As filed with the Securities and
Exchange Commission on January 20, 2006
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CARDTRONICS, INC.*
(exact name of registrant as specified in its charter)
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Delaware
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76-0681190
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(State or Other Jurisdiction of
Incorporation or Organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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3110 Hayes Road, Suite 300
Houston, Texas 77082
(281) 596-9988
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrants Principal Executive
Offices)
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J. Chris Brewster
Chief Financial Officer and Treasurer
3110 Hayes Road, Suite 300
Houston, Texas 77082
(281) 596-9988
(Name, Address, Including Zip Code, and Telephone
Number,
Including Area Code, of Agent for Service)
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Copy to:
David P. Oelman, Esq.
Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin Street
Houston, Texas 77002-6760
713-758-3708
713-615-5861 (fax)
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effective date of
this Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box.
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If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
number of the earlier effective registration statement for the
same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Amount of
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Title of Each Class of
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Amount
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Offering
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Aggregate
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Registration
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Securities to be Registered
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to be Registered
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Price per Note(1)
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Offering Price(1)
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Fee
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9.250% Senior Subordinated Notes due 2013
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$200,000,000
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100%
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$200,000,000
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$21,400
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Guarantees by certain of Cardtronics, Inc.s subsidiaries
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(2)
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(1)
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Estimated solely for the purpose of calculating the registration
fee in accordance with Rule 457(f) under the Securities Act
of 1933.
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(2)
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Pursuant to Rule 457(n) no separate fee for the guarantees
is payable because the guarantees relate to other securities
that are being registered concurrently.
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*
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Includes certain subsidiaries of Cardtronics, Inc. identified
below.
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Cardtronics GP, Inc.
(Exact Name of Registrant As Specified In Its Charter)
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Delaware
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75-3003720
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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Cardtronics LP, Inc.
(Exact Name of Registrant As Specified In Its Charter)
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Delaware
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51-0412519
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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Cardtronics, LP
(Exact Name of Registrant As Specified In Its Charter)
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Delaware
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76-0419117
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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Each Registrant hereby amends this Registration Statement on
such dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities
Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
PROSPECTUS
Cardtronics, Inc.
Offer to Exchange up to
$200,000,000 of 9.250% Senior Notes due 2013
for
$200,000,000 of 9.250% Senior Notes due 2013
that have been Registered under the Securities Act of 1933
Terms of the Exchange Offer
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We are offering to exchange up to $200,000,000 of our
outstanding 9.250% Senior Notes due 2013 for new notes with
substantially identical terms that have been registered under
the Securities Act and are freely tradable.
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We will exchange all outstanding notes that you validly tender
and do not validly withdraw before the exchange offer expires
for an equal principal amount of new notes.
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The exchange offer expires at 5:00 p.m., New York City
time,
on ,
2006, unless extended. We do not currently intend to extend the
exchange offer.
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Tenders of outstanding notes may be withdrawn at any time prior
to the expiration of the exchange offer.
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The exchange of outstanding notes for new notes will not be a
taxable event for U.S. federal income tax purposes.
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Terms of the New 9.250% Senior Notes Offered in the
Exchange Offer
Maturity
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The new notes will mature on August 15, 2013.
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Interest
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Interest on the new notes is payable on February 15 and August
15 of each year.
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Interest will accrue from August 12, 2005 or the most
recent date to which interest has been paid.
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Redemption
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We may redeem some or all of the new notes at any time on or
after August 15, 2009 at redemption prices listed in
Description of the New Notes Optional
Redemption, and we may redeem some or all of the notes
before that date by the payment of a make-whole premium.
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Subject to certain limitations, we may also redeem up to 35% of
the new notes using the proceeds of certain equity offerings
completed before August 15, 2008.
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Change of Control
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If we experience a change of control, subject to certain
conditions, we must offer to purchase the new notes.
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Ranking
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The new notes are unsecured senior subordinated obligations. The
new notes rank junior in right of payment with all of our other
existing and future senior debt including borrowings under our
bank credit facilities.
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Please read Risk Factors on page 8 for a
discussion of factors you should consider before participating
in the exchange offer.
These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission nor has the Securities and Exchange Commission passed
upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus
is ,
2006.
This prospectus is part of a registration statement we filed
with the Securities and Exchange Commission. In making your
investment decision, you should rely only on the information
contained in this prospectus and in the accompanying letter of
transmittal. We have not authorized anyone to provide you with
any other information. If you receive any unauthorized
information, you must not rely on it. We are not making an offer
to sell these securities in any state where the offer is not
permitted. You should not assume that the information contained
in this prospectus, or the documents incorporated by reference
into this prospectus, is accurate as of any date other than the
date on the front cover of this prospectus or the date of such
document, as the case may be.
TABLE OF CONTENTS
INDUSTRY AND MARKET DATA
In this prospectus, we rely on and refer to information and
statistics regarding economic trends and conditions and other
data pertaining to the ATM industry. We have obtained this data
from our own research, surveys and studies conducted by third
parties such as Dove Consulting Group, Inc., industry or other
publications, such as
ATM&Debit News, APACS ATM Survey,
APACS Yearbook of Payment Statistics
and other publicly
available sources. We believe that our sources of information
and estimates are reliable and accurate, but we have not
independently verified them. Our statements about the ATM
industry generally, the number and type of ATMs in various
markets, and the size and operations of our competitors in this
prospectus are based on our managements belief, this
statistical data, internal studies and our knowledge of industry
trends.
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements
within the meaning of Section 27A of the Securities Act and
Section 21F of the Exchange Act. Forward-looking statements
include information relating
i
to future events, future financial performance, strategies,
expectations, competitive environment, regulation and
availability of resources. These forward-looking statements
include statements regarding: proposed new programs;
expectations that regulatory developments or other matters will
not have a material adverse effect on our consolidated financial
position, results of operations or liquidity; statements
concerning projections, predictions, expectations, estimates or
forecasts as to our business, financial and operational results
and future economic performance; and statements of
managements goals and objectives and other similar
expressions concerning matters that are not historical facts.
Words such as may, will,
should, could, would,
predicts, potential,
continue, expects,
anticipates, future,
intends, plans, believes,
estimates and similar expressions, as well as
statements in future tense, identify
forward-looking
statements.
You should not read forward-looking statements as a guarantee of
future performance or results. They will not necessarily be
accurate indications of the times at or by which such
performance or results will be achieved. Forward-looking
statements are based on information available at the time those
statements are made and/or managements good faith belief
as of that time with respect to future events. Such statements
are subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed
in or suggested by the forward-looking statements. Important
factors that could cause such differences include, but are not
limited to reliance on third parties for cash management
services; increased regulation and regulatory uncertainty;
trends in ATM usage; decreases in the number of ATMs we can
place with our top merchants; increased industry competition;
our ability to continue to execute our growth strategies; risks
associated with the acquisition of other ATM networks; changes
in interest rates; declines in, or system failures that
interrupt or delay, ATM transactions; changes in the ATM
transaction fees we receive; changes in ATM technology; changes
in foreign currency rates; general and economic conditions; and
other factors discussed under the headings Risk
Factors, Managements Discussion and Analysis
of Financial Condition and Results of Operations and
Business.
Forward-looking statements speak only as of the date the
statements are made. You should not put undue reliance on any
forward-looking statements. We assume no obligation to update
forward-looking statements to reflect actual results, changes in
assumptions or changes in other factors affecting
forward-looking information, except to the extent required by
applicable securities laws. If we do update one or more
forward-looking
statements, you should draw no inference that we will make
additional updates with respect to those or other
forward-looking statements.
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SUMMARY
This summary may not contain all the information that may be
important to you. You should read this entire prospectus and the
documents we have incorporated into this prospectus by reference
before making an investment decision. You should carefully
consider the information set forth under Risk
Factors. In addition, certain statements include
forward-looking information which involves risks and
uncertainties. Please read Forward-Looking
Statements. Unless this prospectus otherwise indicates or
the context otherwise requires, the terms we,
our, us Cardtronics or the
Company as used in this prospectus refer to
Cardtronics, Inc. and its subsidiaries. We refer to automated
teller machines as ATMs throughout this registration
statement. Information referred to in this registration
statement as pro forma gives effect to our
June 30, 2004 acquisition of the ATM business of E*TRADE
Access, Inc. (which we refer to as E*TRADE Access)
and our May 17, 2005 acquisition of Bank Machine
(Acquisitions) Ltd. (which we refer to as Bank
Machine), as if each had occurred prior to the period for
which such information is given.
Company Overview
We operate the largest network of ATMs in the United States and
we are a leading ATM operator in the United Kingdom. As of
September 30, 2005, our network included approximately
26,400 ATMs. For the year ended December 31, 2004, and pro
forma for our E*TRADE Access and Bank Machine acquisitions, our
ATMs dispensed over $9.1 billion in cash and processed more
than 161.4 million transactions. We deploy and operate ATMs
under two distinct arrangements with our merchant partners:
company-owned and
merchant-owned.
Under
company-owned arrangements, we provide the ATM and are typically
responsible for all aspects of its operation, including
procuring cash, supplies and telecommunications as well as
routine and technical maintenance. Under merchant-owned
arrangements, the merchant owns the ATM and is responsible for
providing cash and performing simple maintenance tasks, while we
provide more complex maintenance services, transaction
processing and connection to electronic funds transfer networks.
As of September 30, 2005, approximately 44% of our ATMs
were company-owned and 56% were merchant-owned. Because our
margins are significantly higher on our company-owned machines
as a result of the value of the breadth of services we provide,
our internal and acquisition growth strategy will focus on
increasing the number of company-owned ATMs in our network.
Our domestic ATM network is strengthened by contractual
relationships with leading retail merchants in a variety of
businesses. Amerada Hess, BP Amoco, Chevron, Circle K, Costco,
CVS Pharmacy, Duane Reade, ExxonMobil, Mills Malls, Sunoco,
Target and Walgreens are among our largest domestic merchants in
terms of our revenues. Alfred Jones, Co-Op, Mitchells &
Butlers, the U.K. Post Office, Tates and Tesco are among our
largest United Kingdom merchants in terms of our revenues. Our
merchant customers operate high consumer traffic locations, such
as convenience stores, supermarkets, membership warehouses, drug
stores, shopping malls and airports. Our merchant relationships
are typically governed by multi-year contracts with initial
terms of five years or more. On a pro forma basis for the year
ended December 31, 2004, we generated $278.4 million
of revenues and approximately $2.3 million of net income.
