution Agreement"), and the Contribution Agreement shall be in full force and effect. 4.09 EXISTING INDEBTEDNESS AGREEMENTS. On or prior to the Initial Borrowing Date, there shall have been delivered to (or made available for review by) the Banks copies, certified (in the case of those delivered) as true and correct by an appropriate officer of the Company making such delivery, of all agreements evidencing or relating to the Existing Debt or the Existing Contingent Obligations with respect to Indebtedness for borrowed money (collectively, the "Existing Indebtedness Agreements"). 4.10 THE AMENDED AND RESTATED CREDIT AGREEMENT. On or prior to the Initial Borrowing Date, the Restatement Effecting Date under (and as defined in) the Amended and Restated Credit Agreement shall have occurred. The acceptance of the benefits of each Loan shall constitute a representation and warranty by the Company to each of the Banks that all of the applicable conditions specified above exist as of the date of such Loan. All of the certificates, legal opinions and other documents and papers referred to in this Section 4, unless otherwise specified, shall be delivered to the Administrative Agent at its Notice Office for the account of each of the Banks and in sufficient counterparts for each of the Banks and shall be reasonably satisfactory in form and substance to the Administrative Agent. SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In order to induce the Banks to enter into this Agreement and to make the Loans provided for herein, the Company makes the following representations and warranties to, and agreements with, the Banks, all of which shall survive the execution and delivery of this Agreement, the making of the Loans (with the making of each Loan on and after the Initial Borrowing Date being deemed to constitute a representation and warranty that the matters specified in this Section 5 are true and correct in all material respects on and as of the Initial Borrowing Date and as of the date of each such Loan, unless stated to relate to a specific earlier date): 5.01 CORPORATE STATUS. The Company and each of its Restricted Subsidiaries (i) is a duly organized and validly existing corporation under the laws of the jurisdiction of its organization and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage, (ii) is in good standing under the laws of the jurisdiction of its organization and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified, except, in the cases of clauses (ii) and (iii) above, for such failures to be in good standing and failures to be so qualified which, in the aggregate, would not have a material -13- adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. 5.02 CORPORATE POWER AND AUTHORITY. Each of the Company and each of its Restricted Subsidiaries has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Credit Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Credit Documents to which it is a party. Each of the Company and each of its Restricted Subsidiaries has duly executed and delivered each Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Person enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 5.03 NO VIOLATION. Neither the execution, delivery or performance by the Company or any of its Restricted Subsidiaries of the Credit Documents to which it is a party nor compliance by them with the terms and provisions thereof, nor the consummation of the transactions contemplated therein (i) will contravene in any material respect any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Company or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which any of them or any of their respective property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of the Company or any of its Subsidiaries. 5.04 LITIGATION. There are no actions, suits or proceedings pending, or, to the best knowledge of the Company, threatened, with respect to the Company or any of its Subsidiaries (i) that are likely to have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or (ii) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Banks or the Administrative Agent or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder and under the other Credit Documents to which it is or they are, or will be, a party. 5.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds of all Loans shall be used for general corporate and working capital purposes of the Company and its Subsidiaries (including, without limitation, to finance Permitted Acquisitions and refinance Senior Notes). -14- (b) Neither the making of any Loan hereunder, nor the use of the proceeds thereof, will violate the provisions of Regulation T, U or X of the Board of Governors of the Federal Reserve System and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock, PROVIDED that the Company may use the proceeds of Loans to purchase Margin Stock in compliance with Regulations T, U and X, so long as at the time of the making of such Loan, and after giving effect thereto, not more than 25% of the value of the assets subject to the provisions of Section 7 of the Company, or of the Company and its Restricted Subsidiaries on a consolidated basis, shall constitute Margin Stock. 5.06 GOVERNMENTAL APPROVALS. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any Credit Document, except those which have been obtained or made or those the absence of which, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on either (x) the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or (y) the rights or remedies of the Banks or the Administrative Agent or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder and under the other Credit Documents to which it is or they are, or will be, a party. 5.07 INVESTMENT COMPANY ACT. Neither the Company nor any of its Restricted Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 5.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any of its Restricted Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 5.09 TRUE AND COMPLETE DISCLOSURE. (a) All factual information (taken as a whole) heretofore or contemporaneously furnished by the Company or any of its Subsidiaries in writing to the Administrative Agent and/or any Bank on or before the Initial Borrowing Date (including, without limitation, (i) the Information Memorandum and (ii) all information contained in the Credit Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein is true and complete in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided, it being understood and agreed that for purposes of this Section 5.09(a), such factual information shall not include projections and pro forma financial information. -15- (b) The projections and pro forma financial information contained in the factual information referred to in paragraph (a) above were based on good faith estimates and assumptions believed by such Persons to be reasonable at the time made, it being recognized by the Banks 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. 5.10 FINANCIAL STATEMENTS; FINANCIAL CONDITION. (a) The consolidated balance sheets of the Company and its Subsidiaries as at December 31, 1997 and September 30, 1998 and the related consolidated statements of income and cash flows of the Company and its Subsidiaries for the fiscal year or nine-month period, as the case may be, ended as of said dates, which, in the case of the December 31, 1997 statements, have been examined by Deloitte & Touche, independent certified public accountants, who delivered an unqualified opinion in respect thereof, present fairly the financial position of the Company and its Subsidiaries at the dates of said statements and the results for the period covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements (subject, in the case of the September 30, 1998 statements, to normal year-end audit adjustments). (b) Since December 31, 1997 and after giving effect to the incurrence of Indebtedness hereunder and the other transactions contemplated hereby, there has been no material adverse change in the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole (other than any change in general economic conditions or any change in conditions affecting the Business generally). 5.11 TAX RETURNS AND PAYMENTS. Each of the Company and each of its Restricted Subsidiaries has filed all Federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all Federal taxes and assessments shown to be due on such returns and all other material taxes and assessments, domestic and foreign, in each case payable by it which have become due, other than those not yet delinquent and except for those contested in good faith and for which adequate reserves have been provided in accordance with GAAP. 5.12 COMPLIANCE WITH ERISA. As of the Effective Date, there are no Plans and neither the Company nor any of its Restricted Subsidiaries nor any ERISA Affiliate has incurred any unpaid material liability or reasonably expects to incur any material liability with respect to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) covered by Title IV of ERISA. As of the date of each subsequent Loan, each Plan is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or in reorganization; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for an extension of any amortization period within the meaning of Section 412 of the Code; neither the Company nor any of its Restricted Subsidiaries nor any ERISA Affiliate has incurred or reasonably expects to incur any liability to or on account of a Plan pursuant to ERISA or the Code; no proceedings have been -16- instituted by the PBGC to terminate any Plan; no condition exists which presents a material risk to the Company, any of its Restricted Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to ERISA or the Code; no lien imposed under the Code or ERISA on the assets of the Company, any of its Restricted Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Company and its Restricted Subsidiaries do not maintain or contribute to any "employee welfare benefit plan" (as defined in Section 3(1) of ERISA), which provides benefits to retired employees (other than as required by Section 601 of ERISA) where, with respect to any of the foregoing representations in this Section 5.12, the liability for or the lien which could arise as a result of, the particular circumstance or event which is the subject of the representation, would be reasonably likely to result in a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. Using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Company, its Restricted Subsidiaries and ERISA Affiliates to all Plans which are "multiemployer plans" (as defined in Section 4001(a)(3) of ERISA) (each a "Multiemployer Plan") in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan would not be reasonably likely to be an amount that could result in a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. Notwithstanding anything in this Section 5.12 to the contrary, all representations and warranties made with respect to any Plan which is a Multiemployer Plan shall be made to the best knowledge of the Company. 5.13 SUBSIDIARIES. On the Effective Date, the corporations listed on Annex III under the name of the Company are the only Subsidiaries of the Company. Annex III correctly sets forth, as of the Effective Date, the percentage ownership (direct and indirect) of the Company in each class of capital stock of each of its Subsidiaries and also identifies the direct owner thereof. 5.14 INTELLECTUAL PROPERTY. (a) The Company and each of its Restricted Subsidiaries owns, or is licensed or otherwise authorized to sell, distribute, use or exploit, all material copyrights, literary works, texts and other works of authorship fixed in any tangible medium of expression necessary for the present conduct of its business ("Copyrights"), except to the extent that the failure to own or obtain licenses or authorizations with respect to any of the foregoing, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. (b) The Company and each of its Restricted Subsidiaries owns or is licensed to use all the patents, trademarks, permits, service marks, trade names, technology, know-how and formulas, or rights with respect to the foregoing, necessary for the present conduct of its business, except to the extent that the failure to own or obtain licenses with respect to any of the foregoing, individually or in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and -17- its Restricted Subsidiaries taken as a whole (together with the Copyrights, "Intellectual Property"). (c) All Intellectual Property is protected in all material respects under the laws of the United States relating to such Intellectual Property and has been duly and properly registered or filed with or issued by the appropriate governmental offices and jurisdictions for such registrations, filings or issuances, except to the extent that the failure to make or obtain such registrations, filings or issuances would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. (d) No material claim has been asserted by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property. The use of such Intellectual Property by the Company or its Restricted Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements as do not, individually or in the aggregate, give rise to any liabilities on the part of the Company and its Restricted Subsidiaries that are material to the Company and its Restricted Subsidiaries taken as a whole. 5.15 COMPLIANCE WITH STATUTES, ETC. The Company and each of its Restricted Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Property and the requirements of any permits issued under such Environmental Laws with respect to any such Real Property or the operations of the Company or any of its Subsidiaries), except such noncompliances as would not, in the aggregate, have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. SECTION 6. AFFIRMATIVE COVENANTS. The Company hereby covenants and agrees that on the Effective Date and thereafter for so long as this Agreement is in effect and until the Revolving Loan Commitments have terminated, no Notes are outstanding and the Loans together with interest, Fees and all other Obligations are paid in full: 6.01 INFORMATION COVENANTS. The Company will furnish to each Bank: (a) ANNUAL FINANCIAL STATEMENTS. Within 100 days after the close of each fiscal year of the Company, the consolidated balance sheets of each of (A) the Company and its Subsidiaries and of (B) the Company and its Restricted Subsidiaries, as at the end of such fiscal year and, in each case, the related consolidated statements of income and retained earnings and of cash flows for such fiscal year, setting forth for such fiscal year, in comparative form, the corresponding figures for the preceding fiscal year and, in the case of the figures with respect to the Company and its Restricted Subsidiaries the corresponding figures from the budget for such fiscal year delivered pursuant to Section 6.01(c); all of which shall be examined by Deloitte & Touche or such other independent certified public accountants of recognized national standing as -18- shall be acceptable to the Administrative Agent, whose opinion shall not be qualified as to the scope of audit or as to the status of the Company and its Subsidiaries or of the Company and its Restricted Subsidiaries, as the case may be, as a going concern, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Company and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to its attention or, if such a Default or Event of Default has come to its attention a statement as to the nature thereof (provided that in no event shall such accountants be liable as a result of this Agreement by reason of any failure to obtain knowledge of any Default or Event of Default that would not be disclosed in the course of their audit examination). (b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event within 50 days after the close of each of the first three quarterly accounting periods in each fiscal year of the Company (beginning with the quarterly accounting period ending March 31, 1999) and, at the sole option of the Company, at any time prior to 100 days after the close of the fourth quarterly accounting period in each fiscal year, the consolidated balance sheet of each of (A) the Company and its Subsidiaries and of (B) the Company and its Restricted Subsidiaries, as at the end of such quarterly period and the related consolidated statements of income and retained earnings and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Company that they fairly present the financial condition of the Company and its Subsidiaries or of the Company and its Restricted Subsidiaries, as the case may be, as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end audit adjustments. (c) BUDGETS; ETC. Not more than 90 days after the commencement of each fiscal year of the Company, budgets of the Company and its Restricted Subsidiaries in reasonable detail for each of the four fiscal quarters of such fiscal year setting forth Consolidated EBITDA and consolidated sales and setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. (d) OFFICER'S CERTIFICATES. At the time of the delivery of the financial statements provided for in Section 6.01(a) and (b), a certificate of the chief financial officer, controller or chief accounting officer of the Company (i) to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth the calculations required to establish whether the Company and its Subsidiaries were in compliance with the provisions of Sections 7.04(c), 7.05(d), 7.07 and Sections 7.09 through and including 7.11, as at the end of such fiscal quarter or year, as the case may be and (ii) setting forth the calculations demonstrating (A) with respect to each Affected Transaction consummated during the most recently ended fiscal quarter, that the Company was in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 and (B) with respect to each business sold (or deemed sold) pursuant to Section 7.02(c) hereof, compliance by the Company with clause (iii) of such Section 7.02(c). In addition, at the time of the delivery of the financial statements provided for in Section 6.01(a) and (b), a certificate of the chief financial -19- officer, controller or chief accounting officer of the Company setting forth the amount of, and calculations required to establish the amount of, Excess Cash Flow for the respective fiscal year or quarter. (e) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event within three Business Days after any officer of the Company obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Company proposes to take with respect thereto and (y) the commencement of, or threat of, or any significant development in, any litigation or governmental proceeding pending against the Company or any of its Subsidiaries which is likely to have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole, or the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their respective obligations hereunder or under any other Credit Document. (f) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of each report or "management letter" submitted to the Company or any of its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any of its Subsidiaries. (g) OTHER INFORMATION. Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the SEC by the Company or any of its Subsidiaries and, with reasonable promptness, such other information or documents (financial or otherwise) as the Administrative Agent on its own behalf or on behalf of the Required Banks may reasonably request from time to time. 6.02 BOOKS, RECORDS AND INSPECTIONS. The Company will, and will cause each of its Restricted Subsidiaries to, permit, upon notice to the chief financial officer or other Authorized Officer of the Company, officers and designated representatives of the Administrative Agent or the Required Banks to visit and inspect any of the properties or assets of the Company and any of its Restricted Subsidiaries in whomsoever's possession, and to examine the books of account of the Company and any of its Restricted Subsidiaries and discuss the affairs, finances and accounts of the Company and of any of its Restricted Subsidiaries with, and be advised as to the same by, their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Administrative Agent or the Required Banks may desire. 6.03 PAYMENT OF TAXES. The Company will pay and discharge, and will cause each of its Restricted Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 7.03(a) or charge upon any properties of the Company or any of its Restricted Subsidiaries; PROVIDED that neither the Company nor any of its Restricted Subsidiaries -20- shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 6.04 CORPORATE FRANCHISES. The Company will do, and will cause each of its Restricted Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its rights, franchises, licenses, permits and Intellectual Property rights except to the extent its failures to do so would not, in the aggregate, have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole; PROVIDED, HOWEVER, that any transaction permitted by Section 7.02 will not constitute a breach of this Section 6.04. 6.05 COMPLIANCE WITH STATUTES, ETC. The Company will, and will cause each of its Restricted Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) other than those the non-compliance with which would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole or on the ability of the Company or of the Subsidiary Guarantors, taken as a whole, in either case, to perform its or their obligations hereunder or under any other Credit Document. 6.06 ERISA. As soon as possible and, in any event, within 30 days after the Company, any of its Restricted Subsidiaries or any ERISA Affiliate knows or could reasonably be expected to know of the occurrence of any of the following and where it could reasonably be expected that a material liability of the Company and its Restricted Subsidiaries and ERISA Affiliates, taken as a whole, could result in connection therewith, the Company will deliver to each of the Banks a certificate of the chief financial officer or other Authorized Officer of the Company setting forth details as to such occurrence and such action, if any, which the Company, such Restricted Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Company, such Restricted Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application is reasonably likely to be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Plan has been or is reasonably likely to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings are reasonably likely to be or have been instituted to terminate a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; or that the Company, any of its Restricted Subsidiaries or any ERISA Affiliate will or is reasonably likely to incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or -21- with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(1) of ERISA. At the request of any Bank, the Company will deliver to such Bank a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. 6.07 END OF FISCAL YEARS; FISCAL QUARTERS. The Company will, for financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 6.08 USE OF PROCEEDS. All proceeds of the Loans shall be used as provided in Section 5.05. 6.09 OWNERSHIP OF SUBSIDIARIES. The Company will, at all times, maintain, directly or indirectly, ownership of at least a majority of the capital stock of its Restricted Subsidiaries, except to the extent 100% of the capital stock owned by the Company or any Restricted Subsidiary of any such Restricted Subsidiary is sold, transferred or disposed of in a transaction permitted by Section 7.02(c) or (j) or any such Restricted Subsidiary is merged, consolidated or liquidated in a transaction permitted by Section 7.02(e), PROVIDED that the Company shall not be required to own a majority of the capital stock of Canadian Sailings Inc. so long as the Company continues to hold at least as much of such capital stock as is held on the Effective Date. 6.10 MAINTENANCE OF CORPORATE SEPARATENESS. The Company will, and will cause each of its Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings and the maintenance of corporate offices and records. Neither the Company nor any Restricted Subsidiary shall make any payment to a creditor of any Unrestricted Subsidiary in respect of any liability of such Unrestricted Subsidiary, and no bank account of an Unrestricted Subsidiary shall be commingled with any bank account of the Company or any of its Restricted Subsidiaries. Any financial statements distributed to any creditors of an Unrestricted Subsidiary shall clearly establish the separateness of such Unrestricted Subsidiary from the Company and its Restricted Subsidiaries. Finally, neither the Company nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of any Unrestricted Subsidiary which is a direct Subsidiary of the Company or any Restricted Subsidiary being ignored by any court of competent jurisdiction, or in the assets and liabilities of the Company or any Restricted Subsidiary being substantively consolidated with those of any Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. SECTION 7. NEGATIVE COVENANTS. The Company hereby covenants and agrees that as of the Effective Date, and thereafter for so long as this Agreement is in effect and until the Revolving Loan Commitments have terminated, no Notes are outstanding and the Loans, together with interest, Fees and all other Obligations are paid in full: 7.01 CHANGES IN BUSINESS. The Company will not, and will not permit any of its Restricted Subsidiaries to, engage in any businesses other than Businesses, PROVIDED that the -22- Company and its Restricted Subsidiaries may engage in businesses other than a Business so long as the businesses engaged in by the Company and its Restricted Subsidiaries, taken as a whole, consist substantially of Businesses. 7.