Exhibit 4.2
DATE 28 March 2002
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CORDIANT COMMUNICATIONS GROUP PLC
THE BANK OF NEW YORK and
HSBC INVESTMENT BANK PLC
(as Arrangers)
HSBC INVESTMENT BANK PLC
(as Agent and Security Trustee)
THE BANKS AND FINANCIAL INSTITUTIONS
THE BANK OF NEW YORK
(as Swingline Bank)
HSBC BANK PLC
(as Overdraft Bank)
CORDLANT FINANCE, INC.
(as Issuer under the Note Purchase Agreements)
THE NOTEHOLDERS
AGREEMENT
Bingham Dana LLP
London
AGREEMENT
DATE 28 March 2002
PARTIES
1 CORDIANT COMMUNICATIONS GROUP PLC as the Parent (the "Parent"), for itself
and for and on behalf of the companies whose names, registered numbers (if
any) and registered offices are set out in Part A of Schedule 1 as Original
Borrowers; the company whose name, registered number (if any) and
registered office are set out in Part B of Schedule 1 as the Swingline
Borrower; the companies whose names, registered numbers (if any) and
registered offices are set out in Part C of Schedule 1 as the Overdraft
Borrowers; the companies whose names are set out in Part A of Schedule 2 as
the Original Guarantors under the Syndicated Loan Agreement (as defined
below) and Subsidiary Guarantors in respect of the Note Purchase Agreements
(as defined below); the companies whose names, registered numbers (if any)
and registered offices are set out in Part B of Schedule 2 as the Overdraft
Guarantors; and the companies whose names, registered numbers (if any) and
registered offices are set out in Schedule 3 as the Additional Overdraft
Borrowers;
2 THE BANK OF NEW YORK and HSBC INVESTMENT BANK PLC as Arrangers under the
Syndicated Loan Agreement;
3 HSBC INVESTMENT BANK PLC as Agent and Security Trustee under the Syndicated
Loan Agreement;
4 THE BANKS AND FINANCIAL INSTITUTIONS whose names are set out in Schedule 4
as the Banks under the Syndicated Loan Agreement;
5 THE BANK OF NEW YORK as the Swingline Bank under the Syndicated Loan
Agreement;
6 HSBC BANK PLC as the Overdraft Bank under the Syndicated Loan Agreement;
7 CORDIAINT FINANCE, INC. as Issuer under the Note Purchase Agreements;
8 THE INSTITUTIONS whose names are set out in Schedule 5 as Noteholders.
RECITALS
A This Agreement relates to:
(1) an Agreement dated 4 July 2000 made between certain of the parties
hereto and referred to herein whereby the Banks agreed to make
available to the Parent and the Borrowers facilities of up to
US$400,000,000 upon the terms and subject to the conditions therein
contained (as amended, the "Syndicated Loan Agreement") and to a deed
dated 30 August 2000 made between such parties whereby the Security
Trustee agreed to hold the benefit of certain security documents on
trust for the named beneficiaries (the "Security Trust Deed"); and
(2) the separate Note Purchase Agreements dated as of April 5, 2001 made
between the Issuer, the Parent as Parent Guarantor and the purchasers
identified therein (collectively, the "Note Purchase Agreements"),
pursuant to which the Issuer issued and sold $175,000,000 in aggregate
principal amount of its 7.61% Guaranteed Senior
Notes due 2011 (as defined therein the "Notes"); the Noteholders being
the current holders of the existing Notes.
B The Parties have entered into this Agreement to record:
(1) the waivers, upon and subject to the terms and conditions, and for the
period, set out herein, of certain anticipated breaches of covenants
and events of default (howsoever described) under the Syndicated Loan
Agreement and/or the Note Purchase Agreements; and
(2) their agreements in principle with respect to certain proposed
amendments to the Syndicated Loan Agreement, the Security Trust Deed
and the Note Purchase Agreements.
AGREEMENT
1 Definitions and interpretation
Reference is made to the Term Sheets attached hereto as Exhibit "A" (the
"Banks' Term Sheet"), Exhibit "B" (the "Noteholders' Term Sheet") and
Exhibit "C" (the "Intercreditor Term Sheet") (the "Term Sheets").
Capitalised terms used and not defined in this Agreement shall have the
meanings ascribed to them in the Term Sheets, the Note Purchase Agreements
or the Syndicated Loan Agreement, save as specifically provided herein or
as the context may otherwise require.
2 Waivers
Upon and subject to the terms of this Agreement, for the period from the
date of this Agreement until 5.00 p.m. London time on 15 May, 2002 (the
"Waiver Scheduled Termination Date"):
2.1 each Bank hereby waives (the "Bank Waiver") each Default and each
Event of Default (however described) which may be constituted by the
failure of the Parent to comply with all or any of the covenants
contained in Clause 13.1(a) (Net Interest Cover) and 13.1(b) (Maximum
Gross Debt: Adjusted PBIT) on 31 December 2001, upon terms that,
unless otherwise agreed by the Majority Banks or as otherwise provided
in clause 4, no drawings or utilisations may be made under the
Syndicated Loan Agreement, other than the rolling of existing
advances, prior to the time the definitive agreements for the Proposed
Amendments (as defined below) and the Intercreditor Agreement are
entered into (and the Parent on behalf of itself and the Borrowers
confirms that no such drawings or utilisations will be made); and
2.2 each Noteholder hereby waives (the "Note Agreement Waiver") each
Default and Event of Default constituted by the failure of the Parent
to comply with paragraphs (a) (ratio of EDIT to Consolidated Net
Interest Expenditure) and (b) (Consolidated Gross Borrowings to
Adjusted EBITDA) of Section 10.3 of each Note Purchase Agreement in
respect of the period of two Fiscal Half-Years ended 31 December 2001
and for any periods after 31 December 2001 and until the Termination
Date;
provided that the Note Agreement Waiver and the Bank Waiver shall terminate
at the earliest of (the "Termination Date"): (a) the Waiver Scheduled
Termination Date; or (b) the occurrence or existence of any non-waived
Event of Default (howsoever described) (including, without limitation, as a
result of the failure of the Parent to pay all accrued and previously
unpaid interest on the Notes and under the Syndicated Loan Agreement)
subject to
the waiver requirements under the Note Purchase Agreements and the
Syndicated Loan Agreement respectively or (c) the occurrence of an event of
default under or in respect of the Interim New Money Facility (as defined
in clause 4 of this Agreement) whether in respect of any covenant, payment
or security therefor.
3 Proposed amendments etc.
3.1 Subject to the terms of this Agreement and the Term Sheets:
3.1.1 the Parent and the Finance Parties (as defined in the
Syndicated Loan Agreement) agree in principle to amend the
Syndicated Loan Agreement in accordance with the terms set
out in the Banks' Term Sheet and the Noteholders consent in
principle to such amendments;
3.1.2 the Parent, the Issuer and the Noteholders agree in
principle to amend the Note Purchase Agreements in
accordance with the terms set out in the Noteholders' Term
Sheet and the Finance Parties consent in principle to such
amendments; and
3.1.3 the Parent, the Issuer, the Finance Parties and the
Noteholders agree in principle to enter into, and, in the
case of the Parent, to procure that all other Obligors,
Subsidiary Guarantors and other relevant members of the
Group enter into, an Intercreditor Agreement upon the terms
set out in the lntercreditor Term Sheet.
3.2 The agreement of each party to consent to the proposed amendments (the
"Proposed Amendments") and the entering into of the Intercreditor
Agreement described in Clause 3.1 above are expressly conditional upon
the following:
3.2.1 the payment by the Parent to each Noteholder and Bank of the
fees referred to in the Term Sheets and expressed to be
payable on execution of the agreements evidencing the
Proposed Amendments;
3.2.2 the payment by the Parent of all professional fees and
expenses referred to in the Term Sheets (it is agreed that
the obligations of the Parent in respect of professional
fees and expenses shall survive any termination of this
Agreement or the Note Agreement Waiver or the Bank Waiver);
and
3.2.3 all of the conditions precedent set forth in the Term
Sheets.
3.3 Each of the Finance Parties and the Noteholders confirms that it has
the requisite authority for the amendments and agreements contemplated
by the Banks' Term Sheet or the Noteholders' Term Sheet (as
applicable) and the Intercreditor Term Sheet.
3.4 The parties will use all reasonable endeavours to procure that the
Syndicated Loan Agreement as amended in accordance with the Banks'
Term Sheet, the Note Purchase Agreements as amended in accordance with
the Noteholders' Term Sheet and the Intercreditor Agreement described
in clause 3.1, in form and substance mutually satisfactory to all
parties acting in good faith, are entered into not later than 5.00
p.m. (London time) on Friday 19 April, 2002 for the purpose of giving
effect to the Term Sheets.
4 Interim New Money Facility
4.1 The Banks and the Parent will, by 5:00pm on Thursday 4 April 2002,
enter into an agreement whereby the Banks will lend up to
(pound)20,000,000 (the "Interim New Money Facility") to the Parent for
the period from 5 to 19 April 2002. The loan will be on terms
acceptable to the Banks, which will be consistent in all material
respects with the terms of the facility outlined in the Banks' Term
Sheet. The loan will have priority over the Old Money and the Notes
and will be secured by a composite guarantee and debenture from the
Parent and its principal UK subsidiaries. Such guarantee and debenture
shall be treated as New Security under the Intercreditor Agreement, as
outlined in the Intercreditor Term Sheet.
4.2 Notwithstanding anything to the contrary, the Banks will irrevocably
agree in writing with the Parent and the Noteholders to consent to the
appointment of an administrator of any of the Parent and its principal
UK subsidiaries concerned, to procure that any receiver appointed by
the Banks shall resign office upon the appointment of an administrator
and to give at least two business days prior written notice to the
Parent and the Noteholders of their intention to appoint a receiver.
4.3 Upon amendment of the Syndicated Loan Agreement in accordance with the
terms of the Bank's Term Sheet, the Interim New Money Facility shall
terminate and all outstanding amounts thereunder shall be refinanced
under the Syndicated Loan Agreement as so amended and treated in all
respects as New Money under the lntercreditor Agreement.
4.4 The Parent represents and warrants that entry into the Interim New
Money Facility and the borrowing of loans in an aggregate amount of up
to (pound)20,000,000 thereunder shall not cause a Default or Event of
Default under the Note Purchase Agreement after giving effect to the
waivers set forth in Clause 2 of this Agreement. The Parent shall be
deemed to repeat the representations and warranties on the date of
borrowing of any loan under the Interim New Money Facility and breach
of such representations and warranties shall be deemed to be an Event
of Default under the Note Purchase Agreement.
5 Representations and Warranties
5.1 The Parent hereby represents and warrants to each of the Noteholders
and the Banks (collectively, the "Institutions") as follows:
5.1.1 the Parent and the Issuer have the full corporate power and
authority to enter into this Agreement and to amend the
Syndicated Loan Agreement and the Existing Note Purchase
Agreements, to enter into the Intercreditor Agreement and to
grant security as contemplated by the Term Sheets, and this
Agreement, the Intercreditor Agreement and such amendments
pursuant to the Term Sheets have been duly authorized by all
necessary corporate action on the part of the Parent and the
Issuer;
5.1.2 the entry into and performance of:
(a) this Agreement,
(b) the Syndicated Loan Agreement as amended,
(c) the Amended and Restated Note Purchase Agreement,
(d) the Intercreditor Agreement, and
(e) the guarantee and security documents contemplated by
the Term Sheets,
by the Parent or any Obligor or any Subsidiary required to
be a guarantor pursuant to the Term Sheets (a "Subsidiary
Guarantor") and the Issuer does not and will not conflict
with: (i) any law or regulation applicable to them, or (ii)
any agreement or instrument binding upon them or any member
of the Group;
5.1.3 all factual statements contained in the Information Package,
as defined below, (excluding any financial projections
contained therein) were, as at their respective dates, true
and accurate in all material respects and did not contain
any untrue statement of a material fact or (to the best of
the knowledge of the directors of the Parent) omit to state
a fact necessary in order to make the statements contained
therein not misleading in any material respect; and
5.1.4 all financial projections which have been prepared by the
Parent (or on its behalf) and contained in the Information
Package have been prepared in good faith and based upon
assumptions which were reasonable at the time prepared and
at the time made available to any Finance Party.
5.2 For the purpose of this Clause 5, "Information Package" means:
(a) The Information Disclosure for Lenders (14 December 2001);
(b) The KPMG Accountants Report;
(c) The Financial Model;
(d) The Group Structure Charts dated 31 Jan 2002;
(e) The Guarantor Coverage Analysis dated 31 Jan 2002;
(f) The Acquisition Earn out Analysis dated 4 Feb 2002;
(g) The Customer Memorandum dated 31 Jan 2002; and
(h) The presentation documentation provided by the Company with its
presentation on or about 19 March 2002.
6 Miscellaneous
6.1 This Agreement and the Term Sheets maybe amended, or any provision
hereof or thereof may be waived, with the agreement of all affected
parties hereto.
6.2 In furtherance of the provisions hereof, any termination of, or
failure to satisfy any of the conditions precedent set forth in, this
Agreement shall not impair the effectiveness of any of the Syndicated
Loan Agreement, the Note Purchase Agreements, the Notes and the
Security Trust Deed (it being the intention of the parties hereto that
such agreements and instruments remain in full force and effect in all
respects under such circumstances).
6.3 Except as expressly set forth in Clause 2, the delivery of this
Agreement shall not constitute a waiver of any right, power or remedy
of any Institution under the Syndicated Loan Agreement and the Note
Purchase Agreements and such agreements shall remain in full force and
effect and are hereby ratified and confirmed.
6.4 After the Termination Date nothing in this Agreement shall be
construed as a waiver of any Default or Event of Default under the
Note Purchase Agreements or the Syndicated Loan Agreement and each
Institution shall be entitled to exercise any remedy available to it,
whether under the Note Purchase Agreements, the Notes, the Syndicated
Loan Agreement or
otherwise, in respect of any Event of Default which occurred prior to
or after the Termination Date. For the avoidance of doubt, upon
execution and delivery of the definitive agreements implementing the
Proposed Amendments and the Intercreditor Agreement, this Agreement
shall cease to have any effect.
6.5 This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, English law (without
regard to principles of conflicts of law). The courts of England have
non-exclusive jurisdiction in relation to any claim or dispute arising
out of or in connection with this Agreement.
6.6 This Agreement may be executed in any number of identical separate
counterparts, each of which for all purposes shall be deemed an
original but all of which shall constitute collectively one Agreement.
6.7 The parties do not intend that this Agreement should create any rights
which are enforceable by any person who is not a party, whether under
the Contracts (Rights of Third Parties) Act 1999 or otherwise, save
that the provisions of clause 2 shall be enforceable by the other
Obligors and Subsidiary Guarantors referred to in item 1 of the
parties hereto.
This Agreement shall become effective when executed and delivered by the Parent,
the Issuer, the Arrangers, the Agent, each Bank and each Noteholder.
[Signature pages follow]
CORDIANT COMMUNICATIONS GROUP PLC
By: Arthur D'Angelo
Name: Arthur D'Angelo
Title: Director
CORDIANT FINANCE, INC.
By: Arthur D'Angelo
Name: Arthur D'Angelo
Title: Director and Officer
HSBC INVESTMENT BANK PLC
(individually and as Arranger, Agent and Security Trustee)
By: A. P. Smith
Name: Andrew P. Smith
Title: Director
THE BANK OF NEW YORK
(individually and as Arranger and Swingline Bank)
By: G. Dorkin
Name: Gerry Dorkin
Title: Vice President
ABN AMRO BANK N.V., LONDON BRANCH
By: S.J. Hamilton Kim Slater
Name: S.J. Hamilton C.K. Slater
Title: Vice President Assistant Vice President
ALLIED IRISH BANK PLC
By: Kieran O'Driscoll Sonya Iovieno
Name: Kieran O'Driscoll Sonya Iovieno
Title: Senior Relationship Manager Relationship Manager
BANK OF SCOTLAND
By: Jerry Perritt
Name: Jerry Perritt
Title: Director of Corporate Banking
BANQUE WORMS
By: M. Messager P. Eygonnet
Name: M Messager Pierre Eygonnet
Title:
CITIBANK, N.A.
By: Julio Ojea Quintana
Name: Julio Ojea Quintana
Title: Director
DAI-ICHI KANGYO BANK, LTD
By: O. Suzuki Karen Latto
Name: Osamu Suzuki Karen Latto
Title: Senior Manager Manager
FLEET NATIONAL BANK
By: P. D. Rivers
Name: Paul D. Rivers
Title: Managing Director
THE FUJI BANK, LIMITED
By: R. Allen
Name: Richard Allen
Title: Assistant General Manager
LLOYDS TSB BANK PLC
By: Stewart John Taylor
Name: Stewart John Taylor
Title: Regional Head of Business Support, London and South East and
credit services.
THE ROYAL BANK OF SCOTLAND PLC
By: A.S. Hewish
Name: Annette Hewish
Title: Relationship Manager
SCOTIABANK EUROPE PLC
By: James Forward
Name: James Forward
Title: Director Media, Leisure, Communications
WESTDEUTSCHE LANDESBANK GIROZENTRALE
By: Ian Anderson Chris Greaves
Name: Ian Anderson Christopher Greaves
Title: Executive Director Director
HSBC BANK PLC
(individually and as Overdraft Bank)
By: A.O. Thomas
Name: A.O. Thomas
Title: European Head, TMT
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: Marie Fioramonti
Name: Marie Fioramonti
Title: Managing Director
HARTFORD LIFE INSURANCE COMPANY
By: Prudential Private Placement Investors, L.P., as Investment Advisor
By: Prudential Private Placement Investors, Inc,, General Partner
By: Marie Fioramonti
Name: Marie Fioramonti
Title: Managing Director
HARTFORD LIFE INSURANCE COMPANY
By: HARTFORD INVESTMENT SERVICES, INC.
Its Agent and Attorney-in-Fact
By: Betsy Roberts
Name: Betsy Roberts
Title: Senior Vice President
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
By: Marie Fioramonti
Name: Marie Fioramonti
Title: Managing Director
PRUCO LIFE INSURANCE COMPANY
By: Marie Fioramonti
Name: Marie Fioramonti
Title: Managing Director
USG ANNUITY & LIFE COMPANY
By: Fred C. Smith
Name: Fred C. Smith
Title: Executive Vice President
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
By: Fred C. Smith
Name: Fred C. Smith
Title: Executive Vice President
GOLDEN AMERICAN LIFE INSURANCE COMPANY
By: Fred C. Smith
Name: Fred C. Smith
Title: Executive Vice President
RELIASTAR LIFE INSURANCE COMPANY
By: Fred C. Smith
Name: Fred C. Smith
Title: Executive Vice President
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
By: HARTFORD INVESTMENT SERVICES, INC.
Its Agent and Attorney-in-Fact
By: Betsy Roberts
Name: Betsy Roberts
Title: Senior Vice President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: Mark A. Ahmed
Name: Mark A. Ahmed
Title: Managing Director
AMERICAN UNITED LIFE INSURANCE COMPANY
By: Christopher D. Pahlke
Name: Christopher D. Pahlke
Title: Vice President, Private Placements
THE STATE LIFE INSURANCE COMPANY
By: Christopher D. Pahlke
Name: Christopher D. Pahlke
Title: Vice President, Private Placements
SCHEDULE 1
PART A
Original Borrowers
Name of Borrower Registered Number Registered office/address
(if any)
1 Cordiant Communications 1320869 121-141 Westbourne Terrace
Group plc London W2 6JR
2 Bates UK Limited 913184 121-141 Westbourne Terrace
London W2 6JR
3 Cordiant US Holdings Inc. 13-3965951 Corproation Trust Centre
1209 Orange Street
Wilmington
Newcastle
Delaware, USA
4 Bates Deutschland Holdings HRB 8608 Hanauer Landstrasse
GmbH 287-289
60314 Frankfurt am Main
Germany
SCHEDULE 1
PART B
Swingline Borrower
Name of Borrower Registered Number Registered office/address
(if any)
1 Cordiant US Holdings Inc. 13-3965951 Corporation Trust Centre
1209 Orange Street
Wilmington
Newcastle
Delaware, USA
SCHEDULE 1
PART C
Overdraft Borrowers
Name of Borrower Registered Number Registered office/address
(if any)
1 Atlas Advertising Limited 964286 121-141 Westbourne Terrace
London W2 6JR
2 Bates Overseas Holdings 2217108 121-141 Westbourne Terrace
Limited London W2 6JR
3 Bates UK Limited 913184 121-141 Westbourne Terrace
London W2 6JR
4 Cordiant Communications 1320869 121-141 Westbourne Terrace
Group plc London W2 6JR
5 Cordiant Group Limited 63031 121-141 Westbourne Terrace
London W2 6JR
6 Cordiant Property Holdings 2263916 121-141 Westbourne Terrace
Limited London W2 6JR
7 ICM International Limited 1802173 121-141 Westbourne Terrace
London W2 6JR
8 Swot Plus Limited 1929347 121-141 Westbourne Terrace
London W2 6JR
9 The Decision Shop Limited 615225 121-141 Westbourne Terrace
London W2 6JR
10 XMSS Limited 2463385 121-141 Westbourne Terrace
London W2 6JR
SCHEDULE 2
PART A
Original Guarantors under the Syndicated Loan Agreement
Name of Guarantor
1 Cordiant Communications Group plc
2 Bates Europe Limited
3 Bates UK Limited
4 Atlas Advertising Limited
5 The Decision Shop Limited
6 ICM International Limited
7 Cordiant US Holdings Inc.
8 Bates Advertising USA Inc.
9 Bates Churchill Public Relations, Inc
10 Bates Churchill Advertising Inc
11 Bates Worldwide (Delaware), Inc
12 CCG.XM Inc
13 Healthworld Corporation Inc.
14 Bates Healthworld Inc.
15 Falk Healthworld Inc.
16 Lighthouse Global Network Inc.
17 Fitch Inc.
Name of Guarantor
18 Morgen Walke Associates Inc.
19 Bates Deutschland Holdings GmbH
20 Cordiant Communications Group
Australia Pty. Limited
Subsidiary Guarantors in respect of the Note Purchase Agreements
1 The Communications Group Pty Limited
2 Atlas Advertising Limited
3 Bates Europe Limited
4 Bates UK Limited
5 ICM International Limited
6 The Decision Shop Limited
7 Bates Deutschland Holding GmbH
8 Bates Advertising USA, Inc.
9 Bates Churchill Advertising, Inc.
10 Bates Churchill Public Relations, Inc.
11 Bates Healthworld, Inc.
12 Bates Travel and Tourism, Inc.
13 Bates Worldwide (Deleware), Inc.
14 CCG.XM, Inc.
15 Cordiant US Holdings, Inc.
16 Falk Healthworld, Inc.
17 Fitch, Inc.
18 GHBM, Inc.
19 Healthworld Corporation
20 Lighthouse Global Network Inc.
21 Morgen-Walke Associates, Inc.
SCHEDULE 2
PART B
Overdraft Guarantors
1 Atlas Advertising 964286 121-141 Westbourne Terrace
Limited London W2 6JR
2 Bates Overseas Holdings 2217108 121-141 Westbourne Terrace
Limited London W2 6JR
3 Bates UK Limited 913184 121-141 Westbourne Terrace
London W2 6JR
4 Cordiant Communications 1320869 121-141 Westbourne Terrace
Group plc London W2 6JR
5 Cordiant Group Limited 63031 121-141 Westbourne Terrace
London W2 6JR
6 Cordiant Property 2263916 121-141 Westbourne Terrace
Holdings Limited London W2 6JR
7 ICM International 1802173 121-141 Westbourne Terrace
Limited London W2 6JR
8 Swot Plus Limited 1929347 121-141 Westbourne Terrace
London W2 6JR
9 The Decision Shop Limited 615225 121-141 Westbourne Terrace
London W2 6JR
10 XMSS Limited 2463385 121-141 Westbourne Terrace
London W2 6JR
SCHEDULE 3
Additional Overdraft Borrowers
1 Healthworld Holdings Limited 3458882 121-141 Westbourne Terrace
London W2 6JR
2 Milton Marketing Group Limited 3113109 121-141 Westbourne Terrace
London W2 6JR
3 Headcount WW Field Marketing 1425412 121-141 Westbourne Terrace
Limited London W2 6JR
4 Colwood Healthworld Limited 2213846 121-141 Westbourne Terrace
London W2 6JR
5 Bates Healthworld Limited 3961667 121-141 Westbourne Terrace
London W2 6JR
6 Milton Marketing Limited 1385429 121-141 Westbourne Terrace
London W2 6JR
7 Financial Dynamics Holdings 3345319 121-141 Westbourne Terrace
Limited London W2 6JR
8 Lighthouse Holdings (UK) Limited 3719632 121-141 Westbourne Terrace
London W2 6JR
9 Fitch Design Consultants Limited 670130 121-141 Westbourne Terrace
London W2 6JR
10 Financial Dynamics Limited 1656428 121-141 Westbourne Terrace
London W2 6JR
11 Connect Six Limited 2191533 121-141 Westbourne Terrace
London W2 6JR
12 Connect Five Limited 1928295 121-141 Westbourne Terrace
London W2 6JR
13 Clarion Communications PR Limited 2517824 121-141 Westbourne Terrace
London W2 6JR
14 PSD Associates Limited 2431038 121-141 Westbourne Terrace
London W2 6JR
15 Scholz & Friends London Limited 3398022 121-141 Westbourne Terrace
London W2 6JR
16 N.A.S.A.2.0 London Limited 3942853 121-141 Westbourne Terrace
London W2 6JR
17 CCG.XM 4023322 121-141 Westbourne Terrace
London W2 6JR
18 CCG.XM Holdings Limited 3961670 121-141 WestbourneTerrace
London W2 6JR
19 Bamber Forsyth Limited 2097924 121-141 Westbourne Terrace
London W2 6JR
20 Corporate and Financial Design 2693509 121-141 Westbourne Terrace
Design Limited London W2 6JR
SCHEDULE 4
Banks under the Syndicated Loan Agreement
1 HSBC Bank plc Media/Telecoms Group
27-32 Poultry
London EC2P 2BX
2 The Bank of New York Level 48
One Canada Square
London E14 5 AL
3 ABN AMRO Bank N.V., London Branch 250 Bishopsgate
London EC2M 4AA
4 Allied Irish Bank plc Corporate Banking Britain
St Helen's
1 Undershaft
London EC3A 8AB
5 Bank of Scotland 38 Threadneedle Street
London EC2P 2EH
6 Banque Worms Tour Voltaire
1 Place des Degres
F-92059 Paris La Defense
FRANCE
7 Citibank, N.A. Media & Communications Group
388 Greenwich Street
21st Floor
New York 10013
UNITED STATES OF AMERICA
8 Dai-Ichi Kangyo Bank, Ltd 24 King William Street
London EC4R 9DB
9 Fleet Boston Financial 39 Victoria Street
Westminster
London SW1H OED
10 The Fuji Bank, Limited River Plate House
7-11 Finsbury Circus
London EC2M 7DH
11 Lloyds TSB Bank plc Credit Services
4th Floor
11 - 15 Monument Street
London EC3R 8LR
12 The Royal Bank of Scotland plc 135 Bishopsgate
London EC2M 3UR
13 Scotiabank Europe plc Scotia House
33 Finsbury Square
London EC2A 1BB
14 Westdeutsche Landesbank Girozentrale Woolgate Exchange
25 Basinghall Street
London EC2V 5HA
SCHEDULE 5
Noteholders
AMERICAN UNITED LIFE INSURANCE COMPANY
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
GOLDEN AMERICAN LIFE INSURANCE COMPANY
HARTFORD LIFE AND ANNUITY INSURANCE COMPANY
HARTFORD LIFE INSURANCE COMPANY
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY
PRUCO LIFE INSURANCE COMPANY OF NEW JERSEY
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
RELIASTAR LIFE INSURANCE COMPANY
THE STATE LIFE INSURANCE COMPANY
USG ANNUITY & LIFE COMPANY
EXHIBIT A
Banks' Term Sheet
CORDIANT COMMUNICATIONS GROUP PLC
---------------------------------
US$400M CREDIT AGREEMENT
------------------------
Banks Term Sheet
----------------
Indicative Key Restructuring Terms and Conditions
-------------------------------------------------
This term sheet is attached to an agreement in principle (the "Agreement in
Principle") relating, inter alia, to a US$400m Loan Agreement dated 4 July 2000
between, amongst others, Cordiant Communications Group plc (as the "Parent"),
the Parent and various of its Subsidiaries listed in schedule 1 thereto (as the
"Borrowers"), The Bank of New York and HSBC Investment Bank plc (as the
"Arrangers"), various banks and financial institutions listed in schedule 2
thereto (as the "Banks"), HSBC Investment Bank plc (as the "Agent" and "Security
Trustee"), The Bank of New York (as the "Swingline Bank"), and HSBC Bank plc (as
the "Overdraft Bank"), as amended from time to time (the "Credit Agreement").