Our revenue is recurring in nature and is primarily derived from
ATM surcharge fees paid by cardholders and interchange fees paid
by their banks and other financial institutions. We generate
additional revenue by branding our ATMs with signage from banks
and other financial institutions, resulting in added convenience
for their customers and increased usage of our ATMs. We
typically provide our merchant customers with all of the
services required to operate an ATM, which include transaction
processing, cash management, maintenance and monitoring. We
believe that we are among the low-cost providers in our industry
due primarily to our substantial network of ATMs, which provides
us significant scale advantages. Our focus on customer service,
together with our experience and scale, has contributed to
strong relationships with leading national and regional
merchants in the United States and we expect to develop the same
strong relationships in the United Kingdom.
1
Since May 2001, we have acquired 12 networks of ATMs and
one operator of a surcharge-free ATM alliance, increasing the
number of ATMs we operate from approximately 4,100 to
approximately 26,400 as of September 30, 2005. On
June 30, 2004, we acquired the ATM business of E*TRADE
Access, adding approximately 13,155 ATMs to our network, and on
May 17, 2005, we acquired Bank Machine, which expanded our
operations to the United Kingdom and added approximately
1,000 ATMs to our network. From 2001 to 2004, the total number
of annual transactions processed within our network increased
from approximately 19.9 million to approximately
111.6 million.
Our principal executive offices are located at 3110 Hayes Road,
Suite 300, Houston, Texas 77082 and our telephone number is
(281) 596-9988. Our website address is
www.cardtronics.com.
Information contained on our website
is not part of this prospectus.
Recent Transactions
Bank Machine Acquisition.
On May 17, 2005, we
acquired the ATM business of Bank Machine (Acquisitions)
Limited, an independent operator of ATMs in the United Kingdom,
for approximately $92.0 million in cash and
35,221 shares of our Series B Convertible Preferred
Stock valued by us at approximately $3.0 million. Through
this transaction, we acquired approximately 1,000 ATMs and
related site agreements, of which approximately 850 are
company-owned and 150 are merchant-owned ATMs. On average, these
ATMs process twice the number of surcharge-bearing transactions
and have approximately 40% higher revenue per surcharge-bearing
transaction than our domestic ATMs. This acquisition also
allowed us to expand our business to the United Kingdom and
positions us for further expansion to other European markets.
E*TRADE Access Acquisition.
On June 30, 2004,
we acquired the ATM business of E*TRADE Access, Inc., an
indirect wholly owned subsidiary of E*TRADE Financial Corp., for
approximately $106.9 million in cash. Through this
transaction we acquired 13,155 ATMs and related placement
agreements, of which approximately 2,450 were company-owned and
10,705 were merchant-owned. As a result of this acquisition, we
increased the number of ATM machines that we own or manage from
approximately 12,000 to over 25,000 ATMs. This acquisition also
allowed us to expand our relationships with national merchants,
including Albertsons, Chevron, CVS Pharmacy and Target, through
the placement agreements that we acquired.
Other Acquisitions.
On March 1, 2005, we
acquired a portfolio of approximately 475 ATMs and related
contracts located in independent grocery stores in and around
the New York metropolitan area for approximately
$8.2 million in cash. On April 21, 2005, we acquired a
portfolio of approximately 330 ATMs and related contracts, at BP
Amoco locations throughout the Midwest, for approximately
$9.0 million in cash. Such acquisitions were funded with
cash on hand and borrowings under our bank credit facilities.
Substantially all of the ATMs acquired in these transactions are
company-owned.
On December 21, 2005, we acquired all of the outstanding
shares of ATM National, Inc., the owner and operator of a
nationwide surcharge-free ATM alliance. The consideration for
such acquisition totaled $4.4 million, and was comprised of
$2.6 million in cash and 21,111 shares of our common
stock. Additionally, we agreed to assume approximately
$1.3 million in liabilities associated with such
acquisition. Furthermore, the merger agreement allows for the
issuance of up to 10,000 additional shares of our common stock
within 105 days of the closing date based on the occurrence
of certain events.
Preferred Stock Offering.
On February 10,
2005, we issued 894,568 shares of our Series B
Convertible Preferred Stock to investment funds controlled by TA
Associates, Inc. for gross proceeds of $75.0 million,
representing a 30.6% equity interest on a fully diluted basis as
of such date. The net proceeds of this offering were used to
redeem all of the outstanding shares of our Series A
Preferred Stock and to repurchase approximately 24% of our
outstanding shares of common stock and vested options to
purchase our common
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stock. In connection with that offering, we also appointed two
designees of TA Associates, Inc. to our board of directors.
Amended and Restated Credit Facilities.
On
May 17, 2005, in connection with our Bank Machine
acquisition, we amended and restated our bank credit facilities
with BNP Paribas and Bank of America, N.A. We used borrowings
from these secured facilities to finance our Bank Machine
acquisition and repay amounts under our prior facilities. Our
bank credit facilities, as amended and restated, consisted of a
revolving credit facility of up to $100.0 million, a first
lien term facility of up to $125.0 million and a second
lien term facility of up to $75.0 million. We utilized the
net proceeds from our senior subordinated notes offering, as
discussed below, along with additional borrowings under our
revolving credit facility to retire permanently our first and
second lien term loans in August 2005. In addition, our
revolving credit facility was increased to a maximum borrowing
capacity of $150.0 million, subject to the financial
covenants contained in the revolving credit facility. As of
September 30, 2005, we had approximately $41.8 million
outstanding under the facility and the ability to borrow an
additional $37.1 million under the facility. Substantially
all of our domestic assets and 65% of the capital stock of our
United Kingdom subsidiaries are pledged to secure borrowings
under our revolving credit facility. Furthermore, each of our
domestic subsidiaries has guaranteed our obligations under the
facility.
Senior Subordinated Notes Offering.
On
August 12, 2005, we issued $200.0 million in senior
subordinated notes pursuant to Rule 144A of the Securities
Act of 1933, as amended. Such senior subordinated notes are the
notes that are subject to the exchange offer described herein.
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The Exchange Offer
On August 12, 2005, we completed a private offering of
the outstanding notes. As part of the private offering, we
entered into a registration rights agreement with the initial
purchasers of the outstanding notes in which we agreed, among
other things, to deliver this prospectus to you and to use our
best efforts to complete the exchange offer within 330 days
after the date we issued the outstanding notes. The following is
a summary of the exchange offer.
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Exchange Offer
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We are offering to exchange new notes for outstanding notes.
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Expiration Date
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The exchange offer will expire at 5:00 p.m. New York City
time,
on ,
2006, unless we decide to extend it.
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Condition to the Exchange Offer
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The registration rights agreement does not require us to accept
outstanding notes for exchange if the exchange offer or the
making of any exchange by a holder of the outstanding notes
would violate any applicable law or interpretation of the staff
of the SEC. A minimum aggregate principal amount of outstanding
notes being tendered is not a condition to the exchange offer.
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Procedures for Tendering Outstanding Notes
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To participate in the exchange offer, you must follow the
procedures established by The Depository Trust Company, which we
call DTC, for tendering notes held in book-entry
form. These procedures, which we call ATOP, require
that the exchange agent receive, prior to the expiration date of
the exchange offer, a computer generated message known as an
agents message that is transmitted through
DTCs automated tender offer program and that DTC confirm
that:
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DTC has received your instructions to exchange your
notes; and
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you agree to be bound by the terms of the letter of
transmittal.
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For more details, please refer to the sections of this
prospectus entitled Exchange Offer Terms of
the Exchange Offer and Procedures for
Tendering.
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Guaranteed Delivery Procedures
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None.
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Withdrawal of Tenders
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You may withdraw your tender of outstanding notes at any time
prior to the expiration date. To withdraw, you must submit a
notice of withdrawal to exchange agent using ATOP procedures
before 5:00 p.m. New York City time on the expiration date
of the exchange offer. Please read Exchange
Offer Withdrawal of Tenders.
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Acceptance of Outstanding Notes and Delivery of New Notes
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If you fulfill all conditions required for proper acceptance of
outstanding notes, we will accept any and all outstanding notes
that you properly tender in the exchange offer on or before
5:00 p.m. New York City time on the expiration date. We
will return any outstanding note that we do not accept for
exchange to you without expense as promptly as practicable after
the expiration date. We will deliver the new notes as promptly
as practicable after the expiration date and acceptance of the
outstanding notes
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for exchange. Please refer to the section in this prospectus
entitled Exchange Offer Terms of the Exchange
Offer.
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Fees and Expenses
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We will bear all expenses related to the exchange offer. Please
refer to the section in this prospectus entitled Exchange
Offer Fees and Expenses.
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Use of Proceeds
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The issuance of the new notes will not provide us with any new
proceeds. We are making this exchange offer solely to satisfy
our obligations under our registration rights agreement.
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Consequences of Failure to Exchange Outstanding Notes
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If you do not exchange your outstanding notes in this exchange
offer, you will no longer be able to require us to register the
outstanding notes under the Securities Act except in the limited
circumstances provided under our registration rights agreement.
In addition, you will not be able to resell, offer to resell or
otherwise transfer the outstanding notes unless we have
registered the outstanding notes under the Securities Act, or
unless you resell, offer to resell or otherwise transfer them
under an exemption from the registration requirements of, or in
a transaction not subject to, the Securities Act.
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U.S. Federal Income Tax
Considerations
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The exchange of new notes for outstanding notes in the exchange
offer should not be a taxable event for U.S. federal income
tax purposes. Please read Federal Income Tax
Considerations.
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Exchange Agent
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We have appointed Wells Fargo Bank, National Association as
exchange agent for the exchange offer. You should direct
questions and requests for assistance and requests for
additional copies of this prospectus (including the letter of
transmittal) to the exchange agent addressed as follows: Wells
Fargo Bank, National Association, Attention: Corporate Trust
Operations, Sixth and Marquette, MAC N9303-121, Minneapolis, MN
55479. Eligible institutions may make requests by facsimile at
(612)
667-4927.