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC. The Company will not, and will not permit any of its Restricted Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or enter into any partnerships, joint ventures or sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment (and, to the extent consistent with industry practices, other tangible and intangible assets) in the ordinary course of business) of any Person, except that the following shall be permitted: (a) any sale, transfer or other disposition of (x) inventory in the ordinary course of business or (y) any other tangible or intangible asset in the ordinary course of business of the Company and/or its Restricted Subsidiaries; (b) the advances, investments and loans permitted pursuant to Section 7.05; (c) Asset Sales constituting the disposition of a business (including, without limitation, to the extent permitted in this Section 7.02(c), sales of the capital stock of a Restricted Subsidiary but excluding sales of the stock of an Unrestricted Subsidiary); PROVIDED that (i) no Default or Event of Default exists at such time or would exist immediately after giving effect thereto; (ii) such sale, transfer or disposition (or deemed sale, transfer or disposition pursuant to any Permitted Restricted Subsidiary Conversion) (x) is for fair market value, as determined in good faith by management of the Company (or, in the case of any Permitted Restricted Subsidiary Conversion or Permitted Restricted Asset Sale, to the extent requested by the Administrative Agent or the Required Banks, as determined by a written opinion of value reasonably satisfactory to the Administrative Agent by an Appraisal Firm) and (y) except in the case of a Permitted Restricted Subsidiary Conversion otherwise permitted pursuant to the terms hereof, results in consideration in the form of cash, promissory notes issued by the respective purchaser and/or other assets, PROVIDED that, to the extent any such other assets are received by the Company and/or its Restricted Subsidiaries in connection with any such Asset Sale, (I) the market value of such other assets, when added to the aggregate amount of other consideration received in connection with such Asset Sale, shall equal or exceed the market value of the assets so sold (such value to be set forth, to the extent requested by the Administrative Agent or the Required Banks, in a written opinion of value reasonably satisfactory to the Administrative Agent by an Appraisal Firm) and (II) such assets are permitted to be acquired by the Company or any of its Restricted Subsidiaries pursuant to Section 7.02(g) at the time of consummation of such Asset Sale (both before and after giving effect to such Asset Sale); (iii) the businesses sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) by the Company and/or its Restricted Subsidiaries pursuant to this Section 7.02(c) in any fiscal year of the Company shall not, in the aggregate, have EBITDA in the immediately preceding fiscal year in an amount in excess of 25% of the Consolidated EBITDA of the Company and its Restricted -23- Subsidiaries for such preceding fiscal year, determined on a PRO FORMA basis as if (A) any dispositions (or deemed dispositions pursuant to any Permitted Restricted Subsidiary Conversion) consummated during such preceding fiscal year had been consummated on the first day of such preceding fiscal year and (B) any acquisitions consummated after the beginning of such preceding fiscal year but prior to the date of any proposed Asset Sale pursuant to this Section 7.02(c) had been consummated on the first day of such preceding fiscal year; and (iv) to the extent such sale, transfer or disposition constitutes a sale, transfer or disposition of less than 100% of the capital stock of any Restricted Subsidiary of the Company, after giving effect to such sale, transfer or disposition, the Company shall own at least a majority of the capital stock of such Restricted Subsidiary; (d) Asset Sales constituting the disposition of the capital stock owned by the Company and its Restricted Subsidiaries of Unrestricted Subsidiaries; (e) any Restricted Subsidiary may be merged or consolidated with or into, or be liquidated into, the Company or any other Restricted Subsidiary of the Company, or all or any part of its business, properties and assets may be conveyed, leased, sold or otherwise transferred to the Company or any other Restricted Subsidiary, PROVIDED that (v) in any such merger or consolidation involving the Company, the Company shall be the surviving corporation, (w) no Default or Event of Default exists or would exist after giving effect thereto, (x) no Excluded Foreign Restricted Subsidiary or Excluded Domestic Restricted Subsidiary may be the surviving corporation of any such merger or consolidation (other than, in the case of an Excluded Foreign Restricted Subsidiary, a merger or consolidation with another Excluded Foreign Restricted Subsidiary and other than, in the case of an Excluded Domestic Restricted Subsidiary, a merger or consolidation with another Excluded Domestic Restricted Subsidiary), (y) no businesses, properties or assets may be transferred to Excluded Foreign Restricted Subsidiaries if after giving effect to such transfer the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000 and (z) to the extent any business, properties or assets are transferred to Excluded Domestic Restricted Subsidiaries in connection with any such merger or consolidation the Company shall have determined, with respect to such transaction, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement; (f) the Company and/or its Restricted Subsidiaries may lease real or personal property (so long as such lease does not create Capitalized Lease Obligations except as otherwise permitted by Section 7.04); (g) so long as no Default or Event of Default exists or would result therefrom, the Company and its Restricted Subsidiaries may acquire assets, the capital stock of, or other ownership interests in, any Person (any such acquisition permitted by this clause (g), a "Permitted Acquisition"); PROVIDED that (A) after giving effect to any such acquisition, the Company and its Restricted Subsidiaries shall be in compliance with Section 7.01 hereof; (B) the Company shall have determined, with respect to such acquisition, that, on a PRO Forma Basis, the Company and its Restricted Subsidiaries would have been in compliance with Sections 7.09, 7.10 and 7.11 of this Agreement; and (C) to the extent that such acquisition is of the capital stock -24- of or other ownership interest in another Person (such Person, the "Acquired Entity"), (I) such acquisition must be of at least a majority of such capital stock or of such ownership interests, such Person shall constitute a Restricted Subsidiary and all of the applicable provisions of Section 7.14 shall have been complied with in respect of such Restricted Subsidiary and (II) the Board of Directors or other governing body of the Acquired Entity shall not have indicated, either publicly or privately to the Company or any of its Restricted Subsidiaries, its opposition to the consummation by the Company or such Subsidiary of such acquisition; (h) the Company and its Restricted Subsidiaries may sell or discount, in each case without recourse, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (i) Capital Expenditures by the Company and/or its Restricted Subsidiaries made in the ordinary course of business; and (j) the Company and its Restricted Subsidiaries may sell assets (and may effect Permitted Restricted Subsidiary Conversions) other than in the ordinary course of business, so long as (x) each such asset is sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) at fair market value, as determined in good faith by management of the Company; (y) each such sale (or deemed sale pursuant to any Permitted Restricted Subsidiary Conversion) results in consideration in the form of cash, promissory notes issued by the respective purchaser and/or other assets, PROVIDED that, to the extent any such other assets are received by the Company and/or its Restricted Subsidiaries in connection with any such asset sale, (I) the market value of such other assets, when added to the aggregate amount of other consideration received in connection with such asset sale, shall equal or exceed the market value of the assets so sold and (II) such assets are permitted to be acquired by the Company or any of its Restricted Subsidiaries pursuant to Section 7.02(g) at the time of consummation of such asset sale (both before and after giving effect to such asset sale); and (z) the aggregate value of all assets so sold (or deemed sold pursuant to any Permitted Restricted Subsidiary Conversion) by the Company and its Restricted Subsidiaries in any fiscal year shall not exceed $25,000,000. 7.03 LIENS. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Company or its Restricted Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Company or any of its Restricted Subsidiaries) or assign any right to receive income, except: (a) Liens for taxes not yet due or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Company or any of its Restricted Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', warehousemen's -25- and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company or its Restricted Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (c) Liens in existence on the Effective Date which are listed, and the property subject thereto described, in Annex IV, without giving effect to any extensions or renewal thereof ("Permitted Liens"); (d) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.08; (e) 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, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); (f) leases or subleases granted to third Persons not interfering in any material respect with the business of the Company or any of its Restricted Subsidiaries; (g) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (h) Liens arising from UCC financing statements regarding leases permitted by this Agreement; (i) purchase money Liens securing payables arising from the purchase by the Company or any of its Restricted Subsidiaries of any equipment or goods in the normal course of business, PROVIDED that such payables shall not constitute Indebtedness; (j) any interest or title of a lessor or sublessor under any lease permitted by this Agreement; (k) Liens created pursuant to Capital Leases permitted pursuant to Section 7.04(c); (l) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods so long as such Liens attach only to the imported goods; -26- (m) Liens on assets acquired (or owned by a Restricted Subsidiary acquired) after the Effective Date securing Indebtedness permitted under Section 7.04(g), PROVIDED that at the time of such acquisition the value of the assets subject to such Liens does not exceed 10% of the total value of the assets so acquired, or of the assets of the Restricted Subsidiary so acquired, as the case may be; (n) Liens arising out of consignment or similar arrangements for the sale of goods entered into by the Company or any of its Restricted Subsidiaries in the ordinary course of business; (o) Liens created under this Agreement and/or the other Credit Documents; (p) Liens created under the Existing Credit Agreements and the other Existing Facility Documents; and (q) Liens not otherwise permitted hereunder which secure Indebtedness, Contingent Obligations or other obligations (in each case permitted hereunder) not exceeding (as to the Company and its Restricted Subsidiaries) $20,000,000 in the aggregate at any time outstanding. 7.04 INDEBTEDNESS. The Company will not, and will not permit any of its Restricted Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Indebtedness incurred pursuant to the Existing Credit Agreements and the other Existing Facility Documents; (c) Capitalized Lease Obligations of the Company and its Restricted Subsidiaries; PROVIDED that the aggregate Capitalized Lease Obligations under all Capital Leases outstanding at any one time shall not exceed $50,000,000; (d) Existing Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Effective Date and listed on Part A of Annex V hereto ("Existing Debt"), without giving effect to any subsequent extension, renewal or refinancing thereof except pursuant to Section 7.04(i); (e) Indebtedness to the extent permitted pursuant to Section 7.05(c); (f) Indebtedness evidenced by the Subordinated Exchange Debentures after the issuance thereof in an aggregate principal amount not to exceed $500,000,000 at any time outstanding; (g) Indebtedness of a Restricted Subsidiary acquired after the Effective Date (or Indebtedness assumed at the time of an acquisition of an asset securing such Indebtedness), -27- PROVIDED that (i) such Indebtedness was not incurred in connection with or in anticipation of such acquisition and (ii) at the time of such acquisition such Indebtedness does not exceed 10% of the total value of the assets of the Restricted Subsidiary so acquired, or of the asset so acquired, as the case may be; (h) additional Indebtedness of the Company and its Restricted Subsidiaries not otherwise permitted hereunder; PROVIDED that (A) in no event shall the final maturity of such Indebtedness occur prior to the ECA Maturity Date, (B) in no event shall such Indebtedness have a shorter average life than the Loans under and as defined in the Existing Credit Agreements, (C) in no event shall such Indebtedness contain terms and conditions (including, without limitation, with respect to the obligor and guarantors, if any, in respect of such Indebtedness, prepayment and redemption provisions, covenants, defaults, security, remedies and, if applicable, subordination provisions) materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of (I) in the case of Indebtedness issued to the public or in accordance with Rule 144A or similar rule under the Securities Act of 1933, as amended, the Senior Notes, (II) in the case of other senior Indebtedness, this Agreement and the other Credit Documents, and (III) in the case of other Indebtedness, similar Indebtedness of the Company then outstanding or if no similar Indebtedness of the Company is then outstanding, the Senior Notes (in each case excluding the impact of market conditions on the interest rate and other economic terms) and (D) the Company shall have determined, with respect to the incurrence of such Indebtedness, that the Company and its Restricted Subsidiaries would have been in compliance, on PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement (any Indebtedness issued pursuant to this Section 7.04(h), "Additional Indebtedness"), PROVIDED FURTHER that, the aggregate principal amount of any such Additional Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole), when added to the aggregate principal amount of Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole) pursuant to Section 7.04(j), shall not exceed $300,000,000 at any time outstanding; (i) Indebtedness of the Company and its Restricted Subsidiaries constituting Permitted Refinancing Debt; and (j) additional Indebtedness of the Company and its Restricted Subsidiaries (including, but not limited to, Non-Facility Letter of Credit Outstandings) not exceeding in an aggregate principal amount at any one time outstanding an amount equal to $150,000,000, PROVIDED that the aggregate principal amount of such Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole), when added to the aggregate principal amount of Additional Indebtedness incurred directly by the Subsidiary Guarantors (taken as a whole) pursuant to Section 7.04(h), shall not exceed $300,000,000 at any time outstanding. 7.05 ADVANCES, INVESTMENTS AND LOANS. The Company will not, and will not permit any of its Restricted Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, except: -28- (a) the Company and its Restricted Subsidiaries may invest in cash and Cash Equivalents; (b) the Company or any of its Restricted Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Company or such Restricted Subsidiary, as the case may be; (c) the Company may make intercompany loans and advances to any Restricted Subsidiary, and any Restricted Subsidiary may make intercompany loans and advances to any other Restricted Subsidiary or the Company (collectively, "Intercompany Loans"), PROVIDED that (i) no Intercompany Loan may be made to an Excluded Foreign Restricted Subsidiary at any time if after giving effect to such Intercompany Loan the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000, and (ii) no such Intercompany Loan may be made by the Company or a Wholly-Owned Restricted Subsidiary to an Excluded Domestic Restricted Subsidiary; (d) so long as no Default or Event of Default exists or would result therefrom, the Company and its Restricted Subsidiaries may make loans and advances of cash to, or cash capital contributions in, any Unrestricted Subsidiary of the Company; PROVIDED that (i) the sum of (A) the aggregate amount of capital contributions made in, plus the aggregate principal amount of loans or advances outstanding at any one time made to, Unrestricted Subsidiaries after the ECA Effective Date pursuant to this clause (d) (such amount, the "Unrestricted Subsidiary Investment Amount") plus (B) the Aggregate Conversion Amount at such time, shall not exceed the Unrestricted Subsidiary Investment Limit then in effect, and (ii) the Unrestricted Subsidiary receiving cash proceeds from such loan, advance or contribution shall utilize the entire amount of cash so received to effectuate an acquisition of assets or capital stock of a Person not an affiliate of the Company and its Subsidiaries (other than pursuant to a Permitted Restricted Subsidiary Conversion or a Permitted Restricted Asset Sale) or to develop the Business and to finance the working capital needs of such Unrestricted Subsidiary; (e) the Company and its Restricted Subsidiaries shall be permitted to (i) make Permitted Acquisitions, (ii) engage in any transaction to the extent permitted by Section 7.02(e) and (iii) acquire and hold promissory notes issued by the purchasers of assets sold in accordance with Section 7.02(c) or 7.02(j); (f) the Company and any of its Restricted Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (g) the Company or any Subsidiary Guarantor may acquire capital stock or other equity securities (or warrants, rights or options with respect thereto) issued by any other Restricted Subsidiary; -29- (h) Interest Rate Protection Agreements permitted by Section 7.06(d) shall be permitted; (i) investments by the Company or Restricted Subsidiaries in (x) Subsidiary Guarantors, PROVIDED that if the Subsidiary Guarantor in which such investment is made is a newly-formed Subsidiary or a Partially-Owned Restricted Subsidiary newly designated as a Subsidiary Guarantor pursuant to Section 7.14(b)(x), all of the applicable provisions of Section 7.14 shall have been satisfied with respect to such Restricted Subsidiary, (y) Excluded Domestic Restricted Subsidiaries, PROVIDED that, the Company shall have determined, in connection with any such investment, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement and (z) in Excluded Foreign Restricted Subsidiaries, PROVIDED that no investment in an Excluded Foreign Restricted Subsidiary may be made at any time if after giving effect to such investment the Net Investments in Excluded Foreign Restricted Subsidiaries would exceed $30,000,000; (j) the Company and its Restricted Subsidiaries may make loans and advances to officers, employees and agents in the ordinary course of business (i) constituting travel advances or (ii) otherwise equal in the aggregate for the Company and its Restricted Subsidiaries, in the case of all loans and advances pursuant to this clause (ii), to no more than $10,000,000 at any one time outstanding less the principal amount of all Contingent Obligations then outstanding pursuant to Section 7.06(h); (k) the Company may acquire obligations of, or make loans or advances to, one or more management investors in connection with such management investors' acquisition of shares of capital stock of the Company, PROVIDED that (x) the aggregate amount of cash actually advanced to all such management investors by the Company and its Restricted Subsidiaries shall not exceed $10,000,000 at any time, and (y) the aggregate principal amount of all such obligations, loans and advances shall not exceed $25,000,000 at any one time outstanding; and (l) advances, investments and loans not otherwise permitted hereunder with an aggregate cost or principal amount, as the case may be, not to exceed $25,000,000 at any time outstanding. 7.06 CONTINGENT OBLIGATIONS. The Company will not, and will not permit any of its Restricted Subsidiaries to, contract, create, incur, assume or suffer to exist any Contingent Obligations, except: (a) any Subsidiary Guarantor may become liable as guarantor with respect to any Indebtedness, obligation or liability of the Company or any other Subsidiary Guarantor to the extent that such Indebtedness, obligation or liability is otherwise permitted by this Agreement, PROVIDED that a Subsidiary Guarantor (x) may not guaranty any Subordinated Exchange Debentures and (y) may only guaranty Permitted Refinancing Debt if and to the extent either (A) it guarantied the indebtedness refinanced thereby or (B) such Subsidiary Guarantor would have guarantied the indebtedness refinanced thereby if it had been a Subsidiary of the Company while such indebtedness was outstanding; -30- (b) Contingent Obligations pursuant to the Subsidiary Guaranty; (c) Contingent Obligations pursuant to the Existing Facility Documents; (d) Contingent Obligations under Interest Rate Protection Agreements with respect to the Loans, loans incurred under the Additional Credit Agreement or any other floating rate Indebtedness of the Company and its Restricted Subsidiaries otherwise permitted by this Agreement; (e) Contingent Obligations pursuant to the Contribution Agreement; (f) Contingent Obligations of the Company outstanding on the Effective Date and listed on Part B of Annex V hereto ("Existing Contingent Obligations"), without giving effect to any subsequent extension, renewal or refinancing thereof; (g) the Company may become liable as guarantor with respect to any Indebtedness, obligation or liability of any Subsidiary Guarantor to the extent that such Indebtedness, obligation or liability is otherwise permitted by this Agreement; (h) the Company and its Restricted Subsidiaries may guaranty in the ordinary course of business loans and advances to officers, employees and agents so long as the aggregate principal amount of the loans and advances so guaranteed does not exceed $10,000,000 less the principal amount of all loans and advances outstanding pursuant to Section 7.05(j); and (i) additional Contingent Obligations (including, without limitation, Contingent Obligations consisting of Non-Facility Letters of Credit and reimbursement obligations with respect thereto) not otherwise permitted hereunder not exceeding (for the Company and all of its Restricted Subsidiaries) in aggregate principal amount at any time outstanding an amount equal to the lesser of (x) $30,000,000 and (y) when added to the aggregate principal amount of Indebtedness outstanding under Section 7.04(j) at such time, $150,000,000. 7.07 DIVIDENDS, ETC. The Company will not, and will not permit any of its Restricted Subsidiaries to, declare or pay any dividends (other than dividends payable solely in capital stock of such Person) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and the Company will not permit any of its Restricted Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Company or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: (a) the Company may pay regularly accruing dividends on each issuance of Preferred Stock through the issuance of additional shares of such Preferred Stock, PROVIDED that -31- the Company may pay such regularly accruing dividends on its Preferred Stock in cash so long as no Default or Event of Default exists at such time or would result therefrom; (b) any Subsidiary of the Company may pay Dividends to the Company or to any Wholly-Owned Restricted Subsidiary of the Company; (c) any Partially-Owned Restricted Subsidiary may pay cash Dividends to its stockholders, PROVIDED that the Company and its Restricted Subsidiaries must receive at least their proportionate share of any Dividends paid by such Subsidiary; (d) so long as no Default or Event of Default exists at such time or would result therefrom (x) the Company may issue its Subordinated Exchange Debentures in exchange for its Senior Preferred Stock in accordance with the terms thereof, (y) the Company may issue its Subordinated Exchange Debentures in exchange for its Series B Preferred Stock in accordance with the terms thereof and (z) the Company may issue its Subordinated Exchange Debentures in exchange for its Series C Preferred Stock in accordance with the terms thereof, PROVIDED that in each such case, the Company shall have determined, with respect to such issuance, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement; (e) the Company may exchange shares of its common stock in replacement for shares of outstanding Preferred Stock; (f) the Company may issue Permitted Replacement Preferred Stock so long as either (x) such stock is issued in exchange for or (y) all of the proceeds from such issuance are used to redeem or repurchase, shares of outstanding Preferred Stock; (g) the Company may redeem or repurchase shares of its common stock from management investors; PROVIDED that (x) no Default or Event of Default is then in existence or would arise therefrom and (y) the aggregate amount of all cash paid in respect of all such shares and equity interests so redeemed or repurchased does not exceed the sum of (i) $5,000,000 in any fiscal year or $15,000,000 in the aggregate after the Effective Date and (ii) the amount of cash proceeds received by the Company in respect of the issuance of common equity to management investors on or after the Effective Date; (h) the Company and its Subsidiaries may enter into transactions permitted under Section 7.05(g); (i) the Company and its Restricted Subsidiaries may acquire the capital stock of Unrestricted Subsidiaries in accordance with the provisions of this Agreement; (j) so long as no Default or Event of Default exists at such time or would result therefrom, the Company may redeem or repurchase shares of its Preferred Stock at a price equal to the liquidation preference thereof plus accrued but unpaid dividends thereon and any applicable premium with respect thereto in exchange for, or with the proceeds of, Additional Preferred Stock and/or Indebtedness incurred under Sections 7.04(h) and/or 7.04(j) (it being -32- understood and agreed that such redemption and/or repurchase need not occur contemporaneously with the issuance of such Additional Preferred Stock or Indebtedness); (k) so long as no Default or Event of Default exists at such time or would result therefrom, the Company may declare and pay cash Dividends to the holders of its common stock (including, without limitation, repurchases of shares of its common stock), PROVIDED that (x) the aggregate amount of cash Dividends paid pursuant to this clause (k) during any fiscal year of the Company does not exceed $25,000,000 and (y) the Company shall have determined, in connection with such Dividend, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement; and (l) the Company may pay additional cash Dividends to the holders of its common stock so long as (x) no Default or Event of Default exists at such time or would result therefrom, (y) the Leverage Ratio at such time is less than 4.00:1.00 and (z) the Company shall have determined, in connection with such Dividend, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement. 7.08 TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of business, with any Affiliate (other than the Company or any Restricted Subsidiary) other than on terms and conditions substantially as favorable to the Company or such Restricted Subsidiary as would be obtainable by the Company or such Restricted Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; PROVIDED that (i) the Company may pay management and transaction fees to KKR or its affiliates which have been disclosed in writing to the Banks prior to the Effective Date; (ii) the payment of transaction fees to KKR for the rendering of financial advice and services in connection with acquisitions, dispositions and financings by the Company and its Restricted Subsidiaries in amounts which are in accordance with past practices shall be permitted; (iii) loans and advances to officers, employees and agents in the ordinary course of business shall be permitted; (iv) customary fees may be paid to non-officer directors of the Company and/or its Restricted Subsidiaries; (v) the loans, advances and contributions made (or deemed made) in Unrestricted Subsidiaries in compliance with Section 7.05(d) shall be permitted; and (vi) transactions specifically permitted by the provisions of this Agreement to occur between the Company, its Restricted Subsidiaries and their respective Affiliates shall be permitted to the extent so otherwise specifically permitted. 7.09 FIXED CHARGE COVERAGE RATIO. The Company will not permit the ratio of (i) Consolidated EBITDA of the Company and its Restricted Subsidiaries to (ii) Consolidated Fixed Charges of the Company and its Restricted Subsidiaries, for any Test Period, to be less than 1.05 to 1.0. 7.10 INTEREST COVERAGE RATIO. The Company will not permit the ratio of (i) Consolidated EBITDA of the Company and its Restricted Subsidiaries to (ii) Consolidated -33- Interest Expense of the Company and its Restricted Subsidiaries for any Test Period to be less than 1.80:1.00. 7.11 LEVERAGE RATIO. The Company will not permit the ratio (the "Leverage Ratio") of (i) Consolidated Debt of the Company and its Restricted Subsidiaries at any date of determination thereof to (ii) Consolidated EBITDA of the Company and its Restricted Subsidiaries for the Test Period then last ended, to exceed, at any time, 6.00:1.00. 7.12 ISSUANCE OF STOCK. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, issue, sell, assign, pledge or otherwise encumber or dispose of any shares of its or such Restricted Subsidiary's preferred or preference stock or other redeemable equity securities (or warrants, rights or options to acquire shares of any of the foregoing) except: (a) in the case of shares of capital stock of the Company and its Restricted Subsidiaries, to the extent permitted by Section 7.02, 7.03, 7.05, 7.07 or 7.13(b); (b) issuances by Restricted Subsidiaries to the Company or to Wholly-Owned Restricted Subsidiaries; and (c) issuances by the Company of additional preferred stock not otherwise permitted hereunder; PROVIDED that (A) in no event shall such preferred stock contain any provision requiring mandatory redemption or permitting any put with respect to all or any portion of such stock prior to the ECA Maturity Date, (B) in no event shall such preferred stock contain terms and conditions (including, without limitation, pay-in-kind features, liquidation preferences, voting rights and exchange rights) materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of the Existing Preferred Stock (excluding the impact of market conditions on the dividend rate and other economic terms) and (C) the Company shall have determined, in connection with such issuance, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement, PROVIDED that, for purposes of the calculation of compliance with Section 7.09, the ratio set forth in Section 7.09 shall be deemed to equal 1.25 to 1.0 (any Preferred Stock issued pursuant to this Section 7.12(c), "Additional Preferred Stock"). 