The Credit Agreement will be amended and restated in a mutually acceptable form
in accordance with the terms and conditions of this term sheet which are to be
documented in a restructuring deed to be entered into between, amongst others,
the parties to the Credit Agreement in a mutually acceptable form (the
"Restructuring Deed") and which will also contain waivers of any Defaults or
Events of Default under the Credit Agreement that have been identified to the
Banks prior to the date on which the Restructuring Deed is executed.
The amendments and waivers to the Credit Agreement to be effected by the
Restructuring Deed are referred to in this term sheet as the "Restructuring",
and the date on which the conditions to the Restructuring Deed are met and the
Restructuring becomes effective as the "Restructuring Date".
Capitalised terms used in this term sheet shall have the meanings defined in the
Credit Agreement, unless indicated otherwise.
The Finance Parties under the Credit Agreement and the holders (the
"Noteholders") of Cordiant Finance Inc.'s 7.61 % Guaranteed Notes due 2011 (the
"Notes") issued under the Note Purchase Agreements dated 5 April 2001 (the "Note
Purchase Agreements") (as amended and restated in accordance with the terms and
conditions set out in the term sheet entitled "Term sheet - Indicative Key Terms
and Conditions of the Proposed Amendments" attached to the Agreement in
Principle (the "Amended and Restated Note Purchase Agreement")) (amongst others)
shall enter into an intercreditor agreement (the "lntercreditor Agreement")
which shall give effect to the term sheet entitled "lntercreditor Term Sheet -
Key Intercreditor Restructuring Terms and Conditions" which is also attached to
the Agreement in Principle. The terms and conditions of the Restructuring are
subject to the terms and conditions of the lntercreditor Agreement.
1 Information and reporting requirements
The Parent will:
1.1 Annual audited financial statements: prepare consolidated financial
statements for the Group in respect of each financial year and cause
the same to be reported on by the Auditors and provide such financial
statements to the Agent together with the report of the Auditors
thereon, the notes thereto, the directors' report thereon, and the
Auditors report required in 1.5 below, together with the Group's
preliminary audited consolidated financial statements, at the time
such preliminary audited consolidated financial statements are issued
to the Parent's shareholders but in any event within 90 days of the
end of each financial year.
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1.2 Quarterly Management Accounts: prepare unaudited consolidated
quarterly management accounts for the Group in respect of each
financial quarter in the agreed form and provide such accounts to the
Agent within 45 days after the end of each financial quarter, together
with the Compliance Certificate required in 1.4 below. The quarterly
management accounts shall include:
(a) a cashflow statement and a consolidated profit and loss account
in respect of the relevant financial quarter, the financial year
to that date, and whatever periods or rolling 12 month periods
are relevant to the calculations required to test the Financial
Covenants;
(b) a comparison of all relevant results with the relevant annual
budget required to be provided in 1.6 below;
(c) a comparison of actual performance for that financial quarter
with the performance during the equivalent financial quarter
during the immediately preceding financial year;
(d) a consolidated balance sheet as at the end of that financial
quarter; and
(e) a management discussion and analysis consistent with the agreed
form Index of Management Discussion and Analysis;
(f) a statement of the aggregate net proceeds of relevant disposals
made during such period to which the mandatory prepayment
requirements at 15.1 below apply;
(g) (for the purposes relevant for the Maximum Capital Expenditure
covenant at 3.3 below) a statement of the Capital Expenditure (as
defined in 3.3 below) during such period;
(h) an analysis of the profit and loss account by profit centres; and
(i) a statement of the consideration paid by the Group (and broken
down by Group members) in respect of Permitted Acquisitions
during such period.
1.3 Monthly Management Accounts: prepare unaudited consolidated monthly
management accounts in respect of the Group in respect of each month
and provide such accounts to the Agent within 30 days after the end of
each month. The monthly management accounts shall include:
(a) a consolidated cashflow statement (including a 4 week rolling
forecast of central liquidity in the agreed form)
(b) a consolidated profit and loss account for the relevant month and
the financial year to that date;
(c) a comparison of all relevant results with the relevant annual
budget required to be provided in 1.6 below;
(d) a comparison of actual performance for that month with the
performance during the equivalent month during the immediately
preceding financial year;
(e) a management discussion and analysis consistent with the agreed
form Index of Management Discussion and Analysis;
(f) a statement of the aggregate net proceeds of relevant disposals
made during such period to which the mandatory prepayment
requirements at 15.1 below apply;
(g) (for the purposes relevant for the Maximum Capital Expenditure
covenant at 3.3 below) a statement of the Capital Expenditure (as
defined in 3.3 below) during such period; and
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(h) a statement of the investments and other transactions entered
into pursuant to the ring-fencing arrangements at 17.2(b) below.
1.4 Compliance Certificates: prepare a certificate verifying the
compliance or otherwise with the Financial Covenants set out in 3
below, confirming that no Default has occurred which is continuing
unremedied and unwaived, and attaching a list of Material Subsidiaries
(determined in accordance with the definition at 23.1 below) and have
it signed by its finance director, or if the finance director is
unavailable for any reason, any other director of the Parent, and
provide such certificate to the Agent at the time of the delivery of
the quarterly management accounts for each financial quarter.
1.5 Annual Auditors' report: at the time of delivery of the audited
consolidated financial statements, deliver a report from the Auditors
(in a format acceptable to the Agent and which can be relied upon by
the Agent (for itself and the other Finance Parties)) stating:
(a) the amounts of the respective financial definitions in respect of
or, as the case may be, as at the end of the relevant period
specified in the Financial Covenants as extracted from such
audited consolidated financial statements and indicating the
manner in which such amounts have been calculated;
(b) the application of the respective amounts of such financial
definitions to the Financial Covenants; and
(c) a list of the Group companies that are Material Subsidiaries as
at the date of such audited consolidated financial statements (as
defined in 23.1 below),
and each such report shall (in the absence of manifest error) be
conclusive as to matters contained in it.
1.6 Annual Budget: prepare an annual budget for each financial year
(broken down on a monthly basis and updated on a quarterly basis) in
the agreed form, and (i) provide each such annual budget to the Agent
as soon as it becomes available, and in any event not later than 45
days after the commencement of the financial year the subject thereof,
(ii) provide an update of each such annual budget to the Agent as soon
as it becomes available and in any event not later than 20 days after
the commencement of each financial quarter in the financial year the
subject thereof, and (ii) immediately upon being approved by the
Parent's board of directors, provide to the Agent any amendments or
revisions to each such annual budget.
1.7 Reports and notices to creditors, Noteholders and shareholders:
provide to the Agent at the time of issue thereof every report,
circular, notice or like document issued by the Parent or any of its
Subsidiaries to its creditors (or any class of creditors) generally or
to the Noteholders and every notice convening a meeting of the
shareholders or any class of the shareholders of the Parent.
1.8 Further information: and each Borrower will, provide to the Agent such
further financial and other information concerning the Group (or any
member of it) and its affairs as the Agent or any Bank (acting through
the Agent) may from time to time reasonably require.
1.9 Independent accountant's report: notify the Agent immediately upon it
becoming aware that a breach of clause 13.1 (Financial Covenants) or
an Event of Default under any of clauses 14.1(a) (Non payment) or
14.1(e) to 14.1(n) inclusive (Cross-default and insolvency events) is
reasonably likely to occur either immediately or within the following
12 months. Upon receiving such notification from the Parent, the Agent
(acting on the instruction of the Majority Banks) shall have the right
to require the preparation of an independent accountants' report on
the financial and business condition and prospects of the Group and/or
such other reports as the Majority Banks shall require (the cost in
each case to be borne by the Parent) and the Parent will (and will
procure that each other member of the Group will) provide the persons
preparing each such report with all assistance and information
requested by them.
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2 Adjustment to Event of Default grace period
The grace period under the Event of Default at clause 14.1(c) (Breach
of other obligations) of the Credit Agreement shall be reduced to 5
Banking Days in so far as it relates to a breach of the obligations or
undertakings to deliver financial statements, compliance certificates
and Auditor's reports required for the Financial Covenants testing at
the time and in the manner stipulated in the relevant clauses of the
Credit Agreement.
3 Financial Covenants
3.1 The existing Financial Covenants shall be replaced by:
(a) Consolidated EBITDA to Consolidated Net Interest Expenditure; and
(b) Consolidated Gross Borrowings to Consolidated EBITDA,
each to be tested quarterly on the basis of management accounts and
the annual audited consolidated financial statements. Consolidated
EBITDA and Consolidated Net Interest Expenditure shall be calculated
on a rolling twelve months basis and Consolidated Gross Borrowings
shall continue to be calculated on the basis of the average daily
outstandings during the most recent two quarters. The covenant levels
are set out below.
The Parent will procure that the ratio of Consolidated EBITDA to
Consolidated Net Interest Expenditure for each period date set out in
column A shall not be less than the corresponding ratio set out in
column B
A B
12 month period ending Ratio
---------------------- -----
31 March 2002 2.50:1
30 June 2002 1.75:1
30 September 2002 2.50:1
31 December 2002 2.50:1
31 March 2003 2.75:1
30 June 2003 3.00:1
30 September 2003 3.25:1
31 December 2003 3.75:1
31 March 2004 4.00:1
30 June 2004 4.50:1
30 September 2004 5.00:1
The Parent will procure that the ratio of Consolidated Gross
Borrowings as at the end of, to Consolidated EBITDA in respect of,
each period set out in column A shall not be greater than the ratio
set out in column B
A B
12 month period ending Ratio
---------------------- -----
31 March 2002 5.75:1
30 June 2002 8.50:1
30 September 2002 4.75:1
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31 December 2002 4.75:1
31 March 2003 4.25:1
30 June 2003 3.75:1
30 September 2003 3.75:1
31 December 2003 3.50:1
31 March 2004 3.00:1
30 June 2004 3.00:1
30 September 2004 2.75:1
3.2 For these purposes:
"Consolidated EBITDA" means, in respect of any period, the
consolidated trading profits, but before:
(i) exceptional items and extraordinary items separately identified
in the relevant (each as profit and loss account);
(ii) profits and losses on disposals of capital assets;
(iii) amortisation of goodwill and other intangible assets;
(iv) depreciation and impairment;
(v) Consolidated Gross Interest Expenditure and interest received or
receivable; and
(vi) Taxes;
of the Group for such period and after taking into account the
applicable share of any profit or loss of any joint venture or other
person which is not a Subsidiary of the Parent and after deducting (to
the extent otherwise included) profits (or adding back losses)
attributable to minority interests in members of the Group and after
deducting (to the extent not otherwise deducted) Property Payments;
and the following existing definitions shall continue to apply (as
amended below):
"Consolidated Gross Borrowings" means the aggregate principal or
capital amount of all Borrowed Money incurred by the Group (including
any fixed or minimum premium payable on final repayment) plus the
aggregate principal element of Borrowed Money secured by any
Encumbrance over all or any part of the undertaking, property, assets,
rights or revenues of any member of the Group except that:
(i) moneys owing by one member of the Group to another member of the
Group shall not be taken into account;
(ii) to avoid double counting, no guarantee of a liability which is
already taken into account shall itself be taken into account;
(iii) no liability shall be taken into account more than once in any
computation;
(iv) Consolidated Gross Borrowings expressed in or calculated by
reference to a currency other than Sterling shall be converted
into Sterling by reference to the rate of exchange used by the
Parent for the conversion of such currency in accordance with the
management policy of converting such amounts on a daily basis or,
if the relevant currency was not thereby involved, by reference
to the rate of exchange or approximate
5
rate of exchange ruling on such date and determined on such basis
as the Agent may determine or approve;
(v) the principal amount of Consolidated Gross Borrowings deemed to
be outstanding in relation to Finance Leases or hire purchase
agreements shall be the present value of the minimum lease or
hire payments discounted at the interest rate implicit in the
relevant lease or hire purchase agreement;
(vi) Indebtedness in respect of cash collateralised guarantees issued
by a Bank or any of its associates on behalf of the Group to
media authorities shall not be taken into account;
(vii) Indebtedness of the Group in respect of the guarantees issued by
banks on behalf of the Group to media authorities in Korea and
the United Kingdom shall not be taken into account; and
(viii) debit balances at any bank or financial institution under the
cash management arrangements of the Group shall be taken into
account net of the credit balances of the Group at such bank or
financial institution to the extent that such credit balances are
subject to contractual set-off against such debit balances (both
before and after insolvency) under such cash management
arrangements;
"Consolidated Gross Interest Expenditure" means, in respect of a
period, the aggregate amount (calculated on a consolidated basis) of
all continuing, regular or periodic costs, charges and expenses
accrued during that period in respect of Consolidated Gross
Borrowings, including:
(a) any acceptance commission paid or payable in respect of any bills
of exchange or other negotiable instruments;
(b) any initial issue discount allowed on the issue of debentures (to
the extent relating to that period when amortised over the term
of such debentures); and
(c) the interest component of rentals under Finance Leases,
but excluding:
(i) arrangement and other one-off fees (including the fees (and
interest thereon) referred to in 4 and 8 below and the PIK
Management Fees in respect of the Notes pursuant to the terms of
the Amended and Restated Note Purchase Agreement), to the extent
relating to that period when amortised over the term of the
relevant Consolidated Gross Borrowings; and
(ii) amounts discounted for FRS12 or SSAP24 purposes to the extent
they are non-cash items;
"Consolidated Net Interest Expenditure" means, in respect of a period,
the Consolidated Gross Interest Expenditure accrued for that period
net of credit interest accrued by the Group during such period; and
"Property Payments" means the aggregate amount of (i) the payments
made by any member of the Group pursuant to leases of unoccupied land
or buildings of which such member of the Group is a lessor and (ii)
the amount by which payments under a lease of land or buildings of
which a member of the Group is a lessee exceeds the amount of rental
received by such member of the Group in respect of such land or
buildings from any other person;
and the definition of "Borrowed Money" shall be revised as follows:
"Borrowed Money" means Indebtedness in respect of (i) money borrowed or
raised and debit balances at banks, (ii) any amount raised pursuant to any
note purchase facility or the issue of bonds, notes, debentures, loan stock
or any similar instrument, (iii) any counter-indemnity
6
obligation in respect of a guarantee, indemnity, bond, standby or
documentary letter of credit or any other instrument issued by a bank
or financial institution, (iv) acceptance or documentary credit
facilities, (v) receivables sold or discounted (otherwise than on a
non-recourse basis), (vi) deferred payments for assets or services
acquired where the deferred payment is arranged primarily as a method
of raising finance or financing the acquisition of the asset or
services acquired (excluding credit granted in the ordinary course of
trading for a period not exceeding 120 days (or in the case of Greece,
Spain and Italy, not exceeding 180 days) and deferred consideration
payments in respect of acquisitions or investments permitted in
accordance with 17.2 and the deferred consideration obligations set
out in schedule 13 to the Credit Agreement), (vii) the capital element
of Finance Leases and hire purchase contracts, (viii) (except for the
purposes of the definition of "Consolidated Gross Borrowings" and
clause 14.1.5 of the Credit Agreement) Derivatives Contracts, (ix) any
preference or other shares which are mandatorily redeemable or
redeemable at the option of the holder thereof (other than the
preference shares listed in schedule 13 of the Credit Agreement), (x)
any other transaction (including without limitation forward sale or
purchase agreements where the deferred payment is arranged primarily
as a method of raising finance or financing the acquisition of the
asset or services acquired) having the commercial effect of a
borrowing or raising of money or of any of (ii) to (ix) above and (x)
guarantees in respect of Indebtedness of any person falling within any
of (i) to (x) above.
3.3 The following new covenant shall be included:
Maximum Capital Expenditure
The total Capital Expenditure of all members of the Group in any
financial year shall not exceed the Budgeted Capital Expenditure for
such financial year but so that in respect of any financial year where
the relevant actual Capital Expenditure (less any amount which was
carried forward from the previous financial year) is less than the
Budgeted Capital Expenditure for that financial year, an amount equal
to such deficit may be carried over to the following financial year
only (and not otherwise or further) and shall be deemed to be spent
before Budgeted Capital Expenditure in that year.
"Budgeted Capital Expenditure" means Capital Expenditure incurred or
to be incurred in a financial year up to a maximum of:
Financial year ending Amount (pound) millions
--------------------- -----------------------
31 December 2002 10
31 December 2003 17.5
31 December 2004 20
"Capital Expenditure" means any expenditure which should be treated as
capital expenditure in the audited consolidated financial statements
of the Group in accordance with the Original Accounting Principles.
3.4 In addition the Consolidated Net Worth covenant from the Amended and
Restated Note Purchase Agreement in respect of the Notes shall be
included in the Credit Agreement.
3.5 In this term sheet, "Financial Covenants" means the financial
covenants referred to in this section 3.
4 Restructuring fees and expenses
4.1 The Parent shall enter into a fee letter agreeing to pay a
co-ordination fee to the Arrangers in the form of the draft letter
provided.
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4.2 The Parent shall pay to the Banks (pro rata) a restructuring fee of
1.00% of the Total Commitments which shall be earned on the execution
of the Agreement in Principle and shall be payable on the execution of
the Restructuring Deed.
4.3 The Parent shall pay to the Banks (pro rata) a fee (the "Deferred
Fee") calculated at 1.00% of the average daily principal outstandings
under the Credit Agreement during the two most recent quarters, which
shall accrue quarterly in arrears after the execution of the Agreement
in Principle, and which shall be payable upon the earliest of:
(a) the occurrence of an Event of Default under the Credit Agreement;
(b) the cancellation of the Total Commitments under the Credit
Agreement; and
(c) 8 November 2004.
Interest on such Deferred Fee shall accrue at 9.25% per annum and
shall be payable when such Deferred Fee is payable.
4.4 The Parent shall enter into fee letters agreeing to pay fees to the
Agent, the Swingline Bank, and HSBC Investment Bank plc (as the
security trustee under the terms of the lntercreditor Agreement (the
"Common Security Trustee")) in the form of the draft letters provided.
4.5 The Parent shall pay all expenses of the Finance Parties in connection
with the proposed Restructuring, including, without limitation, the
fees and expenses of Norton Rose and Covington and Burling as counsel
to the Finance Parties and the fees and expenses of other local law
counsel instructed by Norton Rose on behalf of the Finance Parties,
regardless of whether the amendments and waivers are consummated.
5 Drawdown Notices
5.1 In Drawdown Notices relating to drawings under the Revolving Credit
Facility (other than in the case of rollovers), each of the Parent and
the relevant Borrower shall make an additional representation and
warranty that "it is not aware (after due enquiry) of any matter or
event which is reasonably likely to result in a breach of clause 13.1
(Financial Covenants) or an Event of Default under any of clauses
14.1(a) (Non payment) or 14.1(e) to 14.1(n) inclusive (Cross-default
and insolvency events) either immediately on the date of the Drawdown
Notice or within the period ending 12 months after the date of the
drawing."
5.2 In the case of Revolving Credit Advances to be drawn in Sterling, the
Borrower must provide a Drawdown Notice not later than 1 p.m. on the
second Banking Day before the proposed Drawdown Date. In the case of
Swingline Advances the Swingline Borrower must provide a Drawdown
Notice not later than 11 a.m. (New York City time) on the relevant
Drawdown date. The notice periods for all other drawings remain as
currently stated in the Credit Agreement.
6 Margin
On and from the Restructuring Date the Margin shall be 3.25% per
annum.
7 Commitment Commission
The Parent shall pay to the Banks (pro rata) commitment commission at
the rate of 1.25% per annum on the daily undrawn and uncancelled
amount on the Facilities, payable on the dates falling at three month
intervals after the date of the Credit Agreement and on the last day
of the Availability Period in respect of the Revolving Credit
Facility.
8
8 PIK Management Fee
The Parent shall pay an additional management fee (the "PIK Management
Fee") to the Banks (pro rata) to be calculated as a percentage fee on
the average daily principal outstandings under the Credit Agreement
during the two most recent quarters and shall be calculated quarterly
in accordance with the following table showing the ratio of
Consolidated Gross Borrowings to Consolidated EBITDA:
Quarter Ending Consolidated Gross Borrowings : Consolidated EBITDA
March 2002 less than greater than greater than greater than greater than
or equal to 4.60 4.84 5.08 5.32
4.60 but less than but less than but less than
or equal to or equal to or equal to
4.84 5.08 5.32
June 2002 less than greater than greater than greater than greater than
or equal to 6.25 6.81 7.38 7.94
6.25 but less than but less than but less than
or equal to or equal to or equal to
6.81 7.38 7.94
September 2002 less than greater than greater than greater than greater than
or equal to 3.56 3.84 4.13 4.41
3.56 but less than but less than but less than
or equal to or equal to or equal to
3.84 4.13 4.41
December 2002 less than greater than greater than greater than greater than
or equal to 3.37 3.71 4.06 4.40
3.37 but less than but less than but less than
or equal to or equal to or equal to
3.71 4.06 4.40
March 2003 less than greater than greater than greater than greater than
or equal to 3.40 3.59 3.77 3.96
3.40 but less than but less than but less than
or equal to or equal to or equal to
3.59 3.77 3.96
June 2003 less than greater than greater than greater than greater than
or equal to 3.28 3.40 3.52 3.63
3.28 but less than but less than but less than
or equal to or equal to or equal to
3.40 3.52 3.63
September 2003 less than greater than greater than greater than greater than
or equal to 3.22 3.35 3.49 3.62
3.22 but less than but less than but less than
or equal to or equal to or equal to
3.35 3.49 3.62
December 2003 less than greater than greater than greater than greater than
or equal to 2.89 3.02 3.15 3.27
2.89 but less than but less than but less than
or equal to or equal to or equal to
3.02 3.15 3.27
March 2004 less than greater than - - -
or equal to 2.89
2.89 but less than
or equal to
3.00
June 2004 less than greater than - - -
or equal to 2.70
2.70 but less than
or equal to
3.00
September 2004 less than greater than - - -
or equal to 2.70
2.70 but less than
or equal to
2.75
Rate 0.00% 0.50% 1.00% 1.50% 2.00%
The PIK Management Fee shall be calculated using the Parent's
quarterly Compliance Certificates but shall not be payable by the
Parent until the earliest of (i) the cancellation in full of the Total
Commitments under the Credit Agreement, (ii) the prepayment in full of
the Notes, (iii) any enforcement of the security referred to in 20
below, (iv) the occurrence of any Event of Default specified in
clauses 14.1(h) (Insolvency) to (n) (Analogous proceedings)
(inclusive) of the Credit Agreement, (v) any of the Notes becoming due
and payable, whether automatically or by declaration, or (vi) 8
November 2004. Any PIK Management Fee that is payable in respect of
any quarter shall accrue interest at 9.25% per annum, which interest
shall accrue but shall not be payable until the P1K Management Fee is
payable. The accrual of interest on the PIK Management Fee shall begin
as of the quarter-end date shown on the relevant Compliance
Certificate.
To the extent that the "New Money" (as defined in the term sheet
attached to the Agreement in Principle entitled "lntercreditor Term
Sheet - Key lntercreditor Restructuring Terms and Conditions) portion
of the Commitments under the Credit Agreement are repaid and cancelled
in full at any time or the Finance Parties agree to eliminate the
priority treatment of such New Money under the terms of the
Intercreditor Agreement at any time, any future accretion of the PIK
Management Fee shall cease at the later of that time and 1 January
2003 (it being understood that any PIK Management Fee that has been
calculated for any quarter prior to
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such time shall continue to be payable at the relevant time of payment
as provided above and will continue to accrue interest until such
payment date).
9 Switch of base commitments from US$ to(pound)
The base currency of the Commitments shall be converted from US
dollars to Sterling on the Restructuring Date, such conversion being
at the Agent's spot rate of exchange two Banking Days prior to the
Restructuring Date. Amounts drawn shall remain outstanding in the
currencies which they were drawn.
10 Full prepayment events
The Borrowers shall prepay all the Facilities in whole immediately
upon the occurrence of an External Refinancing (which shall be defined
to mean the borrowing or raising of Borrowed Money (including without
limitation, any public or private issue of debt securities) by any
member of the Group with a view, inter alia, to the repayment and
cancellation of any amount of any of the Facilities) or the sale or
other disposal of all or substantially all of the assets and
undertakings of the Group whereupon the Total Commitments in respect
of all the Facilities shall be reduced to zero.
11 Rights issue/equity raising
11.1 The Parent will not issue any shares or otherwise acquire any
additional capital other than:
(a) the issue of ordinary shares (i) as consideration for the
acquisitions referred to in 17.1 below pursuant to the Parent's
obligations (actual or contingent) as at the Restructuring Date
or (ii) in consideration for acquisitions permitted under 17.2
below ((i) and (ii) together being the "Permitted Acquisitions");
and
(b) the issue of ordinary shares for cash payable in full on the date
of issue and which ordinary shares do not carry any right to a
return or to redemption nor any right to be converted into shares
carrying such right before all amounts (whether actual or
contingent) owing under the Credit Agreement have been paid in
full and the Finance Parties have no further obligations
thereunder, or the granting of an option to call on the Parent to
issue such shares,
and the Parent will at all times procure that no other member of the
Group will issue any shares or otherwise acquire any additional
capital (or grant any rights to call for the issue or allotment of any
of the same) other than the issue of shares by a member of the Group
to another member of the Group permitted under 17.2(a) or 17.2(b)
provided that (A) where the existing shares in such member of the
Group are subject to an Encumbrance under any of the Security
Documents, such additional shares are also subject to such an
Encumbrance and (B) where such existing shares are subject to
Encumbrances which are structured to avoid an adverse US Tax
consequence to the Group, such additional shares shall only be issued
to the existing holding company of the issuing member of the Group;
11.2 The proceeds (net of reasonable related costs) of any rights issue or
other equity raising (other than those permitted under 11.1(a)) shall
be applied in mandatory prepayment and cancellation of the facilities
under the Credit Agreement.
12 Dividends and other distributions
12.1 The Parent will not:
12.1.1 and will procure that no other member of the Group will redeem or
purchase or otherwise reduce any of the Parent's share capital or any
uncalled capital or unpaid liability in respect thereof or reduce the
amount (if any) for the time being standing to the credit of the
Parent's share premium account or capital redemption or other
undistributable reserve in any manner (other than a partial capital
reorganisation in order to create distributable reserves where no
10
amount is paid or becomes payable (including, without limitation, by
way of set-off, combination of accounts or otherwise) to any
shareholder in the Parent as part of such reorganisation); or
12.1.2 declare, pay (including, without limitation, by way of set-off,
combination of accounts or otherwise) or permit to accrue any dividend
or make any other distribution or payment (whether in cash or in
specie), including any interest and/or unpaid dividends, in respect of
its equity or any other share capital for the time being in issue
except that it may declare and pay a final dividend (but not an
interim dividend) in respect of any financial year after 31 December
2001, provided that:
(a) the Financial Covenants have been tested and passed as at the 30
June Financial Covenants test date in the following financial
year; and
(b) no breach of any of the Financial Covenants has occurred and is
continuing and no other Default or Event of Default has occurred
which is continuing; and
(c) the ratio of Consolidated Gross Borrowings to Consolidated EBITDA
was not greater than 3.50:1 on each of two most recent
consecutive Financial Covenant test dates; and
(d) the dividend does not exceed 25% of Consolidated Excess Cashflow
if the ratio of Consolidated Gross Borrowings to Consolidated
EBITDA was not less than 3.25:1 on each of the two most recent
consecutive financial covenant test dates; and
(e) the dividend does not exceed 50% of Consolidated Excess Cashflow;
and
(f) not later than 5 and no more than 15 Banking Days prior to the
proposed date for the payment of that dividend the finance
director (or, if he is unavailable for any reason, any other
director in each case in such directors' opinion but without
personal liability) of the Parent delivers to the Agent a
certificate in which the Parent certifies (without qualification)
that:
(i) it proposes to pay a dividend and states the amount of it;
(ii) no breach of any of the Financial Covenants has occurred and
is continuing and no other Default has occurred which is
continuing;
(iii) in the opinion of the board of directors of the Parent
(acting in good faith and after having regard (inter alia)
to the current and projected trading and cash flow position
of the Group (such projections being based on reasonable
assumptions), and assuming the making of such dividend):
(A) no breach of clause 13.1 (Financial Covenants) or any
Event of Default is reasonably likely to occur either
immediately or within the period ending 12 months after
the date of the dividend; and
(B) the Group is reasonably likely to have sufficient
working capital during such 12 month period,
and such certificate shall be accompanied by (a) a forecast
for the period of 6 full months following the proposed
payment date showing the projected respective amounts of
Consolidated EBITDA, Consolidated Gross Borrowings,
Consolidated Net Interest Expenditure, Capital Expenditure
and Net Worth and their application to the Financial
Covenants in respect of each Financial Covenant test date
within such period, such forecast to be based on the
knowledge of the Parent and the circumstances then existing
at such time together with reasonable assumptions, and (b) a
calculation by the Parent of Consolidated Excess Cash Flow
for the relevant financial year (showing the calculations on
which it is based) together with a statement from the
Auditors as to the amount of the Consolidated Excess Cash
Flow confirming that in all material respects the
calculation has been made
11
in accordance with the audited consolidated financial
statements of the Group for the relevant financial year and
the definition of Consolidated Excess Cash Flow.