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5
Terms of the New Notes
The new notes will be identical to the outstanding notes
except that the new notes are registered under the Securities
Act and will not have restrictions on transfer, registration
rights or provisions for additional interest and will contain
different administrative terms. The new notes will evidence the
same debt as the outstanding notes, and the same indenture will
govern the new notes and the outstanding notes.
The following summary contains basic information about the
new notes and is not intended to be complete. It does not
contain all the information that is important to you. For a more
complete understanding of the new notes, please refer to the
section of this prospectus entitled Description of the New
Notes.
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Issuer
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Cardtronics, Inc.
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Notes Offered
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$200.0 million aggregate principal amount of
9
1
/
4
% Senior
Subordinated Notes due 2013 (the notes).
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Maturity
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The notes will mature on August 15, 2013.
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Interest
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Interest on the notes will accrue at the rate of
9
1
/
4
% per
annum. Interest on the notes will be payable semi-annually, in
cash, in arrears on February 15 and August 15 of each year,
commencing on February 15, 2006.
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Guarantees
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All payments on the notes, including principal and interest,
will be jointly and severally guaranteed on a senior
subordinated basis by all of our existing domestic subsidiaries
and certain of our future subsidiaries. See Description of
the New Notes Guarantees.
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Ranking
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The notes and the guarantees will be unsecured senior
subordinated obligations and will rank:
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junior in right of payment to all of our and our
subsidiary guarantors existing and future senior
indebtedness, including borrowings under our bank credit
facilities and guarantees of those borrowings;
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equally in right of payment with any of our and our
subsidiary guarantors future senior subordinated
indebtedness; and
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senior in right of payment to any of our and our
subsidiary guarantors future indebtedness that is
expressly subordinated in right of payment to the notes.
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Optional Redemption
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We may redeem some or all of the notes on or after
August 15, 2009 at the redemption prices set forth in this
registration statement. At any time prior to August 15,
2009, we may redeem the notes, in whole or in part, at a price
equal to 100% of their outstanding principal amount plus the
make-whole premium described under Description of the New
Notes Optional Redemption.
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In addition, we may redeem up to 35% of the aggregate principal
amount of the notes at a redemption price of 109.250% using the
proceeds of certain equity offerings completed on or before
August 15, 2008. We may make this redemption only if, after
the redemption, at least 65% of the aggregate principal amount
of the notes originally issued remains outstanding.
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Change of Control
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If we sell substantially all of our assets or experience
specific kinds of changes of control, we must offer to
repurchase the notes at a price in cash equal to 101% of their
principal amount, plus accrued and unpaid interest, if any, to
the date of purchase.
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Certain Covenants
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The indenture governing the notes contains covenants that, among
other things, limit our ability and the ability of our
subsidiaries to:
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incur or guarantee additional indebtedness;
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incur senior subordinated debt;
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make certain restricted payments;
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consolidate or merge with or into other companies;
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conduct asset sales;
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restrict dividends or other payments to us;
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engage in transactions with affiliates or related
persons;
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create liens;
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redeem or repurchase capital stock; and
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issue and sell preferred stock in restricted
subsidiaries.
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These limitations will be subject to a number of important
qualifications and exceptions. See Description of the New
Notes Certain Covenants.
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Absence of a Public Market
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The new notes generally will be freely transferable; however,
there can be no assurance as to the development or liquidity of
any market for the new notes.
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Investment in the notes involves substantial risks. See
Risk Factors immediately following this summary for
a discussion of certain risks relating to an investment in the
notes.
7
RISK FACTORS
Before making an investment decision with respect to the
exchange offer you should carefully consider the following
risks, as well as the other information contained in this
prospectus memorandum, including our consolidated financial
statements and the related notes and Managements
Discussion and Analysis of Financial Condition and Results of
Operations. The risks described below are those which we
believe are the material risks we face as well as risks related
to the exchange offer.
Risks Related to Our Business
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We operate in a changing and unpredictable regulatory
environment. If we are subject to new legislation regarding the
operation of our ATMs, we could be required to make substantial
expenditures to comply with such legislation, which may
adversely affect our profit margins.
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With its initial roots in the banking industry, the ATM industry
has always been regulated, if not by individual states, by the
rules and regulations of the federal Electronic Funds Transfer
Act, which establishes the rights, liabilities and
responsibilities of participants in electronic funds transfer,
or EFT, systems. The vast majority of states have few, if any,
licensing requirements. However, recent media publicity on the
use of electronic devices to steal ATM card information, or
skimming devices, at ATMs has resulted in several states,
including California, New Jersey and New York, introducing
legislation regulating the deployment and operation of ATMs. In
these three states no final legislation has been passed.
Accordingly, we may face a more restrictive and increased
regulatory environment in coming years.
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The passing of legislation banning or limiting surcharge
fees would severely impact our revenue.
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As off-premise ATMs became more prevalent in the 1990s, a few
states (most notably Iowa) were slow to change their existing
laws that prohibited surcharge fees in connection with ATM
transactions. However, by the late 1990s, 49 states
permitted surcharge fees, with Iowa being the lone exception. In
2002, a federal court, relying upon the federal preemption
doctrine, and citing federal banking laws, overturned
Iowas law that prohibited ATM surcharge fees. Despite the
nationwide acceptance of surcharge fees at ATMs, a few consumer
activists (most notably in California) have from time to time
attempted to impose local bans on surcharge fees. Even in the
few instances where these efforts have passed the local
governing body (such as with an ordinance adopted by the city of
Santa Monica, California), federal courts have overturned these
local laws on federal preemption grounds. However, such efforts
may resurface and, should the federal courts abandon their
adherence to the federal preemption doctrine, such efforts could
receive more favorable consideration than in the past. Any
successful legislation banning or limiting surcharge fees could
result in a substantial loss of revenues and significantly
curtail our ability to continue our operations as currently
configured.
In the United Kingdom, the Treasury Select Committee of the
House of Commons published a report regarding surcharges in the
ATM industry in March 2005. This committee was formed to
investigate public concerns regarding the ATM industry,
including adequacy of disclosure to ATM customers regarding
surcharges, whether ATM providers should be required to provide
free services in low-income areas and whether to limit the level
of surcharges. The committees report included a number of
recommendations, including a recommendation to Parliament that
ATMs should be subject to the Banking Code, which is a voluntary
code of practice adopted by all financial institutions in the
United Kingdom. The U.K. government has yet to signal its
acceptance of the Committees report, and there is no
certainty that such report will be accepted. Should the report
be accepted, the main impact of the Banking Code will be that
ATM operators will be required to provide 30 days
notice to the public prior to converting a surcharge-free ATM to
one which charges surcharges. If the legislature or another body
with regulatory authority in the United Kingdom were to impose
limits on the level of surcharges for ATM transactions, our
business in the United Kingdom would be adversely affected.
8
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We depend on ATM transaction fees for substantially all of
our revenues and would be adversely affected by a decline in
usage of or surcharge fees at our ATMs.
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Transaction fees charged to cardholders and their financial
institutions for transactions processed on our ATMs, including
surcharge and interchange transaction fees, have historically
accounted for most of our revenues. We expect that revenues from
ATM transaction fees will continue to account for a substantial
majority of our revenues for the foreseeable future.
Consequently, our future operating results will depend on
(1) the continued market acceptance of our services in our
target markets, (2) maintaining the level of transaction
fees we receive, (3) our ability to install, acquire and
operate more ATMs and (4) continued usage of our ATMs by
cardholders. For example, increased acceptance of credit and
debit cards by merchants and service providers, or any loss of
confidence by the consuming public in the safety and security of
ATM transactions, could result in decreased usage of our ATMs.
In addition, it is possible that alternative technologies to our
ATM services will be developed and implemented. If such
alternatives are successful, we will likely experience a decline
in the usage of our ATMs. Moreover, surcharge fees are set by
negotiation between us and our merchant partners, and could
change over time. Further, growth in surcharge-free ATM networks
and widespread consumer bias toward such networks could
adversely affect our revenue even though we receive fees from
our participation in surcharge-free networks. We cannot assure
you that surcharge fees will not decline in the future.
Accordingly, a decline in usage of our ATMs by ATM cardholders
or in the levels of fees received by us in connection with such
usage would have a material adverse impact on our business,
growth, financial condition and results of operations. During
the three months ended March 31, 2005 and June 30,
2005, total domestic transaction revenues (including surcharge,
interchange and branding fees) declined by approximately 2.7%
and 2.4%, respectively (versus prior year levels) for our ATMs
that were transacting throughout the same periods in both 2005
and 2004. See Managements Discussion and Analysis of
Financial Condition and Results of Operations
Industry Trends.
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We will be subject to new proposed guidelines under the
Americans with Disabilities Act that may require us to retrofit
non-compliant ATMs, thus increasing our capital expenditures and
decreasing our net income.
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The Americans with Disabilities Act, or ADA, currently
prescribes provisions that ATMs be made accessible to and
independently usable by persons with vision impairments. The
Department of Justice is likely to adopt proposed accessibility
guidelines under the ADA that include provisions addressing ATMs
and how to make them more accessible to the disabled. Under the
proposals, ATM height and reach requirements would be shortened,
keypads would be required to be laid out in the manner of
telephone keypads, and ATMs would be required to possess speech
capabilities, among other modifications. If adopted, these new
guidelines would affect the manufacture of ATM equipment going
forward, could require us to retrofit the ATMs in our domestic
network, and may result in an increase in our capital
expenditures and a decrease in our net income. Further, from
time to time groups representing persons with various
disabilities have threatened or actually commenced litigation
against ATM owners or operators to require those operators to
make their ATMs more accessible to members of the affected group
in compliance with the ADA guidelines and similar state
statutes. In connection with our E*TRADE Access acquisition, we
assumed the liabilities related to a lawsuit filed by the
National Foundation for the Blind related to one of these
matters. This action and similar future actions from other
parties could result in a diversion of our management and
financial resources. See Business Legal
Proceedings.