7.13 MODIFICATIONS OF CERTAIN AGREEMENTS, ETC. The Company will not, and will not permit any of its Subsidiaries to: (a) after the issuance thereof, amend or modify (or permit the amendment or modification of) any of the terms or provisions of the Senior Notes, the Existing Facility Documents, the Preferred Stock, the Subordinated Exchange Debentures, any Additional Indebtedness, any Permitted Refinancing Debt or any agreement related to any of the foregoing other than pursuant to a Permitted Amendment and/or (b) make (or give any notice in respect thereof) any voluntary or optional payment or prepayment or redemption or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto money or securities before due for the purpose of paying when due) or exchange of any Subordinated Exchange Debentures, or any Permitted Refinancing Debt (to the extent issued to refinance Subordinated Exchange Debentures), PROVIDED that the Subordinated Exchange Debentures and any Permitted Refinancing Debt previously issued to refinance same may be (i) -34- refinanced with (A) Additional Indebtedness (to the extent that such Additional Indebtedness would have qualified as Permitted Refinancing Debt in respect thereof if it had been issued contemporaneously with such refinancing) and/or Permitted Refinancing Debt or (B) the proceeds from a common equity issuance by the Company or an issuance by the Company of Additional Preferred Stock, in each case, after the Effective Date or (ii) exchanged for Additional Preferred Stock or non-redeemable common equity of the Company (it being understood and agreed that any refinancing of such Indebtedness need not occur contemporaneously with the issuance of such Additional Indebtedness, Additional Preferred Stock and/or common equity). In addition, the Company will not, and will not permit any of its Restricted Subsidiaries to, agree to modify, supplement, amend, rescind or otherwise alter the terms, conditions or provisions of its Certificate of Incorporation (including, without limitation, by the filing of any certificate of designation) or its By-Laws in any material respect, other than such modifications, supplements or amendments that would not materially adversely affect the interests of the Banks under this Agreement or the other Credit Documents. 7.14 LIMITATION ON THE CREATION OF SUBSIDIARIES; REDESIGNATION OF PARTIALLY-OWNED RESTRICTED SUBSIDIARIES. (a) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not, and shall not permit any Subsidiary to, establish, create or acquire after the Effective Date any Subsidiary unless (w) such Subsidiary is an Unrestricted Subsidiary; (x) such Subsidiary is an Excluded Foreign Restricted Subsidiary; (y) such Subsidiary is a Partially-Owned Restricted Subsidiary and at the time of creation or acquisition thereof, the Company shall have made a Non-Guarantor Designation with respect to such Partially-Owned Restricted Subsidiary in accordance with the terms hereof or (z) such Subsidiary is a Restricted Subsidiary (other than a Restricted Subsidiary of the type described in clauses (x) or (y) above) and each such new Restricted Subsidiary becomes a party to the Subsidiary Guaranty by executing a Subsidiary Assumption Agreement in the form of Exhibit G hereto. (b) At any time and from time to time, (x) the Company may redesignate any Excluded Domestic Restricted Subsidiary as a Subsidiary Guarantor by giving notice thereof to the Administrative Agent and by causing such Subsidiary to become a party to the Subsidiary Guaranty by executing a Subsidiary Assumption Agreement in the form of Exhibit G hereto, and (y) the Company may redesignate any Subsidiary Guarantor which is a Partially-Owned Restricted Subsidiary as an Excluded Domestic Restricted Subsidiary by making a Non-Guarantor Designation with respect to such Subsidiary in accordance with the terms hereof. (c) At the time of the creation of any Subsidiary described in clause (z) of Section 7.14(a) and at the time of any redesignation pursuant to clause (x) of Section 7.14(b), each such new Subsidiary Guarantor shall execute and deliver, or cause to be executed and delivered, in each case to the extent not previously executed and delivered, all other relevant documentation of the type described in Section 4 as such new Subsidiary Guarantor would have had to deliver if such new Restricted Subsidiary had been a Restricted Subsidiary and a Subsidiary Guarantor on the Effective Date. (d) Notwithstanding anything to the contrary contained in this Section 7.14 or elsewhere in this Agreement, in no event shall any Subsidiary of the Company guaranty any -35- Indebtedness of the Company or any Wholly-Owned Subsidiary unless such Subsidiary is a party to the Subsidiary Guaranty; PROVIDED that, to the extent not prohibited by Section 7.04 hereof, (x) Excluded Foreign Restricted Subsidiaries may guaranty Indebtedness of other Excluded Foreign Restricted Subsidiaries and (y) Unrestricted Subsidiaries may guaranty Indebtedness of other Unrestricted Subsidiaries. 7.15 LIMITATION ON PAYMENTS UNDER THE NON-COMPETE NOTES. The Company will not, and will not permit any of its Subsidiaries to, make any payment representing the principal of, or interest on, any Non-Compete Note at any time when any Default or Event of Default exists or would exist immediately after giving effect to such payment. SECTION 8. EVENTS OF DEFAULT. Upon the occurrence of any of the following specified events (each an "Event of Default"): 8.01 PAYMENTS. (a) The Company shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for five or more days, in the payment when due of any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document or (b) any Subsidiary Guarantor shall default in the payment when due of any amount in respect of any payment of the type described in clause (a)(ii) above pursuant to the Subsidiary Guaranty, and such default shall continue for five or more days; or 8.02 REPRESENTATIONS, ETC. Any representation, warranty or statement made by the Company or any Subsidiary Guarantor herein or in any other Credit Document or in any statement or certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 8.03 COVENANTS. The Company shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 6.08 or 7, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 8.01, 8.02 or clause (a) of this Section 8.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by the Administrative Agent or the Required Banks; or 8.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Company or any of its Restricted Subsidiaries shall (i) default in any payment with respect to any Indebtedness or Contingent Obligation (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Contingent Obligation was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or Contingent Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or Contingent Obligation (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness or Contingent Obligation to become due prior to its stated maturity; or (b) any Indebtedness or Contingent Obligation (other than the Obligations) of the Company or any of its Restricted Subsidiaries shall be declared to be due and payable, or shall be -36- required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof, PROVIDED that it shall not constitute an Event of Default pursuant to clause (a) or (b) of this Section 8.04 unless the principal amount of any one issue of such Indebtedness or Contingent Obligation exceeds $7,500,000 or the aggregate amount of all such Indebtedness and Contingent Obligations referred to in clauses (a) and (b) above exceeds $15,000,000 at any one time; or 8.05 BANKRUPTCY, ETC. The Company or any of its Restricted Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Company or any of its Restricted Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Company or any of its Restricted Subsidiaries; or the Company or any of its Restricted Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any of its Restricted Subsidiaries; or there is commenced against the Company or any of its Restricted Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Company or any of its Restricted Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any of its Restricted Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Company or any of its Restricted Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Company or any of its Restricted Subsidiaries for the purpose of effecting any of the foregoing; or 8.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code; any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA; any Plan shall have an Unfunded Current Liability; or the Company, any Restricted Subsidiary or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code; or the Company or any Restricted Subsidiary has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees (other than as required by Section 601 of ERISA); and (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability, on the part of the Company, any of its Restricted Subsidiaries or any ERISA Affiliate, which lien, security interest or liability will have a material adverse effect on -37- the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole; or 8.07 SUBSIDIARY GUARANTY. (a) The Subsidiary Guaranty or any provision thereof shall cease to be in full force and effect, or any Subsidiary Guarantor thereunder or any Person acting on behalf of such Subsidiary Guarantor shall deny or disaffirm such Subsidiary Guarantor's obligations under such Subsidiary Guaranty or (b) except as otherwise provided in Section 8.01(b), any Subsidiary Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Subsidiary Guaranty, PROVIDED that in the case of Section 13 of the Subsidiary Guaranty, if the default constitutes a failure to perform or comply with any provision, covenant or agreement contained in Section 6 (other than Section 6.08) of this Agreement, such default shall continue unremedied for a period of at least 30 days after notice to the defaulting Subsidiary Guarantor by the Administrative Agent or the Required Banks; or 8.08 JUDGMENTS. One or more judgments or decrees shall be entered against the Company or any of its Restricted Subsidiaries involving a liability of $8,000,000 or more in the case of any one such judgment or decree or $20,000,000 or more in the aggregate for all such judgments and decrees for the Company and its Restricted Subsidiaries (not paid or to the extent not covered by insurance) and any such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 8.09 OWNERSHIP. A Change of Control Event shall have occurred; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Banks, by written notice to the Company, take any or all of the following actions, without prejudice to the rights of the Administrative Agent or any Bank to enforce its claims against the Company, except as otherwise specifically provided for in this Agreement (PROVIDED that if an Event of Default specified in Section 8.05 shall occur with respect to the Company, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Revolving Loan Commitment (or the unutilized portion thereof) terminated, whereupon the Revolving Loan Commitment of each Bank (or the unutilized portion thereof) shall forthwith terminate immediately and any Commitment Fees shall forthwith become due and payable without any other notice of any kind; and (ii) declare the principal of and any accrued interest in respect of all Loans and all obligations owing hereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. SECTION 9.. DEFINITIONS. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "Additional Indebtedness" shall have the meaning provided in Section 7.04(h). -38- "Additional Preferred Stock" shall have the meaning provided in Section 7.12(c). "Adjusted Total Commitment" shall mean at any time the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of all Defaulting Banks. "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Administrative Agent appointed pursuant to Section 10.10. "Affected Period" shall mean, with respect to each Affected Transaction, the period commencing on the date occurring twelve months prior to the last day of the then most recently ended fiscal quarter of the Company and ending on the date such Affected Transaction is consummated. "Affected Transaction" shall mean and include each of the following: (i) any transfer of assets to an Excluded Domestic Restricted Subsidiary in connection with a transaction permitted pursuant to Section 7.02(e), (ii) any Permitted Acquisition, (iii) any incurrence of Additional Indebtedness, (iv) any investment in an Excluded Domestic Restricted Subsidiary pursuant to Section 7.05(d), (v) any issuance of Subordinated Exchange Debentures, (vi) the payment of any Dividend as permitted by Section 7.07(k) or (l), (vii) any issuance of Additional Preferred Stock, (viii) any Permitted Restricted Subsidiary Conversion or Non-Guarantor Designation and (ix) any designation of an Unrestricted Subsidiary as a Restricted Subsidiary pursuant to the definition of "Restricted Subsidiaries." "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Conversion Amount" shall mean, at any time, the sum of the Conversion Value Amount with respect to each Permitted Restricted Subsidiary Conversion consummated after the ECA Effective Date but on or prior to the date of determination thereof. "Aggregate Unutilized Revolving Loan Commitment" with respect to any Bank at any time shall mean such Bank's Revolving Loan Commitment at such time less the aggregate outstanding principal amount of all Revolving Loans made by such Bank. "Agreement" shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "Amended and Restated Credit Agreement" shall mean the Amended and Restated Credit Agreement, dated as of May 24, 1996 and amended and restated as of March 11, 1999, among the Company, Canadian Sailings Inc., a Canada corporation, various lending -39- institutions, The Bank of Nova Scotia, as the Canadian lender, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, as amended, modified, supplemented or extended from time to time in accordance with the terms thereof. "Applicable Commitment Fee Percentage" shall mean 0.375%. "Applicable Margin" shall mean, at any time, (a) with respect to Base Rate Loans, 0.75% and (b) with respect to Eurodollar Loans, 1.75%. "Appraisal Firm" shall mean an independent appraisal firm (which may be an investment banking firm of national recognition) selected by, and at the expense of, the Company and reasonably satisfactory to the Administrative Agent. "Asset Sale" shall mean any sale, transfer or other disposition by the Company or any of its Restricted Subsidiaries to any Person other than the Company or any Restricted Subsidiary of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding any sale, transfer or other disposition by the Company of its capital stock) of the Company or such Restricted Subsidiary, including, without limitation, a Permitted Restricted Asset Sale and any sale, transfer or other disposition deemed made pursuant to a Permitted Restricted Subsidiary Conversion (other than (x) any sale, transfer or disposition of Cash Equivalents and (y) any sale, transfer or disposition permitted by Section 7.02(a), (e) or (h). "Authorized Officer" shall mean any officer of the Company designated as such in writing to the Administrative Agent by the Company, in each case to the extent reasonably acceptable to the Administrative Agent. "Bank" shall have the meaning provided in the first paragraph of this Agreement. "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing or (ii) a Bank having notified the Administrative Agent and/or the Company that it does not intend to comply with the obligations under Section 1.01(a) or 1.01(b), in the case of either (i) or (ii) as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall have the meaning provided in Section 8.05. "Base Rate" at any time shall mean the higher of (x) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (y) the Prime Lending Rate as in effect from time to time. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). -40- "Borrowing" shall mean a borrowing of Loans from all Banks on a given date (or resulting from conversions on a given date), in each case, as required by the provisions of this Agreement, being of a single Type of Loans and having, in the case of Eurodollar Loans, the same Interest Period, PROVIDED that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "Business" shall mean and include the communications, information, education, publishing and/or media businesses. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market. "Capital Expenditures" shall mean, for any period, any expenditures (whether paid in cash or accrued as liabilities and including in all events all amounts expended or capitalized under Capital Leases) by any Person during that period that, in conformity with GAAP, are or are required to be included in the property, plant or equipment reflected in the balance sheet of such Person. "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Company or any of its Restricted Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (PROVIDED that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank, (y) any commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (z) any bank whose short-term commercial paper rating from Standard & Poor's Ratings Group ("S&P") is at least A-2 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-2 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent -41- of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within one year after the date of acquisition, (iv) 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 S&P or Moody's and (v) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "Change of Control Event" shall mean (a) any "Change of Control" or similar term as defined in the indentures governing the terms of the Senior Notes as in effect on the Effective Date or in any agreement governing any Indebtedness incurred pursuant to Section 7.04(f), (h), (i) or (j), (b) KKR or one or more Affiliates of KKR shall cease to own (directly or indirectly) at least 25% on a fully diluted basis of the economic and voting interest in the Company's common stock or (c) any Person or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934 , as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of more of the voting common stock of the Company than that owned (directly or indirectly) by KKR and its Affiliates. "Chase" shall mean The Chase Manhattan Bank or any successor thereto by merger. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated and the rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Commitment Fee" shall have the meaning provided in Section 2.01(a). "Company" shall have the meaning provided in the first paragraph of this Agreement. "Consolidated Capital Expenditures" shall mean, for any period, the aggregate of all Capital Expenditures by the Company and its Restricted Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Assets" shall mean, at any time, the current assets (other than cash and Cash Equivalents, and deferred income taxes to the extent included in current assets) of the Company and its Restricted Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities of the Company and its Restricted Subsidiaries determined on a consolidated basis, but excluding (i) all short-term Indebtedness for borrowed money, (ii) the current portion of any long-term Indebtedness of the Company or its Restricted Subsidiaries, (iii) deferred income taxes, (iv) liabilities arising from cash overdrafts, and (v) liabilities arising from the honoring by a bank or -42- other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such liabilities are extinguished within three Business Days of their incurrence; in each case to the extent included in current liabilities. "Consolidated Debt" shall mean all Indebtedness of the Company and its Restricted Subsidiaries, determined on a consolidated basis, other than Indebtedness owing by the Company to any of its Restricted Subsidiaries or by any of the Company's Restricted Subsidiaries to the Company or any other Restricted Subsidiary of the Company, PROVIDED that, for purposes of this definition, (x) only the principal amount of Indebtedness outstanding under the Non-Compete Notes issued as of the date of determination (net of the amount of any reduction to the amounts owed under such Non-Compete Notes made in accordance with the terms of the Non-Competition Agreement referred to in the definition of Non-Compete Notes) shall be included and (y) Indebtedness of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Debt in an aggregate amount equal to the percentage equity ownership of the Company in such Partially-Owned Restricted Subsidiary multiplied by the aggregate Indebtedness of such Partially-Owned Restricted Subsidiary. "Consolidated EBITDA" shall mean, for any period, (A) the sum (without duplication) of the amounts for such period of (i) the net income (or loss) of the Company and its Restricted Subsidiaries on a consolidated basis for such period taken as a single accounting period, PROVIDED that, except as provided in clauses (I) through (III) below, there shall be excluded from Consolidated EBITDA (x) the net income (or loss) of all Unrestricted Subsidiaries and all Partially-Owned Restricted Subsidiaries for such period and (y) all cash or other payments received during such period by the Company and its Restricted Subsidiaries from any Unrestricted Subsidiaries from dividends or distributions (including tax sharing payments), in each case to the extent otherwise included, (ii) provisions for taxes based on income, (iii) Consolidated Interest Expense, (iv) amortization or write-off of deferred financing costs, (v) losses on sales of assets (excluding sales in the ordinary course of business) and other extraordinary losses, (vi) non-cash amounts charged as compensation for "phantom stock" arrangements, (vii) all non-cash interest expense not included in the foregoing clause (vi), (viii) depreciation expense and (ix) amortization expense, in the case of each of clauses (ii) through (ix) above to the extent deducted in determining net income (or loss) pursuant to clause (i) above for such period, LESS (B) the amount for such period of gains on sales of assets (excluding sales in the ordinary course of business) and other extraordinary gains, in each case, to the extent included in determining net income (or loss) pursuant to clause (A)(i) above for such period, all as determined on a consolidated basis; PROVIDED, HOWEVER, that (I) for purposes of Section 7.11, (1) there shall be included in determining Consolidated EBITDA for any period (x) the net income (or loss) of any person, business, property or asset (other than an Unrestricted Subsidiary) acquired and not subsequently sold or otherwise disposed of (but not including the net income (or loss) of any related person, business, property or assets to the extent not so acquired) by the Company or one of its Restricted Subsidiaries during such period (each such person, business, property or asset acquired and not subsequently disposed of, an "Acquired Entity or Business"), and the net income (or loss) of any Unrestricted Subsidiary that is converted into a Restricted Subsidiary during such period (each, a "Converted Restricted -43- Subsidiary"), in each case based on the actual net income (or loss) of such Acquired Entity or Business or Converted Restricted Subsidiary for the entire period (including the portion thereof occurring prior to such acquisition or conversion) and (y) an increase in respect of each Acquired Entity or Business acquired during such period equal to the cost adjustment amount applicable to the relevant period determined by the Company to represent the savings secured by the Company in connection with its reduction of salary and other employment expenses and lease and other contractual expenses with respect to such Acquired Entity or Business and (2) there shall be excluded in determining Consolidated EBITDA for any period the net income (or loss) of any person, business, property or asset (other than an Unrestricted Subsidiary) sold or disposed of by the Company or one of its Restricted Subsidiaries during such period (each such person, business, property or asset so sold or disposed of, a "Sold Entity or Business"), and the net income (or loss) of any Restricted Subsidiary that is converted into an Unrestricted Subsidiary during such period (each, a "Converted Unrestricted Subsidiary"), in each case based on the actual net income (or loss) of such Sold Entity or Business or Converted Unrestricted Subsidiary for the entire period (including the portion thereof occurring prior to such sale, disposition or conversion), (II) for purposes of this definition, subject to clause (III) below, there shall be included or excluded any of the items described in the above clauses (A) and (B) attributable to a Partially-Owned Restricted Subsidiary, but only to the extent of the equity percentage ownership of the Company in such Partially-Owned Restricted Subsidiary and (III) in the event the aggregate portion of Consolidated EBITDA for any period attributable to Partially-Owned Restricted Subsidiaries (the "Limited EBITDA Component") exceeds an amount equal to 15% of the aggregate amount of Consolidated EBITDA of the Company and its Restricted Subsidiaries for such period, the Limited EBITDA Component (and accordingly Consolidated EBITDA), in each case, for such period, shall be reduced such that the Limited EBITDA Component for such period equals 15% of the aggregate amount of such Consolidated EBITDA for such period. "Consolidated Fixed Charges" shall mean, for any period, the sum, without duplication, of the amounts for such period of (i) Consolidated Interest Expense, plus consolidated cash Dividend expense payable in respect of all Preferred Stock and common stock of the Company, (ii) provisions for taxes based on income other than (x) changes in deferred taxes, (y) taxes on gains resulting from sales of assets (other than sales in the ordinary course of business) and (z) taxes on gains on extraordinary items, (iii) Consolidated Capital Expenditures paid in cash, (iv) scheduled payments on Indebtedness for borrowed money (including the term loans outstanding under the Existing Credit Agreements but excluding the revolving loans outstanding under the Existing Credit Agreements) and on the Non-Compete Notes (other than, in the case of any payments referred to in this clause (iv), any interest payments to the extent included in Consolidated Interest Expense), and (v) the Net Maximum Exposure Reduction, if positive, for such period; all as determined on a consolidated basis for the Company and its Restricted Subsidiaries; PROVIDED that for purposes of this definition, fixed charges of the type referred to in clauses (i)-(v) above of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Fixed Charges in an aggregate amount equal to the percentage equity ownership of the Company in such Partially-Owned Restricted Subsidiary multiplied by the fixed charges of the type referred to above of such Partially-Owned Restricted Subsidiary for the respective period. "Consolidated Interest Expense" shall mean, for any period, total interest expense (including that attributable to Capital Leases in accordance with GAAP but excluding non-cash interest expenses) of the Company and its Restricted Subsidiaries determined on a consolidated basis with respect to all outstanding Indebtedness of the Company and its Restricted Subsidiaries, 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 (I.E., costs minus benefits) under Interest Rate Protection Agreements, but excluding, however, amortization of deferred financing costs to the extent included in total interest expense, all as determined on a consolidated basis; PROVIDED that for purposes of this definition, interest expense of the type referred to above of any Partially-Owned Restricted Subsidiary shall be included in Consolidated Interest Expense in an aggregate amount equal to the percentage equity ownership of the Company in such Partially-Owned Restricted Subsidiary multiplied by the interest expense of the type referred to above of such Partially-Owned Restricted Subsidiary for the respective period. -44- "Contingent Obligations" shall mean as to any Person (i) any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof and (ii) any Interest Rate Protection Agreement; PROVIDED, HOWEVER, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Contribution Agreement" shall have the meaning provided in Section 4.08. "Conversion Value Amount" shall have the meaning set forth in the definition of Permitted Restricted Subsidiary Conversion. "Copyrights" shall have the meaning provided in Section 5.14(a). "Credit Documents" shall mean this Agreement, any Notes to the extent issued, the Subsidiary Guaranty and the Contribution Agreement. "Credit Party" shall mean the Company and each Subsidiary Guarantor. -45- "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Dividends" shall have the meaning provided in Section 7.07. "EBITDA" shall mean, for any Restricted Subsidiary or business, for any period, the portion of Consolidated EBITDA attributable to such Restricted Subsidiary or business. "ECA Maturity Date" shall mean July 31, 2004 (I.E., the Final Maturity Date under and as defined in the Amended and Restated Credit Agreement). "ECA Effective Date" shall mean May 28, 1996 (I.E., the Original Effective Date under and as defined in the Amended and Restated Credit Agreement). "Effective Date" shall have the meaning provided in Section 11.10. "Environmental Law" shall mean any federal, state, provincial or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to the environment, health, safety or Hazardous Materials. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Company or any Subsidiary of the Company would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of 1%) of the offered quotation to first-class banks in the interbank Eurodollar market by each Reference Bank for U.S. dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of such Reference Bank for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple -46- of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D); PROVIDED that if one or more of the Reference Banks fails to provide the Administrative Agent with its aforesaid rate, then the Eurodollar Rate in respect of Loans shall be determined based on the rate or rates provided to the Administrative Agent by the other Reference Banks or Bank. "Event of Default" shall have the meaning provided in Section 8. "Excess Cash Flow" shall mean, for any period, the remainder of (x) the sum of (i) Consolidated EBITDA for such period and (ii) the decrease, if any, in Working Capital from the first day to the last day of such period, minus (y) the sum of (i) the amount of Consolidated Fixed Charges for such period (but in the case of Consolidated Capital Expenditures included therein, only to the extent such expenditures are not financed by Indebtedness (other than Loans hereunder)) and (ii) the increase, if any, in Working Capital from the first day to the last day of such period, PROVIDED that in calculating the amount referred to in clause (x)(ii) or (y)(ii) above, as the case may be, (A) for any period during which the Company and/or any of its Restricted Subsidiaries have consummated an Asset Sale pursuant to Section 7.02(c) or a Permitted Acquisition, the portion of the change in Working Capital for such period attributable to the entity or business sold or purchased shall be based (x) in the case of an Asset Sale, on the change in Working Capital attributable to the entity or business sold from the first day of such period to the date of the consummation of such sale and (y) in the case of an acquisition, on the change in Working Capital attributable to the entity or business acquired from the date of consummation of such acquisition to the last day of such period and (B) Working Capital shall only include the assets and liabilities of a Partially-Owned Restricted Subsidiary to the extent of the percentage equity interest of the Company in such Partially-Owned Restricted Subsidiary. "Excess Cash Flow Amount" shall mean an amount which initially shall be zero and which shall be (i) increased on the date of delivery of Section 6.01 Financials in respect of the first three fiscal quarters in each year of the Company (commencing with the fiscal quarter ended June 30, 1996) by an amount (if positive) equal to 75% of Excess Cash Flow for the fiscal quarter in respect of which such Section 6.01 Financials are delivered, PROVIDED that in the event that Excess Cash Flow for the first and/or second fiscal quarter in any fiscal year is negative, then for purposes of this clause (i) the Excess Cash Flow for the third fiscal quarter in such fiscal year shall be deemed to be reduced by the amount of such negative Excess Cash Flow for such first and/or second quarter, and (ii) increased on the date of delivery of Section 6.01 Financials in respect of each fiscal year of the Company by an amount (if positive) equal to 75% of the Excess Cash Flow for such fiscal year LESS an amount (if any) equal to the aggregate amount by which the Excess Cash Flow Amount was increased pursuant to clause (i) above in respect of the first, second and third quarters in such fiscal year. -47- "Excluded Domestic Restricted Subsidiary" shall mean any Partially-Owned Restricted Subsidiary with respect to which the Company shall have made a Non-Guarantor Designation in accordance with the provisions hereof. "Excluded Foreign Restricted Subsidiaries" shall mean (i) Daily Racing Form of Canada Ltd., a Canada corporation, (ii) Admirefruit Limited, a U.K. corporation, (iii) Canadian Red Book, Inc., a Canada corporation, (iv) Canadian Sailings Inc., a Canada corporation and (v) each Restricted Subsidiary of the Company established, created or acquired after the Effective Date which is incorporated in a jurisdiction outside the United States, except to the extent the requirements set forth in clause (z) of 7.14(a), and Section 7.14(c), are satisfied with respect to such Subsidiary. "Existing Contingent Obligations" shall have the meaning provided in Section 7.06(f). "Existing Credit Agreements" shall mean and include each of the Amended and Restated Credit Agreement and the $250,000,000 Credit Agreement. "Existing Facility Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries in connection with the Existing Credit Agreements (including, without limitation, the Existing Credit Agreements and any guaranty or guaranties relating thereto), as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Existing Debt" shall have the meaning provided in Section 7.04(d). "Existing Indebtedness Agreements" shall have the meaning provided in Section 4.10. "Existing Preferred Stock" shall include preferred stock of the Company issued prior to the Effective Date and listed on Annex VI hereto, without giving effect to any extension or replacement thereof, as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Federal Funds Effective Rate" shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent. "Fees" shall mean (i) all amounts payable pursuant to, or referred to in, Section 2.01 and (ii) all other fees payable to the Administrative Agent or any Bank as may be agreed to -48- from time to time between the Company and the Administrative Agent or such Bank, as the case may be. "Final Maturity Date" shall mean December 30, 1999. "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 7, including defined terms as used therein, are subject (to the extent provided therein) to Section 11.07(a). "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar import, under any applicable Environmental Law. "Indebtedness" of any Person shall mean without duplication (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person and (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, I.E., take-or-pay and similar obligations, PROVIDED that Indebtedness shall not include (x) trade payables and accrued expenses, in each case arising in the ordinary course of business and (y) any obligations under Interest Rate Protection Agreements. "Information Memorandum" shall mean the Confidential Information Memorandum dated February, 1999 and distributed to the Banks prior to the Effective Date. "Initial Borrowing Date" shall mean the date on or after the Effective Date upon which the initial Borrowing of Loans hereunder occurs. "Intellectual Property" shall have the meaning provided in Section 5.14(b). "Intercompany Loan" shall have the meaning provided in Section 7.05(c). "Interest Period" with respect to any Eurodollar Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. -49- "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement designed to protect the Company or any of its Subsidiaries against fluctuations in interest rates. "KKR" shall mean Kohlberg Kravis Roberts & Co., a Delaware limited partnership. "Leasehold" of any Person means all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Leverage Ratio" shall have the meaning provided in Section 7.11. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any similar recording or notice statute, and any lease having substantially the same effect as the foregoing). "Loan" shall have the meaning provided in Section 1.01. "Margin Stock" shall have the meaning provided in Regulation U. "Maximum Exposure" shall have the meaning provided in the Existing Credit Agreements. "Minimum Borrowing Amount" shall mean $3,000,000. "Minimum Retention Amount" shall mean, at any time, $5,000,000 multiplied by a fraction (i) the numerator of which shall be the Total Revolving Loan Commitment at such time and (ii) the denominator of which shall be $150,000,000. "Net Investments in Excluded Foreign Restricted Subsidiaries" shall mean the remainder of (i) the sum of (x) the aggregate value of all businesses, properties and assets transferred by the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) to Excluded Foreign Restricted Subsidiaries after the ECA Effective Date, (y) the aggregate outstanding principal amount of all Intercompany Loans made to Excluded Foreign Restricted Subsidiaries by the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the ECA Effective Date and (z) the aggregate amount of all investments by the Company and its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) in Excluded Foreign Restricted Subsidiaries after the ECA Effective Date, minus (ii) the sum of (x) the aggregate value of all businesses, properties and assets transferred by Excluded Foreign Restricted Subsidiaries to the Company and/or its Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the ECA Effective Date and (y) the aggregate amount of all cash dividends and other cash distributions on common stock paid by Excluded Foreign Restricted Subsidiaries to the Company and its -50- Restricted Subsidiaries (other than Excluded Foreign Restricted Subsidiaries) after the ECA Effective Date. "Net Maximum Exposure Reduction" shall have the meaning provided therefor in the Existing Credit Agreements. "Non-Compete Notes" shall mean the promissory notes issued by K-III Holdings Corporation III pursuant to the Non-Competition Agreement, dated as of June 17, 1991, among K-III Holdings Corporation III, News America Holdings Incorporated and the other parties thereto in an aggregate principal amount not to exceed $50,000,000, as such notes may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof. "Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank. "Non-Facility Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate maximum amount available to be drawn (regardless of whether any conditions for drawing could then be met) under all outstanding Non-Facility Letters of Credit and (ii) the aggregate amount of all Non-Facility Unpaid Drawings. "Non-Facility Letters of Credit" shall mean each letter of credit (other than any letter of credit issued pursuant to the Existing Credit Agreements) issued for the account of the Company or any of its Restricted Subsidiaries, PROVIDED that the reimbursement obligations of the Company or such Restricted Subsidiary with respect to such letter of credit may be secured only to the extent permitted by Section 7.03(q). "Non-Facility Unpaid Drawings" shall mean all amounts paid or disbursed by the issuers of Non-Facility Letters of Credit which have not been reimbursed. "Non-Guarantor Designation" shall mean and include each of (x) the designation by the Company of any newly created or acquired Partially-Owned Restricted Subsidiary and (y) the redesignation of any existing Partially-Owned Restricted Subsidiary which is a Subsidiary Guarantor, in each case, as an Excluded Domestic Restricted Subsidiary by delivery of a written notice to the Administrative Agent of such designation or redesignation, as the case may be; PROVIDED that the Company may only make a Non-Guarantor Designation hereunder if, at the time of such designation (i) no Default or Event of Default exists or would result therefrom and (ii) the Company shall have determined, with respect to such designation, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement. "Note" shall mean and include each promissory note, in the form agreed by the Company and the Administrative Agent prior to the Effective Date, to the extent issued pursuant to Section 1.05(b) hereof. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). -51- "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent at 1 Chase Manhattan Plaza, New York, New York 10081, or such other office as the Administrative Agent may designate to the Company and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Partially-Owned Restricted Subsidiary" shall mean any Restricted Subsidiary of the Company to the extent that the Company and its Wholly-Owned Restricted Subsidiaries shall own less than 100% of the capital stock of such Restricted Subsidiary. "Payment Office" shall mean the office of the Administrative Agent at 270 Park Avenue, New York, New York 10017, or such other office as the Administrative Agent may designate to the Company and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" shall have the meaning provided in Section 7.02(g). "Permitted Amendments" shall mean, to any amendment or supplement to or waiver of the documents governing or evidencing (x) any issue of Indebtedness which does not (i) add, directly or indirectly, any new covenant, event of default, collateral requirement or repayment requirement (including pursuant to any put arrangement), (ii) modify in any manner materially adverse to the issuer or guarantors thereof any existing covenant, event of default, collateral requirement or repayment requirement (including any shortening or any amortization requirements), (iii) increase the interest rate thereon or modify in any manner the time or manner of payment of such interest (including any option or right to pay such interest in kind), (iv) modify any of the subordination provisions or (v) contain any provision which, in the opinion of the Administrative Agent, is materially adverse to the interests of the Banks, (y) any issue of Preferred Stock which does not (i) add, directly or indirectly, any new covenant, default, voting, redemption, exchange or put provision, (ii) modify in any manner adverse to the issuer thereof any existing covenant, default, voting, redemption, exchange or put provision, (iii) increase the dividend rate thereon or modify in any manner the time or manner of payment of such dividends (including any option or right to pay such dividends in kind) or (iv) contain any provision which, in the opinion of the Administrative Agent, is materially adverse to the interests of the Banks or (z) the sole effect of which is to (i) delete covenants or events of default and/or (ii) add to, or increase existing, exceptions to the covenants contained therein, or waive any of the covenants contained therein or any rights of the holders of such Indebtedness or Preferred Stock, as the case may be, set forth therein. "Permitted Liens" shall have the meaning provided in Section 7.03(c). -52- "Permitted Refinancing Debt" shall mean Indebtedness issued in connection with a refinancing of any or all of the Existing Debt, the Subordinated Exchange Debentures, any Additional Indebtedness or any other Permitted Refinancing Debt; PROVIDED that (i) such Indebtedness has a longer average life than the Indebtedness being refinanced and (ii) such Indebtedness, and the agreements and other documents entered into by the Company and/or any of its Restricted Subsidiaries in connection therewith shall contain terms and conditions (including, without limitation, with respect to the obligor and guarantors, if any, in respect of such Indebtedness, amortization schedules, interest rates, redemption provisions, covenants, defaults, security, remedies and, if the Indebtedness so refinanced is subordinated to any other Indebtedness of the Company or its Restricted Subsidiaries, subordination provisions) not materially less favorable to the Company and its Restricted Subsidiaries or to the Banks than the terms and conditions of the Indebtedness so refinanced (excluding, for purposes of this clause (ii), the impact of market conditions on the interest rate and other economic terms). "Permitted Replacement Preferred Stock" shall mean preferred stock of the Company issued in connection with the replacement and cancellation of any outstanding Preferred Stock; PROVIDED that such preferred stock and the agreements, certificates of designation and other documents entered into by the Company in connection therewith shall contain terms and conditions (including, without limitation, dividend rates, pay-in-kind features, redemption provisions, put rights, liquidation preferences, voting rights and exchange rights) not materially less favorable to the Company or to the Banks than the terms and conditions of the preferred stock being replaced (excluding the impact of market conditions on the dividend rate and other economic terms), as such preferred stock may be amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Permitted Restricted Asset Sale" shall mean any sale, transfer or other disposition by the Company or any of its Restricted Subsidiaries (other than Canadian Sailings Inc.) to any Unrestricted Subsidiary of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding any sale, transfer or other disposition by the Company of its capital stock) of the Company or such Restricted Subsidiary; PROVIDED that the Company or such Restricted Subsidiary shall only be permitted to effectuate a Permitted Restricted Asset Sale so long as (i) no Default or Event of Default exists or would result therefrom, (ii) the Company shall have delivered to the Administrative Agent the opinion of value of an Appraisal Firm to the extent required by Section 7.02(c) and (iii) the Company shall have, or shall have caused such Restricted Subsidiary to have, complied with the other terms and conditions of Section 7.02(c) or (j), as the case may be. "Permitted Restricted Subsidiary Conversion" shall mean the redesignation by the Company of a Restricted Subsidiary (other than Canadian Sailings Inc.) of the Company as an Unrestricted Subsidiary of the Company pursuant to a written notice to the Administrative Agent and the Banks; PROVIDED that any such redesignation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be deemed to constitute a sale of all of the assets of the respective Restricted Subsidiary for all purposes of this Agreement; PROVIDED FURTHER, that the Company shall only be permitted to effectuate a Permitted Restricted Subsidiary Conversion so long as (i) no Default or Event of Default exists or would result therefrom, (ii) the Company shall have delivered to the -53- Administrative Agent the opinion of value of management of the Company or, to the extent required by Section 7.02(c), the Appraisal Firm required by such Section (the value set forth in any such opinion, the "Conversion Value Amount"), (iii) the Company shall have complied with the other terms and conditions of Section 7.02(c) or (j), as the case may be, (iv) the Aggregate Conversion Amount at such time, when added to the Unrestricted Subsidiary Investment Amount at such time shall not exceed the Unrestricted Subsidiary Investment Limit then in effect, and (v) the Company shall have determined, with respect to such conversion, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan, as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) the Company, any Restricted Subsidiary or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which the Company, any Restricted Subsidiary or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Preferred Stock" shall mean and include the Existing Preferred Stock and, once issued, any Additional Preferred Stock and any Permitted Replacement Preferred Stock. "Prescribed Forms" shall mean such duly executed form(s) or statement(s), and in such number of copies, which may, from time to time, be prescribed by law and which, pursuant to applicable provisions of (a) an income tax treaty between the United States and the country of residence of the Bank providing the form(s) or statement(s), (b) the Code, or (c) any applicable rule or regulation under the Code, permit the Company to make payments hereunder for the account of such Bank free of deduction or withholding of income or similar taxes. "Prime Lending Rate" shall mean the rate which the Administrative Agent announces from time to time as its prime commercial lending rate, the Prime Lending Rate to change when and as such prime commercial lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. The Administrative Agent may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "PRO FORMA Basis" shall mean, with respect to each Affected Transaction in connection with which any calculation of compliance with any financial covenant or financial term is required, the calculation thereof on a PRO FORMA basis, for the Test Period ended on the last day of the most recently ended fiscal quarter, determined as if (x) such Affected Transaction, each other Affected Transaction effected by Company during the Affected Period and any reduction of Consolidated Debt during such Affected Period effected with the proceeds received by the Company and/or its Restricted Subsidiaries of (A) the issuance of common equity by the Company or (B) the sale of the capital stock or other ownership interest of the Company in an -54- Unrestricted Subsidiary (to the extent not otherwise included in Consolidated EBITDA), in each case, had occurred on the first day of such Affected Period, and (y) with respect to any Affected Transaction involving the issuance of Indebtedness or Preferred Stock, such Indebtedness and/or Preferred Stock had remained outstanding at all times during such Affected Period. "PRO RATA Share" shall mean, for each Bank, the percentage obtained by dividing such Bank's Revolving Loan Commitment by the Total Revolving Loan Commitment, PROVIDED that, if at any time of the determination of a Bank's "Pro Rata Share", any Revolving Loan Commitments under this Agreement shall have been terminated, Pro Rata Share shall be calculated with reference to the amount of Revolving Loans outstanding rather than such Revolving Loan Commitments. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Reference Banks" shall mean Chase, The Bank of New York and Bankers Trust Company. "Register" shall have the meaning provided in Section 1.05(a). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Replaced Bank" shall have the meaning provided in Section 1.10(c)(ii). "Replacement Bank" shall have the meaning provided in Section 1.10(c)(ii). "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan other than those events as to which the 30-day notice is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 2615. "Required Banks" shall mean Non-Defaulting Banks, the sum of whose Revolving Loan Commitments (or after the termination thereof, the then total outstanding Revolving Loans) constitute at least 51% of the Adjusted Total Commitment (or after the termination thereof, the then total outstanding Revolving Loans of Non-Defaulting Banks). "Restricted Subsidiaries" shall mean (x) all of the Subsidiaries of the Company in existence on the Effective Date, including, without limitation, Canadian Sailings Inc., (y) any Subsidiary owned (directly or indirectly) by the Company that is created, established or acquired after the Effective Date and which does not constitute an Unrestricted Subsidiary on the date of the creation, establishment and/or acquisition thereof and (z) any Unrestricted Subsidiary of the -55- Company to the extent designated by the Company as a Restricted Subsidiary hereunder by written notice to the Administrative Agent; PROVIDED that the Company shall only be permitted to so designate a new Restricted Subsidiary so long as (i) no Default or Event of Default exists or would result therefrom, (ii) at least 51% of the capital stock of such newly-designated Restricted Subsidiary is owned by the Company or one or more Wholly-Owned Restricted Subsidiaries and all of the applicable provisions of Section 7.14 shall have been complied with in respect of such newly-designated Restricted Subsidiary, (iii) the Company shall have determined, with respect to such designation, that the Company and its Restricted Subsidiaries would have been in compliance, on a PRO FORMA Basis, with Sections 7.09, 7.10 and 7.11 of this Agreement and (iv) such Unrestricted Subsidiary is permitted to be designated a Restricted Subsidiary pursuant to the Senior Note Documents; PROVIDED FURTHER, that, at the time of any Permitted Restricted Subsidiary Conversion or the sale of 100% of the capital stock owned by the Company or any Restricted Subsidiary of a Restricted Subsidiary to an Unrestricted Subsidiary pursuant to a Permitted Restricted Asset Sale, the Restricted Subsidiary so converted or sold shall no longer constitute a Restricted Subsidiary hereunder. "Revolving Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I hereto directly below the column entitled "Revolving Loan Commitment", as same may be reduced from time to time pursuant to Sections 2.02, 2.03 and/or 8. "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Section 6.01 Financials" shall mean the financial statements delivered, or to be delivered, pursuant to Section 6.01(a) or (b). "Senior Note Documents" shall mean and include each of the documents and other agreements entered into by the Company or any of its Subsidiaries (including, without limitation, the indentures pursuant to which each issuance of the Senior Notes are issued and any guaranty or guaranties relating thereto) relating to the issuance by the Company of any Senior Notes, as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Notes" shall mean and include the Company's (x) 7-5/8% Senior Secured Notes due 2008, (y) 10-1/4% Senior Notes due 2004 and (z) 8-1/2% Senior Notes due 2006, in each case, as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Preferred Stock" shall mean the Company's $2.875 Senior Exchangeable Preferred Stock, as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Series B Preferred Stock" shall mean the Company's $11.625 Series B Exchangeable Preferred Stock, as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. -56- "Series C Preferred Stock" shall mean the Company's Series C Exchangeable Preferred Stock, as in effect on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Specified Change of Control Event" shall mean a Change of Control Event of the type described in clause (a) of the definition thereof. "Subordinated Exchange Debentures" shall mean and include the Company's (x) 11-1/2% Subordinated Debentures due 2004, (y) 11-5/8% Class B Subordinated Exchange Debentures due 2005 and (z) 10% Subordinated Exchange Debentures due 2008, in each case, in the form delivered to the Banks on the Effective Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time, PROVIDED that Canadian Sailings Inc. shall be deemed to be a Subsidiary of the Company for all purposes. "Subsidiary Guarantor" shall mean (i) each Restricted Subsidiary in existence on the Effective Date (other than Excluded Foreign Restricted Subsidiaries) and (ii) each Restricted Subsidiary of the Company formed after the Effective Date and each Excluded Domestic Restricted Subsidiary designated as such by the Company, in each case, which has executed and delivered a counterpart of the Subsidiary Guaranty to the Administrative Agent on behalf of the Banks, PROVIDED that any such Restricted Subsidiary which is a Partially-Owned Restricted Subsidiary shall cease to constitute a Subsidiary Guarantor to the extent the Company shall have made a Non-Guarantor Designation with respect to such Subsidiary in accordance with the terms hereof. "Subsidiary Guaranty" shall have the meaning provided in Section 4.05. "Taxes" shall have the meaning provided in Section 3.04. "Test Period" shall mean the four consecutive fiscal quarters of the Company then last ended. "Total Revolving Loan Commitment" shall mean the sum of the Revolving Loan Commitments of each of the Banks. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, the Total Revolving Loan Commitment at such time less the aggregate principal amount of all Revolving Loans at such time. -57- $250,000,000 Credit Agreement" shall mean the Credit Agreement, dated as of May 24, 1996, among the Company, various lending institutions, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, as amended, modified, supplemented or extended from time to time in accordance with the terms thereof. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, I.E., a Base Rate Loan or Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under such 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 the Plan's actuary in the most recent annual valuation of the Plan. "Unrestricted Subsidiary" shall mean (i) any Subsidiary of the Company that is formed or acquired after the Effective Date, which is funded through loans, advances and/ or capital contributions as permitted by, and in compliance with, Section 7.05(d), PROVIDED that at the time of the initial loan, advance or capital contribution by the Company or any Restricted Subsidiary to such Subsidiary (x) the Company designates such Subsidiary as an Unrestricted Subsidiary in a written notice to the Administrative Agent and (y) such Subsidiary and the Company shall have entered into a tax sharing agreement in form and substance reasonably satisfactory to the Required Banks, (ii) any Restricted Subsidiary of the Company redesignated as an Unrestricted Subsidiary pursuant to a Permitted Restricted Subsidiary Conversion and any Restricted Subsidiary sold to an Unrestricted Subsidiary pursuant to a Permitted Restricted Asset Sale, in each case to the extent consummated in accordance with the terms of the respective definitions thereof and Section 7.02(c) or 7.02(j), as the case may be, and (iii) each Subsidiary of an Unrestricted Subsidiary; PROVIDED that, at the time of any designation of the type described in clause (z) of the definition of "Restricted Subsidiary," the Subsidiary so designated shall no longer constitute an Unrestricted Subsidiary hereunder. "Unrestricted Subsidiary Investment Amount" shall have the meaning provided in Section 7.05(d). "Unrestricted Subsidiary Investment Limit" shall mean, at any time, the sum of (i) $200,000,000, (ii) the Excess Cash Flow Amount at such time, (iii) an amount equal to all cash or other payments received by the Company and its Restricted Subsidiaries from Unrestricted Subsidiaries from dividends or distributions after the ECA Effective Date (PROVIDED that for purposes of this clause (iii), cash and other payments received by a Partially-Owned Restricted Subsidiary shall be added to the Unrestricted Subsidiary Investment Limit only to the extent of the equity percentage ownership of the Company in such Partially-Owned Restricted Subsidiary), PLUS (iv) an amount equal to the aggregate net proceeds received by the Company from the -58- issuance of equity securities of the Company after the ECA Effective Date, PROVIDED that if the net proceeds from any such equity issuance are not utilized to make a loan or advance to, or a cash capital contribution in, an Unrestricted Subsidiary pursuant to Section 7.05(d) within 30 days following the date of such equity issuance, then the net proceeds from such equity issuance shall no longer be added to the Unrestricted Subsidiary Investment Limit. "U.S. Dollars" and "$" shall mean freely transferable lawful money of the United States of America. "Wholly-Owned Restricted Subsidiary" shall mean any Restricted Subsidiary of the Company which is not a Partially-Owned Restricted Subsidiary. "Working Capital" shall mean the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Written" or "in writing" shall mean any form of written communication or a communication by means of telex, telecopier device, telegraph or cable. SECTION 10. THE ADMINISTRATIVE AGENT. 