12.2 For these purposes:
"Consolidated Excess Cash Flow" means, in respect of any financial
year the Consolidated EBITDA of the Group for such period:
after the addition of (if not already added):
(a) cash dividends received from investments in joint ventures and
other persons which are not Subsidiaries of the Parent (after
Taxes);
(b) Tax rebates received in cash which the Group is entitled to
retain; and
(c) any other non-cash items expensed in arriving at Consolidated
EBITDA,
after the deduction of (if not already deducted):
(i) payments in respect of Capital Expenditure;
(ii) payments of cash exceptional and extraordinary items;
(iii) Group Taxes paid;
(iv) any other non-cash items credited in arriving at Consolidated
EBITDA,
(v) Consolidated Net Interest Expenditure;
(vi) all cash dividends paid by the Parent and all cash dividends paid
in respect of minority interests in other members of the Group;
(vii) all repayments and prepayments of the Notes and all amounts
applied in repayment and cancellation of the facilities under the
Credit Agreement (where crediting cash to a cash collateral
account pending such application is deemed to be such an actual
prepayment) except for mandatory repayments or prepayments of the
Notes or the facilities under the Credit Agreement in accordance
with 11, 15.1, or 16.6 below to the extent that the proceeds from
the relevant transaction which give rise to such repayments or
prepayments are excluded in determining Consolidated EBITDA for
the period;
(viii) the principal amount of rental payments of Capitalised Lease
Obligations;
(ix) all cash consideration paid for Permitted Acquisitions
(including, without limitation, by way of earnouts or deferred
consideration); and
(x) all amounts paid in connection with employee share option
schemes,
and excluding the applicable share of any loss or profit of any joint
venture or other person which is not a Subsidiary of the Parent
included in arriving at Consolidated EBITDA,
in each case for, or paid during, such financial year and all
calculated on a consolidated basis.
12
13 Other borrowings
13.1 The negative undertaking at clause 12.2(b) of the Credit Agreement in
respect of Borrowed Money will be revised as set out below:
No other Borrowed Money or finance transactions: it will not, and will
procure that no other member of the Group will, incur or permit to
exist on its behalf any obligations in respect of Borrowed Money,
including Finance Leases, whether on or off balance sheet, to any
person, or any sale and leaseback except:
(i) Borrowed Money arising from normal trade credit;
(ii) the Borrowed Money of any persons acquired by any member of the
Group pursuant to the D Acquisition provided that such Borrowed
Money at no time exceeds Korean Won 16,900,000,000 (or its
equivalent) in aggregate;
(iii) any Borrowed Money of any person (other than pursuant to the D
Acquisition or the Lighthouse Acquisition) acquired by any member
of the Group after the date of this Agreement, where such
Borrowed Money was existing at the time of such acquisition and
was not incurred in contemplation of, or in connection with, that
acquisition and where no member of the Group other than the
person so acquired has any obligation (actual or contingent) in
respect of such Borrowed Money (and where such Borrowed Money is
permitted under 17.2(c) below) and is repaid or otherwise
discharged within 30 days of such acquisition;
(iv) Borrowed Money not exceeding Australian dollars 10,000,000 in
aggregate in respect of working capital facilities made available
in Australia to members of the Group;
(v) Borrowed Money in respect of debit balances at any bank or
financial institution under the cash management arrangements of
the Group (net of the credit balances of the Group at such bank
or financial institution to the extent that such credit balances
are subject to contractual set-off against such debit balances
(both before and after insolvency under such cash management
arrangements) where the aggregate of all such net debit balances
of the Group does not exceed (pound)5,000,000 (or its
equivalent);
(vi) Borrowed Money in respect of (i) the Facilities and (ii) the
Notes (under the terms of the Note Purchase Agreements (and the
Amended and Restated Note Purchase Agreement) or as such terms
may be amended in accordance with the lntercreditor Agreement);
(vii) Indebtedness in respect of Finance Leases provided that the
aggregate amount of the principal element of the Indebtedness
under such Finance Leases does not exceed (pound)2,000,000 (or
its equivalent) at any time;
(viii) performance bonds issued by a member of the Group in respect of
the obligations (other than any payment obligations) of another
member of the Group in the ordinary course of trading;
(ix) Derivatives Contracts entered into in accordance with the Hedging
Strategy (as revised and agreed with the Agent on or about the
Restructuring Date);
(x) Borrowed Money owed by one member of the Group to another member
of the Group (but subject to 18(b));
(xi) Borrowed Money in respect of guarantees issued by banks on behalf
of Group members to media authorities in Korea and the United
Kingdom in each case in connection with bona fide arrangements
for maintenance of media accreditation in accordance with normal
industry practice; and
(xii) Borrowed Money in addition to that permitted by 13.1(i) to (xi)
not exceeding (pound)16,000,000 (or its equivalent) in aggregate
at any given time;
13
13.2 The sale, factoring or discounting of receivables and the sale and
leaseback/sale and repurchase of assets will not be permitted other
than the sale, factoring or discounting of receivables on a
non-recourse basis where the aggregate amount of receivables so sold,
factored or discounted does not exceed (pound)500,000 (or its
equivalent) in aggregate.
14 Permitted Encumbrances/Guarantees
14.1 The definition of Permitted Encumbrances at clause 1.2 of the Credit
Agreement will be revised as set out below:
"Permitted Encumbrances" means:
(a) any Encumbrance created pursuant to the terms of this Agreement
and/or the Security Documents;
(b) any right of set-off arising by operation of law in the ordinary
course of trading;
(c) any Encumbrance created in favour of a bank in connection with
any bona fide cash management and/or netting arrangements for the
Group (subject to 17.2(b) below);
(d) any lien arising with respect to Taxes of the Group;
(e) any Encumbrance which the Agent (acting on the instructions of
the Majority Banks) has at any time in writing agreed shall be a
Permitted Encumbrance;
(f) the Encumbrances to be listed in schedule 7 to the Credit
Agreement as amended and restated pursuant to the Restructuring
(as agreed between the Parent and the Arrangers) securing the
amount set opposite the relevant Encumbrance in such schedule 7,
but not any increase in such amount;
(g) any Encumbrance given by a member of the Group in connection with
bona fide arrangements for the maintenance of media accreditation
of any member of the Group provided that such members of the
Group purchase media (and give such Encumbrances) only in
accordance with normal industry practice;
(h) any Encumbrance on assets acquired after the date of this
Agreement or on assets of a company which becomes a Subsidiary
after the date of this Agreement (which Encumbrances were in
existence at the date of acquisition or such company becoming a
Subsidiary, but were not created in contemplation thereof) but in
each case only if the maximum amount thereby permitted from time
to time to be secured has not been increased on account of, or
since the date of, the acquisition of such asset or the date on
which such company becomes a Subsidiary and provided that the
same is discharged in full within 30 days of the date of the
relevant acquisition or such company becoming a Subsidiary
(i) any Encumbrance (a "New Encumbrance") created by any member of
the Group in substitution for any Encumbrance referred to in
paragraph (f) above (an "Existing Encumbrance") provided that (i)
such Existing Encumbrance is irrevocably and unconditionally
discharged no later than the time of creation of the New
Encumbrance, (ii) the New Encumbrance relates only to the same
assets as the Existing Encumbrance and (iii) the Indebtedness
secured by the New Encumbrance does not exceed the Indebtedness
secured by the Existing Encumbrance;
(j) any Encumbrance created in favour of a plaintiff or a defendant
in any action, or the court or tribunal before which such action
is brought, as security for costs for expenses where any member
of the Group is prosecuting or defending such action in the bona
fide interest of such member and/or any other member of the Group
provided that the total amount secured does not exceed
(pound)500,000;
14
(k) the trust established in accordance with the terms of the letters
dated 21st August 1997 to beneficiaries of the support agreement
dated 1st October 1987 and made between the Parent (1) and Ted
Bates Worldwide Inc. (2);
(l) liens arising by operation of law or by way of contract in the
ordinary course of business to the extent that the same would
otherwise arise by operation of law and are not incurred in
connection with the raising of finance;
(m) any Encumbrance constituted by a Finance Lease permitted under
13.1;
(n) any pledge of documents of title relevant to the asset as
security for the liabilities of a member of the Group in respect
of a documentary credit facility taken out in the ordinary course
of business;
(o) any retention of title to goods supplied to any member of the
Group where that retention is required by the supplier in the
ordinary course of its trading activities and on customary terms;
(p) any Encumbrance granted by a member of the Group over any rent
deposits as security for rental payments to be made by such
member of the Group under or pursuant to any lease of premises
used for its business; and
(q) any Encumbrance not otherwise permitted pursuant to paragraphs
(a) to (p) above (inclusive) and securing Indebtedness in
aggregate not exceeding (pound)2,000,000;
14.2 The definition of Permitted Guarantees at clause 1.2 of the Credit
Agreement will be revised as set out below:
"Permitted Guarantees" means:
(a) any guarantee which the Agent (acting on the instructions of the
Majority Banks) has at any time in writing agreed shall be a
Permitted Guarantee;
(b) any guarantee given by a member of the Group of the obligations
of any Guarantor, any guarantee given by a member of the Group
which is not a Guarantor of the obligations of another member of
the Group which is also not a Guarantor and any guarantee which
constitutes a Permitted Investment (as defined in 17.2 below);
(c) any guarantee given by any member of the Group to be listed in
schedule 9 to the Credit Agreement as amended and restated
pursuant to the Restructuring (as agreed between the Parent and
the Arrangers) guaranteeing the amount set opposite the relevant
guarantee in such schedule 9, but not any increase in such
amount;
(d) any guarantee given by a company which becomes a Subsidiary after
the date of this Agreement (which guarantee was in existence at
the date such company becomes a Subsidiary and was not created in
contemplation thereof) but only if the maximum amount guaranteed
has not been increased on account of or since the date on which
such company becomes a Subsidiary and provided that the same is
discharged within 30 days of the relevant company becoming a
Subsidiary;
(e) any guarantee given by a company in the Group in favour of a bank
in connection with any bona fide cash management and/or netting
arrangements for the Group (subject to 17.2(b) below);
(f) any guarantee given by a member of the Group in connection with
bona fide arrangements for the maintenance of media accreditation
of any member of the Group provided that such members of the
Group purchase media (and give such guarantees) only in
accordance with normal industry practice;
15
(g) any indemnity given by a member of the Group required by a bank
as part of its normal terms and conditions for transacting
business indemnifying such bank against costs and losses it may
sustain as a consequence of accepting telephone or facsimile
instructions from such member of the Group; and
(h) any counter indemnity given by any member of the Group in
connection with a Bid Bond;
15 Disposals
15.1 The mandatory prepayment and cancellation of the facilities under the
Credit Agreement will be required from the proceeds of disposals as
follows:
15.1.1 Subject to 15.1.2 below, but without prejudice to 15.2 below, if any
member of the Group disposes of any assets (including shares and fixed
assets) to any person which is not a member of the Group, of which:
(a) the aggregate Net Proceeds are at least (pound)500,000 (or its
equivalent at the date of the disposal) (each a "relevant
disposal"); and
(b) the aggregate Net Proceeds of relevant disposals in any financial
year are in excess of (pound)5,000,000 (or its equivalent at the
date of disposal),
the Parent shall (or shall procure that it and the other Borrowers
shall), apply an amount equal to the aggregate Net Proceeds of such
relevant disposals which are in excess of (pound)5,000,000 (or its
equivalent) in mandatory prepayment and cancellation of the facilities
under the Credit Agreement in accordance with the terms of the
lntercreditor Agreement.
"Net Proceeds" means, in respect of a disposal of an asset or any of
the matters referred to in 16.6, the full amount of proceeds received
by a member of the Group in respect thereof less the reasonable costs
incurred by the relevant member of the Group in relation thereto for
which purpose (a) such proceeds shall be taken to include, in addition
to consideration directly attributable to the disposal of such asset
or such matter, any amount owing to and set-off by the relevant
purchaser or other relevant third party (b) any proceeds received
otherwise than in cash will be treated as Net Proceeds only upon the
subsequent realisation of cash from such proceeds and (c) "reasonable
costs incurred by the relevant member of the Group" includes
reasonable legal fees, agents' commissions, auditors' fees,
registration fees and Taxes paid or properly provided for in
accordance with the Appropriate Accounting Principles (where such Tax
is likely to become payable within the following 18 months, or, in the
case of any of the matters referred to in 16.6.1 or 16.6.4 only, where
the Parent demonstrates to the reasonable satisfaction of the Agent
that such Tax will become payable after such period);
15.1.2 The provisions of 15.1.1 above will not apply in relation to the
disposals referred to in 15.2.1(a), (c), (d), (e), (f), and (g) below.
15.2 Clause 12.2(d) (Negative undertaking: disposals) shall be revised as
follows:
15.2.1 Each Borrower will not and will procure that none of its Subsidiaries
will sell, transfer, lease, surrender, lend or otherwise dispose of
the whole or any part of its present or future undertakings, assets or
revenues whether by one or a series of transactions related or not (or
enter into any binding commitment to do any of the same (whether
conditional or otherwise)) (each a "disposal") except for:
(a) the disposal of stock-in-trade in the ordinary course of day to
day trading;
(b) any disposal for cash on arm's length terms where the aggregate
of the greater of the consideration and the market value of all
such disposals does not exceed (pound)10,000,000 (or its
equivalent) provided that the aggregate Net Proceeds of such
disposal are applied as (and to the extent) required by 1.1.1
above; and
16
(c) any disposal by:
(i) a member of the Group to a Guarantor; and
(ii) a member of the Group which is not a Guarantor to another
member of the Group which is not a Guarantor,
but so that in each case where any such asset is shares, other
ownership interests in any person or entity, real property or
real estate (or related insurance policies), receivables
(including intra-Group debts) or, in each case, rights or claims
in respect of any such asset and is subject or is expressed to be
subject to an Encumbrance pursuant to any Security Document such
disposal shall only be permitted either where the Agent is
satisfied that the guarantee given by the disposee of the
obligations of the Parent, Borrowers, Guarantors and security
providers under (inter alia) the Credit Agreement, the Notes and
the Security Documents is not limited to a greater extent than
that given by the disposer and that either (A) such Encumbrance
is not prejudiced as a result of such disposal or (B) the asset
concerned becomes subject to a fully enforceable, legally binding
Encumbrance in favour of the Common Security Trustee and the
other Finance Parties and Noteholders substantially equivalent to
or better than such other Encumbrance or with the consent of the
Agent (acting on the instructions of the Majority Banks);
(d) dealings with trade debtors with respect to book debts in the
ordinary course of trading;
(e) disposals of cash on arm's length terms not otherwise prohibited
by the Credit Agreement and Security Documents;
(f) disposals which constitute Permitted Investments (as defined in
17.2 below); and
(g) the disposals permitted by 16.5 provided that the proceeds of
such disposals are applied in accordance with 16.6;
and so that where the asset or assets the subject of a disposal
permitted by this paragraph (whether pursuant to 15.2.1(a) to (g)
above or with the prior written consent of the Agent acting on the
instructions of the Majority Banks (but excluding the assets referred
to in the last paragraph of 15.2.1(c) in the case of any disposal
under such clause)) is or are subject to an Encumbrance created by the
Security Documents, the consent of the Agent (but without prejudice or
responsibility to or in respect of any other requisite consent) shall
be granted (and shall be deemed to be granted) for the release of the
Encumbrance created by the Security Documents over such assets
provided that no Default shall have occurred and be continuing neither
remedied nor waived (and the Agent is irrevocably authorised by the
Finance Parties to grant such releases or, as appropriate, to instruct
and/or authorise the Common Security Trustee to grant such releases
without reference to the Finance Parties) and the Agent shall
accordingly instruct the Common Security Trustee to grant the relevant
releases.
16 Zenith
16.1 The Parent will undertake that no member of the Group will terminate,
amend or vary (or acquiesce in any termination, amendment or variation
of) the terms of the Joint Venture Agreement dated 27 September 2001
with Publicis Group S.A. (the "JVA") in a way which might reasonably
be expected to adversely affect the Group's rights or interests under
or in respect of the put and call options contained therein relating
to the Group's shares in Zenith Optimedia Group Limited ("Zenith")
(except as required by 16.2 below) or which might reasonably be
expected to adversely affect (or delay) the amount of receipt of any
amount referred to in 16.6 below.
16.2 The Parent shall transfer its shares in Zenith Optimedia Group Limited
to Sonic Sun Limited, an English wholly-owned non-trading solvent
subsidiary of the Parent, in accordance with the terms of the JVA.
Sonic Sun Limited will be subject to the guarantee and security
requirements set
17
out in 20.1(a) of this term sheet (save that the security will not
cover the shares in Zenith while the consent of Publicis Group S.A.
has not been obtained).
16.3 Sonic Sun Limited will not carry out any trading, business or other
activity or own any material assets other than holding the shares in
Zenith, acting in relation to the joint venture constituted by the
JVA, and complying with the call options or exercising the put options
under the JVA and will not incur any material liabilities of any
nature whatsoever (whether actual or contingent) other than (i)
liabilities for reasonable professional fees (ii) liabilities under
the JVA (iii) liabilities under the Security Documents to which it is
party and (iv) liabilities which will arise if it were wound up;
16.4 Any and all of the Group's right, interest and title in respect of the
shares in Zenith will be held at all times by Sonic Sun Limited.
16.5 Sonic Sun Limited will not transfer or otherwise dispense of any
interest in any of the shares it holds from time to time in Zenith
other than (i) pursuant to the exercise of a call option or a put
option under the JVA or (ii) a disposal to a person which is not a
member of the Group and where the net proceeds of such disposal are at
least equal to the net proceeds which would be received by the Group
following the exercise of such a put option at such time, in each case
where the resulting proceeds are applied in accordance with 16.6 and
will not create any Encumbrance over any interest in any of the shares
it holds from time to time in Zenith except under a Security Document.
16.6 The mandatory prepayment and cancellation of the facilities under the
Credit Agreement will be required from the Net Proceeds of:
16.6.1 any exercise of the put or call options under the JVA or any other
disposal of shares (or other interests) in Zenith;
16.6.2 any claims for damages or other remedies in respect of any breach of
the put and call options in the JVA;
16.6.3 any claim in respect of all warranties, indemnities and
representations contained in the JVA to the extent connected to the
put and call options; and
16.6.4 any Flotation of, or sale or other disposal of all or substantially
all of its assets and undertakings by, Zenith or any of its
Subsidiaries.
17 Acquisition/joint ventures/investments
17.1 Subject to further review by the Arrangers, the acquisitions listed in
the Earnout Projections for 2002 to 2004 provided by the Parent and
dated 4 February 2002 shall be the basis of the revised Permitted
Acquisitions listed in schedule 12.
17.2 Save for Permitted Acquisitions, each Borrower will not, and will
procure that none of its Subsidiaries will, acquire or make any
investment in any companies, joint ventures or partnerships or other
persons or acquire any businesses (or interests therein) (or commit to
do any of the same (whether conditionally or otherwise)) except for:
(a) investments in the then existing Guarantors (or a member of the
Group or a newly formed entity which in each case simultaneously
becomes a Guarantor) and investments by a member of the Group
which is not a Guarantor in another member of the Group which is
not a Guarantor;
(b) Permitted Investments (as defined below); and
(c) the acquisition of related businesses (including companies where
the liability of its shareholders is limited to their respective
share capital in such company but not other entities) provided
that:
18
(i) the consideration (without double counting within the
Group), including, without limitation, any deferred
consideration (whenever payable), and the obligations in
respect of Borrowed Money of any such company immediately
following its acquisition or repaid directly or indirectly
by any member of the Group or otherwise assumed by the Group
and taking the value of any non-cash consideration at the
higher of its stated value under the agreement(s) for the
acquisition in question and the market value of such
consideration on the date such agreement(s) were entered
into by the Group, in respect of all such acquisitions by
the Group (other than consideration constituted by ordinary
shares in the Parent issued or transferred to the relevant
vendor (or as it may direct)) shall not exceed $2,000,000
(or its equivalent) in aggregate in any financial year; and
(ii) the consideration constituted by ordinary shares in the
Parent issued or transferred to the relevant vendor (or as
it may direct)) in respect of any single acquisition shall
not exceed $20,000,000 (or its equivalent); and
(iii) the finance director of the Parent delivers a certificate
to the Agent at least 5 Banking Days before any member of
the Group enters into any commitment (conditional or
otherwise) to make such an acquisition in which the finance
director of the Parent confirms that in his opinion (but
without any personal liability on the part of such finance
director):
(A) the Parent is basing such certificate on the most
recent financial information relating to such business
which has been obtained by the Parent (acting prudently
and reasonably) and the Group's latest forecasts and
projections (which are fair and reasonable and have
taken full and proper account of the business to be so
acquired (including, without limitation, all contingent
liabilities relating to the business to be so
acquired));
(B) the business to be so acquired is not insolvent and is
EBITDA positive (as determined in accordance with the
definition of Consolidated EBITDA in 3.2, but adjusted
to exclude the effect of historic non-recurring costs
which will no longer be incurred by that business
following its acquisition);
(C) such acquisition is not, and the Parent it is not aware
(after due enquiry) of any matter or event which is,
reasonably likely to result in a breach of clause 13
(Financial Covenants) or an Event of Default under any
of clauses 14.1(a) (Non payment) or 14.1(e) (Cross
Default) to 14.1.(n) (Analogous proceedings) inclusive
either immediately or within the period ending 12
months after the date of such acquisition;
(D) the Group is reasonably likely to have sufficient
working capital during the period ending 12 months
after the date of such acquisition;
(E) after taking into account any Capital Expenditure
incurred by the Group in making such acquisition, the
Group will still be able, in compliance with the
Financial Covenant in 3.3, to undertake sufficient
Capital Expenditure so as to properly maintain its
businesses during the period ending 12 months after the
date of such acquisition;
(F) in the case of acquisitions by members of the Group
that are not Guarantors, such acquisition is not funded
directly or indirectly by any Guarantor, other than to
the extent such funding is a Permitted Investment; and
(G) no Default has occurred which is continuing and no
Default will arise as a result of such acquisition; and
19
(iv) no Default has occurred which is continuing and no Default will
arise as a result of such acquisition, and
for the avoidance of doubt, any such acquired businesses shall be
immediately subject to the provisions of 13.1 and 20.
Subject to the proviso below, "Permitted Investments" means (i)
investments in the shares of or other ownership interests in, (ii)
loans or credit granted to, (iii) disposals to (not otherwise
permitted under 15.2.1(a) to (e) inclusive or clause 15.2.1(g)), and
(iv) guarantees of the Indebtedness of, any member of the Group which
is not a Guarantor (or such investments in establishing a new entity
which once formed is a member of the Group which is not a Guarantor)
where the aggregate of such investments, loans, credit, disposals and
guarantees made in the relevant financial year, together (without
double counting) with the Pooling Borrowed Money at any relevant time
during such financial year, at no time exceeds:
(a) (pound)20,000,000 (or its equivalent) during the financial year
ending 31 December 2002; or
(b) (pound)15,000,000 (or its equivalent) during each subsequent
financial year.
Provided that, for the purposes of the definition of "Permitted
Investments":
(i) "Pooling Borrowed Money" means, at any relevant time, the
aggregate of the Borrowed Money of any members of the Group
which are not Guarantors under any cash management
arrangements in respect of which any Guarantor grants any
guarantee, rights of set-off or any other Encumbrance or
grants an intra-Group loan;
(ii) the value attributable to a disposal of an asset shall be
the market value of the disposed asset; and
(iii) the relevant aggregate limit applicable during a financial
year shall be increased by the amount of (A) any repayment,
release or cancellation (whether in whole or in part) of
loans, credits and guarantees previously taken into account
for the purpose of determining compliance with "Permitted
Investments" during such financial year and (B) cash
proceeds (to the extent not already taken into account
pursuant to (A)), (net of related costs and Taxes) received
by a Guarantor from a member of the Group which is not a
Guarantor in such financial year under a series of related
transactions involving an investment in such non-Guarantor
made by such Guarantor within 13 months of such receipt and
previously taken into account for the purpose of determining
compliance with "Permitted Investments" (to the extent that
such net cash proceeds do not exceed the amount of such
investment so taken into account).
18 Loans and Guarantees
Each Borrower will not, and will procure that none of its Subsidiaries
will, make any loans, grant any credit (except for normal trade credit
in the ordinary course of day-to-day trading) or give any guarantee
save for:
(a) Permitted Guarantees to or for the benefit of any person; and
(b) loans or credit to a Guarantor or loans or credit from one member
of the Group which is not a Guarantor to another member of Group
which is not a Guarantor and loans or credit which constitute
Permitted Investments.
19 Cash management undertakings
19.1 The Parent will use its best endeavours to procure that cash held by
members of the Group which are not Guarantors and which is not
required to meet working capital liabilities will be repatriated
directly or indirectly to the bank account of a Guarantor located in
England and Wales or the United States, to the extent that such
repatriation can be done in a legal and tax-
20
efficient manner and without incurring costs which are
disproportionate to the benefit to the Finance Parties.
19.2 The members of the Group will conduct their Cash Pooling Arrangements
in the UK, the US and the Euro-Zone with a Bank or Banks, excluding
the Cash Pooling Arrangements in place as at the date of the execution
of the Agreement in Principle with non-Banks in Germany and Italy (to
be specifically identified in the Credit Agreement as amended and
restated pursuant to the Restructuring Deed) and except as otherwise
agreed in writing with the Agent.
19.3 The Parent will not permit any member of the Group incorporated or
formed in the United States or in England and Wales that is not a
Guarantor to be a party to any Cash Pooling Arrangements with any
other member or members of the Group, other than where the value of
any loans, credit, rights of set-off, guarantee or other Encumbrance
provided to such member or members of the Group does not exceed
(pound)500,000 and (for the avoidance of doubt) such loans, credit,
rights of set-off, guarantee or other Encumbrance is subject to the
provisions of 17.2(b) of this term sheet.
For these purposes:
"Cash Pooling Arrangements" means arrangements for the pooling of the
balances of any two or more Group member's bank accounts pursuant to
which arrangements any such member of the Group grants a guarantee,
rights of set-off or any other Encumbrance or transfers cash between
the relevant bank accounts pursuant to an intra-Group loan.
"Euro Zone" means each country that is a Participating Member State.
"Participating Member State" means a member state of the European
Union that has adopted or adopts the single currency in accordance
with the Treaty.
"Treaty" means the Treaty establishing the European Economic Community
being the Treaty of Rome of 25 March 1957 as amended by the Single
European Act 1986 and the Maastricht Treaty (which was signed on 7
February 1992 and came into force on 1 November 1993) as amended,
varied or supplemented from time to time.
20 Guarantees and security
20.1 A guarantee and security package will be required. This will include
(subject to the limitations and issues noted at the end of schedule
1):
(a) guarantees from, and first ranking fixed and floating charges
over, all the assets and undertaking of the members of the Group
incorporated in England and Wales listed in Part 1 of schedule 1
(and the issued share capital of each of these companies (other
than the Parent) will be the subject of a pledge/charge by its
parent); and
(b) to the extent capable of being provided, guarantees from material
members of the Group incorporated in the US, Germany, the
Netherlands and Australia as set out in Part 2 of schedule 1 and
pledges/charges over the issued share capital of those companies.
20.2 All guarantees and security documents shall be in form and substance
satisfactory to the Agent.
20.3 Clause 12.1(o) will be revised to include an ongoing obligation to
procure that Material Subsidiaries incorporated in England and Wales,
the US, Germany and the Netherlands provide guarantees and security
consistent with 20.1, to the extent capable of being provided
(excluding any Subsidiaries of the Parent which are Material
Subsidiaries as at the Restructuring Date but which are not required
to provide guarantees or security as a condition to the Restructuring,
so long as the reasons for such security not being so required are
continuing). Materiality for this purpose will be based on the revised
definition of "Material Subsidiary" set out in 23 below.
20.4 The terms and principles governing the taking of security both as a
condition to the Restructuring and as an ongoing obligation after the
Restructuring Date shall be agreed
21
between the Parent, the Agent and the Common Security Trustee in a
security memorandum dated on or about the Restructuring Date (the
"Security Memorandum").
20.5 The guarantee and security package will be held by the Common Security
Trustee (or its agents) and will secure all amounts outstanding under
(inter alia) the Credit Agreement, the Notes and the Security
Documents on the basis set out in the Intercreditor Agreement.