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We derive a substantial portion of our revenue from ATMs
placed with a small number of merchants. If one or more of our
top merchants were to cease doing business with us, or to
substantially reduce its dealings with us, our revenues could
decline.
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For the year ended December 31, 2004, and on a pro forma
basis giving effect to our E*TRADE Access and Bank Machine
acquisitions, we derived approximately 16% of our total revenues
from ATMs placed at the locations of our five largest merchants.
We expect to continue to depend upon a relatively small number
of merchants for a significant percentage of our revenues. The
loss of any of our largest merchants, or a decision by any one
of them to reduce the number of our ATMs placed in their
locations, would decrease our
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revenues. These merchants may elect not to renew their contracts
when they expire. Even if such contracts are renewed, the
renewal terms may be less favorable to us than the current
contracts. If any of our five largest merchants fail to renew
their contracts upon expiration, or if the renewal terms with
any of them are less favorable to us than under our current
contracts, this could have a material adverse impact on our
business, growth, financial condition and results of operations.
On February 21, 2005, Winn-Dixie, a merchant customer with
which we had approximately 849 ATMs deployed as of June 30,
2005, and which accounted for approximately 2.4% of our total
revenues for the six months ended June 30, 2005, filed for
bankruptcy protection. As part of its bankruptcy restructuring
efforts, Winn-Dixie announced that it was planning to close
approximately 326 of its existing 913 stores. Of the
326 locations identified for closure by Winn-Dixie,
approximately 307 were locations in which we had deployed ATMs.
Accordingly, during the months of July and August 2005, all 307
ATMs were deinstalled from those locations, leaving us with
approximately 542 remaining operating locations as of
September 30, 2005.
If Winn -Dixies restructuring efforts are
unsuccessful and additional store closings are required, or
current transaction levels decline, our future operating results
may be negatively impacted through lower revenues and gross
profits, and the prospect of impairment charges.
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The ATM industry is highly competitive and such
competition may increase, which may adversely affect our profit
margins.
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The ATM business is and can be expected to remain highly
competitive. While our principal competition in the United
States comes from national and regional financial institutions,
we also compete with other independent ATM companies. Several of
our competitors are larger, more established and have greater
financial and other resources than we do. Our competitors could
prevent us from obtaining or maintaining desirable locations for
our ATMs, cause us to reduce the surcharge revenue generated by
transactions at our ATMs or cause us to pay higher merchant
fees, thereby reducing our profits. In addition to our current
competitors, additional competitors may enter the market. We can
offer no assurance that we will be able to compete effectively
against these current and future competitors. Increased
competition could result in transaction fee reductions, reduced
gross margins and loss of market share.
In the United Kingdom, we face competition from several
companies with operations larger than our own. Many of these
competitors have financial and other resources substantially
greater than our United Kingdom subsidiary. These companies
may be able to pay more for acquisitions and may be able to
better define, evaluate, and bid for available acquisition
targets in the United Kingdom or elsewhere. Our ability to
expand our business to other areas of the United Kingdom and in
the future will depend upon our ability to successfully conduct
operations, evaluate and select suitable acquisitions, and
consummate transactions in this competitive environment.
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We may be unable to integrate our recent and future
acquisitions in an efficient manner and inefficiencies would
increase our cost of operations and reduce our
profitability.
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Our acquisitions involve certain inherent risks to our business,
including the following:
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the operations, technology and personnel of any acquired
companies may be difficult to integrate;
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the allocation of management resources to consummate these
transactions may disrupt our
day-to
-day
business; and
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acquired networks may not achieve anticipated revenues, earnings
or cash flow. Such a shortfall could require us to write down
the carrying value of the intangible assets associated with any
acquired company, which would adversely affect our reported
earnings.
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Since May 2001, we have acquired 12 ATM networks. Prior to our
E*TRADE Access and Bank Machine acquisitions, we had acquired
only the assets of deployed ATM networks, rather than businesses
and their related infrastructure. We currently anticipate that
our future acquisitions will likely reflect a mix of asset
acquisitions and acquisitions of businesses, with each
acquisition having its own set of unique
10
characteristics. To the extent that we elect to acquire an
existing company or the operations, technology and personnel of
another ATM provider, we may assume some or all of the
liabilities associated with the acquired company and face new
and added challenges integrating such acquisition into our
operations.
Our recent growth, particularly because of the size of our
E*TRADE Access and Bank Machine acquisitions, and any future
growth may strain our management systems, information systems
and resources. We will need to continue to invest in and improve
our financial and managerial controls, reporting systems and
procedures as we continue to grow and expand our business. As we
grow, we must also continue to hire, train, supervise and manage
new employees. We may not be able to hire, train, supervise and
manage sufficient personnel or develop management and operating
systems to manage our expansion effectively.
In addition, our Bank Machine acquisition created, and any
future acquisition of ATMs located outside the United States
will create, additional risks for us to manage, including,
exposure to foreign currency fluctuations, difficulties in
complying with foreign laws and regulations, staffing and
managing foreign operations and potentially adverse tax
consequences.
Any inability on our part to manage effectively our past or
future growth or to successfully grow the revenue and
profitability of our business could have a material adverse
effect on our business, growth, financial condition and results
of operations.
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The full impact of our recent acquisitions on our
operating results is not fully reflected in our historical
financial results, which as a result we believe are not
necessarily indicative of our future results of
operations.
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Since May 2001, we have acquired 12 ATM networks, including our
recent E*TRADE Access and Bank Machine acquisitions. Nine of
these acquisitions contributed a substantial portion of our
total revenues in the year ended December 31, 2004, and
four of these acquisitions, representing approximately 72% of
the ATMs we have acquired since May 2001, were completed in 2004
and 2005. Of the approximately 18,900 ATMs we have acquired
since May 2001 and prior to December 31, 2004,
approximately 13,155 were acquired after January 2004. As a
result, our operating results for the year ended
December 31, 2004 do not reflect a
full-years
results for a significant portion of the ATMs we operated as of
December 31, 2004, including the approximately 13,155 ATMs
we acquired in our E*TRADE Access acquisition on June 30,
2004. Accordingly, our historical results may not be indicative
of results to be expected in future periods.
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Changes in interest rates could increase our operating
costs by increasing interest expense under our credit facilities
and our cash management costs.
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Interest expense under our credit facilities and our vault cash
rental expense are sensitive to changes in interest rates,
particularly because a substantial majority of our indebtedness
earns interest at floating rates and our vault cash rental
expense is based on market rates of interest. Vault cash is the
cash we use in our machines in cases where cash is not provided
by the merchant. We pay rental fees on the average amount
outstanding to our vault cash providers under a floating rate
formula. Based on the $389.4 million in domestic vault cash
outstanding as of September 30, 2005, and taking into
account the $300.0 million in interest rate swaps that are
currently in effect, for every interest rate increase of
100 basis points, we would incur an additional
$0.9 million of vault cash rental expense on an annualized
basis. Additionally, based on the $45.3 million in vault
cash outstanding in the U.K. as of September 30, 2005, we
would incur an additional $0.5 million in vault cash rental
expense on an annualized basis for every interest rate increase
of 100 basis points. Furthermore, based on the
$41.8 million in floating rate indebtedness outstanding
under our credit facility as of September 30, 2005, for
every interest rate increase of 100 basis points, we would
incur an additional $0.4 million of annual interest
expense. Recent increases in interest rates in the
U.S. have resulted in increases in our interest expense
under our credit facility and our vault cash rental expense.
Although we currently hedge a substantial portion of our vault
cash interest rate risk over the next five years, we may not be
able to enter into similar arrangements for similar amounts in
the future. Furthermore, we have not currently entered into any
derivative financial instruments to hedge our variable interest
rate exposure in the U.K. Any significant future increases in
interest rates in the U.S. or the U.K. could have an
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adverse impact on our business, financial condition and results
of operations by increasing our operating costs and expenses.
Please see Managements Discussion and Analysis of
Financial Condition and Results of Operations
Disclosure About Market Risk.
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We are exposed to the risk of fluctuations in foreign
currencies, specifically the British Pound.
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Fluctuations in rates between the British Pound and
U.S. dollar may impact our financial results from our U.K.
operations since we translate our earnings generated in British
Pounds into U.S. dollars at the then current exchange rate.
In addition, we financed our Bank Machine acquisition with
U.S. dollar-denominated borrowings, thus exposing our net
investment in the United Kingdom to foreign currency
fluctuations. We currently do not hedge against the risks
associated with fluctuations in exchange rates. Although we may
use hedging techniques in the future, we may not be able to
eliminate or reduce the effects of currency fluctuations. As a
result, exchange rate fluctuations could have an adverse impact
on our future operating results.
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Our international operations may not be successful.
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Approximately 4% of our ATMs are located in the U.K. and
contributed approximately 20% of our pro forma gross profit for
the year ended December 31, 2004. We expect to continue to
expand in the U.K. and potentially into other countries as
opportunities arise. Our international operations are subject to
certain inherent risks, including:
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exposure to currency fluctuations;
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difficulties in complying with foreign laws and regulations;
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unexpected changes in regulatory requirements;
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difficulties in staffing and managing foreign
operations; and
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potentially adverse tax consequences.
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Any of these factors could have a material adverse effect on our
international operations and international expansion and,
consequently, on our business, results of operations and
financial condition.
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If we, our transaction processors, our EFT network or
other service providers experience system failures, the ATM
products and services we provide could be delayed or
interrupted, which would harm our business.
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Our ability to provide reliable service largely depends on the
efficient and uninterrupted operations of our transaction
processors, telecommunications network systems and other service
providers. Although our contracts with merchants do not include
any guarantees related to network availability problems due to
factors beyond our control, any significant interruptions could
severely harm our business and reputation and result in a loss
of revenue. Additionally, if any such interruption is caused by
us, such interruption could result in the loss of the affected
merchants or damage our relationships with such merchants. We
have not been the cause of any such interruptions in the past.
Our systems and operations and those of our transaction
processors and our EFT network and other service providers could
be exposed to damage or interruption from fire, natural
disaster, unlawful acts, terrorist attacks, power loss,
telecommunications failure, unauthorized entry and computer
viruses. We cannot be certain that any measures we and our
service providers have taken to prevent system failures will be
successful or that we will not experience service interruptions.