10.01 APPOINTMENT. Each Bank hereby irrevocably designates and appoints Chase as Administrative Agent of such Bank and to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes Chase as the Administrative Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Administrative Agent agrees to act as such upon the express conditions contained in this Section 10. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. The provisions of this Section 10 are solely for the benefit of the Administrative Agent and the Banks, and neither the Company nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Banks and the Administrative Agent neither assumes and nor shall it be deemed to have assumed any obligation or relationship of agency or trust with or for the Company or any of its Subsidiaries. 10.02 DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 10.03. -59- 10.03 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company, any of its Subsidiaries or any of their respective officers contained in this Agreement or the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document or for any failure of the Company or any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Credit Documents, or to inspect the properties, books or records of the Company or any of its Subsidiaries. The Administrative Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Credit Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Banks or by or on behalf of the Company to the Administrative Agent, or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 10.04 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 10.05 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has actually received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice -60- of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; PROVIDED that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 10.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER BANKS. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Company and its Subsidiaries. The Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other condition, prospects or creditworthiness of the Company or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 10.07 INDEMNIFICATION. The Banks agree to indemnify the Administrative Agent in its capacity as such ratably according to their respective "percentages" (which shall equal, for each Non-Defaulting Bank, that percentage determined by dividing such Bank's Revolving Loan Commitment by the Adjusted Total Commitment, it being understood and agreed that references to Revolving Loan Commitments (as well as to the Adjusted Total Commitment) at a time when any such Revolving Loan Commitment (or Adjusted Total Commitment) has been terminated shall be references to such terminated Revolving Loan Commitment (or Adjusted Total Commitment, as the case may be) as in effect immediately prior to such termination), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken -61- or omitted to be taken by the Administrative Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Company or any of its Subsidiaries; PROVIDED that no Bank shall be liable to the Administrative Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrative Agent. If and to the extent any amount paid to the Administrative Agent is subsequently recovered by the Administrative Agent from the Company or any of its Subsidiaries, the Administrative Agent shall promptly pay to each Bank to the extent such Bank paid the Administrative Agent, its "percentage" of the amount so recovered. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 10.07 shall survive the payment of all Obligations. 10.08 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its respective affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and its Subsidiaries as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. 10.09 HOLDERS. The Administrative Agent may deem and treat the payee of any Note which has been issued hereunder as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any such Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 10.10 RESIGNATION OF THE ADMINISTRATIVE AGENT; SUCCESSOR AGENT. The Administrative Agent may resign as the Administrative Agent upon 20 days' notice to the Banks. Upon the resignation of the Administrative Agent, the Required Banks shall appoint from among the Banks a successor Administrative Agent for the Banks subject to prior approval by the Company (such approval not to be unreasonably withheld), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall include such successor agent effective upon its appointment, and the resigning Administrative Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the resignation of the Administrative Agent hereunder, the provisions of this Section 10 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. -62- SECTION 11. MISCELLANEOUS. 11.01 PAYMENT OF EXPENSES, ETC. The Company agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, the reasonable fees and disbursements of White & Case LLP) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and in connection with the Administrative Agent's syndication efforts with respect to this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of the Administrative Agent and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein and, after an Event of Default shall have occurred and be continuing, the protection of the rights of the Administrative Agent and each of the Banks thereunder (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for the Administrative Agent and for each of the Banks); (iii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify the Administrative Agent and each Bank, its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Administrative Agent or any Bank is a party thereto) related to the entering into and/or performance of any Credit Document or the use of the proceeds of any Loans hereunder or the consummation of any other transactions contemplated in any Credit Document including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). 11.02 RIGHT OF SETOFF. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Company or any of its Subsidiaries or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of any Credit Party against and on account of the Obligations and liabilities of such Credit Party to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of such Credit Party purchased by such Bank pursuant to Section 11.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. -63- 11.03 NOTICES. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including facsimile communication) and mailed, facsimilied or delivered, if to the Company, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Bank, at its address specified for such Bank on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, facsimilied or cabled or sent by overnight courier, and shall be effective when received. 11.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; PROVIDED that the Company may assign or transfer any of its respective rights or obligations hereunder without the prior written consent of the Banks. Each Bank may at any time grant participations in any of its rights hereunder to another financial institution; PROVIDED FURTHER, that, in the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Company hereunder shall be determined as if such Bank had not sold such participation, except that the participant shall be entitled to receive the additional amounts under Sections 1.10, 1.11 and 3.04 of this Agreement to, and only to, the extent that such Bank would be entitled to such benefits if the participation had not been entered into or sold; and PROVIDED FURTHER, that no Bank shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan in which such participant is participating (it being understood that any waiver of an installment on, or the application of any prepayment or the method of application of any prepayment to the amortization of the Loans shall not constitute an extension of the final scheduled maturity date), or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant's participating interest in any Revolving Loan Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Revolving Loan Commitment shall not constitute a change in the terms of any Revolving Loan Commitment and that an increase in any Revolving Loan Commitment shall be permitted without the consent of any participant if such participant's participation is not increased as a result thereof), (ii) release all or substantially all of the Subsidiary Guarantors from the Subsidiary Guaranty (except as expressly provided in the Credit Documents) or (iii) in each case consent to the assignment or transfer by the Company or any other Subsidiaries of the Company of any of its rights and obligations under this Agreement or any other Credit Document except in accordance with the terms hereof and thereof. (b) Notwithstanding the foregoing, (x) any Bank may assign all or a portion of its Loans and/or Revolving Loan Commitment and its rights and obligations hereunder to its parent corporation and/or any affiliate of such Bank which is at least 50% owned by such Bank and/or -64- its parent company and (y) with the consent of the Administrative Agent and the Company (which consents shall not be unreasonably withheld) any Bank may assign all or a portion of its Loans and/or Revolving Loan Commitment and its rights and obligations hereunder to one or more commercial banks or other financial institutions (including one or more Banks). No assignment pursuant to the immediately preceding sentence shall (x) to the extent such transaction represents an assignment to an institution other than one or more Banks hereunder, be in an aggregate amount less than the minimum of $5,000,000 or (y) so long as no Default or Event of Default then exists, reduce the Revolving Loan Commitments and/or Term Loans of the assigning Bank to an aggregate amount less than the Minimum Retention Amount unless the same are reduced to $0. If any Bank so sells or assigns all or a part of its rights hereunder, any reference in this Agreement or the other Credit Documents to such assigning Bank shall thereafter refer to such Bank and to the respective assignee Bank to the extent of their respective interests and the respective assignee Bank shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would if it were such assigning Bank. Each assignment pursuant to this Section 11.04(b) shall be effected by the assigning Bank and the assignee Bank executing an Assignment and Assumption Agreement substantially in the form of Exhibit F (appropriately completed). At the time of any such assignment, Annex I shall be deemed to be amended to reflect the Revolving Loan Commitments of the respective assignee Bank (which shall result in a direct reduction to the respective Revolving Loan Commitments of the assigning Bank) and of the other Banks, (ii) the Administrative Agent shall record such assignment and the resultant effects thereof on the Loans and/or Revolving Loan Commitments of the assigning Bank and the assignee Bank in the Register and (iii) the Administrative Agent shall receive from the assigning Bank and/or the assignee Bank at the time of each assignment the payment of a nonrefundable assignment fee in an aggregate amount of $3,000 with respect to each such assignment (provided that in the event of simultaneous assignments relating to this Agreement and the Additional Credit Agreement, the fees for such assignments shall total $3,000). Each Bank and the Company agree to execute such documents (including, without limitation, amendments to this Agreement and the other Credit Documents) as shall be necessary to effect the foregoing. Promptly following any assignment pursuant to this Section 11.04(b), the assigning Bank shall promptly notify the Company thereof. Nothing in this Section 11.04(b) shall prevent or prohibit any Bank from pledging its Loans or, if issued, Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank. (c) Notwithstanding any other provisions of this Section 11.04, no transfer or assignment of the interests or obligations of any Bank hereunder or any grant of participations therein shall be permitted if such transfer, assignment or grant would require the Company to file a registration statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any State. 11.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Company and the Administrative Agent or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document -65- preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Administrative Agent or any Bank would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Administrative Agent or the Banks to any other or further action in any circumstances without notice or demand. 11.06 PAYMENTS PRO RATA. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Company in respect of any Obligations of the Company hereunder, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its PRO RATA share of such payment) PRO RATA based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the Company to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; PROVIDED that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 11.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks. 11.07 CALCULATIONS; COMPUTATIONS. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Company to the Banks); PROVIDED that except as otherwise specifically provided herein, all computations determining compliance with Section 7, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1997 historical financial statements delivered to the Banks pursuant to Section 6.10(a); PROVIDED FURTHER, that in the event that the Accounting Standards Executive Committee of the AICPA adopts the statement of position (substantially in the proposed form as of the Original Effective Date) relating to computer software developed or obtained for internal use, and the Company's -66- independent auditors concur with such accounting change as it relates to the presentation of the Company's financial statements, then compliance with Section 8 will thereafter be determined giving effect to such statement of position. (b) All computations of interest (other than interest on Base Rate Loans) and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. All computations of interest on Base Rate Loans hereunder shall be made on the actual number of days elapsed over a year of 365 days. 11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, the Company hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Company hereby further irrevocably waives any claim that any such courts lack jurisdiction over the Company, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or any other Credit Document brought in any of the aforesaid courts, that any such court lacks jurisdiction over the Company. The Company irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Company, at its address for notices pursuant to Section 11.03, such service to become effective 30 days after such mailing. The Company hereby irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. The Company hereby represents and warrants that its chief executive office is located at 745 Fifth Avenue, New York, New York 10151, and the Company hereby further agrees that it shall not move its chief executive office unless it shall give the Administrative Agent not less than 30 days' prior written notice of its intention so to do. The Company agrees that (x) prior to moving its chief executive office outside New York City and (y) and if for any reason any designee, appointee and agent previously appointed pursuant to this sentence shall cease to be available to act as such, the Company shall designate a designee, appointee and agent or replacement designee, appointee and agent, as the case may be, in New York City on the terms and for the purposes of this provision satisfactory to the Administrative Agent. Nothing herein shall affect the right of the Administrative Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Company in any other jurisdiction. (b) The Company hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or -67- claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 11.09 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with the Company and the Administrative Agent. 11.10 EFFECTIVENESS. This Agreement shall become effective on the date (the "Effective Date") on which the Company, the Administrative Agent and each of the Banks shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Administrative Agent at its Notice Office or, in the case of the Banks, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Company and each Bank prompt written notice of the occurrence of the Effective Date. 11.11 HEADINGS DESCRIPTIVE. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.12 AMENDMENT OR WAIVER. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Company and the Required Banks; PROVIDED that no such change, waiver, discharge or termination shall, without the consent of each Bank (other than a Defaulting Bank) affected thereby, (i) extend the final scheduled maturity of any Loan (it being understood that any waiver of the application of any prepayment of or the method of application of any prepayment to the amortization of the Loans shall not constitute any such extension), or reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) or Fees thereon, or reduce the principal amount thereof, or increase the Revolving Loan Commitments of any Bank over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory repayment or reduction in the Total Revolving Loan Commitment shall not constitute a change in the terms of any Commitment of any Bank), (ii) release all or substantially all of the Subsidiary Guarantors from the Subsidiary Guaranty (except as expressly provided in the Credit Documents) and (iii) amend, modify or waive any provision of this Section, or Section 1.10, 1.11, 3.04, 8.01, 10.07, 11.01, 11.02, 11.04, 11.06 or 11.07(b), (iv) reduce the percentage specified in, or otherwise modify, the definition of, Required Banks, or (v) consent to the assignment or transfer by any Credit Party of any of its rights and obligations under this Agreement or any other Credit Document except in accordance with the terms hereof or thereof. No provision of Section 11 may be amended without the consent of the Administrative Agent. -68- 11.13 SURVIVAL. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 3.04, 10.07 or 11.01, shall survive the execution and delivery of this Agreement and the making and repayment of the Loans and the satisfaction of all other Obligations. 11.14 DOMICILE OF LOANS. Each Bank may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank, provided, that the Company shall not be responsible for costs arising under Sections 1.10, 1.11 or 3.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent such costs would not otherwise be applicable to such Bank in the absence of such transfer. 11.15 CONFIDENTIALITY. Each of the Banks agrees that it will use its best efforts not to disclose without the prior consent of the Company (other than to its employees, auditors, counsel or other professional advisors, to affiliates or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to the Company or any of its Subsidiaries which is furnished pursuant to this Agreement and which is designated by the Company to the Banks in writing as confidential, PROVIDED that any Bank may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state, provincial or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, and (e) to any prospective transferee in connection with any contemplated transfer of any of the Loans and/or Revolving Loan Commitments or any interest herein by such Bank, PROVIDED that such prospective transferee agrees to be bound by the provisions of this Section. 11.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. * * * -69- IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written. Address: 745 Fifth Avenue New York, NY 10151 PRIMEDIA INC. Telephone No.: (212) 745-0101 Telecopier No.: (212) 745-0199 By Attention: Beverly Chell, Esq. ----------------------------------- Title: THE CHASE MANHATTAN BANK, Individually and as Administrative Agent By ----------------------------------- Title: -70- BANKERS TRUST COMPANY, Individually and as Co-Syndication Agent By ----------------------------------- Title: THE BANK OF NEW YORK, Individually and as Co-Syndication Agent By ----------------------------------- Title: THE BANK OF NOVA SCOTIA, Individually, as Canadian Lender and as Documentation Agent By ----------------------------------- Title: BANK OF AMERICA NT&SA By ----------------------------------- Title: NATIONSBANK OF TEXAS, N.A. By ----------------------------------- Title: UNION BANK OF CALIFORNIA By ----------------------------------- Title: -71- SOCIETE GENERALE, NEW YORK BRANCH By ----------------------------------- Title: BANK OF MONTREAL, CHICAGO BRANCH By ----------------------------------- Title: BANK OF HAWAII By ----------------------------------- Title: PNC BANK, NATIONAL ASSOCIATION By ----------------------------------- Title: -72- ANNEX I LIST OF BANKS Bank Revolving Loan ---- Commitment ---------- The Chase Manhattan Bank $ 20,000,000 Bank of America NT&SA 20,000,000 The Bank of New York 20,000,000 The Bank of Nova Scotia 20,000,000 Bankers Trust Company 20,000,000 Union Bank of California, N.A. 10,000,000 Societe Generale, New York Branch 10,000,000 Bank of Montreal, Chicago Branch 10,000,000 Bank of Hawaii 10,000,000 PNC Bank, National Association 10,000,000 Total $150,000,000 ============ ANNEX II BANK ADDRESSES -------------- Bank Address - ---- ------- The Chase Manhattan Bank, N.A. 270 Park Avenue New York, New York 10017 Telephone No.: (212) _______ Telecopier No.: (212) _______ Attention: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Telephone No.: (212) 250-1724 Telecopier No.: (212) 250-7218 Attention: Gregory Shefrin The Bank of New York 1 Wall Street 16th Floor New York, New York 10286 Telephone No.: (212) 635-8608 Telecopier No.: (212) 635-8595 Attention: Ted Ryan Bank of Nova Scotia One Liberty Plaza, 26th Floor New York, New York 10006 Telephone No.: (212) 225-5042 Telecopier No.: (212) 225-5090 Attention: Vincent Fitzgerald Canadian Notice Office and Canadian Payment Office: International Banking Division Loan Administration and Agency Services 44 Kings Street West, 14th Floor Toronto, Ontario Canada M5H 1H1 Telephone No.: (416) 866-5901/2816/4089 Telecopier No.: (416) 866-5991 Attention: Wallace Yeung/ Nancy Buccat/Nancy Tong Bank of America NT&SA 335 Madison Avenue 5th Floor New York, New York 10017 Telephone No.: (212) 503-7980 Telecopier No.: (212) 503-7173 Attention: Thomas J. Kane NationsBank of Texas, N.A. Bank of America Entertainment/Media Group 335 Madison Avenue New York, New York 10017 Telephone No.: (212) 503-7980 Telecopier No.: (212) 503-7173 Attention: Thomas J. Kane Union Bank of California, N.A. 445 South Figueroa Street 15th Floor Los Angeles, California 90071 Telephone No.: (213) 236-5812 Telecopier No.: (213) 236-5747 Attention: Michael K. McShane Societe Generale, 1221 Avenue of the Americas New York Branch New York, New York 10020 Telephone No.: (212) 278-6852 Telecopier No.: (212) 278-6240 Attention: Elaine Khalil Bank of Montreal, 430 Park Avenue Chicago Branch New York, New York 10022 Telephone No.: (212) 605-1438 Telecopier No.: (212) 605-1648 Attention: Naghmeh Hashemifard Bank of Hawaii 1850 North Central Avenue Suite 400 Phoenix, Arizona 85004 Telephone No.: (602) 257-2485 Telecopier No.: (602) 257-2235 Attention: Eric Pelletier PNC Bank, National Association 1600 Market Street 21st Floor Philadelphia, Pennsylvania 19103 Telephone No.: (215) 585-5165 Telecopier No.: (215) 585-6680 Attention: John Iadanza ANNEX III SUBSIDIARIES ------------ ANNEX IV LIENS ----- ANNEX V PART A. EXISTING DEBT [To include existing Senior Notes and Non-Compete Notes] PART B. EXISTING CONTINGENT OBLIGATIONS ANNEX VI EXISTING PREFERRED STOCK ------------------------ EXHIBIT A FORM OF NOTICE OF BORROWING --------------------------- [Date] The Chase Manhattan Bank, as Administrative Agent for the Banks party to the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Attention: ____________________ Ladies and Gentlemen: The undersigned refers to the Credit Agreement, dated as of March 11, 1999 (as amended, modified or supplemented from time to time, the "Credit Agreement," the terms defined therein being used herein as therein defined), among PRIMEDIA Inc., certain Banks from time to time party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and you, as Administrative Agent for such Banks, and hereby gives you irrevocable notice, pursuant to Section 1.03 of the Credit Agreement, that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the "Proposed Borrowing") as required by Section 1.03 of the Credit Agreement: (i) The Business Day of the Proposed Borrowing is ________, 19__.1 (ii) The aggregate principal amount of the Proposed Borrowing is $_____________. (iii) The Proposed Borrowing is to consist of [Base Rate Loans] [Eurodollar Loans]. [(iv) The initial Interest Period for the Proposed Borrowing is ___ months.]2 - ---------- 1 A Notice of Borrowing must be given at least one Business Day prior to the date of the Proposed Borrowing in the case of Base Rate Loans and three Business Days prior to the date of the Proposed Borrowing in the case of Eurodollar Loans. 2 To be included for a Proposed Borrowing of Eurodollar Loans. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing: (A) the representations and warranties contained in the Credit Agreement or the other Credit Documents are and will be true and correct in all material respects, before and after giving effect to the Proposed Borrowing and to the application of the proceeds thereof, as though made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date; and (B) no Default or Event of Default has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds thereof. Very truly yours, PRIMEDIA Inc. By ---------------------------- Title: EXHIBIT B-1 [FORM OF OPINION OF SIMPSON, THACHER & BARTLETT] EXHIBIT B-2 [FORM OF OPINION OF BEVERLY C. CHELL, ESQ., COUNSEL TO THE CREDIT PARTIES] EXHIBIT B-3 __________, 19___ To: The Administrative Agent and various lending institutions (collectively, the "Banks") party to the Credit Agreement referred to below Re: Credit Agreement, dated as March 11, 1999 (the "Credit Agreement"), among PRIMEDIA Inc. (the "Borrower"), the Banks, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent") for the Banks Ladies and Gentlemen: We have acted as special counsel to the Administrative Agent under the Credit Agreement in connection with the execution and delivery of the Credit Agreement. This opinion is delivered to you pursuant to Section 4.03(iii) of the Credit Agreement. Unless otherwise defined herein, all capitalized terms used herein shall have the respective meanings set forth in the Credit Agreement. In connection with this opinion, we have examined the originals, or certified, conformed or reproduction copies, of all records, agreements, instruments and documents as we have deemed relevant or necessary as the basis for the opinions hereinafter expressed. In stating our opinion, we have assumed the genuineness of all signatures on original or certified copies, the authenticity of documents submitted to us as originals and the conformity to original or certified copies of all copies submitted to us as certified or reproduction copies. We have also assumed, for purposes of the opinions expressed herein, that the parties to the Credit Agreement have the corporate power and authority to enter into and perform the Credit Agreement and that the Credit Agreement has been duly authorized, executed and delivered by each such party. Exhibit B-3 Page 2 Based upon the foregoing, and subject to the limitations set forth herein, we are of the opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by equity principles (regardless of whether enforcement is sought in equity or at law). We have not been requested to render and, with your permission, we express no opinion as to the applicability to the obligations of the Borrower under the Credit Agreement of Section 548 of the Bankruptcy Code and Article 10 of the New York Debtor & Creditor Law relating to fraudulent transfers and obligations. This opinion is limited to the federal law of the United States of America and the laws of the State of New York. Very truly yours, EXHIBIT C [NAME OF COMPANY OR SUBSIDIARY GUARANTOR] Officers' Certificate I, the undersigned, [Chairman/Vice Chairman/President/Vice-President] of [NAME OF THE COMPANY OR SUBSIDIARY GUARANTOR], a corporation organized and existing under the laws of _______________ (the "Company"), DO HEREBY CERTIFY on behalf of the Company that: 1. This Certificate is furnished pursuant to Section 4.04 of the Credit Agreement, dated as of March 11, 1999 among PRIMEDIA Inc., the Banks from time to time party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (such Credit Agreement, as in effect on the date of this Certificate, being herein called the "Credit Agreement"). Unless otherwise defined herein capitalized terms used in this Certificate shall have the meanings assigned to those terms in the Credit Agreement. 