21 Prepayments under the Credit Agreement
21.1 All voluntary and mandatory prepayments under the Credit Agreement
shall first be applied firstly in prepayment of Revolving Credit
Advances outstanding under the Credit Agreement prior to the
Restructuring Date (or any rollover of such Advances), secondly in
prepayment of all other outstanding Revolving Credit Advances, and
thirdly in pro rata prepayment of the Swingline Facility and the
Overdraft Facility.
21.2 All prepayments shall result in the cancellation of an equivalent
amount of the relevant Commitments.
21.3 Any prepayment under the Credit Agreement shall be made in the
currency in which the relevant Advance or Utilisation is then
denominated together with: (a) accrued interest to the date of
prepayment; (b) any additional amount payable under clauses 10.5, 16.2
or 16.5 of the Credit Agreement; (c) all other sums payable by the
Borrowers to the relevant Finance Parties under the Credit Agreement
including, without limitation, any accrued commitment commission
payable under clause 9.1(c) of the Credit Agreement and any amounts
payable under clause 15.1 of the Credit Agreement, and (d) where the
Facilities are prepaid and cancelled in full, the Deferred Fee and the
P1K Management Fee and interest accrued thereon.
22 Material Adverse Effect revisions
22.1 "Material Adverse Effect" to be redefined as meaning a reference to
any effect, event or circumstance (on its own or in combination with
other effect, events or circumstances):
(a) which is, or is reasonably likely to be, materially adverse to
(i) the ability of any of the Parent, the Borrowers, the
Guarantors or the security providers to perform any of its
obligations under the Bank Finance Documents or (ii) the
business, assets or financial condition of the Group taken as a
whole; or
(b) results in, or is reasonably likely to result in any of the Bank
Finance Documents not being legal, valid and binding on, and,
enforceable substantially in accordance with their terms, against
any party thereto.
"Bank Finance Documents" will be defined to mean the Credit Agreement,
the Restructuring Deed, the Substitution Certificates, the Borrower
Accession Agreements, the Overdraft Borrower Accession Agreements, the
fee letters, the Security Documents, the Intercreditor Agreement, the
Agreement in Principle and any documentation from time to time entered
into between the Overdraft Borrowers and the Overdraft Bank relation
to the Overdraft Facility,
22.2 Clause 14.1(t) (Material Adverse Effect) to be amended so that an
Event of Default arises upon the occurrence of any event or
circumstance which, in opinion of the Majority Banks (acting
reasonably):
(a) is, or is reasonably likely to be, materially adverse to (i) the
ability of any of the Parent, the Borrowers, the Guarantors or
the security providers to pay any sum due from it under any of
the Bank Finance Documents, (ii) the ability of any of the
Parent, the Borrowers, the Guarantors or the security providers
to comply with any of its obligations or undertakings expressed
to be assumed by it under 1.1, 1.2, 1.4 and 1.5 at the time and
in the manner stipulated in those paragraphs of this term sheet
(or within the grace period applicable under 2 (Breach of other
obligations)), (iii) the ability of any of the Parent, the
Borrowers, the Guarantors or the security providers to comply
with any of its obligations
22
or undertakings expressed to be assumed by it under clauses 12.2
(Negative undertakings), or 13 (Financial covenants) of the
Credit Agreement, (iv) the ability of any of the Parent, the
Borrowers, the Guarantors or the security providers to perform
any of its obligations under any of the Security Documents or (v)
the business, assets or financial condition of the Group taken as
a whole; or
(b) results in, or is reasonably likely to result in any of the Bank
Finance Documents not being legal, valid and binding on, and,
enforceable substantially in accordance with their terms, against
any party thereto.
23 Material Subsidiary revisions
23.1 "Material Subsidiary" to be redefined to mean any member of the Group
which is party to (inter alia) the Credit Agreement or a Security
Document or any other Subsidiary of the Parent:
(a) whose EBITDA, together with that of its Subsidiaries, is equal to
or exceeds 3 per cent. of the Consolidated EBITDA of the Group
(where EBITDA shall be construed appropriately in respect of such
member of the Group by reference to the definition of
Consolidated EBITDA); or
(b) whose gross revenues, together with those of its Subsidiaries, is
equal to or exceeds 3 per cent. of the consolidated gross
revenues of the Group; or
(c) to which has been transferred (whether by one transaction or a
series of transactions, related or not) all or substantially all
of the assets of another member of the Group which, immediately
prior to that transaction or any of the transactions in that
series, was a Material Subsidiary as determined under paragraphs
(a) or (b) above; or
(d) which is a holding company of a Material Subsidiary determined
under paragraphs (a) to (c) above,
as determined by reference to the then latest quarterly management
accounts of the Group delivered under 1.2, the latest audited
consolidated financial statements for the time being of the Group
delivered under 1.1 and such other financial statements of the
relevant members of the Group (prepared on the same basis as such
financial statements delivered in accordance with 1 in respect of the
same period to which such other financial statements relate) as are
necessary for the relevant Compliance Certificate or Auditors'
Financial Covenants report to be duly completed and delivered in
accordance with 1.4 and 1.5, provided that (i) in the case of a member
of the Group acquired after the end of the period to which the then
latest financial statements of the Group delivered under 1.1 or 1.2
relate, the reference to such then latest financial statements shall
(until financial statements have been delivered under such clauses for
the period in which such acquisition is made) be deemed to be a
reference to a consolidation (in accordance with the Original
Accounting Principles) of such then latest financial statements and
the latest financial statements of such acquired member of the Group
for such period and (ii) a report of the Auditors to the Finance
Parties that a Subsidiary of the Parent is or is not a Material
Subsidiary (in accordance with this definition) when delivered (as
part of the Auditors' report or otherwise) shall be conclusive and
binding on the parties hereto.
24 Transferability
24.1 The Banks will be permitted to transfer their Commitments and
Contributions to any bank or financial institution after consultation
with the Parent but without requiring the consent of the Parent or the
Borrowers, subject to the Borrowers being not obliged to gross up to a
greater extent than they were in relation to the relevant transferor.
24.2 The definition of Qualifying Bank will be updated and will speak as at
the Restructuring Date.
23
25 Other revisions to the Facilities Agreement
25.1 Representations and warranties appropriate to the secured transactions
shall be made including a representation and warranty in respect of
all information and projections provided to the Arrangers in relation
to the Restructuring.
25.2 An additional Event of Default will occur under clause 14 of the
Credit Agreement where there is an Event of Default (as defined in the
Amended and Restated Note Purchase Agreement) under the Amended and
Restated Note Purchase Agreement regardless of any waiver under the
Amended and Restated Note Purchase Agreement.
25.3 The Parent undertakes to promptly provide the Agent with written
notice of the occurrence of any Control Event. For these purposes (1)
"Control Event" means (A) the announcement, by or on behalf of any
person or associate person or persons, in accordance with Rule 25 of
the City Code on Takeovers and Mergers, of a firm intention to make an
offer to the holders of the ordinary shares of the Parent or of a
proposal for a scheme of arrangement, which offer or proposal, if
accepted or approved (as the case may be) by the requisite number(s)
of holders and if the other conditions thereto were satisfied or
waived, would result in a Change of Control (but, for the avoidance of
doubt, "Control Event" shall not include any preliminary approach or
negotiations by any person or group of person to or with the Parent in
respect of any such offer), (2) a "Change of Control" shall occur if a
person (whether alone or together with any associated person or
persons) becomes the beneficial owner of shares in the issued share
capital of the Parent carrying the right to exercise more than 50% of
the votes exercisable at a general meeting of the Parent, and (3) an
"associated person" means, in relation to any person, a person who is
(i) acting in concert (as defined in the City Code on Takeovers and
Mergers) with that person or (ii) a connected person (as defined in
section 839 of the Income and Corporation Taxes Act 1988) of that
person.
26 Most favoured lender status
None of the Parent, the Borrowers, the Guarantors or security
providers will enter into any modification or amendment to any
existing credit facility or other financing document, or enter into
any new credit facility or financing document, that contains financial
covenants, definitions or default provisions more favourable to the
lender or financier thereunder unless the Finance Parties are given
the option of receiving the benefit of such more favourable provisions
at the same time and on the same terms. No additional guarantees or
security will be provided to the Noteholders or any other creditor
unless similar guarantees and security are given in favour of the
Finance Parties.
For the avoidance of doubt and in addition to the foregoing, to the
extent that the Group enters into any modification or amendment to the
Note Purchase Agreements that contains definitions, covenants or other
provisions more favourable to the Noteholders thereunder or under the
term sheet entitled "Term Sheet - Indicative Key Terms and Conditions
of the Proposed Amendments" attached to the Agreement in Principle,
the Finance Parties shall be given the option of receiving the benefit
of such more favourable provisions at the same time and on the same
terms.
27 Conditions precedent to the Restructuring
The amendments to be made to the Credit Agreement pursuant to the
Restructuring shall take effect on and from the date on which the
Agent notifies the Parent and the Finance Parties that the Agent has
received the documents and evidence specified here in 27 , in each
case, in form and substance satisfactory to it, or, as the case may
be, that the requirement to provide any of such documents or evidence
has been waived by the Majority Banks.
27.1 Corporate
Directors certificates from each of the Parent, Borrowers, Guarantors
and security providers annexing (inter alia) (i) copies of the
constitutional documents of each such company or entity,
24
(ii) appropriate supervisory and management board resolutions of each
such company or entity evidencing approval of the entry into the
Restructuring, and (iii) signatures of those persons authorised by the
supervisory and management board resolutions of each such company or
entity referred to in (ii) to sign any of the Restructuring
documentation and to execute all such undertakings, statements,
certificates, notices, acknowledgements and other documents as may be
required to be done, signed and executed by or on behalf of each such
company or entity in connection with the Restructuring documentation
and otherwise in relation to or ancillary to the same.
27.2 Credit Documents
27.2.1 The Restructuring Deed, duly executed by all parties to it.
27.2.2 The Agreement in Principle, duly executed by all parties to it.
27.2.3 A copy, certified as a true copy by an Authorised Officer of the
Parent, of the Amended and Restated Note Purchase Agreement in a form
and substance satisfactory to the Agent together with confirmation
that all conditions to Amended and Restated Note Purchase Agreement
becoming effective (other than in respect of the amendment of the
Credit Agreement in accordance with the terms of the Restructuring
Deed) have been satisfied.
27.3 Security Documents
27.3.1 The Security Memorandum, duly executed.
27.3.2 All Security Documents and other documents required in accordance with
the Security Memorandum in each case in accordance with the basis set
out in the Security Memorandum.
27.3.3 The Intercreditor Agreement, duly executed by all the parties thereto.
27.3.4 The Common Security Trust Deed, duly executed by all the parties
thereto.
27.3.5 The Pledge Agreement to be executed by Cordiant Communications Group
plc, Cordiant Holdings GmbH, Bates Deutschland Holding GmbH and Bates
Germany Werbeagentur GmbH over the shares in the relevant German
Subsidiaries.
27.3.6 The Abstract Acknowledgement of Indebtedness to be executed by
Cordiant Communications Group plc.
27.4 Opinions
27.4.1 An opinion of Norton Rose dated not more than 5 Banking Days prior to
the Restructuring Date.
27.4.2 Local law legal opinions in each jurisdiction in which any Borrower,
Guarantor or security provider is incorporated from legal advisers to
the Agent, the Banks and the Common Security Trustee in respect of
(inter alia) the Restructuring Deed, the Credit Agreement (as amended
in accordance with this term sheet) and the Security Documents.
27.4.3 US law legal opinion from legal advisers to the Parent where
appropriate in respect of (inter alia) due incorporation of, and
execution of the relevant documents by, any Borrower Guarantor or
security provider incorporated or formed in the US.
27.5 Financial
27.5.1 A report from KPMG addressed (among others) to the Finance Parties and
the Parent including confirmation that the Finance Parties and the
Parent may rely thereon.
25
27.5.2 A report from PricewaterhouseCoopers addressed (among others) to the
Finance Parties including confirmation that the Finance Parties may
rely thereon.
27.5.3 A letter from the Auditors confirming that they continue to be
appointed as the auditors of the Parent, and confirming that they will
provide the Auditors report in 1.5.
27.5.4 A revised Hedging Strategy Letter, duly executed.
27.5.5 A copy, certified as a true, complete and up-to-date copy by an
Authorised Officer of the Parent, of the Group structure book and the
Group structure charts.
27.5.6 A copy, certified as a true, complete and up-to-date copy by an
Authorised Officer of the Parent of the agreed form financial model.
27.5.7 A list, certified as true, complete and up-to-date of the material
inter-Group loans.
27.5.8 Copies, certified as a true, complete and up-to-date copies by an
Authorised Officer of the Parent, of the audited consolidated
financial statements of the Group for the financial year ended 31
December 2001 (together with the Group's preliminary audited
consolidated financial statements for that financial year), the
quarterly management accounts of the Group for the quarter ended 31
December 2001, and the monthly management accounts for the month ended
28 February 2002, (and which shall be deemed to have been delivered
pursuant to 1.11.2, and 1.3).
27.6 Transaction Costs
27.6.1 The co-ordination fee letter referred to in 4.1, together with payment
of the fees referred to therein.
27.6.2 Payment of the restructuring arrangement fee for the Banks referred to
in 4.2.
27.6.3 The agency fee letter, the swingline fee letter, and the Common
Security Trustee fee letter referred to in 4.4, together with payment
of any fees referred to in such letters which are payable on or before
the Restructuring Date.
27.6.4 Receipt by the Agent of the other fees, expenses and Taxes payable by
the Parent in accordance with 4.5 and the terms of the Restructuring
Deed.
27.7 Miscellaneous
27.7.1 Either:
(a) a copy, certified as a true copy by an Authorised Officer of
the Parent of all consents, authorisations, licences and
approvals required by the Parent and each Borrower,
Guarantor and security provider to authorise, or required by
the Parent and each Borrower, Guarantor and security
provider in connection with, the execution, delivery,
validity, enforceability and admissibility in evidence of
the Restructuring documentation and the performance by the
Parent and each Borrower, Guarantor and security provider of
its respective obligations under the Restructuring
documentation, or
(b) a certificate signed by an Authorised Officer of the Parent
that no such consent, authorisation, licence or approval
referred to in (a) above is required by the Parent or any
Borrower, Guarantor or security provider.
27.7.2 A certificate from an Authorised Officer of the Parent confirming that
utilisation in full of the Facilities (as amended pursuant to the
Restructuring) would not render the Parent or any Borrower in breach
of any restriction on borrowings applicable to the Parent or any
Borrower in its respective constitutional documents or elsewhere.
27.7.3 Evidence of the repayment of the Korean debenture stock.
26
27.7.4 Evidence that Sonic Sun Limited has acceded to the JVA and that all of
the Group's right, interest and title to shares in Zenith have been
transferred to Sonic Sun Limited and copies of the documents
evidencing such accession and transfer certified by and Authorised
Officer of the Parent as true, complete and up-to-date.
27.7.5 Copies, certified as true copies by an Authorised Officer of the
Parent of all other committed credit facilities of the Group which are
assumed to be in place in the financial model provided pursuant to
paragraph 27.5.6 above, and any necessary consents to the amendment of
the Credit Agreement in accordance with this term sheet required under
the terms of those facilities or written confirmation from an
Authorised Officer of the Parent that no such consents are required.
27.7.6 A certificate of an Authorised Officer of the Parent confirming that,
immediately following the Restructuring Date, the Group will have no
Encumbrances other than Permitted Encumbrances.
27.7.7 A certificate of an Authorised Officer of the Parent confirming that,
immediately following the Restructuring Date, the Group will have no
Borrowed Money other than as permitted by the Credit Agreement as
amended and restated in accordance with the Restructuring.
27.7.8 A certificate of a director of each Additional Overdraft Borrower (as
previously agreed by the Banks to accede to the Credit Agreement)
confirming that utilisation by it of the Overdraft Facility in full
would not cause any borrowing limit binding on it to be exceeded.
27.7.9 Evidence that each Additional Overdraft Borrower (as previously agreed
by the Banks to accede to the Credit Agreement) has acceded to the
Deed of Cross Guarantee dated 11 September 2000 in favour of the
Overdraft Bank.
27
Schedule 1
Security Package
PART 1
Companies incorporated in England and Wales to provide guarantees and first
ranking fixed and floating charges over all of their assets and undertaking. The
issued share capital of each of these companies (excluding Cordiant
Communications Group plc.) is to be the subject of a pledge / charge given by
its shareholders, which in the case of shareholders incorporated in England and
Wales will be contained in the relevant shareholder's first ranking fixed and
floating charges.
1 Cordiant Communications Group plc;
2 Cordiant Group Limited;
3 Bates Overseas Holdings Limited;
4 Bates Europe Limited;
5 Cordiant (US) Holdings Limited;
6 Garrott Dorland Crawford Holdings Limited;
7 Atlas Advertising Limited;
8 Bates UK Limited;
9 Swotplus Limited;
10 Deckchair Studio Limited;
11 Ted Bates Holdings Limited;
12 The Decision Shop Limited;
13 Healthworld UK Holdings Limited;
14 Bates Healthworld Limited;
15 PSD Associates Limited
16 Bamber Forsyth Limited;
17 Fitch Limited;
18 Fitch International Limited;
19 Fitch Worldwide Limited;
20 Business Communications International Group Limited;
21 C&FD (Holdings) Limited;
22 Corporate & Financial Design Limited;
23 Financial Dynamics Holdings Limited;
28
24 Financial Dynamics Limited;
25 Bulletin lnt. Limited;
26 Bulletin lnt. (UK) Limited;
27 ICM International Limited;
28 PCI Livedesign Limited;
29 Cordiant Overseas Holdings Limited;
30 Cordiant Property Holdings Limited;
31 Healthworld Holdings Limited[1];
32 Milton Marketing Group Limited[1];
33 Headcount WW Field Marketing Limited[1];
34 Lighthouse Holdings (UK) Limited[1];
35 Clarion Communications PR Limited[1];
36 CCG.XM Holdings Limited[1];
37 CCG.XM[1];
38 XMSS Limited;
39 Colwood Healthworld Limited;
40 Fitch Design Consultants Limited;
41 Milton Marketing Limited[1];
42 Connect Five Limited[1];
43 Connect Six Limited[1];
44 Propose Two Limited[1];
45 Secure Two Limited[1];
46 Connect One Limited1;
47 N.A.S.A. 2.0 London Limited;
48 Scholz & Friends London Limited[6]; and
49 Sonic Sun Limited[2]
PART 2
Companies or other entities incorporated in (or formed under the laws of) the
US, Germany, the Netherlands and Australia to provide guarantees and the share
capital (or equivalent) of which shall be the subject of pledges / charges.
29
US companies
1 Cordiant US Holdings, Inc.;
2 Healthworld Corporation;
3 Bates Healthworld Inc.;
4 Healthworld International Holdings Inc.;
5 Bates Worldwide (Delaware) Inc.;
6 Bates Advertising USA Inc.;
7 Bates Churchill Public Relations Inc.;
8 Bates Churchill Advertising Inc.;
9 Interactive Edge Inc.;
10 Lighthouse Global Network Inc.;
11 Fitch Inc.;
12 The Leonhardt Group Inc.;
13 Morgen Walke Associates Inc.;
14 Primo Angeli Inc.;
15 CCG.XM Holdings Inc.;
16 CCG.XM Inc.;
17 Microarts Corporation;
18 FaIk Healthworld Inc.;
19 The Decision Shop Inc.;
20 S&S MCC AND MCC Inc.;
21 Channelex Inc.;
22 DWP Bates Technology LLC.;
23 Cordiant Finance Inc.;
24 Peclers Pavis North America, Inc.; and
25 Drummer Associates Inc.
German companies
1 Cordiant Holdings GmbH;
2 Bates Deutschland Holding GmbH;
3 Bates Germany Werbeagentur GmbH;
30
4 XCEED! Agentur Fur Medienberatung Und Innovative Kommunikation GmbH;
5 EMC Starke & Gerlach GmbH; and
6 N.A.S.A. 2.0 GmbH.
Dutch companies
1 Chafma BV;
2 Bates Nederland Holding BV[3]; and
3 Cordiant Finance B.V[4].
Australian companies
1 Cordiant Communications (Australia) Pty Limited; and
2 Cordiant Communications Group Australia Pty Limited[5]
Notes to Schedule 1:
1 The share pledges over the shares of non-US subsidiaries owned by US
companies and the guarantees and security given by non-US subsidiaries of
US companies will be limited to the extent required to avoid adverse US tax
implications. Notwithstanding the foregoing, to the extent that any share
pledges, guarantees and/or security is given for the benefit of the
Noteholders or to otherwise secure obligations incurred in connection with
the Amended and Restated Note Purchase Agreement and are not given for the
benefit of the Finance Parties or to otherwise secure the obligations
incurred in connection with the Credit Agreement, recoveries under such
share pledges, guarantees and/or security shall be shared by the
Noteholders and the Finance Parties pursuant to the terms of the
Intercreditor Agreement.
2 Sonic Sun Limited will be subject to the guarantee and security package as
stated in 20.1(a) of this term sheet (though any charge over the shares
owned by Sonic Sun Limited in Zenith shall be, as stated at 16.2 of this
term sheet, subject to the obtaining of the consent of the other party(s)
to the JVA). In addition, a charge shall be taken over Sonic Sun Limited's
rights (and over the Parent's rights remaining after the transfer of shares
described at 16.2 of this term sheet), under or in connection with the
JVA, including the put and call options, and the proceeds resulting from
completion of the exercise of any of these options as stated in 16.5 of
this term sheet.
3 No charge will be taken over the 35% minority shareholding in Bates
Nederland Holding B.V. The shares owned by Chafma B.V. in Bates Nederland
Holding B.V. will be the subject of a Dutch law share pledge. Bates
Nederland Holding B.V. will not be required to give a guarantee.
4 Cordiant Finance B.V. is the company to which the Euro cash pool is swept
under the Euro cash pooling arrangements. Accordingly it is required to be
subject to the guarantee and security package arrangements outlined at 20
of this term sheet. In addition it will be required to provide a charge
over its bank accounts.
5 No charge will be taken over the 41.59% of shares in Cordiant
Communications Group Australia Pty Limited owned by Cordiant Communications
(Australia) Pty Limited. The shares owned by Chafma B.V. in Cordiant
Communications Group Australia Pty Limited will be the subject of a share
charge.
6 No charge will be provided over the shares in Scholz & Friends London
Limited so long as it is a direct or indirect Subsidiary of Scholz &
Friends AG. The Parent will use reasonable endeavours to procure that
Scholz & Friends London Limited enter into a guarantee, if,
31
however, Scholz & Friends London Limited does not enter into a guarantee
then it will not be permitted to accede to the Credit Agreement as an
Overdraft Borrower.
32
EXHIBIT B
Noteholders' Term Sheet
CORDIANT COMMUNICATIONS GROUP PLC
CORDIANT FINANCE, INC.
Term Sheet -- Indicative Key Terms and Conditions of the
Proposed Amendments
Issuer: Cordiant Finance, Inc. (the "Issuer").
Parent Guarantor: Cordiant Communications Group plc (the "Company")
and, together with its Subsidiaries, the "Group").
Existing Notes: US$175,000,000 7.61% Guaranteed Senior Notes due
2011 (the "Existing Notes" and, as amended by the
amendments contemplated herein, the "Notes"),
issued under the separate Note Purchase
Agreements, dated as of April 5, 2001, among the
Issuer, the Company and, respectively, the
purchasers identified therein (the "Existing Note
Purchase Agreements").
Amendment
and Restatement: The Existing Note Purchase Agreements will be
amended and restated pursuant to an Amended and
Restated Note Purchase Agreement (the "Amended and
Restated Note Purchase Agreement") which will
contain waivers of any Defaults or Events of
Default under the Existing Note Purchase
Agreements that have been identified to the
holders of the Notes prior to the date on which
the Amended and Restated Note Purchase Agreement
is executed.
Interest: The interest rate on the Notes will be permanently
increased to 9.25% per annum (effective as of the
Effective Date (as defined below)). The default
rate of interest for the existing Notes will be
modified accordingly.
Prior to the Put Elimination Date (as defined
below), interest on the Notes will be payable
quarterly. On and after the Put Elimination Date,
interest on the Notes will be payable
semi-annually.
Fees: A participation fee of 0.50% of the outstanding
principal of the Notes shall be payable on the
Effective Date.
A management fee of 0.50% of the outstanding
principal of the Notes shall be payable on the
Effective Date.
PIK Management Fee: The Company shall pay an additional management fee
(the "P1K Management Fee") to each holder of Notes
to be calculated as a percentage fee on the
aggregate outstanding principal amount of the
Notes on the date of calculation and shall be
calculated quarterly in accordance with the
following table showing the ratio of Consolidated
Gross Borrowings to Consolidated EBITDA:
Consolidated Gross Borrowings: Consolidated EBITDA
- -------------------------------------------------------------------------------
03/2002 [] 4.60 >4.60 but []4.84 >4.84 but []5.08 >5.08 but []5.32 > 5.32
06/2002 [] 6.25 >6.25 but []6.81 >6.81 but []7.38 >7.38 but []7.94 > 7.94
09/2002 [] 3.56 >3.56 but []3.84 >3.84 but []4.13 >4.13 but []4.41 > 4.41
12/2002 [] 3.37 >3.37 but []3.71 >3.71 but []4.06 >4.06 but []4.40 > 4.40
03/2003 [] 3.40 >3.40 but []3.59 >3.59 but []3.77 >3.77 but []3.96 > 3.96
06/2003 [] 3.28 >3.28 but []3.40 >3.40 but []3.52 >3.52 but []3.63 > 3.63
09/2003 [] 3.22 >3.22 but []3.35 >3.35 but []3.49 >3.49 but []3.62 > 3.62
12/2003 [] 2.89 >2.89 but []3.02 >3.02 but []3.15 >3.15 but []3.27 > 3.27
03/2004 [] 2.89 >2.89 but []3.00 - - -
06/2004 [] 2.70 >2.70 but []3.00 - - -
09/2004 [] 2.70 >2.70 but []3.00 - - -
- --- ----- ----- ----- ----- -----
Fee 0.00% 0.50% 1.00% 1.50% 2.00%
The PIK Management Fee shall be calculated using
the Company's quarterly compliance certificates
but shall not be payable by the Company until the
earlier of (i) the prepayment in full of the
Notes, (ii) the Bank Refinancing Date (as defined
below), (iii) any enforcement of the security
referred to in the section entitled
"Security/Guarantees" below, (iv) any of the
Events of Default described in paragraph (h), (i),
(j) or (k) of Section 11 of the Existing Note
Purchase Agreements, or (v) any of the Notes
becoming due and payable, whether automatically or
by declaration. Any PIK Management Fee that is
payable in respect of any quarter shall accrue
interest at 9.25% per annum, which interest shall
accrue but shall not be payable until the PIK
Management Fee is payable. The accrual of interest
on the PIK Management Fee shall begin as of the
quarter-end date shown on the compliance
certificate.
To the extent that the "New Money" portion of
outstandings and commitments under the Syndicated
Loan Agreement (as defined below) is repaid and
cancelled in full at any time or banks and
financial institutions party to the Syndicated
Loan Agreement (the "Banks") otherwise agree to
eliminate the "priority" treatment of such "New
Money" portion of the Syndicated Loan Agreement in
the Intercreditor Agreement (as defined below) at
any time, any future
2
accretion of the PIK Management Fee shall cease at
the later of any of those times and January 1,
2003 (it being understood that any PIK Management
Fee that has been calculated for any quarter prior
to such time shall continue to be payable at the
relevant time of payment as provided above and
will continue to accrue interest until such
payment date).
Refinancing Put: On the Bank Refinancing Date (as defined below),
each holder of Notes will be entitled to require
the Company to prepay its Notes, at a price equal
to 100% of the outstanding principal amount of
such Notes plus accrued interest, the accrued PIK
Management Fee (if any) (together with accrued
interest thereon) and the Make-Whole Amount (if
any) (including all deferred amounts in respect
thereof and accrued interest thereon) at the time
of such prepayment (such right being referred to
as the "Refinancing Put"). The Company shall give
at least 30 days (but not more than 45 days) prior
written notice to each holder of the Notes of the
occurrence of the Bank Refinancing Date. Each
holder may elect whether to accept or reject such
prepayment. If a holder does not reply to the
Company prior to the first time the Refinancing
Put shall become exercisable, such holder shall be
deemed to have accepted such prepayment unless it
has specifically rejected such prepayment in
writing. The Company will make all such
prepayments to holders exercising the Refinancing
Put at the same time as any payments are made in
connection with the repayment or refinancing of
the Syndicated Loan Agreement. The "Bank
Refinancing Date" means the earlier of (i)
November 8, 2004 or (ii) the date any refinancing
or repayment in full of the Syndicated Loan
Agreement is consummated.