Further, our property and business interruption insurance may
not be adequate to compensate us for all losses or failures that
may occur.
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We rely on third parties to provide us with the cash we
require to operate many of our ATMs. If these third parties were
unable or unwilling to provide us with the necessary cash to
operate our ATMs, we would need to locate alternative sources of
cash to operate our ATMs or we would not be able to operate our
business.
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In the U.S., we rely on agreements with Bank of America, N.A.
and with Palm Desert National Bank to provide us with all of the
cash that we use in approximately 9,000 of our domestic ATMs
where cash is not provided by the merchant. In addition, we rely
on agreements with Alliance & Leicester Commercial
Bank, or ALCB, and the U.K. Post Office to provide us with all
of the cash that we use in approximately 750 of our U.K. ATMs
where cash is not provided by the merchant. As of
September 30, 2005, the balance of cash held in our
domestic ATMs was approximately $389.4 million, over 98% of
which was supplied by Bank of America. In the United Kingdom,
the balance of cash held in our ATMs as of September 30,
2005 was approximately $45.3 million, over 80% of which was
supplied by ALCB. We pay a fee for our usage of this cash based
on the total amount of vault cash that we are using at any given
time. At all times during the use of this cash, it belongs to
the cash providers. Under our agreements with Bank of America,
ALCB and the U.K. Post Office, each provider has the right to
demand the return of all or any portion of its cash at any time
upon the occurrence of certain events beyond our control,
including certain bankruptcy events of us or our subsidiaries,
or a breach of the terms of our cash provider agreements. Our
current agreement with Bank of America expires on August 2,
2007, subject to automatic one-year renewals. In addition, Bank
of America may terminate its agreement with us and demand the
return of its cash upon 360 days prior written notice. In
the United Kingdom, ALCB and the U.K. Post Office may terminate
their agreements with us and demand the return of their cash
upon 180 and 90 days written notice, respectively.
If our cash providers were to demand return of their cash or
terminate their arrangements with us and remove their cash from
our ATMs, or if they were to fail to provide us with cash as and
when we need it for our ATM operations, our ability to operate
these ATMs would be jeopardized, and we would need to locate
alternative sources of cash in order to operate these ATMs.
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Criminal activity by third parties, whether through
tampering with our ATM machines or otherwise, could result in
decreased consumer confidence in ATM usage and thereby reduce
our profit.
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Recently, there have been reports in the press regarding the use
of ATMs to defraud cardholders and their financial institutions.
Criminals have been known to attach skimming devices to ATMs in
order to copy the encoded personal information on a users
debit or credit card that the criminal then uses to create
counterfeit cards that can be used at ATMs or as credit cards to
make unauthorized purchases. Extensive counterfeiting activity
could undermine consumer confidence in ATMs, thereby reducing
ATM activity and our profit. Although, as of this date, we are
not aware of any our ATMs being used for skimming, we cannot
guarantee that criminals will not target one or more of our ATMs
for skimming operations.
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We rely on EFT network providers, transaction processors
and maintenance providers; if they fail or no longer agree to
provide their services, we could suffer a temporary loss of
transaction revenues or the permanent loss of any merchant
contract affected by such disruption.
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We rely on EFT network providers and have agreements with
transaction processors and maintenance providers and have more
than one such provider in each of these key areas. These
providers enable us to provide card authorization, data capture,
settlement and maintenance services to the merchants we serve.
Typically, these agreements are for periods of up to two or
three years each. If we improperly manage the renewal or
replacement of any expiring vendor contract, or if our multiple
providers in any one key area failed to provide the services for
which we have contracted, and disruption of service to our
merchants occurs, our relationship with those merchants could
suffer. Further, if such disruption of service is significant,
the affected merchants may seek to terminate their agreements
with us.
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Taxes imposed at the state level may decrease our net
income.
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We conduct substantially all of our domestic operations through
our indirectly wholly owned subsidiary, Cardtronics, LP, a
Delaware limited partnership. Because of widespread state budget
deficits, several states
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are evaluating ways to subject partnerships to taxation through
the implementation of state income, franchise or other forms of
taxation. If any state were to impose a tax upon our operating
subsidiary as a stand-alone entity, our consolidated net income,
if any, may decrease.
Risks Related to Our Indebtedness, the New Notes and the
Exchange Offer
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We have a substantial amount of indebtedness, which may
adversely affect our cash flow and our ability to operate our
business, remain in compliance with debt covenants and make
payments on our indebtedness, including the notes.
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As of September 30, 2005, we had outstanding indebtedness
of approximately $243.6 million, which represented
approximately 90% of our total capitalization based on total
book capitalization of $270.7 million.
Our substantial indebtedness could have important consequences
to you. For example, it could:
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make it more difficult for us to satisfy our obligations with
respect to our indebtedness, including the notes, and any
failure to comply with the obligations of any of our debt
instruments, including financial and other restrictive
covenants, could result in an event of default under the
indenture governing the notes and the agreements governing such
other indebtedness;
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require us to dedicate a substantial portion of our cash flow to
pay principal and interest on our debt, which will reduce the
funds available for working capital, capital expenditures,
acquisitions and other general corporate purposes;
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limit our flexibility in planning for and reacting to changes in
our business and in the industry in which we operate;
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make us more vulnerable to adverse changes in general economic,
industry and competitive conditions and adverse changes in
government regulation;
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limit our ability to borrow additional amounts for working
capital, capital expenditures, acquisitions, debt service
requirements, execution of our growth strategy, research and
development costs or other purposes; and
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place us at a disadvantage compared to our competitors who have
less debt.
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Any of the above listed factors could materially and adversely
affect our business and results of operations. Furthermore, our
interest expense could increase if interest rates increase
because a significant amount of our indebtedness bears interest
at floating rates and our vault cash rental expense is based on
market rates of interest. See Description of Other
Indebtedness-Bank Credit Facilities. If we do not have
sufficient earnings to service our debt, we may be required to
refinance all or part of our existing debt, sell assets, borrow
more money or sell securities, none of which we can guarantee we
will be able to do.
We will be able to incur significant additional indebtedness in
the future. Although the indenture governing the notes and our
credit agreement contain restrictions on the incurrence of
additional indebtedness, these restrictions are subject to a
number of important qualifications and exceptions and the
indebtedness incurred in compliance with these restrictions
could be substantial. If new debt is added to our anticipated
debt levels, the related risks that we now face, including those
described above, could intensify.
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Repayment of our debt, including the notes, is dependent
on cash flow generated by our subsidiaries.
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We are a holding company with no material assets other than the
equity interests of our subsidiaries. Our subsidiaries conduct
substantially all of our operations and own substantially all of
our assets. Therefore, repayment of our indebtedness, including
the notes, is dependent on the generation of cash flow by our
subsidiaries and their ability to make such cash available to
us, by dividend, debt repayment or otherwise. Our subsidiaries
may not be able to, or be permitted to, make distributions to
enable us to make payments in respect of our indebtedness,
including the notes. Each of our subsidiaries is a distinct
legal entity and, under certain circumstances, legal and
contractual restrictions may limit our ability to obtain cash
from our subsidiaries. While the indenture governing the notes
limits the ability of our subsidiaries to incur consensual
14
restrictions on their ability to pay dividends or make other
inter-company payments to us, these limitations are subject to
certain qualifications and exceptions. In the event that we do
not receive distributions from our subsidiaries, we may be
unable to make required principal and interest payments on our
indebtedness, including the notes.
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Your right to receive payments on the notes is junior to
our existing and future senior debt, and the guarantees of the
notes are junior to all of the guarantors existing and
future senior debt.
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The notes and the guarantees rank behind all of our and the
guarantors existing and future senior indebtedness. As of
September 30, 2005, the notes and the guarantees were
subordinated to $41.8 million of senior debt, all of which
represented borrowings under our bank credit facility. We are
permitted to incur substantial other indebtedness, including
senior debt, in the future.
As a result of this subordination, upon any distribution to
creditors of our property or the property of the guarantors in a
bankruptcy, liquidation or reorganization or similar proceeding,
the holders of our senior debt and the holders of the senior
debt of the guarantors are entitled to be paid in full in cash
before any payment may be made with respect to the notes or the
guarantees. In addition, all payments on the notes and the
guarantees will be blocked in the event of a payment default on
senior debt and may be blocked for up to 179 consecutive days in
the event of specified non-payment defaults on designated senior
debt. In the event of a bankruptcy, liquidation or
reorganization or similar proceeding relating to us or the
guarantors, the indenture relating to the notes requires that
amounts otherwise payable to holders of the notes in a
bankruptcy or similar proceeding be paid instead to holders of
senior debt until the holders of senior debt are paid in full.
As a result, holders of the notes may not receive all amounts
owed to them and may receive less, ratably, than holders of
trade payables and other unsubordinated indebtedness.
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Your right to receive payments on the notes is effectively
subordinated to the rights of existing and future creditors of
our subsidiaries that are not guarantors on the notes.
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Initially none of our U.K. subsidiaries is required to guarantee
the notes. As a result, holders of the notes will be effectively
subordinated to the indebtedness and other liabilities of these
subsidiaries, including trade creditors. Therefore, in the event
of the insolvency or liquidation of a U.K. subsidiary, following
payment by that subsidiary of its liabilities, such subsidiary
may not have sufficient remaining assets to make payments to us
as a shareholder or otherwise. In the event of a default by any
such subsidiary under any credit arrangement or other
indebtedness, its creditors could accelerate such debt, prior to
such subsidiary distributing amounts to us that we could have
used to make payments on the notes.
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To service our indebtedness, we will require a significant
amount of cash. Our ability to generate cash depends on many
factors beyond our control, and any failure to meet our debt
service obligations could harm our business, financial condition
and results of operations.
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Our ability to pay interest on and principal of the notes and to
satisfy our other debt obligations principally will depend upon
our future operating performance. As a result, prevailing
economic conditions and financial, business and other factors,
many of which are beyond our control, will affect our ability to
make these payments.