2. The persons named below have been duly elected, have duly qualified and, as of and at all times since _____________3 (to and including the date hereof) have been officers of the Company, holding the respective offices below set opposite their names, and the signatures below set opposite their names are their genuine signatures. NAME4 OFFICE SIGNATURE ----- ------ --------- ---------- ---------- ---------- ---------- ---------- ---------- 3. Attached hereto as Exhibit A is a certified copy of the Certificate of Incorporation of the Company as filed with the relevant state governmental authority on the date indicated on such copy, together with all amendments thereto adopted through the date hereof. 4. Attached hereto as Exhibit B is a true and correct copy of the By-Laws of the Company as in effect on _______, together with all amendments thereto adopted through the date hereof. 5. Attached hereto as Exhibit C is a true and correct copy of resolutions duly adopted by the Board of - ---------- 3 Insert a date prior to the time of any corporate action relating to the Credit Agreement. 4 Include name, office and signature of each officer who will sign any Credit Document, including the officer who will sign the certification at the end of this certificate. Directors of the Company by unanimous written consent of the Board of Directors of the Company, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect. Except as attached hereto as Exhibit C, no resolutions have been adopted by the Board of Directors of the Company which deal with the execution, delivery or performance of any of the Credit Documents. [6. The Subordinated Exchange Debentures have not been issued as of the date hereof. 7. The Company currently has no direct or indirect Unrestricted Subsidiaries.]5 [8.] On the date hereof, the representations and warranties contained in the Credit Agreement or the other Credit Documents are true and correct in all material respects, both before and after giving effect to each Revolving Loan to be made on the date hereof and the application of the proceeds thereof, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. [9.] On the date hereof, no Default or Event of Default has occurred and is continuing or would result from the Revolving Loans to be made on the date hereof or from the application of the proceeds thereof. [10.] I know of no proceeding for the dissolution or liquidation of the Company or threatening its existence. - ---------- 5 Insert paragraphs 6 and 7 in Certificate for K-III Communications Corporation only. IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of _____________, 19__. [Name of Company] ------------------------------- Name: Title: I, the undersigned, [SECRETARY/ASSISTANT SECRETARY] of the Company, DO HEREBY CERTIFY that: 1. [Insert name of Person making the above certifications] is the duly elected and qualified ___________ of the Company and the signature above is [his/her] genuine signature. 2. The certifications made by [name] in items 2, 3, 4 and 5 above are true and correct. 3. I know of no proceeding for the dissolution or liquidation of the Company or threatening its existence. IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of ____________, 19__. [Name of Company] ------------------------------- Name: Title: EXHIBIT D SUBSIDIARY GUARANTY GUARANTY, dated as of _________, 19_____, made by the undersigned (each a "Guarantor" and together with any other entity that becomes a party hereto pursuant to Section 26 hereof, the "Guarantors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as hereinafter defined) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, PRIMEDIA Inc. (the "Company"), various financial institutions (the "Banks"), The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent"), have entered into a Credit Agreement, dated as of March 11, 1999 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans as contemplated therein (the Banks, the Co-Syndication Agents, the Documentation Agent and the Administrative Agent herein called the "Bank Creditors"); WHEREAS, on the date hereof the Company is a party to certain Interest Rate Protection Agreements with one or more Banks and/or an affiliate of one or more Banks and in the future the Company may enter into one or more additional Interest Rate Protection Agreements with one or more Banks and/or an affiliate of one or more Banks (any such Bank or affiliate of a Bank party to any such Interest Rate Protection Agreement (even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason) and their subsequent assigns, if any, herein called an "Interest Rate Protection Creditor", and all Interest Rate Protection Creditors, together with the Bank Creditors, collectively herein called the "Creditors"); WHEREAS, the Company owns, directly or indirectly, 100% of the capital stock of each Guarantor; WHEREAS, it is a condition precedent to the making of Loans under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Company under the Credit Agreement and, accordingly, desires to execute this Guaranty in order to satisfy the conditions described in the preceding paragraph and to induce the Banks to make Loans to the Company; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Exhibit D Page 2 Guarantor hereby makes the following representations and warranties to the Creditors and hereby covenants and agrees with each Creditor as follows: 1. Each Guarantor, jointly and severally, irrevocably and unconditionally, guarantees (i) to the Bank Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Loans made to (and to the extent issued, the Notes issued by) the Company under the Credit Agreement and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Company to the Bank Creditors under the Credit Agreement (including, without limitation, indemnities, Fees and interest thereon) now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with the terms of the Credit Documents by the Company (all such principal, interest, liabilities and obligations being herein collectively called the "Credit Agreement Obligations") and (ii) to each Interest Rate Protection Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Company under any Interest Rate Protection Agreements, whether now in existence or hereafter arising, and the due performance and compliance by the Company with all terms, conditions and agreements contained therein (all such obligations and liabilities being herein collectively called the "Interest Rate Protection Obligations", and together with the Credit Agreement Obligations, collectively, the "Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty up to the full amount of the Guaranteed Obligations against each Guarantor without proceeding against any other Guarantor or the Company, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. All payments by each Guarantor under this Guaranty shall be made on the same basis as payments by the Company under Sections 3.03 and 3.04 of the Credit Agreement. 2. Additionally, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations of the Company to the Creditors whether or not due or payable by the Company upon the occurrence in respect of the Company of any of the events specified in Section 8.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the indebtedness of the Company whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Company or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the indebtedness of the Company, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution, termination or increase, decrease or change in personnel by the Company or (e) any payment made to any Creditor on the indebtedness which any Creditor repays the Company Exhibit D Page 3 pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Company, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Company and whether or not any other Guarantor, any other guarantor or the Company be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Company or other circumstance which operates to toll any statute of limitations as to the Company shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives promptness, diligence, presentment, demand of payment, protest, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor or any other guarantor). 6. Any Creditor may at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew or alter, any of the Guaranteed Obligations, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Company or others or otherwise act or refrain from acting; (d) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Company to creditors of such Company; Exhibit D Page 4 (e) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Company to the Creditors regardless of what liabilities of the Company remain unpaid; (f) consent to or waive any breach of, or any act, omission or default under, any of the Interest Rate Protection Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Interest Rate Protection Agreements, the Credit Documents or any of such other instruments or agreements; and/or (g) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Company to recover full indemnity for any payments made pursuant to this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for any Creditor to inquire into the capacity or powers of the Company or any of their Subsidiaries or the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 9. Any indebtedness of the Company now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Company to the Creditors; and such indebtedness of the Company to any Guarantor, if the Administrative Agent, after an Event of Default has occurred, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Creditors and be paid over to the Creditors on account of the indebtedness of the Company to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Company to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the Exhibit D Page 5 same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until the Total Revolving Loan Commitment has terminated and all Guaranteed Obligations have been irrevocably paid in full in cash. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute and cannot be waived) to require the Creditors to (A) proceed against the Company, any other Guarantor, any other guarantor or any other party, (B) proceed against or exhaust any security held from the Company, any other Guarantor, any other guarantor or any other party or (C) pursue any other remedy in the Creditors' power whatsoever. Each Guarantor waives any defense based on or arising out of any defense of the Company, any other Guarantor, any other guarantor or any other party other than payment in full of the Guaranteed Obligations, including without limitation any defense based on or arising out of the disability of the Company, any other Guarantor, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Company other than payment in full of the Guaranteed Obligations. The Creditors may, at their election, foreclose on any security held by the Administrative Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Creditors may have against the Company or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Company or any other party or any security. (b) Each Guarantor waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional indebtedness. Each Guarantor assumes all responsibility for being and keeping itself informed of the Company's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. 11. The Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent acting upon the instructions of the Required Banks and that no Creditor shall have any right individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent for the benefit of the Creditors upon the terms of this Guaranty. The Creditors further agree that this Guaranty may not be enforced against any director, officer, employee or stockholder of any Guarantor. Exhibit D Page 6 12. In order to induce the Banks to make Loans pursuant to the Credit Agreement, and in order to induce the Interest Rate Protection Creditors to execute, deliver and perform the Interest Rate Protection Agreements, each Guarantor represents, warrants and covenants that: (a) Such Guarantor and each of its Restricted Subsidiaries (i) is a duly organized and validly existing corporation under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage (ii) is in good standing under the laws of the jurisdiction of its organization and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified, except, in the case of clauses (ii) and (iii) above, for such failures to be in good standing and failures to be so qualified which, in the aggregate, would not have a material adverse effect on the condition (financial or otherwise), operations, assets, liabilities or prospects of the Company and its Restricted Subsidiaries taken as a whole. (b) Such Guarantor has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Guaranty and has taken all necessary corporate action to authorize the execution, delivery and performance by it of this Guaranty. Such Guarantor has duly executed and delivered this Guaranty, and this Guaranty constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). (c) Neither the execution, delivery or performance by such Guarantor of this Guaranty, nor compliance by it with the terms and provisions hereof, (i) will contravene in any material respect any applicable provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of such Guarantor or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or other material agreement or instrument to which such Guarantor or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of such Guarantor or any of its Subsidiaries. (d) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Guaranty, or (ii) the Exhibit D Page 7 legality, validity, binding effect or enforceability of this Guaranty, except those which have been obtained or made. 13. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Total Revolving Loan Commitment and all Interest Rate Protection Agreements and when no Note remains outstanding and all Guaranteed Obligations have been paid in full, such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Section 6 or 7 of the Credit Agreement, and so that no Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 14. The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket costs and expenses (x) of each Creditor in connection with the enforcement of this Guaranty and, after an Event of Default shall have occurred and be continuing, the protection of such Creditor's rights hereunder and (y) of the Administrative Agent in connection with any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) employed by any of the Creditors or by the Administrative Agent, as the case may be). 15. This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Creditors and their successors and assigns. 16. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of the Required Banks (or to the extent required by Section 11.12 of the Credit Agreement, with the written consent of each Bank) and each Guarantor affected thereby (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). 17. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents has been made available to its principal executive officers and such officers are familiar with the contents thereof. 18. In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any "Event of Default" as defined in the Credit Agreement or any payment default under any Interest Rate Protection Agreement continuing after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not such Creditor shall have made any demand hereunder and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. Exhibit D Page 8 19. All notices, requests, demands or other communications pursuant hereto shall be deemed to have been duly given or made when delivered to the Person to which such notice, request, demand or other communication is required or permitted to be given or made under this Guaranty, addressed to such party at (i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below and (iii) in the case of any Interest Rate Protection Creditor, at such address as such Interest Rate Protection Creditor shall have specified in writing to the Guarantors; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 20. If claim is ever made upon any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (a) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (b) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Company), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or of any other instrument evidencing any liability of the Company, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 21. THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Guaranty or any other Credit Document may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts and hereby irrevocably waives any right it may have to object to the laying of venue of any such action or proceeding in the aforesaid courts and hereby further irrevocably waives and agrees not to plead or claim that any such action or proceeding has been brought in an inconvenient forum. Each Guarantor irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Guarantor at its address set forth opposite its signature below; such service to become effective 30 days after such mailing. Each Guarantor hereby irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Guarantor in any other jurisdiction. 22. In the event that (x) all of the capital stock of one or more Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of Section 7.02 of the Credit Agreement (or such sale or other disposition has been approved in writing by the Exhibit D Page 9 Required Banks (or all Banks if required by Section 11.12 of the Credit Agreement)) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, or (y) the Company designates any Guarantor which is a Partially-Owned Restricted Subsidiary as an Excluded Domestic Restricted Subsidiary by making a Non-Guarantor Designation with respect to such Guarantor in accordance with the terms of the Credit Agreement, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of any Person that owns, directly or indirectly, the capital stock of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 22). 23. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Guarantors and the Administrative Agent. 24. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 25. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. 26. At each time that (x) each Restricted Subsidiary of the Company is formed or acquired after the Initial Borrowing Date except, with respect to any newly formed or acquired Partially-Owned Restricted Subsidiary, to the extent the Company shall have made a Non-Guarantor Designation as to such Partially-Owned Restricted Subsidiary or (y) any Excluded Domestic Restricted Subsidiary is designated by the Company as a Subsidiary Guarantor, in each case, in accordance with the terms of the Credit Agreement, it shall (unless otherwise agreed in writing by the Required Banks, or to the extent required by Section 11.12 of the Credit Agreement, by all of the Banks) upon execution of a counterpart of this Guaranty or of a Subsidiary Assumption Agreement become a Guarantor for all purposes of this Guaranty. * * * Exhibit D Page 10 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written.
Address for Each Guarantor - -------------------------- 745 Fifth Avenue AMERICAN GUIDANCE SERVICE, INC. New York, New York 10151 AMERICAN HEAT VIDEO PRODUCTIONS, INC. Attention: Beverly Chell, Esq. THE APARTMENT GUIDE OF NASHVILLE, INC. ARGUS PUBLISHERS CORPORATION Telephone No.: (212) 745-0101 BACON'S INFORMATION, INC. Telecopier No.: (212) 745-0199 BANKERS CONSULTING COMPANY BOWHUNTER MAGAZINE, INC. CAMBRIDGE RESEARCH GROUP, LTD. CANOE & KAYAK, INC. CARDINAL BUSINESS MEDIA, INC. CARDINAL BUSINESS MEDIA HOLDINGS, INC. CHANNEL ONE COMMUNICATIONS CORP. CLIMBING, INC. COMMCORP, LLC COVER CONCEPTS MARKETING SERVICES, LLC COWLES BUSINESS MEDIA, INC. COWLES ENTHUSIAST MEDIA, INC. COWLES HISTORY GROUP, INC. CSK PUBLISHING COMPANY INCORPORATED CUMBERLAND PUBLISHING, INC. THE ELECTRONICS SOURCE BOOK, INC. EXCELLENCE IN TRAINING CORPORATION FILMS FOR THE HUMANITIES & SCIENCES, INC. FUNK & WAGNALLS YEARBOOK CORP. GARETH STEVENS, INC. GO LO ENTERTAINMENT, INC. GUINN COMMUNICATIONS, INC. HAAS PUBLISHING COMPANIES, INC. HEALTH & SCIENCES NETWORK, INC. HORSE & RIDER, INC. INTERMODEL PUBLISHING COMPANY, LTD. IDTN LEASING CORPORATION INDUSTRIAL TRAINING SYSTEMS CORPORATION INTELLICHOICE, INC. KITPLANES ACQUISITION COMPANY LAW ENFORCEMENT TELEVISION NETWORK, INC. LIFETIME LEARNING SYSTEMS, INC. LITTLE ROCK APARTMENT GUIDE, INC. LOCKERT JACKSON & ASSOCIATES, INC. Exhibit D Page 11 LOW RIDER PUBLISHING GROUP, INC. MADDUX PUBLISHING, INC. MCMULLEN ARGUS PUBLISHING, INC. MEMPHIS APARTMENT GUIDE, INC. MIRAMAR COMMUNICATIONS, INC. PICTORAL, INC. PLAZA COMMUNICATIONS, INC. PRIMEDIA HOLDINGS III INC. PRIMEDIA INFORMATION INC. PRIMEDIA INTERTEC CORPORATION PRIMEDIA MAGAZINES INC. PRIMEDIA MAGAZINE FINANCE INC. PRIMEDIA REFERENCE INC. PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC. PRIMEDIA VENTURES, INC. PRIMEDIA WORKPLACE LEARNING, INC. QWIZ, INC. R.E.R. PUBLISHING CORPORATION RETAILVISION, INC. SIMBA INFORMATION SOUTHWEST ART, INC. SYMBOL OF EXCELLENCE PUBLISHERS, INC. TEL-A-TRAIN, INC. THE VIRTUAL FLYSHOP, INC. TI-IN ACQUISITION CORPORATION TSECRP, INC. VEGETARIAN TIMES, INC. WEEKLY READER CORPORATION WESCOTT COMMUNICATIONS MICHIGAN, INC. WESTCOTT ECI, INC. WESTERN EMPIRE PUBLICATIONS, INC.
By ------------------------------- Title Accepted and Agreed to: THE CHASE MANHATTAN BANK, as Administrative Agent By ----------------------------------- Title: EXHIBIT E CONTRIBUTION AGREEMENT ---------------------- CONTRIBUTION AGREEMENT, dated as of _______, 19___, among each of the Subsidiary Guarantors (as defined in the Credit Agreement referred to below) of PRIMEDIA Inc. (the "Company") listed on the signature pages hereto (each a "Guarantor" and together with any other entity that becomes a party hereto pursuant to Section 11 hereof, the "Guarantors"). As used herein, the term "Contributor" shall mean each of the Guarantors required to make any payment to any other Guarantor pursuant to Section 1 of this Contribution Agreement. Except as otherwise defined herein, capitalized terms used herein and not otherwise defined shall have the meaning assigned to those terms in the Credit Agreement (as hereinafter defined). W I T N E S S E T H : WHEREAS, the Company, various lending institutions from time to time party thereto (the "Banks"), The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, have entered into a Credit Agreement, dated as of March 11, 1999 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Revolving Loans as contemplated therein; WHEREAS, it is a condition precedent to the making of Loans under the Credit Agreement that each Guarantor shall have executed and delivered the Subsidiary Guaranty; WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Company under the Credit Agreement and, accordingly, each Guarantor has executed and delivered the Subsidiary Guaranty in order to satisfy the condition precedent described in the preceding paragraph and to induce the Banks to make Loans to the Company; WHEREAS, pursuant to the Subsidiary Guaranty, each of the Guarantors has agreed unconditionally and irrevocably, and jointly and severally, to guaranty as primary obligor and not merely as surety the Guaranteed Obligations (as defined in the Subsidiary Guaranty); and WHEREAS, the Guarantors wish to enter into this Contribution Agreement to effect an equitable sharing of the Guaranteed Obligations; NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. CONTRIBUTION. At any time a payment in respect of the Guaranteed Obligations is made under the Subsidiary Guaranty, the right of contribution, if any, of each Guarantor against each Contributor shall be determined as provided in the immediately following Exhibit E Page 2 sentence, with the right of contribution of each Guarantor to be revised and restated as of each date on which a payment (a "Relevant Payment") is made on the Guaranteed Obligations under the Subsidiary Guaranty. At any time that a Relevant Payment is made by a Guarantor that results in the aggregate payments made by such Guarantor in respect of the Guaranteed Obligations to and including the date of the Relevant Payment exceeding such Guarantor's Contribution Percentage (as hereinafter defined) of the aggregate payments made by all Guarantors in respect of the Guaranteed Obligations to and including the date of the Relevant Payment (such excess, the "Aggregate Excess Amount"), each such Guarantor shall have a right of contribution against each Contributor who has made payments in respect of the Guaranteed Obligations to and including the date of the Relevant Payment in an aggregate amount less than such Contributor's Contribution Percentage of the aggregate payments made to and including the date of the Relevant Payment by all Guarantors in respect of the Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate Deficit Amount") in an amount equal to (x) a fraction the numerator of which is the Aggregate Excess Amount of such Guarantor and the denominator of which is the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate Deficit Amount of such Contributor. A Guarantor's right of contribution, if any, pursuant to the preceding sentences shall arise at the time of each computation, subject to adjustment to the time of any subsequent computation; PROVIDED, that no Guarantor may take any action to enforce such right until the Guaranteed Obligations have been paid in full and the Total Revolving Loan Commitment has been terminated, it being expressly recognized and agreed by all parties hereto that any Guarantor's right of contribution arising pursuant to this Contribution Agreement against any Contributor shall be expressly junior and subordinate to such Contributor's obligations and liabilities in respect of the Guaranteed Obligations and any other obligations owing under the Subsidiary Guaranty. As used in this Agreement, (i) each Contributor's "Contribution Percentage" shall mean the percentage obtained by dividing (x) the Adjusted Net Worth of such Contributor by (y) the aggregate Adjusted Net Worth of all Guarantors; (ii) the "Adjusted Net Worth" of each Guarantor shall mean the greater of (x) the Net Worth of such Guarantor or (y) zero; and (iii) the "Net Worth" of each Guarantor shall mean the amount by which the fair salable value of such Guarantor's assets on the Initial Borrowing Date exceeds its existing debts and other liabilities (including contingent liabilities, but without giving effect to (1) any Guaranteed Obligations arising under the Subsidiary Guaranty, (2) the obligations of such Guarantor in respect of the Additional Facility Documents, (3) any obligations arising under Article 10 of the respective indentures governing the terms of the Senior Notes and (4) any obligations of such Guarantor in respect of the Company's other Indebtedness for borrowed money), in each case after giving effect to the transactions occurring on the Initial Borrowing Date. 2. NO OTHER CONTRIBUTION OR SUBROGATION RIGHTS. All parties hereto recognize and agree that, except for any right of contribution arising pursuant to Section 1, each Guarantor who makes any payment in respect of the Guaranteed Obligations shall have no right of contribution or subrogation against any other Guarantor in respect of such payment, any such right of contribution or subrogation arising under law or otherwise being expressly waived by all Guarantors. Exhibit E Page 3 3. CONTRIBUTION RIGHT AS AN ASSET. Each of the Guarantors recognizes and acknowledges that the rights to contribution arising hereunder shall constitute an asset in favor of the party entitled to such contribution. In this connection, each Guarantor has the right to waive its contribution right against any other Guarantor to the extent that after giving effect to such waiver such Guarantor would remain solvent, in the determination of the Required Banks. 