Elimination of
Refinancing Put: If all of the Put Elimination Conditions (as
defined below) are satisfied on the Bank
Refinancing Date, the Refinancing Put shall be
eliminated and shall no longer be in force or of
any effect. The date on which the Refinancing Put
is so eliminated is hereafter referred to as the
"Put Elimination Date". The following conditions
shall be defined as the "Put Elimination
Conditions":
(i) the ratio of Consolidated Gross Borrowings
to Consolidated EBITDA on each of the two
most recent testing dates for such covenant
shall not have been greater than 2.50:1;
3
(ii) the ratio of Consolidated EBITDA to
Consolidated Net Interest Expenditure on
each of the two most recent testing dates
for such covenant shall have been not less
than 6.00:1;
(iii) no Default or Event of Default shall have
occurred which is continuing;
(iv) the representations and warranties
contained in the Amended and Restated Note
Purchase Agreement corresponding to
Sections 5.1, 5.4, 5.8, 5.9, 5.10, 5.11,
5.12, 5.15 (as to no defaults under other
indebtedness only), 5.18 and 5.19 of the
Existing Note Purchase Agreements shall be
true and correct at such time as if made at
such time and the Company shall have
delivered an Officer's Certificate to such
effect;
(v) the Company shall have delivered an
Officer's Certificate to the effect that it
is not aware (after due inquiry) of any
matter or event which is reasonably likely
to result in a breach of the Sections in
the Amended and Restated Note Purchase
Agreement setting forth the financial
covenants or an Event of Default under of
any of the Sections in the Amended and
Restated Note Purchase Agreement relating
to payment defaults, cross-defaults or
insolvency-related defaults either
immediately on such date or within the
period ending 12 months after such date;
and
(vi) after giving effect to any refinancing or
repayment in full of the Syndicated Loan
Agreement, the Company shall be in
compliance with the requirement to maintain
Committed Medium-Term Bank Facilities
referred to below.
The ratios referred to in clause (i) and clause
(ii) above will be adjusted on a pro forma basis
to take into account any net proceeds of any
rights issue or similar equity offering by the
Company or the disposal of the Group's shares in
Zenith (as defined below) whether pursuant to the
JVA (as defined below) or otherwise. Such
adjustments will be made by reducing the aggregate
amount of Consolidated Gross Borrowings by the
amount of any such net proceeds applied in
permanent prepayment of Consolidated Gross
Borrowings as permitted under
4
the Amended and Restated Note Purchase Agreement,
by adjusting Consolidated Net Interest Expenditure
by the greater of the average interest rate or the
interest rate of the actual debt paid down, and by
adjusting Consolidated EBITDA to account for the
disposal of the Group's shares in Zenith (as
defined below).
Required Prepayments: The Issuer shall make the required prepayments
contemplated by Section 8.1 in the Existing Note
Purchase Agreements, without any Make-Whole Amount
or other premium.
Immediately upon the occurrence of a Prepayment
Event, the Issuer shall be required to prepay in
full all of its Notes, at a price equal to 100% of
the outstanding principal amount of the Notes plus
accrued interest, the accrued PiK Management Fee
(if any) (together with accrued interest thereon)
and the Make-Whole Amount (if any) (including all
deferred amounts in respect thereof and accrued
interest thereon) at the time of such prepayment.
A "Prepayment Event" means (i) an "External
Refinancing" (which shall be defined to mean the
borrowing or raising of Borrowed Money (including
without limitation any public or private issue of
debt securities) by any member of the Group that
either is not intended to effect the repayment in
full and cancellation of the amount facilities
under the Syndicated Loan Agreement), or in fact
is in an amount that is insufficient to effect the
repayment in full and the cancellation of the
facilities under the Syndicated Loan Agreement and
(ii) the sale or other disposal of all or
substantially all of the assets and undertakings
of the Group.
Voluntary Prepayments: The Issuer will be permitted to prepay all or a
portion of the outstanding principal amount of the
Notes. Any such prepayment shall be at a price
equal to 100% of the outstanding principal amount
of the Notes being so prepaid plus accrued
interest on the amount of such principal and the
Make-Whole Amount (if any) (including all deferred
amounts in respect thereof and accrued interest
thereon) in respect of such principal amount being
so prepaid. Any partial prepayments will be shared
among all holders of the Notes on a pro rata
basis.
Currency of Payments: All payments described in this term sheet and in
the Amended and Restated Note Purchase Agreement
shall be made in US Dollars.
Rights Issues
5
Equity Raising, etc.: Prior to the Put Elimination Date, the Company
will not issue any shares or otherwise acquire any
additional capital other than:
(a) the issue of ordinary shares (i) as
consideration for the acquisitions referred
to in clause (a) of the definition of
"Permitted Acquisitions" below pursuant to
the Company's obligations (actual or
contingent) as at the Effective Date or (ii)
in consideration for Permitted Investments
or acquisitions permitted under clauses (b)
and (d) of the definition of "Permitted
Acquisitions" below; and
(b) the issue of ordinary shares for cash
payable in full on the date of issue and
which ordinary shares do not carry any right
to a return or to redemption nor any right
to be converted into shares carrying such
right before all amounts (whether actual or
contingent) owing under the Notes have been
paid in full, or the granting of an option
to call on the Company to issue such shares,
and the Company will at all times procure that no
other member of the Group will issue any shares or
otherwise acquire any additional capital (or grant
any rights to call for the issue or allotment of
any of the same) other than the issue of shares by
a member of the Group to another member of the
Group permitted under clause (b) of the definition
of "Permitted Acquisitions" below or constituting
Permitted Investments provided that (A) where the
existing shares in such member of the Group are
subject to an Encumbrance under any of the
security documentation, such additional shares are
also subject to such an Encumbrance and (B) where
such existing shares are subject to Encumbrances
which are structured to avoid an adverse US Tax
consequence to the Group, such additional shares
shall only be issued to the existing holding
company of the issuing member of the Group.
Prior to the Put Elimination Date, the proceeds
(net of reasonable related costs) of any rights
issue or other equity raising (other than those
permitted under clause (a) above) shall be applied
in mandatory prepayment of the Notes (subject to
the terms and provisions of the Intercreditor
Agreement). For the avoidance of doubt, a rights
issue or other equity raising occurring
contemporaneously with a refinancing of the
Syndicated Loan Agreement shall
6
be deemed to occur after the Put Elimination Date
if the Put Elimination Conditions in connection
with such refinancing have been satisfied. Any
such prepayment shall be at a price equal to 100%
of the outstanding principal amount of the Notes
being so prepaid plus accrued interest on the
amount of such principal, the accrued PIK
Management Fee (if any) (together with accrued
interest thereon) and the Make-Whole Amount (if
any) (including all deferred amounts in respect
thereof and accrued interest thereon) in respect
of such principal amount being so prepaid.
Prepayment on
Asset Disposals: Prior to the Put Elimination Date, if any member
of the Group disposes of any assets (including
shares and fixed assets) to any person which is
not a member of the Group, of which:
(a) the aggregate Net Proceeds are at
least(pound)500,000 (or its equivalent at
the date of the disposal) (each a "Relevant
Disposal"); and
(b) the aggregate Net Proceeds of Relevant
Disposals in any Fiscal Year are in excess
of(pound)5,000,000 (or its equivalent at the
date of disposal),
the Company shall (or shall procure that it and
its Subsidiaries shall), apply an amount equal to
the aggregate Net Proceeds of such Relevant
Disposals which are in excess of (pound)5,000,000
(or its equivalent) in mandatory prepayment of the
Notes (subject to the terms and provisions of the
Intercreditor Agreement). Any such prepayment
shall be at a price equal to 100% of the
outstanding principal amount of the Notes being so
prepaid plus accrued interest on the amount of
such principal and the Make-Whole Amount (if any)
(including all deferred amounts in respect thereof
and accrued interest thereon) in respect of such
principal amount being so prepaid.
The provisions above will not apply in relation to
the disposals referred to in clauses (a), (c),
(d), (e), (f) and (g) in the definition of
"Permitted Disposals" below.
Following the Put Elimination Date, to the extent
the Company applies the proceeds of any Asset
Disposition to the prepayment of the Notes, such
prepayment shall be made at a price equal to 100%
of the outstanding principal amount of the Notes
being so prepaid plus accrued interest on the
amount of
7
such principal and the Make-Whole Amount (if any)
(including all deferred amounts in respect thereof
and accrued interest thereon) in respect of such
principal amount being so prepaid.
Financial Covenants: The financial covenants contained in Section 10.3
of the Existing Note Purchase Agreements shall be
modified such that the Company will be required to
comply with the following financial covenants:
Consolidated EBITDA to Consolidated Net Interest
Expenditure: The Company will procure that the
ratio of Consolidated EBITDA to Consolidated Net
Interest Expenditure for each period date set out
in column A shall not be less than the
corresponding ratio set out in column B:
A B
12 month period ending Ratio
---------------------- -----
March 31, 2002 2.50:1
June 30, 2002 1.75:1
September 30, 2002 2.50:1
December 31, 2002 2.50:1
March 31, 2003 2.75:1
June 30, 2003 4.00:1
September 30, 2003 3.25:1
December 31, 2003 3.75:1
March 31, 2004 4.00:1
June 30, 2004 4.50:1
September 30, 2004 5.00:1
and each quarter date
thereafter
Consolidated Gross Borrowings to Consolidated
EBITDA: The Company will procure that the ratio of
Consolidated Gross Borrowings as at the end of, to
Consolidated EBITDA in respect of, each period set
out in column A shall not be greater than the
ratio set out in column B:
A B
12 month period ending Ratio
---------------------- -----
March 31, 2002 5.75:1
June 30, 2002 8.50:1
September 30, 2002 4.75:1
December 31, 2002 4.75:1
March 31, 2003 4.25:1
June 30, 2003 3.75:1
September 30, 2003 3.75:1
December 31, 2003 3.50:1
March 31, 2004 3.00:1
June 30, 2004 3.00:1
September 30, 2004 2.75:1
and each quarter date
thereafter
Consolidated Net Worth:
(a) Prior to September 30, 2004, the Company will not
permit Consolidated Net Worth (as defined in the
Existing Note Purchase Agreements) at the any time
to be less than (pound)400,000,000.
(b) On September 30, 2004 and thereafter, the Company
will not permit Consolidated Net Worth at any time
to be less than the sum of (i) the greater of (A)
(pound)400,000,000 and (B) 80% of Consolidated Net
Worth as at September 30, 2004, plus (ii) on a
cumulative basis, 50% of positive "profits
attributable to ordinary shareholders" (as defined
under GAAP) for each Fiscal Quarter beginning with
the Fiscal Quarter ended December 31, 2004.
Each of the above financial covenants is to be
tested quarterly on the basis of management
accounts and the annual audited consolidated
financial statements. Consolidated EBITDA and
Consolidated Net Interest Expenditure shall be
calculated on a rolling twelve months basis and
Consolidated Gross Borrowings shall be calculated
on the basis of the average daily outstandings
during the most recent two Fiscal Quarters.
Maximum Capital Expenditure: The total Capital
Expenditure of all members of the Group in any
Fiscal Year prior to the Put Elimination Date
shall not exceed the Budgeted Capital Expenditure
for such Fiscal Year but so that in respect of any
Fiscal Year where the relevant actual Capital
Expenditure (less any amount which was carried
forward from the previous Fiscal Year) is less
than the Budgeted Capital Expenditure for that
Fiscal Year, an amount
9
equal to such deficit may be carried over to the
following Fiscal Year only (and not otherwise or
further) and shall be deemed to be spent before
Budgeted Capital Expenditure in that year.
Compliance Certificates shall be required from the
Finance Director (or if he is unavailable for any
reason, any other Director) of the Company in
respect of the unaudited accounts and financial
covenants reports shall be required from the
Company's auditors in respect of the annual
audited preliminary financial statements provided
that such reports from the Company's auditors can
be addressed solely to the Company so long as such
reports can be, and are in fact, disclosed to the
holders of the Notes. To the extent the figures
used in these calculations (due solely to changes
in GAAP) differ from those shown in the published
financial statements of the Company, each
compliance certificate shall contain a clear
reconciliation to the published financial
statements including all workings, calculation
methodology and explanation of the accounting
principles used.
The definition of "Borrowed Money" shall be
modified as set forth in the section entitled
"Definitions" below.
Affirmative and Negative
Covenants (Pre-Put
Elimination Date): Prior to the Put Elimination Date, the affirmative
covenants contained in Section 9 of the Existing
Note Purchase Agreements shall continue to apply
and shall include any more restrictive relevant
affirmative covenants contained in the Syndicated
Loan Agreement. The negative covenants contained
in Section 10 (excluding Section 10.3) of the
Existing Note Purchase Agreements shall be
modified to incorporate all of the negative
covenants contained in the Syndicated Loan
Agreement (as amended) such that the Company will
be required, to the extent that the Put
Elimination Date has not occurred, to comply with
all of the negative covenants contained in the
Syndicated Loan Agreement, including without
limitation the following negative covenants:
(a) negative pledge (save for Permitted
Encumbrances);
(b) restrictions on Borrowed Money or finance
transactions (save for Permitted Borrowed
Money);
10
(c) restrictions on the sale, factoring and
discounting of receivables and the sale and
leaseback/sale and repurchase of assets
(other than the sale, factoring or
discounting of receivables on a non-recourse
basis where the aggregate amount of
receivables so sold, factored or discounted
does not exceed (pound)500,000 (or its
equivalent in aggregate));
(d) restrictions on mergers (save for certain
limited exceptions to be agreed with the
Company and the Banks) and disposals (other
than Permitted Disposals (as defined below);
(e) restrictions on loans and the granting of
any credit (except for Permitted Loans and
normal trade credit in the ordinary course
of day-today trading) and restrictions on
guarantees (save for Permitted Guarantees);
(f) restrictions on acquisitions and investments
(save for Permitted Acquisitions);
(g) restrictions on changes of business;
(h) restrictions on the issuance of shares or
otherwise on the acquisition of any
additional capital other than (i) the issue
of ordinary shares (A) as consideration for
the acquisitions referred to in clause (a)
of the definition of "Permitted
Acquisitions" below pursuant to the
Company's obligations (actual or contingent)
as at the Effective Date or (B) in
consideration for Permitted Investments or
acquisitions referred to in clauses (b) and
(d) of the definition of "Permitted
Acquisitions" and (ii) the issue of ordinary
shares for cash payable in full on the date
of issue and which ordinary shares do not
carry any right to a return or to redemption
nor any right to be converted into shares
carrying such right before all amounts
(whether actual or contingent) owing under
the Notes and the Amended and Restated Note
Purchase Agreement have been paid in full;
(i) restrictions on dividends and other
distributions as more particularly described
in the section entitled "Dividends and Other
Distributions" below;
(j) restrictions on cash management
11
arrangements for the Group; and
(k) pan passu ranking of Notes and Subsidiary
Guarantees.
The definition of "Material Adverse Effect" shall
be modified to mean "a reference to any effect,
event or circumstance (on its own or in
combination with other effect, events or
circumstances):
(a) which is, or is reasonably likely to be,
materially adverse to (i) the ability of any
of the Company, the Issuer, the Subsidiary
Guarantors or the security providers to
perform any of its obligations under the
Notes, the Amended and Restated Note
Purchase Agreement, the Subsidiary
Guarantees or any of the security
documentation, or (ii) the business, assets
or financial condition of the Group taken as
a whole; or
(b) results in, or is reasonably likely to
result in, the Notes, the Amended and
Restated Note Purchase Agreement, any of the
Subsidiary Guarantees or any of the security
documentation not being legal, valid and
binding on, and, enforceable substantially
in accordance with their terms, against any
party thereto.
Affirmative and Negative
Covenants (Post-Put
Elimination Date): Following the Put Elimination Date, the
affirmative and negative covenants contained in
Section 9 and Section 10 (excluding Section 10.3)
of the Existing Note Purchase Agreements shall
thereafter apply, in lieu of the covenants set out
in the immediately preceding section, but shall be
modified as follows:
(a) Section 9.7 of the Existing Note Purchase
Agreements shall be modified to (i) provide
that, in connection with any Subsidiary
granting a Subsidiary Guarantee to the
holders of the Notes, other beneficiaries of
a guarantee from such Subsidiary granted in
connection with the Syndicated Loan
Agreement or any Committed Medium-Term
Facilities shall provide a letter to the
holders of the Notes in form and substance
satisfactory to the Majority Holders whereby
the existence and validity of such
Subsidiary Guarantee as well as the pari
passu ranking of such
12
Subsidiary Guaranty and such guarantee are
acknowledged and confirmed and (ii) delete
Section 9.7(b) (and any related provisions
providing for the release of any Subsidiary
Guarantee under any circumstances other than
in connection with a permitted disposal of
the Subsidiary in question);
(b) Section 10.1 shall be modified to expressly
prohibit any floating charges over all
assets and undertakings conferring on the
chargee a power to appoint any
administrative receiver, receiver and/or
manager or any other receiver (a "Receiver")
(or similar Encumbrances under the laws of
any jurisdiction conferring similar powers
on the chargee to appoint a Receiver) or any
Encumbrances on book debts, receivables and
any other current assets of the Group (other
than the sale, factoring or discounting of
receivables on a non-recourse basis where
the aggregate amount of receivables so sold,
factored or discounted does not
exceed(pound)500,000 (or its equivalent in
aggregate), in each case regardless of the
Encumbrances otherwise permitted under
Section 10.1;
(c) the definition of "Permitted Encumbrances"
in the Existing Note Purchase Agreements
shall apply provided that clause (j) of such
definition of "Permitted Encumbrances" shall
be modified to reduce the "basket" contained
therein to 10% of Consolidated Net Worth;
(d) Section 10.2 shall be modified to (i) modify
clause (a) thereof to apply only to Borrowed
Money owing to either the Company or any
Subsidiary Guarantor, (ii) modify clause (d)
thereof to conform to clause (b) of the
definition of "Permitted Borrowed Money"
below, (iii) eliminate the exceptions
contained in clauses (b), (c) and (1)
through (g) thereof and (iv) reduce the
"basket" contained in clause (h) thereof to
10% of Consolidated Net Worth;
(e) Section 10.4 shall be modified to (i)
restrict intra-group Asset Dispositions as
provided in Section 10.4(a) to Asset
Dispositions between the Company and the
Subsidiary Guarantors, (ii) modify the limit
contained in subclause (ii) of Section
10.4(c) to "10% of Consolidated
13
EBITDA for the preceding Fiscal Year" (and
eliminate the definition and concept of
"Adjusted EBITDA"), (iii) modify the limit
contained in subclause (iii) of Section
10.4(c) for all Asset Dispositions made
since the Put Elimination Date to "30% of
Consolidated EBITDA for the then preceding
Fiscal Year" (and eliminate the definition
and concept of "Adjusted EBITDA"), and (iv)
modify Section 10.4(c) to provide that any
reinvestments or debt repayments from the
proceeds of Asset Dispositions be made
within 180 days of the effective date of the
relevant Asset Disposition (rather than
within one year) to qualify for the
exclusion specified therein and that, in
connection with any prepayment of
unsubordinated Borrowed Money and related
offer to repurchase a pro rata portion of
the Notes in connection therewith, the
Make-Whole Amount will be payable by the
Company connection therewith; and
(f) an additional covenant shall be added
prohibiting sale and leaseback transactions,
factoring, asset securitizations and other
similar "off-balance sheet" transactions
other than the sale, factoring or
discounting of receivables on a non-recourse
basis where the aggregate amount of
receivables so sold, factored or discounted
does not exceed (pound)500,000 (or its
equivalent) in aggregate.
Dividends and Other
Distributions: Prior to the Put Elimination Date, the Company
will not:
(a) and will procure that no other member of the
Group will redeem or purchase or otherwise
reduce any of the Company's share capital or
any uncalled capital or unpaid liability in
respect thereof or reduce the amount (if
any) for the time being standing to the
credit of the Company's share premium
account or capital redemption or other
undistributable reserve in any manner (other
than a partial capital reorganization in
order to create distributable reserves where
no amount is paid or becomes payable
(including, without limitation, by way of
set-off, combination of accounts or
otherwise) to any shareholder of the Company
as part of such capital reorganization); or
14
(b) declare, pay (including, without limitation,
by way of set-off, combination of accounts
or otherwise) or permit to accrue any
dividend or make any other distribution or
payment (whether in cash or in specie),
including any interest and/or unpaid
dividends, in respect of its equity or any
other share capital for the time being in
issue except that it may declare and pay a
final dividend (but not an interim dividend)
in respect of any Fiscal Year after December
31, 2001, provided that:
(i) the financial covenants have been
tested and passed as at the June 30
financial covenants test date in the
following Fiscal Year;
(ii) no breach of any of the financial
covenants has occurred and is
continuing and no other Default or
Event of Default has occurred which
is continuing;
(iii) the ratio of Consolidated Gross
Borrowings to Consolidated EBITDA was
not greater than 3.50:1 on each of
the two most recent consecutive
financial covenant test dates;
(iv) the dividend does not exceed 25% of
Consolidated Excess Cash Flow if the
ratio of Consolidated Gross
Borrowings to Consolidated EBITDA was
not less than 3.25:1 on each of two
most recent consecutive financial
covenant test dates;
(v) the dividend does not exceed 50% of
Consolidated Excess Cash Flow;
(vi) not later than 5 and no more than 15
Business Days prior to the proposed
date for the payment of that dividend
the finance director (or, if he is
unavailable for any reason, any other
director in each case in such
directors' opinion but without
personal liability) of the Company
delivers to the holders of the Notes
a certificate in which the Company
certifies (without qualification)
that:
15
(A) it proposes to pay a dividend
and states the amount of it;
(B) no breach of any of the
financial covenants has
occurred and is continuing and
no other Default or Event of
Default has occurred which is
continuing;
(C) in the opinion of the board of
directors of the Company
(acting in good faith and after
having regard (inter alia) to
the current and projected
trading and cash flow position
of the Group (such projections
being based on reasonable
assumptions), and assuming the
making of such dividend):
(1) no breach of any of the
financial covenants or
any Event of Default is
reasonably likely to
occur either immediately
or within the period
ending 12 months after
the date of the dividend;
and
(2) the Group is reasonably
likely to have sufficient
working capital during
such 12 month period,
and such certificate shall be
accompanied by (a) a forecast
for the period of 6 full months
following the proposed payment
date showing the projected
respective amounts of
Consolidated EBITDA,
Consolidated Gross Borrowings,
Consolidated Net Interest
Expenditure, Capital
Expenditure and Consolidated
Net Worth and their application
to the financial covenants in
respect of each financial
covenant test date within such
period, such forecast to be
based on the knowledge of the
Company and the circumstances
16
then existing at such time
together with reasonable
assumptions, and (b) a
calculation by the Company of
Consolidated Excess Cash Flow
for the relevant Fiscal Year
(showing the calculations on
which it is based) together
with a statement from the
Company's auditors as to the
amount of the Consolidated
Excess Cash Flow confirming
that in all material respects
the calculation has been made
in accordance with the audited
consolidated financial
statements of the Group for the
relevant Fiscal Year and the
definition of Consolidated
Excess Cash Flow.
Maintenance of
Committed Medium-
Term Bank Facilities: At all times after the Put Elimination Date, the
Company shall maintain Committed Medium-Term Bank
Facilities having committed availability levels
which, in the aggregate, on any date of
determination, are greater than or equal to the
aggregate principal amount of the Notes
outstanding (provided that the Company shall not
be in violation of this covenant if any bank or
other financial institution providing such
facilities shall be required, by reason of
illegality, increased costs or regulatory
restriction as set forth in customary banking
documentation, to withdraw such facilities).
"Committed Medium-Term Bank Facilities" shall mean
loan or other credit facilities (other than letter
of credit or documentary credit facilities)
providing for revolving or term loans pursuant to
a written commitment by a bank or other financial
institution for which the period until maturity or
termination of such commitment and the borrowings
thereunder have, at the date of determination, at
least 364 days remaining and which are not capable
of being demanded or withdrawn at any time during
such period (other than following an event of
default thereunder).
Change of Control: In the event of a Change of Control, the Company
will offer to prepay the outstanding principal
amount of the Notes, together with accrued
interest, accrued P1K Management Fees (together
with accrued interest thereon) and the Make-Whole
Amount (including all deferred amounts in respect
thereof and accrued interest thereon) (calculated
as provided
17
below). Within 30 days after receipt of the offer
of prepayment from the Company, each holder of the
Notes shall elect whether to accept or reject such
prepayment. If a holder does not reply to the
Company within such 30 days, such holder shall be
deemed to have accepted such prepayment.
Notwithstanding the foregoing, the prepayment of
any Notes held by any holder accepting such offer
(or not having responded to the Company) shall be
made at the same time any payments are made in
connection with the repayment or refinancing of
the Syndicated Loan Agreement as a result of such
Change of Control regardless of whether such 30
day period has passed.
The Company will promptly provide the holders of
the Notes with written notice of the occurrence of
any Control Event.
For these purposes, (1) a "Change of Control"
shall occur if a person (whether alone or together
with any associated person or persons) becomes the
beneficial owner of shares in the issued share
capital of the Company carrying the right to
exercise more than 50% of the votes exercisable at
a general meeting of the Company, (2) a "Control
Event" means (A) the announcement, by or on behalf
of any person or associate person or persons, in
accordance with Rule 2.5 of the City Code on
Takeovers and Mergers, of a firm intention to make
an offer to the holders of the ordinary shares of
the Company or of a proposal for a scheme of
arrangement, which offer or proposal, if accepted
or approved (as the case may be) by the requisite
number(s) of holders and if the other conditions
thereto were satisfied or waived, would result in
a Change of Control or (B) the making of an offer
to the holders of the ordinary shares of the
Company or the proposing of a scheme of
arrangement, which offer or proposal, if accepted
or approved (as the case may be) by the requisite
number(s) of holders and if the other conditions
thereto were satisfied or waived, would result in
a Change of Control (but, for the avoidance of
doubt, "Control Event" shall not include any
preliminary approach or negotiations by any person
or group of persons to or with the Company in
respect of any such offer), and (2) an "associated
person" means, in relation to any person, a person
who is (i) acting in concert (as defined in the
City Code on Takeovers and Mergers) with that
person or (ii) a connected person (as defined in
section 839 of the Income and Corporation Taxes
Act 1988) of that person.
18
In the event of a prepayment of the Notes and the
occurrence of a Change of Control or a Control
Event within six months following such prepayment,
the Company will be obligated, as a separate and
continuing obligation, to pay, on the date of such
Change of Control or Control Event, to each holder
of Notes (as of the date of such prepayment) an
amount equal to the difference between (x) the
Make-Whole Amount calculated on the basis that
such prepayment was in connection with a Change of
Control or Control Event and (y) the amount of the
Make-Whole Amount actually paid on such prepayment
date.
Accrued Interest and
Make-Whole Amount, etc.: All mandatory and optional prepayments on the
Notes will be made together with accrued interest
to the date of payment and, with respect to such
mandatory and optional prepayments other than a
required prepayment contemplated by the first
paragraph of the section entitled "Required
Prepayments" above, the Make-Whole Amount in
respect of the principal amount of the Notes being
prepaid or repaid, provided that any Make-Whole
Amount which is payable in connection with any
partial prepayment of the Notes prior to the Bank
Refinancing Date shall be deferred and shall be
payable on the date the P1K Management Fee is
payable. Any Make-Whole Amount so deferred shall
accrue interest at 9.25% per annum, which interest
shall accrue but shall not be payable until the
deferred Make-Whole Amount is payable. The
"Make-Whole Amount" shall be defined as provided
in the Existing Note Purchase Agreements and
shall, except as provided below, be calculated for
any prepayment or repayment of the Notes based on
the original interest rate (7.6 1%), interest
payment and mandatory prepayment schedule and
maturity date of the Notes as set forth in the
Existing Notes and the Existing Note Purchase
Agreements, provided that, in connection with any
prepayment of the Notes as a result of a Change of
Control, the Make-Whole Amount shall be calculated
based on the modified interest rate and payment
schedule on the Notes (9.25%).
Financial Information
(Pre-Put Elimination Date): Prior to the Put Elimination Date, in addition to
the information required to be delivered pursuant
to Section 7.1 of the Existing Note Purchase
Agreements, the Company will:
19
(a) prepare consolidated financial statements
for the Group in respect of each Fiscal Year
and cause the same to be reported on by the
Company's auditors and provide such
financial statements to the holders of the
Notes together with the report of the
Company's auditors thereon, the notes
thereto, the directors' report thereon and
the report of the Company's auditors
required in clause (e) below, together with
the Group's preliminary audited consolidated
financial statements, at the time such
preliminary audited consolidated financial
statements are issued to the Company's
shareholders but in any event within 90 days
of the end of each Fiscal Year.