If we do not generate sufficient cash flow from operations to
satisfy our debt service obligations, including payments on the
notes, we may have to undertake alternative financing plans,
such as refinancing or restructuring our indebtedness, selling
assets, reducing or delaying capital investments or seeking to
raise additional capital. Our ability to restructure or
refinance our debt will depend on the capital markets and our
financial condition at such time. Any refinancing of our debt
could be at higher interest rates and may require us to comply
with more onerous covenants, which could further restrict our
business operations. In addition, the terms of existing or
future debt instruments, including our credit agreement and the
indenture governing the notes may restrict us from adopting some
of these alternatives. Furthermore, neither affiliates of
CapStreet nor affiliates of TA Associates (our two largest
outside investors) has any obligation to provide us with debt or
equity financing in the future. Our inability to generate
sufficient cash flow to satisfy our
15
debt service obligations, or to refinance our obligations on
commercially reasonable terms, would have an adverse effect,
which could be material, on our business, financial position,
results of operations and cash flows, as well as on our ability
to satisfy our obligations in respect of the notes.
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The terms of our credit agreement and the indenture
governing the notes may restrict our current and future
operations, particularly our ability to respond to changes in
our business or to take certain actions.
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Our credit agreement and the indenture governing the notes
include a number of covenants that, among other things, restrict
our ability to:
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sell or transfer property or assets;
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pay dividends on or redeem or repurchase stock;
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merge into or consolidate with any third party;
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create, incur, assume or guarantee additional indebtedness;
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create certain liens;
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make investments;
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make certain restricted payments, including the payment of
dividends;
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engage in transactions with affiliates;
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redeem or repurchase capital stock;
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issue or sell preferred stock of restricted
subsidiaries; and
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enter into sale and leaseback transactions.
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In addition, we are required by our credit agreement to maintain
specified financial ratios. As a result of these ratios, we are
limited in the manner in which we conduct our business, and may
be unable to engage in favorable business activities or finance
future operations or capital needs. Accordingly, these
restrictions may limit our ability to successfully operate our
business and prevent us from fulfilling our obligations under
the notes.
A failure to comply with the covenants financial ratios could
result in an event of default. In the event of a default under
our credit agreement, the lenders could elect to declare all
borrowings outstanding, together with accrued and unpaid
interest and other fees, to be due and payable, to require us to
apply all of our available cash to repay these borrowings or to
prevent us from making debt service payments on the notes
offered by this registration statement, any of which could
result in an event of default under the indenture governing the
notes. An acceleration of indebtedness under our credit
agreement would also likely result in an event of default under
the terms of any other financing arrangement we have outstanding
at the time. If any or all of our debt were to be accelerated,
there can be no assurance that our assets would be sufficient to
repay such indebtedness in full. If we are unable to repay
outstanding borrowings under our bank credit facility when due,
the lenders will have the right to proceed against the
collateral securing such indebtedness. See Description of
Other Indebtedness and Description of the New
Notes.
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The notes and the guarantees are not secured by our assets
nor those of the guarantors, and the lenders under our credit
agreement are entitled to remedies available to a secured
lender, which gives them priority over you to collect amounts
due to them.
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The notes and the guarantees will be our and the
guarantors unsecured obligations. In contrast, our
obligations outstanding under our credit agreement are secured
by a perfected lien on, and a pledge of substantially all of our
assets, including the stock of our subsidiaries. The notes will
be effectively subordinated to this secured debt to the extent
of the value of the collateral securing such debt. In addition,
we may incur additional secured debt, and the notes will be
effectively subordinated to any such additional secured debt we
may incur to the extent of the value of the collateral securing
such debt.
16
Because the notes and the guarantees will be unsecured
obligations, the assets that secure our secured debt will be
available to pay obligations on the notes only after all such
secured debt has been repaid in full. Accordingly, your right of
repayment may be compromised if any of the following situations
occur:
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we enter into bankruptcy, liquidation, reorganization, or other
winding-up
proceedings;
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there is a default in payment under our credit agreement; or
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there is an acceleration of any indebtedness under our credit
agreement.
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If any of these events occurs, the secured lenders could sell
those of our assets in which they have been granted a security
interest, to your exclusion, even if an event of default exists
under the indenture governing the Senior Notes at such time. As
a result, upon the occurrence of any of these events, there may
not be sufficient funds to pay amounts due on the notes.
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We may not be able to repurchase the notes upon a change
of control.
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The indenture governing the notes requires us to offer to
repurchase some or all of the notes when certain change of
control events occur. If we experience a change of control, you
will have the right to require us to repurchase your notes at a
purchase price in cash equal to 101% of the principal amount of
your notes plus accrued and unpaid interest, if any. Our credit
agreement provides that certain change of control events
(including a change of control as defined in the indenture
governing the notes) constitute a default. Any future credit
agreement or other agreements relating to senior indebtedness to
which we become a party may contain similar provisions. If we
experience a change of control that triggers a default under our
credit agreement, we could seek a waiver of such default or seek
to refinance our credit agreement. In the event we do not obtain
such a waiver or refinance our credit agreement, such default
could result in amounts outstanding under our credit agreement
being declared due and payable. In the event we experience a
change of control that results in us having to repurchase the
notes, we may not have sufficient financial resources to satisfy
all of our obligations under our credit agreement and the notes.
In addition, the change of control covenant in the indenture
does not cover all corporate reorganizations, mergers or similar
transactions and may not provide you with protection in a highly
leveraged transaction. See Description of
Notes Certain Covenants.
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The guarantees may not be enforceable because of
fraudulent conveyance laws.
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Our existing and certain of our future subsidiaries will
guarantee our obligations under the notes. Our issuance of the
notes and the issuance of the guarantees by the guarantors may
be subject to review under state and federal laws if a
bankruptcy, liquidation or reorganization case or a lawsuit,
including in circumstances in which bankruptcy is not involved,
were commenced at some future date by, or on behalf of, our
unpaid creditors or the unpaid creditors of a guarantor. Under
the federal bankruptcy laws and comparable provisions of state
fraudulent transfer laws, a court may void or otherwise decline
to enforce the notes or a guarantors guarantee, or
subordinate the notes or such guarantee to our or the applicable
guarantors existing and future indebtedness. While the
relevant laws may vary from state to state, a court might do so
if it found that when we issued the notes or when the applicable
guarantor entered into its guarantee or, in some states, when
payments became due under the notes or such guarantee, we or the
applicable guarantor received less than reasonably equivalent
value or fair consideration and either:
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were insolvent or rendered insolvent by reason of such
incurrence; or
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were engaged in a business or transaction for which one of our
or such guarantors remaining assets constituted
unreasonably small capital; or
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intended to incur, or believed that we or such guarantor would
incur, debts beyond our or such guarantors ability to pay
such debts as they mature.
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The court might also void the notes or a guarantee, without
regard to the above factors, if the court found that we issued
the notes or the applicable guarantor entered into its guarantee
with actual intent to hinder, delay or defraud its creditors. In
addition, any payment by us or a guarantor pursuant to the notes
or
17
the guarantees could be voided and required to be returned to
us, or such guarantor, or to a fund for the benefit of our or
such guarantors creditors.
A court would likely find that we, or a guarantor, did not
receive reasonably equivalent value or fair consideration for
the notes or such guarantee if we, or such guarantor, did not
substantially benefit directly or indirectly from the issuance
of the notes. Our anticipated use of proceeds, which includes
the distribution of a substantial portion of the proceeds of the
notes to our shareholders, could increase the risk of such a
finding. If a court were to void the notes or a guarantee, you
would no longer have a claim against us or the applicable
guarantor, as the case may be. Sufficient funds to repay the
notes may not be available from other sources, including the
remaining guarantors, if any. In addition, the court might
direct you to repay any amounts that you already received from
us or any guarantor, as the case may be.
The measures of insolvency for purposes of these fraudulent
transfer laws will vary depending upon the law applied in any
proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, we or a guarantor, as applicable,
would be considered insolvent if:
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the sum of our or such guarantors debts, including
contingent liabilities, was greater than the fair saleable value
of our or such guarantors assets; or
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if the present fair saleable value of our or such
guarantors assets were less than the amount than would be
required to pay our or such guarantors probable liability
on our or such guarantors existing debts, including
contingent liabilities, as they become absolute and
mature; or
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we or such guarantor could not pay our or such guarantors
debts as they become due.
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To the extent a court voids the notes or any of the guarantees
as fraudulent transfers or holds the notes or any of the
guarantees unenforceable for any other reason, holders of the
notes would cease to have any direct claim against us or the
applicable guarantor. If a court were to take this action, our
or the applicable guarantors assets would be applied first
to satisfy our or the applicable guarantors liabilities,
if any, before any portion of its assets could be applied to the
payment of the notes.
Each guarantee will contain a provision intended to limit the
guarantors liability to the maximum amount that it could
incur without causing the incurrence of obligations under its
guarantee to be a fraudulent transfer. This provision may not be
effective to protect the guarantees from being voided under
fraudulent transfer law, or may reduce the guarantors
obligation to an amount that effectively makes the guarantee
worthless.
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If you do not properly tender your outstanding notes, you
will continue to hold unregistered outstanding notes and your
ability to transfer outstanding notes will be adversely
affected.
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We will only issue new notes in exchange for outstanding notes
that you timely and properly tender. Therefore, you should allow
sufficient time to ensure timely delivery of the outstanding
notes and you should carefully follow the instructions on how to
tender your outstanding notes. Neither we nor the exchange agent
is required to tell you of any defects or irregularities with
respect to your tender of outstanding notes.
If you do not exchange your outstanding notes for new notes
pursuant to the exchange offer, the outstanding notes you hold
will continue to be subject to the existing transfer
restrictions. In general, you may not offer or sell the
outstanding notes except under an exemption from, or in a
transaction not subject to, the Securities Act and applicable
state securities laws. We do not plan to register outstanding
notes under the Securities Act unless our registration rights
agreement with the initial purchasers of the outstanding notes
requires us to do so. Further, if you continue to hold any
outstanding notes after the exchange offer is consummated, you
may have trouble selling them because there will be fewer such
notes outstanding.