4. AMENDMENT OR WAIVER. Any provision of this Contribution Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the parties hereto and consented to by the Required Banks. 5. BENEFIT OF AGREEMENT. The provisions of this Contribution Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. To the extent any such successor shall be a successor to all or part of the assets of a Guarantor, such successor shall also constitute a Guarantor, with a Contribution Percentage equal to the Contribution Percentage of the predecessor corporation or as otherwise consented to by the Required Banks. 6. PRESERVATION OF RIGHTS. This Contribution Agreement shall not limit any right which any Guarantor may have against any other Person which is not a party hereto. 7. TERMINATION. This Contribution Agreement, as it may be amended, supplemented or otherwise modified from time to time, shall remain in effect and shall not be terminated as to any Guaranteed Obligation until such Guaranteed Obligation has been discharged or otherwise satisfied in accordance with the laws of the State of New York. 8. GOVERNING LAW. THIS CONTRIBUTION AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 9. COUNTERPARTS. This Contribution Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 10. EFFECTIVENESS. This Contribution Agreement shall become effective upon execution hereof by each such party and delivery of executed counterparts hereof by them to the Administrative Agent. 11. ADDITIONAL GUARANTORS. At each time that (x) each Restricted Subsidiary of the Company is formed or acquired after the Initial Borrowing Date except, with respect to any newly formed or acquired Partially-Owned Restricted Subsidiary, to the extent the Company shall have made a Non-Guarantor Designation as to such Partially-Owned Restricted Subsidiary or (y) any Excluded Domestic Restricted Subsidiary is designated by the Company as a Subsidiary Guarantor, in each case, in accordance with the terms of the Credit Agreement, it Exhibit E Page 4 shall upon execution of a counterpart hereof or of a Subsidiary Assumption Agreement become a Guarantor for all purposes of this Contribution Agreement. * * * Exhibit E Page 5 IN WITNESS WHEREOF, the parties hereto have caused this Contribution Agreement to be duly executed by their respective authorized officers as of the date first above written. AMERICAN GUIDANCE SERVICE, INC. AMERICAN HEAT VIDEO PRODUCTIONS, INC. THE APARTMENT GUIDE OF NASHVILLE, INC. ARGUS PUBLISHERS CORPORATION BACON'S INFORMATION, INC. BANKERS CONSULTING COMPANY BOWHUNTER MAGAZINE, INC. CAMBRIDGE RESEARCH GROUP, LTD. CANOE & KAYAK, INC. CARDINAL BUSINESS MEDIA, INC. CARDINAL BUSINESS MEDIA HOLDINGS, INC. CHANNEL ONE COMMUNICATIONS CORP. CLIMBING, INC. COMMCORP, LLC COVER CONCEPTS MARKETING SERVICES, LLC COWLES BUSINESS MEDIA, INC. COWLES ENTHUSIAST MEDIA, INC. COWLES HISTORY GROUP, INC. CSK PUBLISHING COMPANY INCORPORATED CUMBERLAND PUBLISHING, INC. THE ELECTRONICS SOURCE BOOK, INC. EXCELLENCE IN TRAINING CORPORATION FILMS FOR THE HUMANITIES & SCIENCES, INC. FUNK & WAGNALLS YEARBOOK CORP. GARETH STEVENS, INC. GO LO ENTERTAINMENT, INC. GUINN COMMUNICATIONS, INC. HAAS PUBLISHING COMPANIES, INC. HEALTH & SCIENCES NETWORK, INC. HORSE & RIDER, INC. INTERMODEL PUBLISHING COMPANY, LTD. IDTN LEASING CORPORATION INDUSTRIAL TRAINING SYSTEMS CORPORATION INTELLICHOICE, INC. KITPLANES ACQUISITION COMPANY LAW ENFORCEMENT TELEVISION NETWORK, INC. LIFETIME LEARNING SYSTEMS, INC. LITTLE ROCK APARTMENT GUIDE, INC. LOCKERT JACKSON & ASSOCIATES, INC. LOW RIDER PUBLISHING GROUP, INC. MADDUX PUBLISHING, INC. Exhibit E Page 6 MCMULLEN ARGUS PUBLISHING, INC. MEMPHIS APARTMENT GUIDE, INC. MIRAMAR COMMUNICATIONS, INC. PICTORAL, INC. PLAZA COMMUNICATIONS, INC. PRIMEDIA HOLDINGS III INC. PRIMEDIA INFORMATION INC. PRIMEDIA INTERTEC CORPORATION PRIMEDIA MAGAZINES INC. PRIMEDIA MAGAZINE FINANCE INC. PRIMEDIA REFERENCE INC. PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC. PRIMEDIA VENTURES, INC. PRIMEDIA WORKPLACE LEARNING, INC. QWIZ, INC. R.E.R. PUBLISHING CORPORATION RETAILVISION, INC. SIMBA INFORMATION SOUTHWEST ART, INC. SYMBOL OF EXCELLENCE PUBLISHERS, INC. TEL-A-TRAIN, INC. THE VIRTUAL FLYSHOP, INC. TI-IN ACQUISITION CORPORATION TSECRP, INC. VEGETARIAN TIMES, INC. WEEKLY READER CORPORATION WESCOTT COMMUNICATIONS MICHIGAN, INC. WESTCOTT ECI, INC. WESTERN EMPIRE PUBLICATIONS, INC. By --------------------------------- Title: EXHIBIT F FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT ------------------------------------------- DATE: ________, 19__ Reference is made to the Credit Agreement described in Item 2 of Annex I annexed hereto (as such agreement may hereafter be amended, modified or supplemented from time to time, the "Credit Agreement"). Unless otherwise defined in Annex I attached hereto, all capitalized terms shall have their respective meanings as set forth in the Credit Agreement. _____________ (the "Assignor") and ______________ (the "Assignee") hereby agree as follows: 1. The Assignor hereby sells and assigns to the Assignee without recourse and without representation or warranty (other than as expressly provided herein), and the Assignee hereby purchases and assumes from the Assignor, that interest in and to all of the Assignor's rights and obligations under the Credit Agreement as of the date hereof which represents the percentage interest specified in Item 4 of Annex I (the "Assigned Share") of all of the outstanding rights and obligations under the Credit Agreement including, without limitation, with respect to the Assigned Share of the Total Revolving Loan Commitment and all rights and obligations with respect to the Assigned Share of the Loans. 2. The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any liens or security interests; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the other Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or any Subsidiary Guarantor or the performance or observance by the Borrower or any Subsidiary Guarantor of any of its obligations under the Credit Agreement or the other Credit Documents or any other instrument or document furnished pursuant thereto. 3. The Assignee (i) confirms that it has received a copy of the Credit Agreement and the other Credit Documents, together with copies of the financial statements referred to therein and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption Agreement; (ii) agrees that it will, independently and without reliance upon the Administrative Agent, the Assignor or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iii) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Credit Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; [and] (iv) agrees that it will Exhibit F Page 2 perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank[; and (v) attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such taxes at a rate reduced by an applicable tax treaty].6 4. Following the execution of this Assignment and Assumption Agreement by the Assignor and the Assignee, an executed original hereof (together with all attachments) will be delivered to the Administrative Agent. The effective date of this Assignment and Assumption Agreement shall be the date of execution hereof by the Assignor and the Assignee and the consent hereto by the Administrative Agent and the Company, and receipt by the Administrative Agent of the nonrefundable assignment fee referred to in Section 11.04(b) of the Credit Agreement, unless a later date is otherwise specified in Item 5 of Annex I hereto (the "Settlement Date"). 5. Upon the delivery of a fully executed original hereof to the Administrative Agent, as of the Settlement Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption Agreement, have the rights and obligations of a Bank thereunder and under the other Credit Documents and (ii) the Assignor shall, to the extent provided in this Assignment and Assumption Agreement, relinquish its rights and be released from its obligations under the Credit Agreement and the other Credit Documents. 6. It is agreed that the Assignee shall be entitled to (x) all interest on the Assigned Share of the Loans at the rates specified in Item 6 of Annex I; and (y) all Commitment Fees on the Assigned Share of the Total Revolving Loan Commitment at the rate specified in Item 7 of Annex I; which, in each case, accrue on and after the Settlement Date, such interest and Commitment Fees, to be paid by the Administrative Agent directly to the Assignee. It is further agreed that all payments of principal made on the Assigned Share of the Loans which occur on and after the Settlement Date will be paid directly by the Administrative Agent to the Assignee. Upon the Settlement Date, the Assignee shall pay to the Assignor an amount specified by the Assignor in writing which represents the Assigned Share of the principal amount of the respective Loans made by the Assignor pursuant to the Credit Agreement which are outstanding on the Settlement Date, net of any closing costs, and which are being assigned hereunder. The Assignor and the Assignee shall make all appropriate adjustments in payments under the Credit Agreement for periods prior to the Settlement Date directly between themselves on the Settlement Date. - ---------- 6 If the Assignee is organized under the laws of a jurisdiction outside the United States. Exhibit F Page 3 7. THIS ASSIGNMENT AND ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. * * * Exhibit F Page 4 IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written, such execution also being made on Annex I hereto. [NAME OF ASSIGNOR], as Assignor By____________________________ Title: [NAME OF ASSIGNEE], as Assignee By____________________________ Title: ANNEX I ANNEX FOR ASSIGNMENT AND ASSUMPTION AGREEMENT ANNEX I 1. The Borrower: PRIMEDIA Inc. 2. Name and Date of Credit Agreement: Credit Agreement, dated as of March 11, 1999, among PRIMEDIA Inc., the Banks from time to time party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent. 3. Date of Assignment and Assumption Agreement: 4. Amounts (as of date of item #3 above):
Outstanding Revolving Loan Principal of Loans Commitment ------------------ ---------- a. Aggregate Amount for all Banks $______ $______ b. Assigned Share ______% ______% c. Amount of Assigned Share $______ $______
5. Settlement Date: 6. Rate of Interest to the Assignee: As set forth in Section 1.08 of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee)7 [7. Commitment Fees As set forth in Section 2.01(a) of the Credit Agreement (unless otherwise agreed to by the Assignor and the Assignee)]8 - ---------- 7 The Company and the Administrative Agent shall direct the entire amount of the interest to the Assignee at the rate set forth in Section 1.08 of the Credit Agreement, with the Assignor and Assignee effecting any agreed upon sharing of interest through payments by the Assignee to the Assignor. 8 The Company and the Administrative Agent shall direct the entire amount of the Commitment Fees to the Assignee at the rate set forth in Section 2.01(a) of the Credit Agreement, with the Assignor and the Assignee effecting any agreed upon sharing of Commitment Fees through payment by the Assignee to the Assignor. Page 2 8. Notice: ASSIGNOR: --------------------------------- --------------------------------- --------------------------------- --------------------------------- Attention: Telephone: Telecopier: Reference: ASSIGNEE: --------------------------------- --------------------------------- --------------------------------- --------------------------------- Attention: Telephone: Telecopier: Reference: Payment Instructions: ASSIGNOR: --------------------------------- --------------------------------- --------------------------------- --------------------------------- Attention: Reference: ASSIGNEE: --------------------------------- --------------------------------- --------------------------------- --------------------------------- Attention: Reference: Page 3 Accepted and Agreed: [NAME OF ASSIGNEE] [NAME OF ASSIGNOR] By By ------------------------ -------------------------- ------------------------ -------------------------- (Print Name and Title) (Print Name and Title) FORM OF SUBSIDIARY ASSUMPTION AGREEMENT --------------------------------------- SUBSIDIARY ASSUMPTION AGREEMENT (the "Agreement") dated as of _________, _____, by _______________, a _________ corporation (the "New Restricted Subsidiary"). Unless otherwise defined herein, capitalized terms used herein and defined in the Credit Agreement referred to below are used herein as so defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, PRIMEDIA Inc. (the "Company"), various financial institutions party thereto, The Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent, have entered into an Credit Agreement dated as of March 11, 1999 (as amended through the date hereof, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, each Wholly-Owned Restricted Subsidiary of the Company (other than Excluded Foreign Restricted Subsidiaries) has entered into a Subsidiary Guaranty, dated as of _________, 19____ (as amended through the date hereof, the "Subsidiary Guaranty"); WHEREAS, in connection with the Credit Agreement, each Wholly-Owned Restricted Subsidiary of the Company (other than Excluded Foreign Restricted Subsidiaries) has entered into a Contribution Agreement, dated as of _________, 19___ (as amended through the date hereof, the "Contribution Agreement" and together with the Subsidiary Guaranty, the "Subsidiary Documents"); WHEREAS, on _________, ____, the New Restricted Subsidiary was [[newly-formed/acquired] as a [___%] directly owned Subsidiary of _______________, a ___________ corporation][an Excluded Domestic Restricted Subsidiary [__%] directly owned by ______________, a ______________ corporation, that has been designated by the Company as a Subsidiary Guarantor in accordance with the terms of the Credit Agreement]; WHEREAS, pursuant to Section 7.14 of the Credit Agreement, the New Restricted Subsidiary desires to become a party to the Subsidiary Documents; and WHEREAS, the New Restricted Subsidiary desires to execute and deliver this Agreement in order to become a party to each of the Subsidiary Documents; NOW, THEREFORE, IT IS AGREED: 1. SUBSIDIARY GUARANTY. By executing and delivering this Agreement, the New Restricted Subsidiary hereby becomes a party to the Subsidiary Guaranty as a "Guarantor" thereunder, and hereby expressly assumes all obligations and liabilities of a "Guarantor" thereunder. The New Restricted Subsidiary hereby makes each of the representations and Page ii warranties contained in Section 12 of the Subsidiary Guaranty on the date hereof, after giving effect to this Agreement. 2. CONTRIBUTION AGREEMENT. By executing and delivering this Agreement, the New Restricted Subsidiary hereby becomes a party to the Contribution Agreement as a "Guarantor" thereunder, and hereby expressly assumes all obligations and liabilities of a "Guarantor" thereunder. 3. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. * * * IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed and delivered as of the date first above written. [NEW RESTRICTED SUBSIDIARY] By___________________________ Title: ACKNOWLEDGED: THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks By_______________________________________ Title: EX-10.13 24 EXHIBIT 10.13 Exhibit 10.13 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT dated as of February 5, 1998 between PRIMEDIA Inc., a Delaware corporation ("PRIMEDIA") and KKR 1996 Fund L.P., a Delaware limited partnership ("KKR 2996") I. STOCK SALE TO KKR 1996 1.1 Purchase of Common Stock. Subject to all of the terms and conditions of this Agreement, KKR 1996 hereby agrees to purchase from PRIMEDIA, and PRIMEDIA agrees to sell to KKR 1996, 16,666,667 shares of PRIMEDIA common stock, par value $.01 per share ("KKR 1996 Shares"), for $12 per share, for an aggregate purchase price of $200,000,004 (the "Purchase Price"). Such purchase shall be made 20 days after an information statement regarding the purchase has been sent to the stockholders of PRIMEDIA pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended, or the earliest business day thereafter upon which PRIMEDIA receives clearance of the purchase under the Hart-Scott-Rodino Antitrust Improvements Act. The closing of the purchase will take place at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017. At the closing KKR 1996 will pay to PRIMEDIA the Purchase Price, in immediately available funds, against its receipt of duly executed stock certificates, representing the KKR 1996 Shares, registered in the name of KKR 1996 on the books of Primedia. 2 1.2 Management Rights. After the Closing and for so long as the purchaser owns any equity or debt securities of PRIMEDIA, KKR 1996 shall have the right to elect at least one member of the Board of Directors to PRIMEDIA. KKR 1996 shall also have at all times after the closing the right to (i) inspect and copy books and records of PRIMEDIA; (ii) visit and inspect the PRIMEDIA properties; (iii) receive financial statements, operating reports and budgets of PRIMEDIA; (iv) receive materials sent to the PRIMEDIA Board of Directors; and (v) consult with and provide non-binding advice to PRIMEDIA management on significant corporate actions. II. PURCHASER'S REPRESENTATIONS, WARRANTIES AND AGREEMENTS 2.1 Investment Intention. KKR 1996 represents and warrants that it is purchasing the KKR 1996 Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution of any thereof. KKR 1996 agrees that it will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate or otherwise dispose of any of the KKR 1996 Shares (or solicit any offers to buy, purchase, or otherwise acquire or take a pledge of any of the Shares), except in compliance with the Securities Act of 1933, as amended (the "Act"), and the rules and regulations thereunder. 2.2 Legends. The certificate (or certificates) representing the KKR 1996 Shares shall bear the following legend (until such time as subsequent transfers thereof are no longer restricted in accordance with the Act): 3 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS OR THE RULES AND REGULATIONS THEREUNDER." 2.3 Federal Securities Laws Matters. KKR 1996 represents that it is familiar with Release No. 5226 issued by the Securities and Exchange Commission (the "SEC") under the Act, it has consulted with its counsel with regard thereto, and it is fully aware of the position of the SEC limiting the resale to the public of any of the KKR 1996 Shares. 2.4 Compliance with Rule 144. If any of the KKR 1996 Shares are disposed of in accordance with Rule 144 under the Act, KKR 1996 shall deliver to PRIMEDIA at or prior to the time of such disposition an executed copy of Form 144 (if required by Rule 144) and such other documentation as PRIMEDIA may reasonably require in connection with such sale. 2.5 Ability to Bear Risk. KKR 1996 represents and warrants that (a) the financial situation of KKR 1996 is such that it can afford to bear the economic risk of holding the unregistered KKR 1996 Shares for an indefinite period and (b) it can afford to suffer the complete loss of its investment in the KKR 1996 Shares. 2.6 Access to Information; Evaluation of Risks. KKR 1996 represents and warrants that (a) it understands and has taken cognizance of all the risk factors related to the purchase of the KKR 1996 Shares, (b) it has received and carefully reviewed information regarding the business of PRIMEDIA and has been granted the opportunity to ask questions of, and receive 4 answers from, representatives of PRIMEDIA concerning the terms and conditions of the purchase of the KKR 1996 Shares and to obtain any additional information which it deems necessary to verify the accuracy or completeness of the information furnished to it and (c) its knowledge and experience in financial and business matters is such that it is capable of evaluating the risks of the investment in the KKR 1996 Shares. III. RULE 144 PRIMEDIA agrees that it will use its best efforts to file in a timely manner all reports required to be filed by it pursuant to the Securities Exchange Act of 1934, as amended, and, upon request of KKR 1996 or a transferee of KKR 1996 Shares, will furnish KKR 1996 with such information as may be necessary to enable KKR 1996 to effect routine sales pursuant to Rule 144 under the Act. IV. REGISTRATION RIGHTS KKR 1996 will have such rights to have the KKR 1996 Shares registered under the Act as may be provided in any Registration Rights Agreement entered into by KKR 1996, PRIMEDIA and other holders or purchasers of shares of Common Stock of PRIMEDIA on or after the date hereof. V. MISCELLANEOUS 5.1 Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified mail, return receipt requested, 5 postage prepaid, to the parties to this Agreement at the following addresses or to such other address as either party to this Agreement shall specify by notice to the other: if to PRIMEDIA, to it at: PRIMEDIA Inc. 745 Fifth Avenue New York, NY 10151 Attention: Beverly Chell, Esq. With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: Gary I. Horowitz, Esq. if to KKR 1996, to it at: KKR 1996 Fund L.P. 9 West 57th Street New York, NY 10019 Attention: Perry Golkin With a copy to: Latham & Watkins 885 Third Avenue New York, NY 10022 Attention: Scott Bowie, Esq. All such notices and communications shall be deemed to have been received on the date of delivery or on the third business day after the mailing thereof. 5.2 Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Except as provided in Article V, nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective 6 successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein. 5.3 Waiver. Either party hereto may by written notice to the other (a) extend the time for the performance of any of the obligations or other actions of the other under this Agreement; (b) waive compliance with any of the conditions or covenants of the other contained in this Agreement; and (c) waive or modify performance of any of the obligations of the other under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by any party to exercise any right or privilege hereunder shall be deemed a waiver of such party's rights or privileges hereunder or shall be deemed a waiver of such party's rights to exercise the same at any subsequent time or times hereunder. 5.4 Amendment. This Agreement may be amended, modified or supplemented only by a written instrument executed by KKR 1996 and PRIMEDIA. 5.5 Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by 7 reason hereof shall be assignable by PRIMEDIA or KKR 1996 without the prior written consent of the other party. 5.6 Expenses. PRIMEDIA agrees that, whether or not the transactions contemplated by this Agreement are consummated, PRIMEDIA will pay or cause to be paid all costs and expenses arising in connection with the preparation, execution, administration and enforcement of, and the preservation of rights under, this Agreement, including, without limitation: (a) all taxes (other than taxes based on income), fees or other charges which may be payable in connection with the sale or purchase of the KKR 1996 Shares pursuant to this Agreement; (b) all expenses incurred by KKR 1996 in connection with the maintenance of its books and records, preparation of tax returns and delivery of tax information to its partners; (c) an allocable portion of certain expenses incurred by KKR 1996 in connection with its organization in an amount not to exceed $10,000 in the aggregate, including, without limitation, legal fees; and (d) all reasonable travel and other out-of-pocket expenses of the general partner of KKR 1996 incurred in connection with KKR 1996's ownership of the KKR 1996 Shares. In addition, after consummation of the transactions contemplated by this Agreement and so long as KKR 1996 owns any shares of common stock acquired pursuant to this Agreement, PRIMEDIA will reimburse KKR 1996 or the general partner of KKR 1996 for all 8 costs incurred in transmitting information regarding PRIMEDIA to the limited partners of KKR 1996 or in distributing dividends or other distributions received from PRIMEDIA to the limited partners of KKR 1996. 5.7 Indemnification. Whether or not the transactions contemplated hereby are consummated, PRIMEDIA agrees to indemnify and hold harmless KKR 1996, its limited and general partners and its affiliates (and the partners, members, directors, officers, affiliates and controlling persons of each of the foregoing) (each a "KKR 1996 Indemnitee") from and against any liabilities, obligations, losses, damages, deficiencies, obligations, fines and assessments, penalties, actions, judgments, suits, claims, costs, injuries, demands, proceedings, investigations, arbitrations (including shareholder claims, actions, injuries, demands, suits, judgments, proceedings, investigations or arbitrations) and disbursements, including, without limitation, accountant's and attorney's fees and expenses incurred by a KKR 1996 Indemnitee before or after the date of this Agreement and arising out of, resulting from, or relating to (i) the operations of PRIMEDIA, (ii) KKR 1996's purchase and/or ownership of the KKR 1996 Shares or (iii) any litigation to which a KKR 1996 Indemnitee is made a party in its capacity as a shareholder or owner (or a partner, member, director, officer, affiliate or controlling person of a shareholder or owner) of securities of PRIMEDIA. 5.8 Limited Liability of Partners. Notwithstanding any other provision of this Agreement, neither the general 9 partner nor the limited partners nor any future general or limited partner of KKR 1996 shall have any personal liability for performance of any obligation of KKR 1996 under this Agreement in excess of the respective capital contribution of such general partner and limited partners to KKR 1996. 5.9 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of New York. 5.10 Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 5.11 Counterparts. This Agreement may be executed in any number of 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. 10 IN WITNESS WHEREOF, PRIMEDIA and KKR 1996 have executed this Agreement as of the day and year first above written. PRIMEDIA INC. By: /s/ Beverly C. Chell ---------------------------------- Name: Beverly C. Chell Title: Vice Chairman KKR 1996 FUND L.P. By: KKR Associates 1996 L.P. Its General Partner By: KKR 1996 GP LLC By: /s/ Perry Golkin ----------------------------- Member EX-10.15 25 EXHIBIT 10.15 Exhibit 10.15 AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT This AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of February 5, 1998 is made and entered into by PRIMEDIA Inc., formerly K-III Communications Corporation, a Delaware corporation (the "Company"), KKR 1996 Fund L.P., a Delaware limited partnership ("KKR 1996"), Publishing Associates, L.P., a Delaware limited partnership ("Publishing Associates"), MA Associates, L.P., a Delaware limited partnership ("MA Associates"), FP Associates, L.P., a Delaware limited partnership ("FP Associates"), Magazine Associates, L.P., a Delaware limited partnership ("Magazine Associates"), KKR Partners II, L.P., a Delaware limited partnership ("Partners"), and Channel One Associates, L.P., a Delaware limited partnership ("Channel One Associates"). 1. Background. (a) Pursuant to a Securities Purchase Agreement, dated as of February 5, 1998 (the "Stock Purchase Agreement"), between the Company and KKR 1996, the Company has sold to KKR 1996 an aggregate of 16,666,667 shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $12 per share, for an aggregate purchase price of $200,000,004. (b) The Company and Channel One Associates are parties to a Registration Rights Agreement dated as of March 1, 1995. This Amended and Restated Registration Rights amends and restates such agreement in its entirety. (c) The Company, Publishing Associates, MA Associates, FP Associates, Magazine Associates and Partners are parties to an Amended and Restated Registration Rights Agreement dated as of December 31, 1993. This Amended and Restated Registration Rights Agreement amends and restates such agreement in its entirety. 