(b) prepare unaudited consolidated quarterly
management accounts for the Group in respect
of each Fiscal Quarter in the agreed form
and provide such accounts to the holders of
the Notes within 45 days after the end of
each Fiscal Quarter, together with the
compliance certificate required in clause
(d) below. The quarterly management accounts
shall include:
(i) a cashflow statement and a
consolidated profit and loss account
in respect of the relevant Fiscal
Quarter, the Fiscal Year to that
date, and whatever periods or rolling
12 month periods are relevant to the
calculations required to test the
financial covenants;
(ii) a comparison of all relevant results
with the relevant annual budget
required to be provided in clause (f)
below;
(iii) a comparison of actual performance
for that Fiscal Quarter with the
performance during the equivalent
Fiscal Quarter during the immediately
preceding Fiscal Year;
(iv) a consolidated balance sheet as at
the end of that Fiscal Quarter;
(v) a management discussion and analysis
in a form satisfactory to the
Majority Holders;
20
(vi) a statement of the aggregate net
proceeds of relevant disposals made
during such period to which the
mandatory prepayment requirements
described in the section entitled
"Prepayment on Asset Disposals" above
apply;
(vii) (for the purposes relevant for the
Maximum Capital Expenditure financial
covenant) a statement of the Capital
Expenditure (as defined herein)
during such period;
(viii) an analysis of the profit and loss
account by profit centers; and
(ix) a statement of the consideration paid
by the Group (and broken down by
Group members) in respect of
Permitted Acquisitions during such
period.
(c) prepare unaudited consolidated monthly
management accounts in respect of the Group
in respect of each month and provide such
accounts to the holders of the Notes within
30 days after the end of each month. The
monthly management accounts shall include:
(i) a consolidated cashflow statement
(including a 4 week rolling forecast
of central liquidity in the agreed
form);
(ii) a consolidated profit and loss
account for the relevant month and
the Fiscal Year to that date;
(iii) a comparison of all relevant results
with the relevant annual budget
required to be provided in clause (f)
below;
(iv) a comparison of actual performance
for that month with the performance
during the equivalent month during
the immediately preceding Fiscal
Year;
(v) a management discussion and analysis
in a form satisfactory to the
Majority Holders;
21
(vi) a statement of the aggregate net
proceeds of relevant disposals made
during such period to which the
mandatory prepayment requirements
described in the section entitled
"Prepayment on Asset Disposals" above
apply;
(vii) (for the purposes relevant for the
Maximum Capital Expenditure financial
covenant) a statement of the Capital
Expenditure (as defined herein)
during such period; and
(viii) astatement of the investments and
other transactions entered into
pursuant to the ring-fencing
arrangements constituting Permitted
Investments.
(d) prepare a certificate verifying the
compliance or otherwise with all financial
covenants, confirming that no Default or
Event of Default has occurred which is
continuing unrexnedied and unwaived, and
attaching a list of Material Subsidiaries
(determined on the basis of the relevant
financial statements in accordance with the
revised definition stated below) and have it
signed by its finance director, or if the
finance director is unavailable for any
reason, any other director of the Company,
and provide such certificate to the holders
of the Notes at the time of the delivery of
the quarterly management accounts for each
Fiscal Quarter.
(e) at the time of delivery of the audited
consolidated financial statements, deliver a
report from the Company's auditors (in a
format acceptable to the Majority Holders
and which can be relied upon by holders of
the Notes) stating:
(i) the amounts of the respective
financial definitions in respect of
or, as the case may be, as at the end
of the relevant period specified in
the financial covenants as extracted
from such audited consolidated
financial statements and indicating
the manner in which such amounts have
been calculated;
22
(ii) the application of the respective
amounts of such financial definitions
to the financial covenants; and
(iii) a list of the Group companies that
are Material Subsidiaries determined
on the basis of the relevant
financial statements in accordance
with the revised definition stated
below,
and each such report shall (in the absence
of manifest error) be conclusive as to
matters contained in it.
(f) prepare an annual budget for each Fiscal
Year (broken down on a monthly basis and
updated on a quarterly basis) in a form
satisfactory to the Majority Holders, and
(i) provide each such annual budget to the
holders of the Notes as soon as it becomes
available, and in any event not later than
45 days after the commencement of the Fiscal
Year the subject thereof, (ii) provide an
update of each such annual budget to the
holders of the Notes as soon as it becomes
available, and in any event not later than
20 days after the commencement of each
Fiscal Quarter in the Fiscal Year the
subject thereof, and (iii) immediately upon
being approved by the Company's board of
directors, provide to the holders of the
Notes any amendments or revisions to each
such annual budget.
(g) provide to the holders of the Notes at the
time of issue thereof every report,
circular, notice or like document issued by
the Company or any of its Subsidiaries to
its creditors (or any class of creditors)
generally or to the Banks (as defined below)
and every notice convening a meeting of the
shareholders or any class of the
shareholders of the Company.
(h) provide to the holders of the Notes all
information (including, without limitation,
all financial information reports,
projections, forecasts, budgets and business
information (but excluding any routine
administrative notices and certificates))
provided by the Company or any Subsidiary to
any Bank (as defined in the Syndicated Loan
Agreement), other bank lender or similar
provider of credit or finance to the Company
or such Subsidiary.
23
(i) the Issuer will, and each Subsidiary
Guarantor will, provide to the holders of
the Notes such further financial and other
information concerning the Group (or any
member of it) and its affairs as any holder
of Notes may from time to time reasonably
request.
(j) notify the holders of the Notes immediately
upon it becoming aware that a breach of a
financial covenant, or an Event of Default
as a result of non payment, cross-default or
an insolvency event, is reasonably likely to
occur either immediately or within the
following 12 months. Upon receiving such
notification from the Company, the Majority
Holders shall have the right to require the
preparation of an independent accountants'
report on the financial and business
condition and prospects of the Group and]or
such other reports as the Majority Holders
shall require (the cost in each case to be
borne by the Company) and the Company will
(and will procure that each other member of
the Group will) provide the persons
preparing each such report with all
assistance and information requested by
them.
Prior to the Put Elimination Date, the grace
period for an Event of Default shall be reduced to
5 Business Days in so far as it relates to a
breach of the obligations or undertakings to
deliver financial statements, compliance
certificates and reports of the Company's auditors
required to test the financial covenants testing
at the time and in the manner stipulated in the
relevant clauses of the Amended and Restated Note
Purchase Agreement.
Financial Information
(Post-Put Elimination Date): Following the Put Elimination Date, the Company
shall provide the information described in Section
7.1 of the Existing Note Purchase Agreements to
the holders of the Notes, together with the
following additional information:
(a) within 45 days of the end of each Fiscal
Quarter, an unaudited consolidated balance
sheet of the Company and its Subsidiaries as
at the end of such Fiscal Quarter and an
unaudited consolidated profit and loss
account of the Company and its Subsidiaries
for such Fiscal Quarter, setting forth in
comparative form the figures for the
corresponding Fiscal
24
Quarter in the previous Fiscal Year and
certified by a Senior Financial Officer; and
(b) all information (including, without
limitation, all financial information
reports, projections, forecasts, budgets and
business information (but excluding any
routine administrative notices and
certificates)) provided by the Company or
any Subsidiary to any bank lender or similar
provider of credit or finance to the Company
or such Subsidiary.
In addition, the Company will provide the covenant
compliance certificates required pursuant to
Section 7.2 of the Existing Note Purchase
Agreements to the holders of the Notes with the
quarterly financial statements referred to in
clause (a) above, and in connection with each
compliance certificate, the Company will provide a
list of Material Subsidiaries.
Most Favored Lender
Status: None of the Company or the Subsidiaries providing
guarantees will enter into any modification or
amendment to any existing credit facility or other
financing document, or enter into any new credit
facility or financing document, that contains
financial covenants, definitions or default
provisions more favorable to the lender or
financier thereunder unless the holders of the
Notes are given the option of receiving the
benefit of such more favorable provisions at the
same time and on the same terms. No additional
guarantees will be provided to the Banks or any
other creditor of the Company, the Issuer or any
Subsidiary Guarantor unless similar guarantees are
given in favor of the holders of the Notes.
For the avoidance of doubt and in addition to the
foregoing, to the extent that the Group enters
into any modification or amendment to the
Syndicated Loan Agreement that contains
definitions, covenants or other provisions more
favorable to the Banks thereunder or under the
Indicative Key Restructuring Terms and Conditions
attached as Schedule 2 hereto, the holders of the
Notes shall be given the option of receiving the
benefit of such more favorable provisions at the
same time and on the same terms.
Events of Default: The Amended and Restated Note Purchase Agreement
shall contain Events of Default substantially
identical to those in Section 11 of the Existing
Note Purchase Agreements (amended to
25
ensure that they are no less restrictive than
those in the Syndicated Loan Agreement) and shall
contain the following additional Events of
Default:
(a) a cross-default to the Syndicated Loan
Agreement providing for an Event of Default
under the Amended and Restated Note Purchase
Agreement regardless of any waiver under the
Syndicated Loan Agreement.
(b) a refusal for a period of more than 7
Business Days by the Banks under the
Syndicated Loan Agreement or the relevant
banks or financial institutions under any
Committed Medium-Term Bank Facilities to
fund any advance requested by the Company or
any other borrower under the Syndicated Loan
Agreement or such Committed Medium-Term Bank
Facilities (as the case may be).
Representations
And warranties: Appropriate to this secured transaction and
including the representations and warranties in
the Existing Note Purchase Agreements and the
representations and warranties in the Syndicated
Loan Agreement.
A representation and warranty shall be made in
respect of all information and projections
provided to the holders of the Notes in relation
to the proposed amendments.
Intercreditor Agreement: The holders of the Notes and the Banks party to
the Syndicated Loan Agreement shall enter into an
intercreditor agreement satisfactory in form,
scope and substance to the holders of the Notes,
which shall give effect to the terms set out in
the term sheet attached as Schedule 3 hereto (the
"Intercreditor Agreement"). The provisions of this
term sheet are subject to the terms and conditions
of the Intercreditor Agreement.
Guarantees/Security: The Company's obligations under the Notes and the
Amended and Restated Note Purchase Agreement will
be secured by the following guarantee and security
package (subject to the limitations and issues
noted at the end of Schedule 1 hereto):
(i) the existing Subsidiary Guarantees in
favour of the holders of the Notes given by
certain Subsidiaries of the Company prior
to the date hereof (as set out in Part 1 of
Schedule 1 hereto);
26
(ii) additional guarantees from, and first
ranking fixed and floating charges over,
all of the assets and undertaking of the
members of the Group incorporated in
England and Wales listed in Part 2 of
Schedule 1 hereto (and the issued share
capital of each of these companies (other
than the Company) will be the subject of a
pledge/charge by its parent); and
(iii) to the extent capable of being provided,
guarantees from material members of the
Group incorporated in the US, Germany, the
Netherlands and Australia as set out in
Part 3 of Schedule 1 hereto and
pledges/charges over the issued share
capital of those companies.
All guarantees and security documents shall be in
form and substance satisfactory to the holders of
the Notes.
Prior to the Put Elimination Date, the Company
shall procure that Material Subsidiaries
incorporated in England and Wales, the US, Germany
and the Netherlands provide guarantees and
security consistent with the terms set out above,
to the extent capable of being provided (excluding
any Subsidiaries of the Company which are Material
Subsidiaries as at the Effective Date (as defined
below) but which are not required to provide
guarantees or security as a condition to the
effectiveness of the proposed amendments, so long
as the reasons for such security not being so
required are continuing). For these purposes
"Material Subsidiary" shall mean any member of the
Group which is party to (inter alia) the
Syndicated Loan Agreement or any other Subsidiary
of the Company:
(i) whose EBITDA, together with that of its
Subsidiaries, is equal to or exceeds 3 % of
the Consolidated EBITDA of the Group (where
EBITDA shall be construed appropriately in
respect of such member of the Group by
reference to the definition of EBITDA); or
(ii) whose gross revenues, together with those
of its Subsidiaries, is equal to or exceeds
3 % of the consolidated gross revenues of
the Group; or
(iii) to which has been transferred (whether by
one transaction or a series of
transactions, related or not) all or
substantially all of the assets of another
member of the Group which,
27
immediately prior to that transaction or
any of the transactions in that series, was
a Material Subsidiary as determined under
paragraphs (i) or (ii) above; or
(iv) which is a holding company of a Material
Subsidiary determined under paragraphs (i)
through (iii) above,
as determined by reference to the then latest
quarterly management accounts, the latest audited
consolidated financial statements for the time
being of the Group delivered under the Amended and
Restated Note Purchase Agreement and such other
financial statements of the relevant members of
the Group (prepared on the same basis as such
financial statements delivered in accordance with
the Amended and Restated Note Purchase Agreement
in respect of the same period to which such other
financial statements relate) as are necessary for
the relevant Compliance Certificate to be duly
completed and delivered in accordance with the
Amended and Restated Note Purchase Agreement,
provided that (i) in the case of a member of the
Group acquired after the end of the period to
which the then latest financial statements of the
Group delivered pursuant to the Amended and
Restated Note Purchase Agreement relate, the
reference to such then latest financial statements
shall (until financial statements have been
delivered under such clauses for the period in
which such acquisition is made) be deemed to be a
reference to a consolidation (in accordance with
Fixed GAAP) of such then latest financial
statements and the latest financial statements of
such acquired member of the Group for such period
and (ii) a report of the Company's auditors to the
holders of the Notes that a Subsidiary of the
Company is or is not a Material Subsidiary (in
accordance with this definition) when delivered
(as part of the report of the Company's auditors
or otherwise) shall be conclusive and binding on
the parties hereto.
Notwithstanding the foregoing, for the purposes of
Sections 5 and 11, the definition of "Material
Subsidiary" shall also include (in addition to the
Subsidiaries referred to above) the companies
listed as Material Subsidiaries in Schedule 5.4.
The existing Subsidiary Guarantees will continue
to be held by the holders of the Notes.
28
The additional guarantees and other security will
be held by the Common Security Trustee (as defined
in the Intercreditor Term Sheet) (or its agents)
pursuant to the Intercreditor Agreement and will
secure all amounts outstanding under the
Syndicated Loan Agreement, the Amended and
Restated Note Purchase Agreement, the Notes and
the security documentation on the basis set out in
the Intercreditor Term Sheet.
The terms and principles governing the taking of
security both as a condition to the effectiveness
of the proposed amendments and as an ongoing
obligation after the Effective Date shall be
agreed between the Company, the holders of the
Note and the Common Security Trustee in a security
memorandum dated on or about the Effective Date
(the "Security Memorandum").
For the avoidance of doubt, the refinancing of the
Syndicated Loan Agreement shall not give rise to
any obligation to release any guarantee or
security unless the Put Elimination Date shall
have occurred and such refinancing is not secured.
On the Put Elimination Date, all security (other
than the Subsidiary Guarantees and the additional
guarantees) shall be released, so long as any
refinancing of the Syndicated Loan Agreement does
not require such security. The lntercreditor
Agreement shall not terminate and the Refinancing
Put shall not be eliminated unless the new bank
facility does not require priority or security.
Cash Management
Undertakings: Prior to the Put Elimination Date, the Company
will use its best endeavours to procure that cash
held by members of the Group which are not
Subsidiary Guarantors and which is not required to
meet working capital liabilities will be
repatriated directly or indirectly to the bank
account of a Subsidiary Guarantor located in
England and Wales or the United States, to the
extent that such repatriation can be done in a
legal and tax-efficient manner and without
incurring costs which are disproportionate to the
benefit to the Finance Parties.
The members of the Group will conduct their Cash
Pooling Arrangements in the UK, the US and the
Euro-Zone with a Bank or Banks, excluding the Cash
Pooling Arrangements in place as at the date of
the execution of the Agreement in Principle with
non-Banks in Germany and Italy (to be specifically
identified in the Amended and Restated Note
29
Purchase Agreement, and except as otherwise agreed
in writing with the Majority Holders.
The Company will not permit any member of the
Group incorporated or formed in the United States
or in England and Wales that is not a Subsidiary
Guarantor to be a party to any cash pooling
arrangements with any other member or members of
the Group, other than where the value of any
loans, credit, rights of set-off, guarantee or
other Encumbrance provided to such member or
members of the Group does not exceed
(pound)500,000 and (for the avoidance of doubt)
such loans, credit, rights of set-off, guarantee
or other Encumbrance constitute Permitted
Investments.
For these purposes:
"Cash Pooling Arrangements" means arrangements for
the pooling of the balances of any two or more
Group member's bank accounts pursuant to which
arrangements any such member of the Group grants a
guarantee, rights of set-off or any other
Encumbrance or transfers cash between the relevant
bank accounts pursuant to an intra-Group loan.
"Euro Zone" means each country that is a
Participating Member State.
"Participating Member State" means a member state
of the European Union that has adopted or adopts
the single currency in accordance with the Treaty.
"Treaty" means the Treaty establishing the
European Economic Community being the Treaty of
Rome of 25 March 1957 as amended by the Single
European Act 1986 and the Maastricht Treaty (which
was signed on 7 February 1992 and came into force
on 1 November 1993) as amended, varied or
supplemented from time to time.
Zenith Put
and Call Options: The Company will undertake that no member of the
Group will terminate, amend or vary (or acquiesce
in any termination, amendment or variation of) the
terms of the Joint Venture Agreement dated 27
September 2001 (the "JVA") with Publicis Group
S.A. ("Publicis") in a way which might reasonably
be expected to adversely affect the Group's rights
or interests under or in respect of the put and
call
30
options contained therein relating to the Group's
shares in Zenith Optimedia Group Limited
("Zenith") (except as required below) or which
might reasonably be expected to adversely affect
(or delay) the amount of receipt of any amount
referred to in the mandatory prepayment provisions
below.
The Company shall transfer its shares in Zenith to
Sonic Sun Limited, an English wholly-owned
non-trading solvent Subsidiary of the Company (the
"JVA Subsidiary") in accordance with the terms of
the JVA. The JVA Subsidiary will be subject to the
guarantee and security requirements set out in
this term sheet (save that the security will not
cover the shares in Zenith while the consent of
Publicis has not been obtained).
The JVA Subsidiary will not carry out any trading,
business or other activity or own any material
assets other than holding the shares in Zenith,
acting in relation to the joint venture
constituted by the JVA, and complying with the
call options or exercising the put options under
the JVA and will not incur any material
liabilities of any nature whatsoever (whether
actual or contingent) other than (i) liabilities
for reasonable professional fees, (ii) liabilities
under the JVA, (iii) liabilities under the
security documentation to which it is a party, and
(iv) liabilities which will arise if it were wound
up.
Any and all of the Group's right, interest, and
title in respect of the shares in Zenith will be
held at all times by the JVA Subsidiary.
The JVA Subsidiary will not transfer or otherwise
dispense of any interest in any of the shares it
holds from time to time in Zenith other than (i)
pursuant to the exercise of a call option or a put
option under the JVA or (ii) a disposal to a
person which is not a member of the Group and
where the net proceeds of such disposal are at
least equal to the net proceeds which would be
received by the Group following the exercise of
such a put option at such time, in each case where
the resulting proceeds are applied in accordance
with the mandatory prepayment provisions below and
will not create any Encumbrance over any interest
in any of the shares it holds from time to time in
Zenith except under any security documentation.
Prior to the Put Elimination Date, the mandatory
prepayment of the Notes (subject to the terms of
the
31
Intercreditor Agreement) will be required from the
Net Proceeds of:
(i) any exercise of the put or call options
under the JVA or any other disposal of
shares (or other interests) in Zenith;
(ii) any claims for damages or other remedies in
respect of any breach of the put and call
options in the JVA;
(iii) any claim in respect of all warranties,
indemnities and representations contained
in the JVA to the extent connected to the
put and call options; and
(iv) any flotation of, or sale or other disposal
of all or substantially all of its assets
and undertakings by, Zenith or any of its
Subsidiaries.
Documentation: Amended and Restated Note Purchase Agreement.
Intercreditor Agreement.
Guarantee Agreements and security documentation,
as set out above.
All documentation will be satisfactory in form,
scope and substance to the holders of the Notes
and their special counsel.
Conditions Precedent: The effectiveness of the Amended and Restated Note
Purchase Agreement and the arrangements
contemplated hereby shall be subject to the
satisfaction of the following conditions precedent
(the date of such satisfaction being referred to
herein as the "Effective Date"):
(a) the effectiveness of the amendments to the
Syndicated Loan Agreement specified in the
Indicative Key Restructuring Terms and
Conditions attached as Schedule 2 hereto on
a basis satisfactory to the holders of the
Notes;
(b) the execution and delivery of an
Intercreditor Agreement in form and
substance consistent with the Intercreditor
Term Sheet and a Common Security Trust Deed
in form and substance satisfactory to the
Majority Holders;
(c) the Security Memorandum, duly executed.
32
(d) the execution and delivery of the Guarantee
Agreements and the security documents
described in the section entitled
"Guarantees/Security" above (including the
Pledge Agreement to be executed by the
Company, Cordiant Holdings GmbH, Bates
Deutschland GmbH and Bates Germany
Werbeagentur GmbH over the shares in the
relevant German Subsidiaries and the
Abstract Acknowledgement of Indebtedness to
be executed by the Company) and
acknowledgements and confirmations from each
existing guarantor that all existing
guarantees are in full force and effect;
(e) the payment by the Company of the fees to
the holders of the Notes described in the
section entitled "Fees" above;
(f) the payment by the Company of all expenses
described in the Section captioned
"Expenses" below;
(g) the delivery of satisfactory legal opinions
from US and English counsel to the Obligors,
and the delivery of customary directors' and
secretaries' closing certificates;
(h) the receipt of all requisite board approvals
and corporate authorisations by the Company,
the Issuer, the Subsidiary Guarantors and
the security providers;
(i) the delivery of directors certificates from
each of the Company, the Issuer, the
Subsidiary Guarantors and security providers
annexing (inter alia) (i) copies of the
constitutional documents of each such
company or entity, (ii) appropriate
supervisory and management board resolutions
of each such company or entity evidencing
approval of the entry into the Amended and
Restated Note Purchase Agreement, the
security documentation and all other
documentation contemplated thereby (the
"Documentation"), and (iii) signatures of
those persons authorised by the supervisory
and management board resolutions of each
such company or entity referred to in (ii)
to sign any of the Documentation and to
execute all such undertakings, statements,
certificates, notices, acknowledgements and
other documents as may be required to be
done,
33
signed and executed by or on behalf of each
such company or entity in connection with
the Documentation and otherwise in relation
to or ancillary to the same;
(j) a report from PricewaterhouseCoopers
addressed (among others) to the holders of
the Notes and the Company including
confirmation that the holders of the Notes
may rely thereon;
(k) the delivery of a letter from the Company's
auditors confirming that they continue to be
appointed as the auditors of the Company,
and confirming that they will provide the
auditors report referred to in the section
entitled "Financial Information (Pre-Put
Elimination Date) above;
(l) the delivery by the Company of a certified
true, complete and up-to-date financial
model (the "Financial Model") and annual
operating budget for the 2002 Fiscal year;
(m) the delivery by the Company of a certified
true, complete and up-to-date list of
material intercompany loans and group
structure chart in form and substance
satisfactory to the Majority Holders;
(n) the delivery by the Company of a revised
hedging strategy letter in form and
substance satisfactory to the Majority
Holders;
(o) copies, certified as a true, complete and
up-to-date copies by a Senior Financial
Officer, of the audited consolidated
financial statements of the Group for the
Fiscal Year ended December 31, 2001
(together with the Group's preliminary
audited consolidated financial statements
for that Fiscal Year), the quarterly
management accounts of the Group for the
Fiscal Quarter ended December 31, 2001, and
the monthly management accounts for the
month ended February 28, 2002, (and which
shall be deemed to have been delivered
pursuant to the section entitled "Financial
Information (Pre-Put Elimination Date)"
above;
(p) either:
34
(i) a copy, certified as a true copy by a
Senior Financial Officer of all
consents, authorisations, licences
and approvals required by the
Company, the Issuer and each
Subsidiary Guarantor and security
provider to authorise, or required by
the Company, the Issuer and each
Subsidiary Guarantor and security
provider in connection with, the
execution, delivery, validity,
enforceability and admissibility in
evidence of the Documentation and the
performance by the Company, the
Issuer and each Subsidiary Guarantor
and security provider of its
respective obligations under the
Documentation, or
(ii) a certificate signed by a Senior
Financial Officer of the Company that
no such consent, authorisation,
licence or approval referred to in
clause (~p)(i) above is required by
the Company, the Issuer or any
Subsidiary Guarantor or security
provider;
(q) a certificate from a Senior Financial
Officer of the Company confirming that
utilisation in full of the facilities under
the Syndicated Loan Agreement (as amended)
would not render the Group in breach of any
restriction on borrowings applicable to the
Group in its respective constitutional
documents or elsewhere.
(r) evidence that the JVA Subsidiary has acceded
to the JVA and that all of the Group's
right, interest and title to shares in
Zenith have been transferred to the JVA
Subsidiary and copies of the documents
evidencing such accession and transfer
certified by a Senior Financial Officer as
true, complete and up-to-date;
(s) the delivery of copies, certified as true
copies by a Senior Financial Officer of the
Company, of all other committed credit
facilities of the Group which are assumed to
be in place in the Financial Model, and any
necessary consents to the amendment of the
Existing Note Purchase Agreements in
accordance with this term sheet required
under the terms of those facilities (or
written confirmation from a
35
Senior Financial Officer that no such
consents are required);
(t) the delivery of a certificate from a Senior
Financial Officer confirming that,
immediately following the Effective Date,
the Group will have no Encumbrances other
than Permitted Encumbrances (including,
without limitation, duly certified copies of
any release documentation in respect of any
such Encumbrances that are not Permitted
Encumbrances);
(u) the delivery of a certificate from a Senior
Financial Officer confirming that,
immediately following the Effective Date,
the Group will have no Borrowed Money other
than as permitted by the Amended and
Restated Note Purchase Agreement;
(v) information in respect of Zenith, including
the put option, and copies of the relevant
documentation;
(w) a report from KPMG, together with a letter
from KPMG, addressed to, and capable of
being relied upon by, the holders of the
Notes in respect of the KPMG report;
(x) local legal opinions from legal advisors to
the holders of the Notes and the Common
Security Trustee in each jurisdiction in
which a guarantor or security provider is
incorporated; and
(y) evidence of the repayment of the Korean
debenture stock.
Expenses: The Company will pay all expenses of the holders
of the Notes in connection with the proposed
amendments, including, without limitation, the
fees and expenses of Bingham Dana LLP and Willkie
Farr & Gallagher, special counsel to the holders
of the Notes, the other local law counsel
instructed by Bingham Dana LLP on behalf of the
holders of the Notes and PricewaterhouseCoopers
reporting accountants to the holders of the Notes
and the Banks, regardless of whether the proposed
amendments are consummated.
Governing law: New York law (Amended and Restated Note Purchase
Agreement and Guarantee Agreements)
36
English law (Intercreditor Agreement)
Definitions: "Borrowed Money" means Indebtedness in respect of
(i) money borrowed or raised and debit balances at
banks, (ii) any amount raised pursuant to any note
purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument,
(iii) any counter-indemnity obligation in respect
of a guarantee, indemnity, bond, standby or
documentary letter of credit or any other
instrument issued by a bank or financial
institution, (iv) acceptance or documentary credit
facilities, (v) receivables sold or discounted
(otherwise than on a non-recourse basis), (vi)
deferred payments for assets or services acquired
where the deferred payment is arranged primarily
as a method of raising finance or financing the
acquisition of the asset or services acquired
(excluding credit granted in the ordinary course
of trading for a period not exceeding 120 days (or
in the case of Greece, Spain and Italy, not
exceeding 180 days) and deferred consideration
payments in respect of Permitted Acquisitions or
Permitted Investments and certain deferred
consideration obligations be set out in a schedule
to the Amended and Redated Note Purchase
Agreement, (vii) the capital element of Finance
Leases and hire purchase contracts, (viii) (except
for the purposes of the definition of
"Consolidated Gross Borrowings") Derivatives
Contracts, (ix) any preference or other shares
which are mandatorily redeemable or redeemable at
the option of the holder thereof (other than
certain preference shares be listed on a schedule
to the Amended and Redated Note Purchase
Agreement), (x) any other transaction (including
without limitation forward sale or purchase
agreements where the deferred payment is arranged
primarily as a method of raising finance or
financing the acquisition of the asset or services
acquired) having the commercial effect of a
borrowing or raising of money or of any of (ii) to
(ix) above and (x) guarantees in respect of
Indebtedness of any person falling within any of
(i) to (x) above.