18
EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
In connection with the issuance of the outstanding notes, we
entered into a registration rights agreement. Under the
registration rights agreement, we agreed to:
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within 240 days after the original issuance of the
outstanding notes on August 12, 2005, file a registration
statement with the SEC with respect to a registered offer to
exchange each outstanding note for a new note having terms
substantially identical in all material respects to such note,
except that the new note will not contain terms with respect to
transfer restrictions;
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use our reasonable best efforts to cause the registration
statement to be declared effective under the Securities Act
within 300 days after the original issuance of the
outstanding notes;
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promptly following the effectiveness of the registration
statement, offer the new notes in exchange for surrender of the
outstanding notes; and
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keep the exchange offer open for not less than 30 days (or
longer if required by applicable law) after the date notice of
the exchange offer is mailed to the holders of the outstanding
notes.
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We have fulfilled the agreements described in the first two of
the preceding bullet points and are now offering eligible
holders of the outstanding notes the opportunity to exchange
their outstanding notes for new notes registered under the
Securities Act. Holders are eligible if they are not prohibited
by any law or policy of the SEC from participating in this
exchange offer. The new notes will be substantially identical to
the outstanding notes except that the new notes will not contain
terms with respect to transfer restrictions, registration rights
or additional interest.
Under limited circumstances, we agreed to use our best efforts
to cause the SEC to declare effective a shelf registration
statement for the resale of the outstanding notes. We also
agreed to use our best efforts to keep the shelf registration
statement effective for up to two years after its effective
date. The circumstances include if:
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a change in law or in applicable interpretations thereof of the
staff of the SEC does not permit us to effect the exchange
offer; or
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for any other reason the exchange offer is not consummated
within 330 days from August 12, 2005, the date of the
original issuance of the outstanding notes; or
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any of the initial purchasers notify us following consummation
of the exchange offer that outstanding notes held by it are not
eligible to be exchanged for new notes in the exchange
offer; or
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certain holders are not eligible to participate in the exchange
offer, or such holders do not receive freely tradeable
securities on the date of the exchange.
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We will pay additional cash interest on the applicable
outstanding notes, subject to certain exceptions:
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if either this registration statement or, if we are obligated to
file one, a shelf registration statement is not declared
effective by the Commission by the date required,
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if we fail to consummate the exchange offer prior to the date
that is 330 days after August 12, 2005, or
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after this registration statement or a shelf registration
statement, as the case may be, is declared effective, such
registration statement thereafter ceases to be effective or
usable (subject to certain exceptions) (each such event referred
to in the preceding clauses being a registration
default);
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from and including the date on which any such registration
default occurs to but excluding the date on which all
registration defaults have been cured.
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The rate of the additional interest will be 0.25% per year
for the first
90-day
period immediately following the occurrence of a registration
default, and such rate will increase by an additional
0.25% per year with respect to each subsequent
90-day
period until all
registration defaults have been cured, up to a maximum
additional interest rate of 1.0% per year. We will pay such
additional interest on regular interest payment dates. Such
additional interest will be in addition to any other interest
payable from time to time with respect to the outstanding notes
and the new notes.
Upon the effectiveness of this registration statement, the
consummation of the exchange offer, the effectiveness of a shelf
registration statement, or the effectiveness of a succeeding
registration statement, as the case may be, the interest rate
borne by the notes from the date of such effectiveness or
consummation, as the case may be, will be reduced to the
original interest rate. However, if after any such reduction in
interest rate, a different registration default occurs, the
interest rate may again be increased pursuant to the preceding
paragraph.
To exchange your outstanding notes for transferable new notes in
the exchange offer, you will be required to make the following
representations:
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any new notes will be acquired in the ordinary course of your
business;
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you have no arrangement or understanding with any person or
entity to participate in the distribution of the new notes;
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you are not engaged in and do not intend to engage in the
distribution of the new notes;
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if you are a broker-dealer that will receive new notes for your
own account in exchange for outstanding notes, you acquired
those notes as a result of market-making activities or other
trading activities and you will deliver a prospectus, as
required by law, in connection with any resale of such new
notes; and
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you are not our affiliate, as defined in
Rule 405 of the Securities Act.
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In addition, we may require you to provide information to be
used in connection with the shelf registration statement to have
your outstanding notes included in the shelf registration
statement and benefit from the provisions regarding additional
interest described in the preceding paragraphs. A holder who
sells outstanding notes under the shelf registration statement
generally will be required to be named as a selling security
holder in the related prospectus and to deliver a prospectus to
purchasers. Such a holder will also be subject to the civil
liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the
registration rights agreement that are applicable to such a
holder, including indemnification obligations.
The description of the registration rights agreement contained
in this section is a summary only. For more information, you
should review the provisions of the registration rights
agreement that we filed with the SEC as an exhibit to the
registration statement of which this prospectus is a part.
Resale of New Notes
Based on no action letters of the SEC staff issued to third
parties, we believe that new notes may be offered for resale,
resold and otherwise transferred by you without further
compliance with the registration and prospectus delivery
provisions of the Securities Act if:
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you are not our affiliate within the meaning of
Rule 405 under the Securities Act;
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such new notes are acquired in the ordinary course of your
business; and
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you do not intend to participate in a distribution of the new
notes.
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The SEC, however, has not considered the exchange offer for the
new notes in the context of a no action letter, and the SEC may
not make a similar determination as in the no action letters
issued to these third parties.
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If you tender in the exchange offer with the intention of
participating in any manner in a distribution of the new notes,
you
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cannot rely on such interpretations by the SEC staff; and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a
secondary resale transaction.
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Unless an exemption from registration is otherwise available,
any security holder intending to distribute new notes should be
covered by an effective registration statement under the
Securities Act. This registration statement should contain the
selling security holders information required by
Item 507 of
Regulation S-K
under the Securities Act. This prospectus may be used for an
offer to resell, resale or other retransfer of new notes only as
specifically described in this prospectus. Only broker-dealers
that acquired the outstanding notes as a result of market-making
activities or other trading activities may participate in the
exchange offer. Each broker-dealer that receives new notes for
its own account in exchange for outstanding notes, where such
outstanding notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities,
must acknowledge by way of the letter of transmittal that it
will deliver a prospectus in connection with any resale of the
new notes. Please read the section captioned Plan of
Distribution for more details regarding the transfer of
new notes.
Terms of the Exchange Offer
Subject to the terms and conditions described in this prospectus
and in the letter of transmittal, we will accept for exchange
any outstanding notes properly tendered and not withdrawn prior
to 5:00 p.m. New York City time on the expiration date. We
will issue new notes in principal amount equal to the principal
amount of outstanding notes surrendered under the exchange
offer. Outstanding notes may be tendered only for new notes and
only in integral multiples of $1,000.
The exchange offer is not conditioned upon any minimum aggregate
principal amount of outstanding notes being tendered for
exchange.
As of the date of this prospectus, $200,000,000 in aggregate
principal amount of the outstanding notes are outstanding. This
prospectus is being sent to DTC, the sole registered holder of
the outstanding notes, and to all persons that we can identify
as beneficial owners of the outstanding notes. There will be no
fixed record date for determining registered holders of
outstanding notes entitled to participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the
provisions of the registration rights agreement, the applicable
requirements of the Securities Act and the Securities Exchange
Act of 1934 and the rules and regulations of the SEC.
Outstanding notes whose holders do not tender for exchange in
the exchange offer will remain outstanding and continue to
accrue interest. These outstanding notes will be entitled to the
rights and benefits such holders have under the indenture
relating to the notes and the registration rights agreement.
We will be deemed to have accepted for exchange properly
tendered outstanding notes when we have given oral or written
notice of the acceptance to the exchange agent and complied with
the applicable provisions of the registration rights agreement.
The exchange agent will act as agent for the tendering holders
for the purposes of receiving the new notes from us.
If you tender outstanding notes in the exchange offer, you will
not be required to pay brokerage commissions or fees or, subject
to the letter of transmittal, transfer taxes with respect to the
exchange of outstanding notes. We will pay all charges and
expenses, other than certain applicable taxes described below,
in connecting with the exchange offer. It is important that you
read the section labeled Fees and
Expenses for more details regarding fees and expenses
incurred in the exchange offer.
We will return any outstanding notes that we do not accept for
exchange for any reason without expense to their tendering
holder as promptly as practicable after the expiration or
termination of the exchange offer.
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Expiration Date
The exchange offer will expire at 5:00 p.m. New York City
time
on 2006,
unless, in our sole discretion, we extend it.
Extensions, Delays in Acceptance, Termination or Amendment
We expressly reserve the right, at any time or various times, to
extend the period of time during which the exchange offer is
open. We may delay acceptance of any outstanding notes by giving
oral or written notice of such extension to their holders.
During any such extensions, all outstanding notes previously
tendered will remain subject to the exchange offer, and we may
accept them for exchange.
In order to extend the exchange offer, we will notify the
exchange agent orally or in writing of any extension. We will
notify the registered holders of outstanding notes of the
extension no later than 9:00 a.m., New York City time, on
the business day after the previously scheduled expiration date.
If any of the conditions described below under
Conditions to the Exchange Offer have
not been satisfied, we reserve the right, in our sole discretion
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to delay accepting for exchange any outstanding notes,
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to extend the exchange offer, or
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to terminate the exchange offer,
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by giving oral or written notice of such delay, extension or
termination to the exchange agent. Subject to the terms of the
registration rights agreement, we also reserve the right to
amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders of outstanding
notes. If we amend the exchange offer in a manner that we
determine to constitute a material change, we will promptly
disclose such amendment by means of a prospectus supplement. The
supplement will be distributed to the registered holders of the
outstanding notes. Depending upon the significance of the
amendment and the manner of disclosure to the registered
holders, we will extend the exchange offer if the exchange offer
would otherwise expire during such period.
Conditions to the Exchange Offer
We will not be required to accept for exchange, or exchange any
new notes for, any outstanding notes if the exchange offer, or
the making of any exchange by a holder of outstanding notes,
would violate applicable law or any applicable interpretation of
the staff of the SEC. Similarly, we may terminate the exchange
offer as provided in this prospectus before accepting
outstanding notes for exchange in the event of such a potential
violation.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us the
representations described under Purpose and
Effect of the Exchange Offer, Procedures
for Tendering and Plan of Distribution and
such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to allow us
to use an appropriate form to register the new notes under the
Securities Act.