2. Definitions. As used in this Agreement, the following capitalized terms shall have the following respective meanings: Exchange Act - The Securities Exchange Act of 1934, as amended. Holder - Any party hereto (other than the Company) and any holder of Registrable Securities who agrees in writing to be bound by the provisions of this Agreement. Person - Any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization or government or any department or agency thereof. Registrable Securities - Any Common Stock issued or issuable to any party to this Amended and Restated Registration Rights Agreement (other than the Company) and any Common Stock 2 which may be issued or distributed in respect of such Common Stock by way of stock dividend or stock split or other distribution, recapitalization or reclassification. As to any particular Registrable Securities, once issued such Securities shall cease to be Registrable Securities when (i) a registration statement with respect to the sale of such Securities shall have become effective under the Securities Act and such Securities shall have been disposed of in accordance with such registration statement, (ii) they shall have been distributed to the public pursuant to Rule 144 or 144A (or any successor provisions) under the Securities Act, (iii) they shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of them shall not require registration or qualification of them under the Securities Act or any state securities or blue sky law then in force, or (iv) they shall have ceased to be outstanding. Registration Expenses - Any and all expenses incident to performance of or compliance with this Agreement, including, without limitation, (i) all SEC and stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses of complying with securities or blue sky laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities), (iii) all printing, messenger and delivery expenses, (iv) all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange pursuant to clause (viii) of Section 5, (v) the fees and disbursements of counsel for the Company and of its independent public accountants, including the expenses of any special audits and/or "cold comfort" letters required by or incident to such performance and compliance, (vi) the reasonable fees and disbursements of one counsel selected by the Holders of a majority of the Registrable Securities being registered to represent all Holders of the Registrable Securities being registered in connection with each such registration, and (vii) any fees and disbursements of underwriters customarily paid by the issuers or sellers of securities, including liability insurance if the Company so desires or if the underwriters so require, and the reasonable fees and expenses of any special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions and transfer taxes, if any. Securities Act - The Securities Act of 1933, as amended. SEC - The Securities and Exchange Commission or any other federal agency at the time administering the Securities Act or the Exchange Act. 3. Incidental Registrations. 3 (a) Right to Include Registrable Securities. If the Company at any time after the date hereof proposes to register its Common Stock under the Securities Act (other than a registration on Form S-4 or S-8, or any successor or other forms promulgated for similar purposes), whether or not for sale for its own account, pursuant to a registration statement on which it is permissible to register Registrable Securities for sale to the public under the Securities Act, it will each such time give prompt written notice to all Holders of Registrable Securities of its intention to do so and of such Holders' rights under this Section 3. Upon the written request of any such Holder made within 15 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such Holder), the Company will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Holders thereof; provided, that (i) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder of Registrable Securities and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses in connection therewith), and (ii) if such registration involves an underwritten offering, all Holders of Registrable Securities requesting to be included in the Company's registration must sell their Registrable Securities to the underwriters selected by the Company on the same terms and conditions as apply to the Company, with such differences, including any with respect to indemnification and liability insurance, as may be customary or appropriate in combined primary and secondary offerings. If a registration requested pursuant to this Section 3(a) involves an underwritten public offering, any Holder of Registrable Securities requesting to be included in such registration may elect, in writing prior to the effective date of the registration statement filed in connection with such registration, not to register such securities in connection with such registration. (b) Expenses. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3. (c) Priority in Incidental Registrations. If a registration pursuant to this Section 3 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the amount of securities requested to be included in such registration exceeds the amount which can be sold in such offering, so as to be likely to have an adverse effect on such offering as contemplated by the Company (including the price at which the Company proposes to sell such securities), 4 then the Company will include in such registration (i) first, 100% of the securities the Company proposes to sell, (ii) second, to the extent of the amount of Registrable Securities requested to be included in such registration which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above, the amount of Registrable Securities which the Holders have requested to be included in such registration, such amount to be allocated pro rata among all requesting Holders on the basis of the relative number of shares of Registrable Securities then held by each such Holder (provided that any Registrable Securities thereby allocated to any such Holder that exceed such Holder's request will be reallocated among the remaining requesting Holders in like manner). 4. Registration on Request. (a) Request by Holders. Upon the written request of any Holder or Holders who, in the aggregate, own at least 15% of the Registrable Securities then outstanding that the Company effect the registration under the Securities Act of all or part of such Holder's or Holders' Registrable Securities and specifying the intended method of disposition thereof, the Company will promptly give written notice of such requested registration to all other Holders of Registrable Securities, and thereupon will, as expeditiously as possible, use its best efforts to effect the registration under the Securities Act of: (i) the Registrable Securities which the Company has been so requested to register by such Holder or Holders; and (ii) all other Registrable Securities which the Company has been requested to register by any other Holder thereof by written request given to the Company within 15 days after the giving of such written notice by the Company (which request shall specify the intended method of disposition of such Registrable Securities), so as to permit the disposition (in accordance with the intended method thereof as aforesaid) of the Registrable Securities so to be registered; provided, that, unless Holders of a majority of the Registrable Securities consent thereto in writing, the Company shall not be obligated to file a registration statement relating to any registration request under this Section 4(a) (i) unless the aggregate requests by the Holder or Holders for such registration cover at least 15% of the number of Registrable Securities then outstanding or (ii) (other than a registration statement on Form S-3 or any successor or similar short-form registration statement) within a period of nine months after the effective date of any other registration statement relating to (A) any registration request under this Section 4(a) which was not effected on Form S-3 (or any successor or similar short-form registration statement) or (B) any registration effected under Section 3, or (iii) if with respect thereto, the managing underwriter, the SEC, the Securities Act or the rules and 5 regulations thereunder, or the form on which the registration statement is to be filed, would require the conduct of an audit other than the regular audit conducted by the Company at the end of its fiscal year, in which case the filing may be delayed until the completion of such regular audit (unless the Holders of the Registrable Securities to be registered agree to pay the expenses of the Company in connection with such an audit other than the regular audit). (b) Registration Statement Form. If any registration requested pursuant to this Section 4 which is proposed by the Company to be effected by the filing of a registration statement on Form S-3 (or any successor or similar short-form registration statement) shall be in connection with an underwritten public offering, and if the managing underwriter shall advise the Company in writing that, in its opinion, the use of another form of registration statement is of material importance to the success of such proposed offering, then such registration shall be effected on such other form. (c) Expenses. The Company will pay all Registration Expenses in connection with the first 20 registrations of Registrable Securities pursuant to this Section 4 upon the written request of any of the Holders. All expenses for any subsequent registrations of Registrable Securities pursuant to this Section 4 shall be paid pro rata by the Company and all other Persons (including the Holders) participating in such registration on the basis of the relative number of shares of Common Stock of each such Person included in such registration. (d) Effective Registration Statement. A registration requested pursuant to this Section 4 will not be deemed to have been effected unless it has become effective; provided, that if, within 180 days after it has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, such registration will be deemed not to have been effected. (e) Selection of Underwriters. If a requested registration pursuant to this Section 4 involves an underwritten offering, the Company shall have the right to select the investment banker or bankers and managers to administer the offering; provided, however, that such investment banker or bankers and managers shall be satisfactory to Holders of a majority of the Registrable Securities and which the Company has been requested to register. (f) Priority in Requested Registrations. If a requested registration pursuant to this Section 4 involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of securities requested to be included in such registration (including securities of the Company which are not Registrable Securities) 6 exceeds the number which can be sold in such offering, the Company will include in such registration only the Registrable Securities requested to be included in such registration. In the event that the number of Registrable Securities requested to be included in such registration exceeds the number which, in the opinion of such managing underwriter, can be sold, the number of such Registrable Securities to be included in such registration shall be allocated pro rata among all requesting Holders on the basis of the relative number of shares of Registrable Securities then held by each such Holder (provided that any shares thereby allocated to any such Holder that exceed such Holder's request shall be reallocated among the remaining requesting Holders in like manner). In the event that the number of Registrable Securities requested to be included in such registration is less than the number which, in the opinion of the managing underwriter, can be sold, the Company may include in such registration the securities the Company proposes to sell up to the number of securities that, in the opinion of the underwriter, can be sold. (g) Additional Rights. If the Company at any time grants to any other holders of Common Stock any rights to request the Company to effect the registration under the Securities Act of any such shares of Common Stock on terms more favorable to such holders than the terms set forth in this Section 4, the terms of this Section 4 shall be deemed amended or supplemented to the extent necessary to provide the Holders such more favorable rights and benefits. 5. Registration Procedures. If and whenever the Company is required to use its best efforts to effect or cause the registration of any Registrable Securities under the Securities Act as provided in this Agreement, the Company will, as expeditiously as possible: (i) prepare and, in any event within 120 days after the end of the period within which a request for registration may be given to the Company, file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective; provided, however, that the Company may discontinue any registration of its securities which is being effected pursuant to Section 3 at any time prior to the effective date of the registration statement relating thereto; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period not in excess of 180 days and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of 7 disposition by the seller or sellers thereof set forth in such registration statement; provided, that before filing a registration statement or prospectus, or any amendments or supplements thereto, the Company will furnish to one counsel selected by the Holders of a majority of the Registrable Securities covered by such registration statement to represent all Holders of Registrable Securities covered by such registration statement, copies of all documents proposed to be filed, which documents will be subject to the review of such counsel; (iii) furnish to each seller of such Registrable Securities such number of copies of such registration statement and of each amendment and supplement thereto (in each case including all exhibits), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and summary prospectus), in conformity with the requirements of the Securities Act, and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities by such seller; (iv) use its best efforts to register or qualify such Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller shall reasonably request, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction where, but for the requirements of this clause (iv), it would not be obligated to be so qualified, to subject itself to taxation in any such jurisdiction, or to consent to general service of process in any such jurisdiction; (v) use its best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (vi) notify each seller of any such Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act within the appropriate period mentioned in clause (ii) of this Section 5, of the Company's becoming aware that the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to 8 make the statements therein not misleading in the light of the circumstances then existing, and at the request of any such seller, prepare and furnish to such seller a reasonable number of copies of an amended or supplemental prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include 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 in the light of the circumstances then existing; (vii) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable (but not more than eighteen months) after the effective date of the registration statement, an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder; (viii) use its best efforts to list such Registrable Securities on any securities exchange on which the Common Stock is then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such exchange, and to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; (ix) enter into such customary agreements (including an underwriting agreement in customary form) and take such other actions as sellers of a majority of such Registrable Securities or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (x) obtain a "cold comfort" letter or letters from the Company's independent public accountants in customary form and covering matters of the type customarily covered by "cold comfort" letters as the seller or sellers of a majority of such Registrable Securities shall reasonably request (provided that Registrable Securities constitute at least 25% of the securities covered by such registration statement); and (xi) make available for inspection by any seller of such Registrable Securities covered by such registration statement, by any underwriter participating in any disposition to be effected pursuant to such registration statement and by any attorney, accountant or other agent retained by any such seller or any such underwriter, all pertinent financial and other records, pertinent corporate documents and properties of the Company, and cause all of the Company's officers, directors and employees to supply 9 all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish the Company with such information regarding such seller and pertinent to the disclosure requirements relating to the registration and the distribution of such securities as the Company may from time to time reasonably request in writing. Each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in clause (vi) of this Section 5, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such Holder's receipt of the copies of the supplemented or amended prospectus contemplated by clause (vi) of this Section 5, and, if so directed by the Company, such Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the period mentioned in clause (ii) of this Section 5 shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to clause (vi) of this Section 5 and including the date when each seller of Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by clause (vi) of this Section 5. 6. Indemnification. (a) Indemnification by the Company. In the event of any registration of any securities of the Company under the Securities Act pursuant to Section 3 or 4, the Company will, and it hereby does, indemnify and hold harmless, to the extent permitted by law, the seller of any Registrable Securities covered by such registration statement, each affiliate of such seller and their respective directors and officers or general and limited partners (and the partners, members, directors, officers, affiliates and controlling Persons of each of the foregoing) each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such seller or any such underwriter within the meaning of the Securities Act (collectively, the "Indemnified Parties"), against any and all losses, claims, damages or liabilities, joint or several, and expenses to which any such Indemnified Party may become subject under the Securities Act, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof, whether or not such Indemnified Party is a party thereto) arise out of or are based upon (a) any untrue statement or alleged 10 untrue statement of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, or (b) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, and the Company will reimburse such Indemnified Party for any legal or any other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, liability, action or proceeding; provided, that the Company shall not be liable to any Indemnified Party in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information with respect to such seller furnished to the Company by such seller for use in the preparation thereof; and provided, further, that the Company will not be liable to any Person who participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the Securities Act, under the indemnity agreement in this Section 6(a) with respect to any preliminary prospectus or the final prospectus or the final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the fact that such underwriter sold Registrable Securities to a person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus (including any documents incorporated by reference therein) or of the final prospectus as then amended or supplemented (including any documents incorporated by reference therein), whichever is most recent, if the Company has previously furnished copies thereof to such underwriter. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any other Indemnified Party and shall survive the transfer of such securities by such seller. (b) Indemnification by the Seller. The Company may require, as a condition to including any Registrable Securities in any registration statement filed in accordance with Section 5 herein, that the Company shall have received an undertaking reasonably satisfactory to it from the prospective seller of such Registrable Securities or any underwriter to indemnify and hold harmless (in the same manner and to the same extent as set forth in subdivision (a) of this Section 6) the Company and all other prospective sellers or any underwriter, as the case may be, with respect to any statement or alleged statement in or omission or alleged omission from such registration statement, any preliminary, final or summary prospectus contained therein, or 11 any amendment or supplement, if such statement or alleged statement or omission or alleged omission was made in reliance upon and in conformity with written information with respect to such seller or underwriter furnished to the Company by such seller or underwriter for use in the preparation of such registration statement, preliminary, final or summary prospectus or amendment or supplement, or a document incorporated by reference into any of the foregoing. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any of the prospective sellers, or any of their respective affiliates, directors, officers or controlling Persons and shall survive the transfer of such securities by such seller. (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party hereunder of written notice of the commencement of any action or proceeding with respect to which a claim for indemnification may be made pursuant to this Section 6, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party, give written notice to the latter of the commencement of such action; provided, that the failure of the indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under the preceding subdivisions of this Section 6, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such action is brought against an indemnified party, unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified 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 for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof, the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in the preceding subdivisions of this Section 6 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of securities under any federal or state law or regulation or governmental authority other than the Securities Act. 12 (e) Non-Exclusivity. The obligations of the parties under this Section 6 shall be in addition to any liability which any party may otherwise have to any other party. 7. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Securities, make publicly available such information), and it will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (ii) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any Holder of Registrable Securities, the Company will deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding anything contained in this Section 7, the Company may deregister under Section 12 of the Exchange Act if it then is permitted to do so pursuant to the Exchange Act and the rules and regulations thereunder. 8. Miscellaneous. (a) Other Investors. The Company may enter into agreements with other purchasers of Common Stock who are then employees of the Company or any of its subsidiaries making them parties hereto (and thereby giving them all of the rights, preferences and privileges of an original party (other than the Company) hereto) with respect to additional shares of Common Stock (the "Supplemental Agreements"); provided that, pursuant to any such Supplemental Agreement, such purchaser expressly agrees to be bound by all of the terms, conditions and obligations of this Agreement as if such purchaser were an original party (other than the Company) hereto; and further provided that such purchaser shall not obtain any right to request registration under Section 4 hereof. All shares of Common Stock issued or issuable pursuant to such Supplemental Agreements by such purchasers shall be deemed to be Registrable Securities. (b) Holdback Agreement. If any such registration shall be in connection with an underwritten public offering, each Holder of Registrable Securities agrees not to effect any public sale or distribution, including any sale pursuant to Rule 144 under the Securities Act, of any equity securities of the Company, or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering), within 7 days before or 90 days (or such lesser period as the managing underwriters may permit) after the effective date of such registration, and the Company hereby also so agrees and agrees to 13 cause each other holder of any equity security, or of any security convertible into or exchangeable or exercisable for any equity security, of the Company purchased from the Company (at any time other than in a public offering) to so agree. (c) Amendments and Waivers. This Agreement may be amended and the Company may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written consent to such amendment, action or omission to act, of the Holders of a majority of the Registrable Securities then outstanding. Each Holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 8(c), whether or not such Registrable Securities shall have been marked to indicate such consent. (d) Successors, Assigns and Transferees. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. In addition, and whether or not any express assignment shall have been made, the provisions of this Agreement which are for the benefit of the parties hereto other than the Company shall also be for the benefit of and enforceable by any subsequent Holder of any Registrable Securities, subject to the provisions contained herein. (e) Notices. All notices and other communications provided for hereunder shall be in writing and shall be sent by first class mail, telex, telecopier or hand delivery: (i) if to the Company, to: Primedia Inc. 745 Fifth Avenue New York, New York 10151 Attention: Beverly C. Chell, Esq. With a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue 22nd Floor New York, New York 10017-3909 Attention: Gary I. Horowitz, Esq. 14 (ii) if to MA Associates, FP Associates, Magazine Associates, Publishing Associates, Channel One Associates, or KKR 1996, to: c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street Suite 4250 New York, New York 10019 Attention: Perry Golkin With a copy to: Latham & Watkins 885 Third Avenue Suite 1000 New York, New York 10022 Attention: Scott Bowie, Esq. (iii) if to Partners, to: KKR Partners II, L.P. c/o Kohlberg Kravis Roberts & Co. 9 West 57th Street Suite 4250 New York, New York 10019 Attention: Perry Golkin With a copy to: Latham & Watkins 885 Third Avenue Suite 1000 New York, New York 10022 Attention: Scott Bowie, Esq. (iv) if to any other holder of Registrable Securities, to the address of such other holder as shown in the books and records of the Company, or to such other address as any of the above shall have designated in writing to all of the other above. All such notices and communications shall be deemed to have been given or made (1) when delivered by hand, (2) five business days after being deposited in the mail, postage prepaid, (3) when telexed, answer-back received or (4) when telecopied, receipt acknowledged. (f) Descriptive Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of terms contained herein. 15 (g) Severability. In the event that any one or more of the provisions, paragraphs, words, clauses, phrases or sentences 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, paragraph, word, clause, phrase or sentence in every other respect and of the remaining provisions, paragraphs, words, clauses, phrases or sentences hereof shall not be in any way impaired, it being intended that all rights, powers and privileges of the parties hereto shall be enforceable to the fullest extent permitted by law. (h) Counterparts. This Agreement may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart. (i) Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York applicable to contracts made and to be performed therein. The parties to this Agreement hereby agree to submit to the jurisdiction of the courts of the State of New York in any action or proceeding arising out of or relating to this Agreement. (j) Specific Performance. The parties hereto acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, it is agreed that they shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of competent jurisdiction in the United States or any state thereof, in addition to any other remedy to which they may be entitled at law or equity. 16 IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above. PRIMEDIA CORPORATION By: Beverly C. Chell -------------------------------------- Title: Vice Chairman KKR 1996 FUND L.P. By: KKR Associates 1996 L.P. Its General Partner By: KKR 1996 GP LLC By: /s/ Perry Golkin -------------------------------------- A Member MA ASSOCIATES, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner FP ASSOCIATES, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner MAGAZINE ASSOCIATES, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner 17 PUBLISHING ASSOCIATES, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner CHANNEL ONE ASSOCIATES, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner KKR PARTNERS II, L.P. By: KKR Associates, L.P. Its General Partner By: /s/ Perry Golkin -------------------------------------- A General Partner EX-27 26 EXHIBIT 27
5 Description: FY 1998 FDS for PRIMEDIA, Inc. 0000884382 PRIMEDIA, INC. 1,000 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 24,538 0 284,441 37,303 41,254 347,142 283,290 135,632 3,041,074 581,187 1,928,892 557,841 0 984,154 (1,064,893) 3,041,074 1,573,573 1,573,573 367,466 367,466 1,087,950 0 144,442 (37,736) 0 (37,736) 0 0 0 (37,736) (.71) (.71)
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