"Budgeted Capital Expenditure" means Capital
Expenditure incurred or to be incurred in a Fiscal
Year up to a maximum of:
Fiscal Year ended Amounts
December 31, 2002 (pound)10,000,000
December 31, 2003 (pound)17,500,000
37
December 31, 2004 (pound)20,000,000
"Capital Expenditure" means any expenditure which
should be treated as capital expenditure in the
audited consolidated financial statements of the
Group in accordance with Fixed GAAP.
"Consolidated EBITDA" means, in respect of any
period, the consolidated trading profits, but
before:
(i) exceptional items and extraordinary items
(each as separately identified in the
relevant profit and loss account);
(ii) profits and losses on disposals of capital
assets;
(iii) amortisation of goodwill and other
intangible assets;
(iv) depreciation and impairment;
(v) Consolidated Gross Interest Expenditure and
interest received or receivable; and
(vi) Taxes;
of the Group for such period and after taking into
account the applicable share of any profit or loss
of any joint venture or other person which is not
a Subsidiary of the Company and after deducting
(to the extent otherwise included) profits (or
adding back losses) attributable to minority
interests in members of the Group and after
deducting (to the extent not otherwise deducted)
Property Payments.
"Consolidated Excess Cash Flow" means, in respect
of any Fiscal Year the Consolidated EBITDA of the
Group for such period:
after the addition of (if not already added):
(a) cash dividends received from investments in
joint ventures and other persons which are
not Subsidiaries of the Company (after
Taxes);
(b) Tax rebates received in cash which the Group
is entitled to retain; and
(c) any other non-cash items expensed in
arriving at Consolidated EBITDA,
38
after the deduction of (if not already
deducted):
(i) payments in respect of Capital
Expenditure;
(ii) payments of cash exceptional and
extraordinary items;
(iii) Group Taxes paid;
(iv) any other non-cash items credited in
arriving at Consolidated EBITDA,
(v) Consolidated Net Interest
Expenditure;
(vi) all cash dividends paid by the
Company and all cash dividends paid
in respect of minority interests in
other members of the Group;
(vii) all repayments and prepayments of the
Notes and all amounts applied in
repayment and cancellation of the
facilities under the Syndicated Loan
Agreement (where crediting cash to a
cash collateral account pending such
application is deemed to be such an
actual prepayment) except for
mandatory repayments or prepayments
of the Notes or the facilities under
the Syndicated Loan Agreement in
accordance with the terms of the
Syndicated Loan Agreement and/or the
Amended and Restated Loan Agreement
(as applicable) to the extent that
the proceeds from the relevant
transaction which give rise to such
repayments or prepayments are
excluded in determining Consolidated
EBITDA for the period;
(viii) the principal amount of rental
payments in respect of Finance
Leases;
(ix) all cash consideration paid for
acquisitions constituting Permitted
Acquisitions (including, without
limitation, by way of earnouts or
deferred consideration); and
(x) all amounts paid in connection with
employee share option schemes,
and excluding the applicable share of any
loss or profit of any joint venture or other
person which is not a Subsidiary of the
Company included in arriving at Consolidated
EBITDA,
39
in each case for, or paid during, such
Fiscal Year and all calculated on a
consolidated basis.
"Consolidated Gross Borrowings" means the
aggregate principal or capital amount of all
Borrowed Money incurred by the Group
(including any fixed or minimum premium
payable on final repayment) plus the
aggregate principal element of Borrowed
Money secured by any Encumbrance over all or
any part of the undertaking, property,
assets, rights or revenues of any member of
the Group except that:
(i) moneys owing by one member of the
Group to another member of the Group
shall not be taken into account;
(ii) to avoid double counting, no
guarantee of a liability which is
already taken into account shall
itself be taken into account;
(iii) no liability shall be taken into
account more than once in any
computation;
(iv) Consolidated Gross Borrowings
expressed in or calculated by
reference to a currency other than
Sterling shall be converted into
Sterling by reference to the rate of
exchange used by the Company for the
conversion of such currency in
accordance with the management policy
of converting such amounts on a daily
basis or, if the relevant currency
was not thereby involved, by
reference to the rate of exchange or
approximate rate of exchange ruling
on such date and determined on such
basis as the Majority Holders may
determine or approve;
(v) the principal amount of Consolidated
Gross Borrowings deemed to be
outstanding in relation to Finance
Leases or hire purchase agreements
shall be the present value of the
minimum lease or hire payments
discounted at the interest rate
implicit in the relevant lease or
hire purchase agreement;
(vi) Indebtedness in respect of cash
collateralised guarantees issued by a
Bank or any of its associates or any
bank under any replacement facility
in respect thereof on behalf of the
Group to media authorities shall not
be taken into account;
40
(vii) Indebtedness of the Group in respect
of the guarantees issued by banks on
behalf of the Group to media
authorities in Korea and the United
Kingdom shall not be taken into
account; and
(viii) without duplication, debit balances
at any bank or financial institutions
under the cash management
arrangements of the Group shall be
taken into account net of the credit
balances of the Group at such bank or
financial institution to the extent
that such credit balances are subject
to contractual set-off against such
debt balances (both before and after
insolvency) under such cash
management arrangements.
"Consolidated Gross Interest Expenditure"
means, in respect of a period, the aggregate
amount (calculated on a consolidated basis)
of all continuing, regular or periodic
costs, charges and expenses accrued during
that period in respect of Consolidated Gross
Borrowings, including:
(a) any acceptance commission paid or
payable in respect of any bills of
exchange or other negotiable
instruments;
(b) any initial issue discount allowed on
the issue of debentures (to the extent
relating to that period when amortised
over the term of such debentures); and
(c) the interest component of rentals
under Finance Leases,
but excluding:
(i) arrangement and other one-off fees
(including the "restructuring fees"
and "P1K management fees" (and
interest thereon) referred to in, and
pursuant to the terms of, the proposed
amendments to the Syndicated Loan
Agreement and the P1K Management Fees
(as defined below)), to the extent
relating to that period when amortised
over the term of the relevant
Consolidated Gross Borrowings); and
(ii) amounts discounted for FRS12 or SSAP24
purposes to the extent they are
non-cash items.
41
"Consolidated Net Interest Expenditure"
means, in respect of a period, the
Consolidated Gross Interest Expenditure
accrued for that period net of credit
interest accrued by the Group during such
period.
"Finance Lease" means a lease treated as a
finance lease pursuant to Fixed GAAP
(including, for the avoidance of doubt, SSAP
21).
"Net Proceeds" means, in respect of a
disposal of an asset or any of the matters
referred to in the mandatory prepayment
provisions contained in the section entitled
"Zenith Put and Call Options" above, the
full amount of proceeds received by a member
of the Group in respect thereof less the
reasonable costs incurred by the relevant
member of the Group in relation thereto for
which purpose (a) such proceeds shall be
taken to include, in addition to
consideration directly attributable to the
disposal of such asset or such matter, any
amount owing to and set-off by the relevant
purchaser or other relevant third party, (b)
any proceeds received otherwise than in cash
will be treated as Net Proceeds only upon
the subsequent realization of cash from such
proceeds and (c) "reasonable costs incurred
by the relevant member of the Group"
includes reasonable legal fees, agents'
commissions, auditors' fees, registration
fees and Taxes paid or properly provided for
in accordance with GAAP (where such Tax is
likely to become payable within the
following 18 months, or, only in the case of
(i) any exercise of the put or call options
under the JVA or any other disposal of
shares (or other interests) in Zenith or
(ii) any flotation of, or sale or other
disposal of all or substantially all of its
assets and undertakings by, Zenith or any of
its Subsidiaries, where the Company
demonstrates to the reasonable satisfaction
of the Majority Holders that such Tax will
become payable after such period).
"Permitted Acquisitions" means:
(a) the acquisitions listed in the Earnout
Projections for 2002 to 2004 provided
by the Company to the holders of the
Notes and dated February 4, 2002;
(b) investments in the then existing
Subsidiary Guarantors (or a member of
the Group or a newly formed entity
which in each case simultaneously
becomes a Subsidiary Guarantor) and
investments by a member of the Group
which is not a Subsidiary
42
Guarantor in another member of the
Group which is not a Subsidiary
Guarantor;
(c) Permitted Investments (as defined
below); and
(d) the acquisition of related businesses
(including companies where the
liability of its shareholders is
limited to their respective share
capital in such company but not other
entities) provided that:
(i) the consideration (without
double counting within the
Group), including, without
limitation, any deferred
consideration (whenever
payable), and the obligations in
respect of Borrowed Money of any
such company immediately
following its acquisition or
repaid directly or indirectly by
any member of the Group or
otherwise assumed by the Group
and taking the value of any
non-cash consideration at the
higher of its stated value under
the agreement(s) for the
acquisition in question and the
market value of such
consideration on the date such
agreement(s) were entered into
by the Group, in respect of all
such acquisitions by the Group
(other than consideration
constituted by ordinary shares
in the Parent issued or
transferred to the relevant
vendor (or as it may direct))
shall not exceed $2,000,000 (or
its equivalent in any other
currency) in aggregate in any
Fiscal Year; and
(ii) the consideration constituted by
ordinary shares in the Company
issued or transferred to the
relevant vendor (or as it may
direct)) in respect of any
single acquisition shall not
exceed $20,000,000 (or its
equivalent); and
(iii) the finance director of the
Company delivers a certificate
to the holders of Notes at least
5 Business Days before any
member of the Group enters into
any commitment (conditional or
otherwise) to make such an
acquisition in which the finance
director of the Company confirms
that in his opinion
43
(but without any personal
liability on the part of such
finance director):
(A) the Company is basing such
certificate on the most
recent financial
information relating to
such business which has
been obtained by the
Company (acting prudently
and reasonably) and the
Group's latest forecasts
and projections (which are
fair and reasonable and
have taken full and proper
account of the business to
be so acquired (including,
without limitation, all
contingent liabilities
relating to the business
to be so acquired);
(B) the business to be so
acquired is not insolvent
and is EBITDA positive (as
determined in accordance
with the definition of
Consolidated EBITDA above,
but adjusted to exclude
the effect of historic
non-recurring costs which
will no longer be incurred
by that business following
its acquisition);
(C) such acquisition is not,
and the Company is not
aware (after due enquiry)
of any matter or event
which is, reasonably
likely to result in a
breach of Section 10.3
(Financial Covenants) of
the Amended and Restated
Note Purchase Agreement or
an Event of Default under
Sections 11(a), 11(b),
11(0, 11(g), 11(h), 11(i),
11(j), 11(k) and 11(1) of
the Amended and Restated
Note Purchase Agreement
either immediately or
within the period ending
12 months after the date
of such acquisition;
(D) the Group is reasonably
likely to have sufficient
working capital during the
period ending 12 months
after the date of such
acquisition;
44
(E) after taking into account
any Capital Expenditure
incurred by the Group in
making such acquisition,
the Group will still be
able, in compliance with
the financial covenant in
the Amended and Restated
Note Purchase Agreement
relating to maximum
capital expenditure as
described in the section
entitled "Financial
Covenants" above, to
undertake sufficient
Capital Expenditure so as
to properly maintain its
businesses during the
period ending 12 months
after the date of such
acquisition;
(F) in the case of
acquisitions by members of
the Group that are not
Subsidiary Guarantors,
such acquisition is not
funded directly or
indirectly by any
Subsidiary Guarantor,
other than to the extent
such funding is a
Permitted Investment; and
(G) no Default or Event of
Default has occurred which
is continuing and no
Default or Event of
Default will arise as a
result of such
acquisition; and
(iv) no Default or Event of Default
has occurred which is continuing
and no Default or Event of
Default will arise as a result
of such acquisition,
and for the avoidance of doubt, any
such acquired businesses shall be
immediately subject to the negative
covenants described in clause (b) of
the section entitled "Affirmative and
Negative Covenants (Pre-Put
Elimination Date)" above and the
provisions of section entitled
"Guarantees/Security" above.
"Permitted Borrowed Money" means:
(a) Borrowed Money arising from normal
trade credit;
45
(b) the Borrowed Money of any persons
acquired by any member of the Group
pursuant to the D Acquisition (as
defined in the Syndicated Loan
Agreement) provided that such Borrowed
Money at no time exceeds Korean Won
16,900,000,000 (or its equivalent) in
aggregate;
(c) any Borrowed Money of any person
(other than pursuant to the D
Acquisition or the Lighthouse
Acquisition (as each such term is
defined in the Syndicated Loan
Agreement)) acquired by any member of
the Group after the date of the
Syndicated Loan Agreement, where such
Borrowed Money was existing at the
time of such acquisition and was not
incurred in contemplation of, or in
connection with, that acquisition and
where no member of the Group other
than the person so acquired has any
obligation (actual or contingent) in
respect of such Borrowed Money (and
where such Borrowed Money is permitted
under clause (d) of the definition of
"Permitted Acquisitions" above) and is
repaid or otherwise discharged within
30 days of such acquisition;
(d) Borrowed Money not exceeding
Australian Dollars 10,000,000 in
aggregate in respect of working
capital facilities made available in
Australia to members of the Group;
(e) without duplication, Borrowed Money in
respect of debit balances at any bank
or financial institution under the
cash management arrangements of the
Group (net of the credit balances of
the Group at such bank or financial
institution to the extent that such
credit balances are subject to
contractual set-off against such debit
balances (both before and after
insolvency under such cash management
arrangements) where the aggregate of
all such net debit balances of the
Group does not exceed (pound)5,000,000
(or its equivalent);
(f) Borrowed Money in respect of the
Syndicated Loan Agreement (as such
terms may be amended in accordance
with the Indicative Key Restructuring
Terms and Conditions attached as
Schedule 2 hereto and the
Intercreditor Term Sheet) and the
Notes;
(g) Indebtedness in respect of Finance
Leases
46
provided that the aggregate amount of
the principal element of the
Indebtedness under such Finance Leases
does not exceed (pound)2,000,000 (or
its equivalent) at any time;
(h) performance bonds issued by a member
of the Group in respect of the
obligations (other than any payment
obligations) of another member of the
Group in the ordinary course of
trading;
(i) derivatives contracts entered into in
accordance with the hedging strategy
agreed with the Majority Holders on or
about the Effective Date;
(j) Borrowed Money owed by one member of
the Group to another member of the
Group (to the extent otherwise
permitted under the Amended and
Restated Note Purchase Agreement);
(k) Borrowed Money of in respect of
guarantees issued by banks on behalf
of members of the Group to media
authorities in Korea and the United
Kingdom in each case in connection
with bona tide arrangements for
maintenance of media accreditation in
accordance with normal industry
practice; and
(1) Borrowed Money in addition to that
permitted by clauses (a) through (k)
above not exceeding (pound)16,000,000
(or its equivalent) in aggregate at
any given time.
"Permitted Disposals" means:
(a) the disposal of stock-in-trade in the
ordinary course of day to day trading;
(b) any disposal for cash on arm's length
terms where the aggregate of the
greater of the consideration and the
market value of all such disposals
does not exceed (pound)10,000,000 (or
its equivalent) provided that the
aggregate Net Proceeds of such
disposal are applied as (and to the
extent) required by the section
entitled "Prepayment on Asset
Disposals" above; and
(c) any disposal by:
(i) a member of the Group to a
Subsidiary Guarantor; and
47
(ii) a member of the Group which is
not a Subsidiary Guarantor to
another member of the Group
which is not a Subsidiary
Guarantor,
but so that in each case where any
such asset is shares, other ownership
interests in any person or entity,
real property or real estate (or
related insurance policies),
receivables (including intra--Group
debts) or, in each case, rights or
claims in respect of any such asset
and is subject or is expressed to be
subject to an Encumbrance pursuant to
any security documentation such
disposal shall only be permitted
either where the Majority Holders are
satisfied that the Subsidiary
Guarantee given by the disposee of the
obligations of the Company, Issuer,
Subsidiary Guarantors and security
providers under (inter alia) the
Syndicated Loan Agreement, the Notes
and the security documentation is not
limited to a greater extent than that
given by the disposer and that either
(1) such Encumbrance is not prejudiced
as a result of such disposal or (2)
the asset concerned becomes subject to
a fully enforceable, legally binding
Encumbrance in favour of the Common
Security Trustee (as defined in the
Intercreditor Term Sheet) the Banks
and the holders of the Notes on terms
substantially equivalent to or better
than such other Encumbrance or with
the consent of the Majority Holders;
(d) dealings with trade debtors with
respect to book debts in the ordinary
course of trading;
(e) disposals of cash on arm's length
terms not otherwise prohibited by the
Amended and Restated Note Purchase
Agreement and the security
documentation;
(f) disposals which constitute Permitted
Investments (as defined below); and
(g) disposals by Sonic Sun Limited with
respect to any of the shares it holds
Zenith Optimedia Group Limited
permitted under the section entitled
"Zenith Put and Call Options" above
provided that the proceeds of such
disposals are applied in accordance
with the mandatory prepayment
provisions described in the section
48
entitled "Zenith Put and Call
Options",
and so that where the asset or assets the
subject of a disposal permitted under this
definition (whether pursuant to clause (a)
to (g) above or with the prior written
consent of the Majority Holders (but
excluding the assets referred to in the last
paragraph of clause (c) above in the case of
any disposal under such clause)) is or are
subject to an Encumbrance created by the
security documentation, the consent of the
Majority Holders (but without prejudice or
responsibility to or in respect of any other
requisite consent) shall be granted (and
shall be deemed to be granted) for the
release of the Encumbrance created by the
security documentation over such assets
provided that no Default or Event of Default
shall have occurred and be continuing
neither remedied nor waived and the Majority
Holders shall accordingly instruct the
Common Security Trustee to grant the
relevant releases.
"Permitted Encumbrances" means:
(a) any Encumbrance constituting Security
in favor of the Banks and the
Noteholders as described in this term
sheet;
(b) any right of set-off arising by
operation of law in the ordinary
course of trading;
(c) any Encumbrance created in favour of a
Bank in connection with any bona fide
cash management and/or netting
arrangements for the Group which
constitute Permitted Investments;
(d) any lien arising with respect to Taxes
of the Group;
(e) any Encumbrance which the Majority
Holders has at any time in writing
agreed shall be a Permitted
Encumbrance;
(f) certain Encumbrances to be listed on a
Schedule to the Amended and Restated
Note Purchase Agreement securing the
amount set opposite the relevant
Encumbrance in such schedule, but not
any increase in such amount;
(g) any Encumbrance given by a member of
the Group in connection with bona fide
arrangements for the maintenance of
media
49
accreditation of any member of the
Group provided that such members of
the Group purchase media (and give
such Encumbrances) only in accordance
with normal industry practice;
(h) any Encumbrance on assets acquired
after the date of the Effective Date
or on assets of a company which
becomes a Subsidiary after the
Effective Date (which Encumbrances
were in existence at the date of
acquisition or such company becoming a
Subsidiary, but were not created in
contemplation thereof) but in each
case only if the maximum amount
thereby permitted from time to time to
be secured has not been increased on
account of, or since the date of, the
acquisition of such asset or the date
on which such company becomes a
Subsidiary and provided that the same
is discharged in full within 30 days
of the date of the relevant
acquisition or such company becoming a
Subsidiary;
(i) any Encumbrance (a "New Encumbrance")
created by any member of the Group in
substitution for any Encumbrance
referred to in paragraph (f) above (an
"Existing Encumbrance") provided that
(i) such Existing Encumbrance is
irrevocably and unconditionally
discharged no later than the time of
creation of the New Encumbrance, (ii)
the New Encumbrance relates only to
the same assets as the Existing
Encumbrance and (iii) the Indebtedness
secured by the New Encumbrance does
not exceed the Indebtedness secured by
the Existing Encumbrance;
(j) any Encumbrance created in favour of a
plaintiff or a defendant in any
action, or the court or tribunal
before which such action is brought,
as security for costs for expenses
where any member of the Group is
prosecuting or defending such action
in the bona fide interest of such
member and/or any other member of the
Group provided that the total amount
secured does not exceed
(pound)500,000;
(k) the trust established in accordance
with the terms of the letters dated
August 21, 1997 to beneficiaries of
the support agreement dated 1st
October 1, 1987 and made between the
Company and Ted Bates Worldwide Inc.;
50
(l) liens arising by operation of law or
by way of contract in the ordinary
course of business to the extent that
the same would otherwise arise by
operation of law, and not incurred in
connection with the raising of
finance;
(m) any Encumbrance constituted by a
permitted Finance Lease;
(n) any pledge of documents of title
relevant to the asset as security for
the liabilities of a member of the
Group in respect of a documentary
credit facility taken out in the
ordinary course of business;
(o) any retention of title to goods
supplied to any member of the Group
where that retention is required by
the supplier in the ordinary course of
its trading activities and on
customary terms;
(p) any Encumbrance granted by a member of
the Group over any rent deposits as
security for rental payments to be
made by such member of the Group under
or pursuant to any lease of premises
used for its business; and
(q) any Encumbrance not otherwise
permitted pursuant to paragraphs (a)
to (p) above (inclusive) and securing
Indebtedness in aggregate not
exceeding(pound)2,000,000.
"Permitted Guarantees" means:
(a) any Guaranty which the Majority
Holders have at any time in writing
agreed shall be a Permitted Guarantee;
(b) any Guaranty given by a member of the
Group of the obligations of any
Subsidiary Guarantor, any Guaranty
given by a member of the Group which
is not a Subsidiary Guarantor of the
obligations of another member of the
Group which is also not a Subsidiary
Guarantor and any Guarantees which
constitutes a Permitted Investment (as
defined below);
(c) certain Guarantees given by members of
the Group to be listed on a schedule
to the Amended and Restated Note
Purchase Agreement guaranteeing the
amount set opposite the relevant
guarantee on such
51
schedule, but not any increase in such
amount;
(d) any Guaranty given by a company which
becomes a Subsidiary after the
Effective Date (which Guaranty was in
existence at the date such company
becomes a Subsidiary and was not
created in contemplation thereof) but
only if the maximum amount guaranteed
has not been increased on account of
or since the date on which such
company becomes a Subsidiary and
provided that the same is discharged
within 30 days of the relevant company
becoming a Subsidiary;
(e) any Guaranty given by a company in the
Group in favor of a bank in connection
with any bona fide cash management
and/or netting arrangements for the
Group which constitute Permitted
Investments;
(f) any Guaranty given by a member of the
Group in connection with bona fide
arrangements for the maintenance of
media accreditation of any member of
the Group provided that such members
of the Group purchase media (and give
such Guarantees) only in accordance
with normal industry practice;
(g) any indemnity given by a member of the
Group required by a bank as part of
its normal terms and conditions for
transacting business indemnifying such
bank against costs and losses it may
sustain as a consequence of accepting
telephone or facsimile instructions
from such member of the Group;
(h) any counter indemnity given by any
member of the Group in connection with
a Bid Bond (as defined in the
Syndicated Loan Agreement).
"Permitted Investments" means (i)
investments in the shares of (or other
ownership interests in), (ii) loans or
credit granted to, (iii) disposals to (not
otherwise permitted under clauses (a) to (e)
inclusive of the definition of "Permitted
Disposals" below or clause (g) of the
definition of "Permitted Disposals" above,
and (iv) guarantees of the Indebtedness of,
any member of the Group which is not a
Subsidiary Guarantor (or such investments in
establishing a new entity which once formed
is a member of the Group which is not a
Subsidiary Guarantor) where the aggregate of
such investments, loans, credit,
52
disposals, and guarantees made in the
relevant Fiscal Year, together (without
double counting) with the Pooling Borrowed
Money (as defined below) at any relevant
time during such Fiscal Year, at no time
exceeds:
(a) (pound)20,000,000 (or its equivalent)
during the Fiscal Year ending December
31, 2002; or
(b) (pound)15,000,000 (or its equivalent)
during each subsequent Fiscal Year.
provided that, for the purposes of this
definition:
(i) "Pooling Borrowed Money" means, at any
relevant time, the aggregate of the
Borrowed Money of any members of the
Group which are not Subsidiary
Guarantors under any cash management
arrangements in respect of which any
Subsidiary Guarantor grants any
guarantee, rights of set-off or any
other Encumbrance or grants an
intra-Group loan;
(ii) the value attributable to a disposal
of an asset shall be the market value
of the disposed asset; and
(iii) the relevant aggregate limit
applicable during a financial year
shall be increased by the amount of
(A) any repayment, release or
cancellation (whether in whole or in
part) of loans, credits and guarantees
previously taken into account for the
purpose of determining compliance with
"Permitted Investments" during such
financial year and (B) cash proceeds
(to the extent not already taken into
account pursuant to sub-clause (A)
above), (net of related costs and
Taxes) received by a Guarantor from a
member of the Group which is not a
Guarantor in such financial year under
a series of related transactions
involving an investment in such
non-Guarantor made by such Guarantor
within 13 months of such receipt and
previously taken into account for the
purpose of determining compliance with
"Permitted Investments" (to the extent
that such net cash proceeds do not
exceed the amount of such investment
so taken into account).
"Permitted Loans" means loans or credit to a
Subsidiary Guarantor or loans or credit from
one
53
member of the Group which is not a
Subsidiary Guarantor to another member of
the Group which is not a Subsidiary
Guarantor and loans or credit constituting
Permitted Investments.
"Property Payments" means the aggregate
amount of (i) the payments made by any
member of the Group pursuant to leases of
unoccupied land or buildings of which such
member of the Group is a lessor and (ii) the
amount by which payments under a lease of
land or buildings of which a member of the
Group is a lessee exceeds the amount of
rental received by such member of the Group
in respect of such land or buildings from
any other person.
"Syndicated Loan Agreement" means the Loan
Agreement dated 4 July 2000 (as amended and
restated on the Effective Date in accordance
with the term sheet set out in Schedule 2
hereto and as further amended and in effect
from time to time) and made between the
Company, certain of Company's Subsidiaries,
The Bank of New York and HS]3C Investment
Bank plc as Arrangers, the banks and
financial institutions party thereto from
time to time, HSBC Investment Bank plc as
Agent and Security Trustee, The Bank of New
York as Swingline Bank and HS]3C Bank plc as
Overdraft Bank.
"Tax" and collectively "Taxes" includes all
present and future taxes, levies, imposts,
duties, fees or charges of whatever nature
together with interest thereon and penalties
in respect thereof.
54
Schedule 1
Security Package
PART 1
1. The Communications Group Pty Limited
2. Atlas Advertising Limited
3. Bates Europe Limited
4. Bates UK Limited
5. ICM International Limited
6. The Decision Shop Limited
7. Bates Deutschland Holding GmbH
8. Bates Advertising USA, Inc.
9. Bates Churchill Advertising, Inc.
10. Bates Churchill Public Relations, Inc.
11. Bates Healthworld, Inc.
12. Bates Travel and Tourism, Inc.
13. Bates Worldwide (Delaware), Inc.
14. CCG.XM, Inc.
15. Cordiant US Holdings, Inc.
16. Falk Healthworld Inc.
17. Fitch, Inc.
18. GHBM Inc.
19. Healthworld Corporation
20. Lighthouse Global Network Inc.
21. Morgen-Walke Associates, Inc.
PART 2
Companies incorporated in England and Wales to provide guarantees and first
ranking fixed and floating charges over all of their assets and undertaking. The
issued share capital of each of these companies (excluding Cordiant
Communications Group plc.) is to be the subject of a pledge / charge given by
its shareholders, which in the case of shareholders incorporated in England and
Wales will be contained in the relevant shareholder's first ranking fixed and
floating charges.
1. Cordiant Communications Group plc;
2. Cordiant Group Limited;
3. Bates Overseas Holdings Limited;
4. Bates Europe Limited;
5. Cordiant (US) Holdings Limited;
6. Garrott Dorland Crawford Holdings Limited;
7. Atlas Advertising Limited;
8. Bates UK Limited;
9. Swotplus Limited;
10. Deckchair Studio Limited;
11. Ted Bates Holdings Limited;
12. The Decision Shop Limited;
Schedule 1-1
13. Healthworld UK Holdings Limited;
14. Bates Healthworld Limited;
15. PSD Associates Limited
16. Bamber Forsyth Limited;
17. Fitch Limited;
18. Fitch International Limited;
19. Fitch Worldwide Limited;
20. Business Communications International Group Limited;
21. C&FD (Holdings) Limited;
22. Corporate & Financial Design Limited;
23. Financial Dynamics Holdings Limited;
24. Financial Dynamics Limited;
25. Bulletin Tnt. Limited;
26. Bulletin mt. (UK) Limited;
27. 1CM International Limited;
28. PCI Livedesign Limited;
29. Cordiant Overseas Holdings Limited;
30. Cordiant Property Holdings Limited;
31. Healthworld Holdings Limited[1];
32. Milton Marketing Group Limited[1];
33. Headcount WW Field Marketing Limited[1];
34. Lighthouse Holdings (UK) Limited[1];
35. Clarion Communications PR Limited[1];
36. CCG.XM Holdings Limited[1];
37. CCG.XM1;
38. XMSS Limited;
39. Colwood Healthworld Limited;
40. Fitch Design Consultants Limited;
41. Milton Marketing Limited[1];
42. Connect Five Limited[1];
43. Connect Six Limited[1];
44. Propose Two Limited[1];
45. Secure Two Limited[1];
46. Connect One Limited[1];
47. N.A.S.A. 2.0 London Limited;
48. Scholz & Friends London Limited[6]
49. Sonic Sun Limited[2].
PART 3
Companies or other entities incorporated in (or formed under the laws of) the
US, Germany, the Netherlands and Australia to provide guarantees and the share
capital (or equivalent) of which shall be the subject of pledges I charges.
US companies
1. Cordiant US Holdings, Inc.;
2. Healthworld Corporation Inc.;
3. Bates Healthworld Inc.;
4. Healthworld International Holdings Inc.;
5. Bates Worldwide (Delaware) Inc.;
Schedule 1-2
6. Bates Advertising USA Inc.;
7. Bates Churchill Public Relations Inc.;
8. Bates Churchill Advertising Inc.;
9. Interactive Edge Inc.;
10. Lighthouse Global Network Inc.;
11. Fitch Inc.;
12. The Leonhardt Group Inc.;
13. Morgen Walke Associates Inc.;
14. Primo Angeli Inc.;
15. CCG.XM Holdings Inc.;
16. CCG.XM Inc.;
17. Microarts Corporation US;
18. Falk Healthworld Inc.;
19. The Decision Shop Inc.;
20. S&S MCC AND MCC Inc.;
21. Channelex Inc.;
22. DWP Bates Technology Inc.;
23. Cordiant Finance Inc.;
24. Peclers Pavis North America, Inc.; and
25. Drummer Associates Inc.
German companies
1. Cordiant Holdings GmbH;
2. Bates Deutschland Holding GmbH;
3. Bates Germany Werbeagentur GmbH;
4. XCEED! Agentur Fur Medienberatung Und Innovative Kommunikation GmbH;
5. EMC Starke & Gerlach GmbH; and
6. N.A.S.A. 2.0 GmbH.
Dutch companies
1. Chafma BY;
2. Bates Nederland Holding BY3; and
3. Cordiant Finance B.V4.
Australian companies
1. Cordiant Communications (Australia) Pty Limited; and
2. Cordiant Communications Group Australia Pty Limited[5]
Notes to Schedule 1:
1. The share pledges over the shares of non-US Subsidiaries owned by US
companies and the guarantees and security given by non-US Subsidiaries of
US companies will be limited to the extent required to avoid adverse US tax
implications. Notwithstanding the foregoing, to the extent that any share
pledges, guarantees and/or security is given for the benefit of the Banks
or to otherwise secure obligations incurred in connection with the
Syndicated Loan Agreement and are not given for the benefit of the holders
of the Notes or to otherwise secure obligations incurred in connection with
the Notes and the Amended and Restated Note Purchase Agreement, any
recoveries under such share pledges, guarantees and/or security shall
shared by the Banks and the holders of the Notes pursuant to the
Schedule 1-3
terms of the Intercreditor Agreement.
2. The JVA Subsidiary will be subject to the guarantee and security package as
in this term sheet (though any charge over the shares owned by the JVA
Subsidiary in Zenith shall be, as stated in this term sheet, subject to the
obtaining of the consent of the other party(s) to the JVA). In addition, a
charge shall be taken over the JVA Subsidiary's rights (and of the
Company's rights remaining after the transfer of shares described in this
term sheet), under or in connection with the JVA, including the put and
call options, and the proceeds resulting from completion of the exercise of
any of these options as stated in this term sheet.
3. No charge will be taken over the 35% minority shareholding in Bates
Nederland Holding B.V. The shares owned by Chafma B.V. in Bates Nederland
Holding B.V. will be the subject of a Dutch law share pledge. Bates
Nederland Holding B.V. will not be required to give a guarantee.
4. Cordiant Finance B.V. is the company to which the Euro cash pool is swept
under the Euro cash pooling arrangements. Accordingly it is required to be
subject to the guarantee and security package arrangements outlined in this
term sheet. In addition it will be required to provide a charge over its
bank accounts.
5. No charge will be taken over the 41.59% of shares in Cordiant
Communications Group Australia Pty Limited owned by Cordiant Communications
(Australia) Pty Limited. The shares owned by Chafma B.V. in Cordiant
Communications Group Australia Pty Limited will be the subject of a share
charge.
6. No charge will be provided over the shares in Scholz & Friends London
Limited ("SFLL") so long as it is a direct or indirect Subsidiary of Scholz
& Friends AG. The Company will use reasonable endeavours to procure that
SFLL enters into a guarantee in accordance with the provisions of this term
sheet. To the extent that SFLL does not enter into such a guarantee, SFLL
shall be excluded from the UK cash management pool.
Schedule 1-4
Schedule 2
[Bank term sheet]
Schedule 2-1
Schedule 3
[Intercreditor term sheet]
Schedule 3-1
EXHIBIT C
Intercreditor Term Sheet
CORDIANT COMMUNICATIONS GROUP PLC
US$400M CREDIT AGREEMENT
AND
US$175M GUARANTEED SENIOR NOTES
Intercreditor Term Sheet
Key Intercreditor Restructuring Terms and Conditions
This term sheet contains the key terms of the intercreditor arrangements agreed
between the Arrangers of the US$400m Loan Agreement dated 4 July 2000 as amended
(the "Original Credit Agreement") and the holders of Cordiant Finance Inc.'s
7.61% Guaranteed Notes due 2011 (the "Notes") issued under separate Note
Purchase Agreements dated as of 5 April 2001 (collectively, the "Original Note
Agreement") in connection with the restructuring (the "Restructuring") of the
facilities made available thereunder.
In this term sheet:
"Agreement in Principle" means the agreement made between the Finance Parties,
the holders of Notes, the Company, Cordiant Finance, Inc. and others and dated
27 March 2002 to which this term sheet is scheduled as Exhibit C;
"Bank Term Sheet" means the bank term sheet scheduled as Exhibit A to the
Agreement in Principle; "Company" means Cordiant Communications Group plc;
"Credit Agreement" means the Original Credit Agreement as amended and restated
in accordance with the terms and conditions set out in the Bank Term Sheet;
"Creditors" means the holders of the Notes and the Finance Parties under the
Original Credit Agreement;
"Enforcement Date" means the date on which the Common Security Trustee demands
payment or discharge of all or any part of the secured obligations under the
Credit Agreement or the Note Agreement, or takes any action to enforce the New
Security it holds on behalf of the Creditors or, if earlier, the date on which a
petition for an administration order, or any other petition is presented or
similar action taken under any insolvency or bankruptcy law in relation to any
Obligor
"Note Agreement" means the Original Note Agreement as amended and restated in
accordance with the terms and conditions set out in the Noteholder Term Sheet;
and
"Noteholder Term Sheet" means the noteholder term sheet scheduled as Exhibit B
to the Agreement in Principle.
Capitalised terms used in this term sheet have the meanings defined in the
Original Credit Agreement, unless indicated otherwise and "Term Sheet" means
this term sheet.
To the extent that either the Bank Term Sheet or the Noteholder Term Sheet (as
the case may be) is inconsistent with this Term Sheet, the terms and conditions
of this Term Sheet shall prevail.
1 Basic security structure
1.1 The new guarantees and security set out in the Bank Term Sheet (the "New
Security") will be held by a common security trustee (the "Common Security
Trustee") for the benefit of all Creditors.
1.2 The existing guarantees of the Original Credit Agreement will continue to
be held by the security trustee under the Original Credit Agreement. The
existing guarantees of the Notes will continue
1
to be held by the existing holders of the Notes (the "Existing Holders").
Each Existing Noteholder undertakes that if all or any of their Notes are
transferred to any other person (other than an affiliate of such Existing
Holder) they will procure that the transferee will accede to the
lntercreditor Agreement and be bound by its terms. In this term sheet,
"Existing Guarantees" means the existing guarantees of the Notes together
with the existing guarantees of the Original Credit Agreement.
2 New Money Priority
2.1 The New Security will secure the New Money and the Old Money from the Banks
and the Notes.
2.2 The New Money from the Banks will rank in priority over the Notes and the
Old Money.
2.3 Until the New Money has been repaid or cash collateralised in full, the New
Money Commitments have been cancelled in full and the New Money commitment
commission paid in full, no principal, Make-Whole Amounts, break funding
costs or other amounts may be paid (by way of payment, set off or
otherwise) in respect of the Old Money or the Notes as the case may be,
except for interest in accordance with the terms of the Credit Agreement or
the Note Agreement. Nothing in this paragraph will affect the continuing
operation of the Revolving Credit Facility in relation to the Old Money.
2.4 "Old Money" is, at any relevant time, the first (pound)111,163,898.43 of
principal outstanding under the various facilities under the Credit
Agreement at that time (such amount being the sum of the sterling
equivalent of the US$236,833.24 of principal drawn under the swingline
facility under the Original Credit Agreement on 1 January 2002 at the
exchange rate then prevailing and the (pound)111,000,000.00 of principal
drawn under the revolving credit facility under the Original Credit
Agreement on such date). To the extent that the sterling equivalent of the
principal outstanding under the various facilities under the Credit
Agreement at any relevant time is less than (pound)111,163,898.43, Old
Money will include undrawn commitments for the purposes of sharing any
pre-enforcement payments in respect of the Old Money (subject to the
loss-sharing and equalisation provisions in paragraph 7).
2.5 "New Money" is, at any relevant time, all principal amounts from time to
time outstanding under the various facilities under the Credit Agreement at
that time in excess of the Old Money. The maximum amount of the New Money
will be the difference between the (pound)111,163,893.43 of outstanding
principal referred to above and the sterling equivalent of $225M which will
be calculated at the spot rate of exchange used under the Restructuring
Deed on the date of the Restructuring.
2.6 "New Money Commitments" are all commitments under the various facilities
under the Credit Agreement from time to time in excess of
(pound)111,163,898.43 in aggregate, subject to the limit provided in
paragraph 2.5.
2.7 The New Money will include all related interest thereon and other amounts
in respect thereof payable under the Credit Agreement.
2.8 Neither the New Money nor the Old Money amounts will be affected by the
rolling and reborrowing of the facilities under the Credit Agreement.
2.9 Prior to the enforcement of the New Security:
(a) accrued interest will be paid when due;
(b) any Make-Whole Amount (as defined in the Note Agreement) and interest
thereon will be deferred and will be payable in accordance with the
terms set out in the Noteholder Term Sheet.
(c) All P1K Management Fees (as defined in the Noteholder Term Sheet and
the Bank Term Sheet) and interest thereon will be deferred and will be
payable in accordance
2
with the terms set out in the Noteholder Term Sheet and the Bank Term
Sheet respectively.
3 Priority between the Notes and the Old Money
3.1 The Notes and the Old Money will rank pan passu after the New Money on the
terms set out in this paragraph.
3.2 Subject to paragraph 5.2 and paragraph 7, the Notes and the Old Money will
share mandatory and voluntary prepayments made prior to the enforcement of
the New Security pro rata to the sum of the drawn principal amounts and
undrawn commitments at the relevant time.
3.3 The amounts to be applied in mandatory and voluntary prepayments of the Old
Money and the Notes in accordance with paragraph 3.2 shall be applied
against principal (and in cancellation of an equivalent amount of
commitments). In addition, the Company will, subject to paragraph 2.9, pay
from other sources interest, break costs and any other amounts payable
under the terms of the Credit Agreement and the Note Agreement.
3.4 Repayments and recoveries in respect of the Notes and the Old Money after
the Enforcement Date shall be applied (subject to paragraphs 3.5 and 6):
(a) first, against principal pro rata;
(b) second, against all interest, commitment commission, the Deferred Fee,
Make-Whole Amounts and all other amounts (other than P1K Management
Fees and accrued interest thereon) payable under or in connection with
the Credit Agreement and the Notes pro rata; and
(c) third, against the P1K Management Fees and accrued interest thereon
pro rata.
3.5 If, prior to enforcement of the New Security, amounts are credited to a
cash collateral account with the Common Security Trustee (if, for example,
a Bank sets cash aside pending the termination of an Interest Period to
avoid broken funding costs) pending their application in prepayment of the
New Money, the Old Money or, as the case may be, the Notes in accordance
with paragraph 3.3, and the New Security is enforced prior to such
application, then such amounts will still be applied in respect of the
prepayments for which they were deposited in accordance with paragraph 3.3
notwithstanding such enforcement.
3.6 For the purposes of sharing under paragraph 3, the amount of any claims
denominated in a currency other than Sterling shall be converted into
Sterling by applying the spot rate of exchange of the Common Security
Trustee as at the date of distribution.
4 Application of mandatory prepayments
4.1 Subject to paragraph 5.1 and paragraph 7, prior to the enforcement of the
New Security, mandatory prepayments will be applied:
(a) first, against the New Money drawn at such time (and in cancellation
of an equivalent amount of New Money Commitments);
(b) second, (once no New Money is outstanding), to pay all commitment
commission in respect of the New Money and the New Money Commitments
shall be cancelled in like amount;
(c) third, after payment in full of New Money and all commitment
commission in respect of the New Money, to pay Old Money drawings and
New Money commitments (to the extent then remaining) shall be
cancelled in like amount; and
3
(d) fourth, (once all the New Money has been prepaid and the New Money
Commitments cancelled in full and all New Money commitment commission
paid in full) against the Old Money and the Notes on the basis set out
in paragraph 3.
5 Application of voluntary prepayments
5.1 Subject to paragraph 5.2 and paragraph 7, voluntary partial prepayments and
cancellations of the principal outstanding in respect of the Old Money and
the Notes may only be made (a) once the New Money has been prepaid or cash
collateralised in full, the New Money Commitments have been cancelled in
full and the New Money commitment commission repaid in full and (b) on the
basis set out in paragraph 3.
5.2 The Company will be permitted to refinance the Facilities under the Credit
Agreement in full (but not in part only), without prepaying the Notes on
the terms set out in the Noteholder Term Sheet if the "Put Elimination
Conditions" (as defined in the Noteholder Term Sheet) have been satisfied.
The Company and the Creditors agree that in all other circumstances any
proceeds of any refinancing shall be shared on the basis set out in this
Term Sheet.
6 Application of recoveries of enforcement
6.1 All proceeds of enforcement of the New Security and the Existing Guarantees
(and other recoveries after the enforcement of the New Security) will be
applied:
(a) first, against the Common Security Trustee's costs and expenses;
(b) second, against the New Money and New Money commitment commission;
(c) third, (subject to paragraph 7) once all the New Money has been repaid
and all New Money commitment commission paid in full) against the Old
Money and the Notes on the basis set out in paragraph 3.4.
6.2 Upon such enforcement, all the Funders' commitments under the Credit
Agreement shall be cancelled (to the extent not previously cancelled).
6.3 On or after the Enforcement Date, any distributions or recoveries received
by the Creditors from whatever source will be turned over to the Common
Security Trustee for application in accordance with this paragraph.
7 Loss sharing and equalisation
7.1 Promptly after the Enforcement Date, each Creditor shall exercise any
available rights of set-off, consolidation or combination of accounts in
accordance with paragraph 10.2.
7.2 Promptly thereafter, and following the repayment in full of the New Money
and the payment in full of the New Money commitment commission (but in any
event no later than three months after the Enforcement Date or, if later,
the date on which the New Money is repaid in full), the Creditors will make
such equalisation payments to each other as are necessary to ensure that,
after such payments have been made, the ratio of each Creditor's Exposure
(as defined below) to the aggregate Exposure of all the Creditors is equal
to the ratio that its Initial Exposure (as defined below) bore to the
aggregate Initial Exposure of all the Creditors (with all amounts being
converted into a common currency for the purpose of such calculation in
accordance with paragraph 7.8). The liability of each Creditor will be
several. Such payments will not be required if, before they are due to be
made, the Common Security Trustee makes payments under paragraph 7.6 which
have the same effect.
7.3 For the purpose of this paragraph, "Exposure" means the principal amount
owing to each Creditor (whether actually or contingently) and "Initial
Exposure" means the Exposure of each Creditor under the Notes or the Old
Money portion of outstandings under the Credit Agreement as of the date of
the Agreement in Principle. The aggregate Initial Exposure of the
Noteholders is $175,000,000 and the aggregate Initial Exposure of the Banks
is (pound)111,163,898.43.
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7.4 Further equalisation payments may be necessary to account for the expiry of
ancillary facilities (such as letters of credit) in a manner to be set
forth in the lntercreditor Agreement. No other equalisation payments will
be made.
7.5 No equalisation will be required by the Overdraft Bank to the extent that
it exercises its right of set-off as permitted by clause 10.1.
7.6 Any payments or distributions to the Creditors after equalisation has taken
place will be made by the Security Trustee pursuant to paragraphs 3.4 and
3.6 but will be adjusted to ensure that immediately after they have been
made the ratio of each Creditor's Exposure to the aggregate Exposure of all
the Creditors is equal to the ratio that its Initial Exposure (as defined
below) bore to the aggregate Initial Exposure of all the Creditors (with
all amounts being converted into a common currency for the purpose of such
calculation in accordance with paragraph 7.8).
7.7 If, following the Enforcement Date, any Creditor receives any payment in
discharge of the principal amount of any Old Money or Notes otherwise than
from the Common Security Trustee, it will pay the amount received to the
Common Security Trustee, for distribution pursuant to paragraph 7.6.
7.8 Any currency conversions required for the purpose of a calculation or
payment to be made under this paragraph 7 shall be made by the Common
Security Trustee at its spot rate of exchange for the currencies concerned
2 days before the calculation or payment concerned is due to be made.
8 Application of voluntary and mandatory prepayments under the Credit
Agreement
8.1 In order to maximise the value of the English law floating charge security
for the benefit of all the Creditors, as between the parties to the Credit
Agreement, all voluntary and mandatory prepayments under the Credit
Agreement will be applied first in prepayment of Revolving Credit Advances
outstanding under the Credit Agreement prior to the Restructuring Date (or
any rollover of such Advances), secondly in prepayment of all other
outstanding Revolving Credit Advances, and thirdly in pro rata prepayment
of outstanding Swingline Advances and Utilisations of the Overdraft
Facility. It is understood that this arrangement shall in no way affect or
impair the priority arrangements among the Creditors set out in this Term
Sheet.
9 Additional guarantees and security
9.1 All additional guarantees (the "Additional Guarantees"), security and other
financial support in respect of the New Money, the Old Money and/or the
Notes must be granted to the Common Security Trustee for the benefit of the
Creditors.
10 Operation of the facilities under the Credit Agreement
10.1 Pending enforcement of the New Security (but without prejudice to the
Banks' rights under the Credit Agreement to prevent drawings and cancel the
facilities), the overdraft facility under the Credit Agreement (having a
net limit of (pound)6,000,000) will continue to operate on a rolling net
basis. Prior to and on enforcement of the New Security, the Overdraft Bank
will be free to set off (and retain without the arrangements in paragraph 3
applying) cash against their gross exposure in order to determine their net
exposure (it being understood that such set-off shall be limited to the
minimum amount required to reduce such gross exposure to such net limit and
such set-off right shall be limited to such overdraft facility).
10.2 Subject to clause 10.1, on the enforcement of the New Security or upon any
other set-off or exercise of rights of consolidation and combination of
accounts, the Banks will pay all amounts otherwise available for set-off to
the Common Security Trustee for distribution in accordance with paragraph
6.
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11 Common Security Trustee/Relevant Majority Creditors
11.1 The Common Security Trustee will hold the New Security and, subject to
paragraph 11.3, will act in accordance with the instructions of the
Relevant Majority Creditors.
11.2 The Common Security Trustee will refrain from enforcing the security
conferred by the New Security and the Security Trustee and the Noteholders
will refrain from enforcing the Existing Guarantees unless and until
instructed by the Relevant Majority Creditors save that if a petition for
an administration order has been presented in respect of any Obligor (and
not struck out) then (unless the Relevant Majority Creditors have
instructed the Common Security Trustee not to enforce the New Security or
any Creditor has not taken any action required by the Common Security
Trustee so that it may so act) the Common Security Trustee will enforce the
New Security by appointing an administrative receiver to the relevant
Obligor.
11.3 Where an asset is subject to a charge or pledge created by the New Security
and such asset is the subject of a disposal which is (to the satisfaction
of the Common Security Trustee) expressly permitted under the Credit
Agreement and the Note Agreement, then, if (a) the Common Security Trustee
has not received notice of any Default or Event of Default (howsoever
described) under the Credit Agreement or the Note Agreement which is
continuing unremedied and unwaived and (b) the Common Security Trustee is
satisfied that the proceeds of that disposal will be applied in accordance
with the Credit Agreement, the Note Agreement and this term sheet, the
Common Security Trustee shall grant a release of the relevant asset from
the charge or pledge concerned.
11.4 Relevant Majority Creditors will be defined as meaning the Majority Banks
under the Credit Agreement and the holders of a majority in unpaid
principal amount of the Notes at the time outstanding (excluding Notes then
owned by the Issuer or any of its Affiliates).
11.5 The Common Security Trustee will initially be HSBC Investment Bank plc.
11.6 The Relevant Majority Creditors will have the right to replace the Common
Security Trustee with another reputable and experienced bank, financial
institution or trustee. HSBC Investment Bank plc will automatically resign
as Common Security Trustee at the same time as the Facilities are repaid
and the commitments cancelled in full, and (subject to paragraph 14.7) a
new Common Security Trustee will be appointed.
11.7 The Creditors will give a mutual obligation to consult each other and
provide information to the Common Security Trustee.
11.8 There will not be any override, so a waiver of a breach of the terms of the
Notes will not constitute a waiver of the Credit Agreement and a waiver of
a breach of the terms of the Credit Agreement will not constitute a waiver
of any term of the Notes or the Note Agreements.
11.9 All the Creditors will give indemnities to the Common Security Trustee and
underwrite the payment of the Common Security Trustee's costs, in each case
to the extent (and only to the extent) that the proceeds of any enforcement
or the New Security are insufficient to cover such costs in full, such
indemnities to operate pro rata to the sum of the relevant drawn amounts
and undrawn commitments at the time concerned.
12 Enforcement action
12.1 All enforcement action will be taken through the Common Security Trustee,
so that the Creditors will give each other (but not the Company or any of
its Subsidiaries) mutual undertakings that, unless the Relevant Majority
Creditors have previously consented in writing, none of the Creditors will:
(a) enforce any of the New Money, the Old Money or the Notes by
attachment, execution or otherwise; or
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(b) have any right to crystallise, or require the Common Security Trustee
to crystallise, any floating charge in the New Security; or
(c) have any right to enforce, or require the Common Security Trustee to
enforce, any security conferred by the New Security by sale,
possession, appointment of a receiver or otherwise; or
(d) have any right to enforce, or require the Security Trustee or the
Common Security Trustee to enforce, any of the Existing Guarantees
other than the enforcement of the Existing Guarantee of the Company by
a holder of Notes; or
(e) petition for (or vote in favour of any resolution for) or initiate or
support or take any steps with a view to any winding up. bankruptcy,
insolvency, liquidation, reorganisation, moratorium, administration,
dissolution or any analogous proceedings or any voluntary arrangement
or assignment for the benefit of creditors or any similar proceedings
involving an Obligor (or any of its Subsidiaries), whether by
petition, convening a meeting, voting for a resolution or otherwise;
or
(f) bring or support any other legal proceedings against any Obligor (or
any of its Subsidiaries) except that nothing in this paragraph 12 will
restrict the bringing of proceedings by any Creditor solely for
injunctive relief (or analogous proceedings in jurisdictions outside
England and Wales) to restrain any actual breach of the Credit
Agreement or the Note Agreement or for specific performance not
claiming damages, in either case where doing so would not conflict
with any other provision of this term sheet.
12.2 For the avoidance of doubt nothing in this paragraph 12 will restrict the
relevant Creditors from:
(a) exercising their respective rights to refuse to make drawings
available or cancel undrawn commitments; or
(b) accelerating any of the New Money or the Old Money under the Credit
Agreement or the Notes or otherwise declaring any of them prematurely
due or payable; or
(c) enforcing the guarantee of the Company; or
(d) taking action to the extent required by the Common Security Trustee in
order that it may appoint a receiver in accordance with paragraph
11.2; or
(e) setting-off in accordance with paragraph 10.1 to ensure that the
exposure of the Overdraft Bank is reduced to the net amount; or
(f) proving in the insolvency of an Obligor.
12.3 The Creditors will give each other (but not the Company or any of its
Subsidiaries) a mutual prohibition on taking action to frustrate
enforcement by the Common Security Trustee.
12.4 The Creditors will also give each other (but not the Company or any of its
Subsidiaries) a mutual undertaking to enforce the Existing Guarantees to
the extent required by the Common Security Trustee (acting on the
instructions of the Relevant Majority Creditors).
12.5 The Creditors will acknowledge that pursuant to any enforcement action by
the Common Security Trustee carried out on the instructions of the Relevant
Majority Creditors it may be desirable for the purpose of such enforcement
and/or maximising the realisation of the security being enforced that any
rights or claims of or by the Common Security Trustee against any Obligor
and/or any security over any assets of any Obligor (in each case) as
contained in or created by any New Security, other than such rights or
claims or security being enforced, and/or other claims by the Creditors
(including the Existing Guarantees) be released and each Creditor will (a)
to the extent required by the Common Security Trustee (acting on the
instructions of the Relevant Majority Creditors) grant such releases to
fully effect such enforcement action and realisation including, without
limitation, to the extent necessary for such purposes, to execute
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release documents and (b) irrevocably authorise the Common Security Trustee
(acting on the instructions of the Relevant Majority Creditors) to grant
any such releases to the extent necessary to fully effect such enforcement
action and realisation including, without limitation, to the extent
necessary for such purposes, to execute release documents in the name of
and on behalf of all the Creditors.
12.6 Recoveries under the Existing Guarantees and, after the enforcement of the
New Security, other recoveries outside the New Security and the Existing
Guarantees will (to the extent necessary) be turned over to the Common
Security Trustee and shared as if they were recoveries by the Common
Security Trustee under the New Security.
13 Limits on amending the Notes and the Credit Agreement
13.1 The Company and the holders of the Notes will undertake to the Banks and
the Banks and the Company will undertake to the holders of Notes that,
other than as agreed by the Banks and the holders of Notes as part of the
Restructuring, they will prevent any:
(a) increase in the interest payable on the Notes or the Facilities under
the Credit Agreement (as the case may be), or
(b) change in the timing or the basis of calculation of such interest
payments; or
(c) reduction in the maturity of the Notes (other than, for the avoidance
of doubt, in connection with the exercise of the Refinancing Put or on
the occurrence of a Prepayment Event (as defined in the Noteholder
Term Sheet) or the Facilities under the Credit Agreement or change in
the timing and amounts of the scheduled repayment installments or
final maturity in respect of the Notes or the Facilities under the
Credit Agreement (as the case may be); or
(d) amendment of the mandatory prepayment provisions of the Notes or the
Facilities under the Credit Agreement (as the case may be); or
(e) change in the definition of Make-Whole Amount which would have the
effect of increasing any Make-Whole Amount payable in respect of the
Notes or extension of the application of the Make-Whole Amount
mechanism; or
(f) amendment of the financial covenants set out in the Notes or the
Credit Agreement (as the case may be);
(g) other change to the Notes or the Facilities under the Credit Agreement
(as the case may be) which will increase any amount payable thereunder
or which might adversely effect the ranking arrangements contemplated
by this term sheet; or
(h) increase or decrease the commitments of the Banks under the Credit
Agreement otherwise than in accordance with this Term Sheet.
13.2 The Agent and the holders of the Notes will each undertake to notify the
other party of any amendments made to the terms and conditions of the
Credit Agreement and the Notes respectively, within a reasonable period
after such amendments have been made.
14 Miscellaneous provisions
14.1 Any amounts received by any Creditor contrary to this term sheet will be
turned over to the Common Security Trustee for redistribution in accordance
with this term sheet.
14.2 No Creditor will challenge the Existing Guarantees or any other security
granted to any other Creditor.
14.3 The Creditors may not transfer their interest under the Notes or the Credit
Agreement without the transferees acceding to the intercreditor agreement
which implements this term sheet.
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14.4 None of the Notes nor the commitments, outstanding amounts or contributions
under the Facilities will be sold to the Company (or its affiliates) or
anyone acting on their behalf.
14.5 No consent of the holders of the Notes will be required to the utilisation
of the facilities under the Credit Agreement in full or in part up to the
limit of those facilities set out in clause 2.
14.6 Hedging liabilities will continue to be unsecured.
14.7 The provisions of the lntercreditor Agreement will terminate if the
Facilities under the Credit Agreement are refinanced in full. Immediately
prior to the termination of the lntercreditor Agreement, the Common
Security Trustee will, at the expense of the Company, transfer the benefit
of the Additional Guarantees to the holders of the Notes at that time.
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