We expressly reserve the right to amend or terminate the
exchange offer, and to reject for exchange any outstanding notes
not previously accepted for exchange, upon the occurrence of any
of the conditions to the exchange offer specified above. We will
give oral or written notice of any extension, amendment,
non-acceptance or termination to the holders of the outstanding
notes as promptly as practicable.
These conditions are for our sole benefit, and we may assert
them or waive them in whole or in part at any time or at various
times in our sole discretion. If we fail at any time to exercise
any of these rights, this
22
failure will not mean that we have waived our rights. Each such
right will be deemed an ongoing right that we may assert at any
time or at various times.
In addition, we will not accept for exchange any outstanding
notes tendered, and will not issue new notes in exchange for any
such outstanding notes, if at such time any stop order has been
threatened or is in effect with respect to the registration
statement of which this prospectus constitutes a part or the
qualification of the indenture relating to the notes under the
Trust Indenture Act of 1939.
Procedures for Tendering
In order to participate in the exchange offer, you must properly
tender your outstanding notes to the exchange agent as described
below. It is your responsibility to properly tender your notes.
We have the right to waive any defects. However, we are not
required to waive defects and are not required to notify you of
defects in your exchange.
If you have any questions or need help in exchanging your notes,
please call the exchange agent whose address and phone number
are described in the section of the prospectus entitled
Where You Can Find More Information.
All of the outstanding notes were issued in book-entry form, and
all of the outstanding notes are currently represented by global
certificates held for the account of DTC. We have confirmed with
DTC that the outstanding notes may be tendered using the
Automated Tender Offer Program (ATOP) instituted by
DTC. The exchange agent will establish an account with DTC for
purposes of the exchange offer promptly after the commencement
of the exchange offer and DTC participants may electronically
transmit their acceptance of the exchange offer by causing DTC
to transfer their outstanding notes to the exchange agent using
the ATOP procedures. In connection with the transfer, DTC will
send an agents message to the exchange agent.
The agents message will state that DTC has received
instructions from the participant to tender outstanding notes
and that the participant agrees to be bound by the terms of the
letter of transmittal.
By using the ATOP procedures to exchange outstanding notes, you
will not be required to deliver a letter of transmittal to the
exchange agent. However, you will be bound by its terms just as
if you had signed it.
There is no procedure for guaranteed late delivery of the notes.
|
|
|
Determinations Under the Exchange Offer
|
We will determine in our sole discretion all questions as to the
validity, form, eligibility, time of receipt, acceptance of
tendered outstanding notes and withdrawal of tendered
outstanding notes. Our determination will be final and binding.
We reserve the absolute right to reject any outstanding notes
not properly tendered or any outstanding notes our acceptance of
which would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defect, irregularities or
conditions of tender as to particular outstanding notes. Our
interpretation of the terms and conditions of the exchange
offer, including the instructions in the letter of transmittal,
will be final and binding on all parties. Unless waived, all
defects or irregularities in connection with tenders of
outstanding notes must be cured within such time as we shall
determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of outstanding notes,
neither we, the exchange agent nor any other person will incur
any liability for failure to give such notification. Tenders of
outstanding notes will not be deemed made until such defects or
irregularities have been cured or waived. Any outstanding notes
received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder as soon
as practicable following the expiration date.
|
|
|
When We Will Issue New Notes
|
In all cases, we will issue new notes for outstanding notes that
we have accepted for exchange under the exchange offer only
after the exchange agent receives, prior to 5:00 p.m., New
York City time, on the expiration date,
23
|
|
|
|
|
a book-entry confirmation of such outstanding notes into the
exchange agents account at DTC; and
|
|
|
|
a properly transmitted agents message.
|
|
|
|
Return of Outstanding Notes Not Accepted or
Exchanged
|
If we do not accept any tendered outstanding notes for exchange
or if outstanding notes are submitted for a greater principal
amount than the holder desires to exchange, the unaccepted or
non-exchanged outstanding notes will be returned without expense
to their tendering holder. Such non-exchanged outstanding notes
will be credited to an account maintained with DTC. These
actions will occur as promptly as practicable after the
expiration or termination of the exchange offer.
|
|
|
Your Representations to Us
|
By agreeing to be bound by the letter of transmittal, you will
represent to us that, among other things:
|
|
|
|
|
any new notes that you receive will be acquired in the ordinary
course of your business;
|
|
|
|
you have no arrangement or understanding with any person or
entity to participate in the distribution of the new notes;
|
|
|
|
you are not engaged in and do not intend to engage in the
distribution of the new notes;
|
|
|
|
if you are a broker-dealer that will receive new notes for your
own account in exchange for outstanding notes, you acquired
those notes as a result of market-making activities or other
trading activities and you will deliver a prospectus, as
required by law, in connection with any resale of such new
notes; and
|
|
|
|
you are not our affiliate, as defined in
Rule 405 of the Securities Act.
|
Withdrawal of Tenders
Except as otherwise provided in this prospectus, you may
withdraw your tender at any time prior to 5:00 p.m. New
York City time on the expiration date. For a withdrawal to be
effective you must comply with the appropriate procedures of
DTCs ATOP system. Any notice of withdrawal must specify
the name and number of the account at DTC to be credited with
withdrawn outstanding notes and otherwise comply with the
procedures of DTC.
We will determine all questions as to the validity, form,
eligibility and time of receipt of notice of withdrawal. Our
determination shall be final and binding on all parties. We will
deem any outstanding notes so withdrawn not to have been validly
tendered for exchange for purposes of the exchange offer.
Any outstanding notes that have been tendered for exchange but
that are not exchanged for any reason will be credited to an
account maintained with DTC for the outstanding notes. This
return or crediting will take place as soon as practicable after
withdrawal, rejection of tender or termination of the exchange
offer. You may retender properly withdrawn outstanding notes by
following the procedures described under
Procedures for Tendering above at any
time on or prior to the expiration date.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make
additional solicitation by telegraph, telephone or in person by
our officers and regular employees and those of our affiliates.
We have not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offer. We will,
however, pay the exchange agent reasonable and customary fees
for its services and reimburse it for its related reasonable
out-of
-pocket expenses.
24
We will pay the cash expenses to be incurred in connection with
the exchange offer. They include:
|
|
|
|
|
SEC registration fees;
|
|
|
|
fees and expenses of the exchange agent and trustee;
|
|
|
|
accounting and legal fees and printing costs; and
|
|
|
|
related fees and expenses.
|
Transfer Taxes
We will pay all transfer taxes, if any, applicable to the
exchange of outstanding notes under the exchange offer. The
tendering holder, however, will be required to pay any transfer
taxes, whether imposed on the registered holder or any other
person, if a transfer tax is imposed for any reason other than
the exchange of outstanding notes under the exchange offer.
Consequences of Failure to Exchange
If you do not exchange new notes for your outstanding notes
under the exchange offer, you will remain subject to the
existing restrictions on transfer of the outstanding notes. In
general, you may not offer or sell the outstanding notes unless
they are registered under the Securities Act, or if the offer or
sale is exempt from the registration under the Securities Act
and applicable state securities laws. Except as required by the
registration rights agreement, we do not intend to register
resales of the outstanding notes under the Securities Act.
Accounting Treatment
We will record the new notes in our accounting records at the
same carrying value as the outstanding notes. This carrying
value is the aggregate principal amount of the outstanding notes
less any bond discount, as reflected in our accounting records
on the date of exchange. Accordingly, we will not recognize any
gain or loss for accounting purposes in connection with the
exchange offer.
Other
Participation in the exchange offer is voluntary, and you should
carefully consider whether to accept. You are urged to consult
your financial and tax advisors in making your own decision on
what action to take.
We may in the future seek to acquire untendered outstanding
notes in open market or privately negotiated transactions,
through subsequent exchange offers or otherwise. We have no
present plans to acquire any outstanding notes that are not
tendered in the exchange offer or to file a registration
statement to permit resales of any untendered outstanding notes.
25
RATIOS OF EARNINGS TO FIXED CHARGES
For purposes of determining the ratio of earnings to fixed
charges, earnings are defined as our income from operations
before income taxes and fixed charges (excluding the effects of
any preferred stock dividends and related accretion expense).
Fixed charges consist of interest expense on all indebtedness,
amortization of debt issuance costs, the interest portion of
lease payments, and preferred stock dividends and accretion
expense. Earnings were insufficient to cover fixed charges by
approximately $3.6 million for the year ended
December 31, 2002 and $4.1 million for the year ended
December 31, 2001.
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended
|
|
|
|
|
|
|
September 30,
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
|
|
|
1.3x
|
|
|
|
1.1x
|
|
|
|
|
|
|
|
|
|
|
|
3.8x
|
|
|
|
1.1x
|
|
The pro forma effect of the refinancing of our existing term
loans with the senior subordinated notes did not change our
historical ratios of earnings to fixed charges for the nine
months ended September 30, 2005 or the year ended
December 31, 2004, by more than 10 percent.
Accordingly, no pro forma ratios have been presented herein.
26
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under
the registration rights agreement. We will not receive any cash
proceeds from the issuance of the new notes in the exchange
offer. In consideration for issuing the new notes as
contemplated by this prospectus, we will receive outstanding
notes in a like principal amount. The form and terms of the new
notes are identical in all respects to the form and terms of the
outstanding notes, except the new notes do not include certain
transfer restrictions. Outstanding notes surrendered in exchange
for the new notes will be retired and cancelled and will not be
reissued. Accordingly, the issuance of the new notes will not
result in any change in our outstanding indebtedness.
27
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
OF CARDTRONICS, INC.
The following selected historical consolidated financial and
operating data should be read together with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our consolidated financial statements and related
notes included elsewhere in this registration statement. The
selected consolidated balance sheet data as of December 31,
2004 and 2003 and the selected consolidated statements of
operations data for the years ended December 31, 2004, 2003
and 2002 have been derived from our audited consolidated
financial statements included elsewhere in this registration
statement. The balance sheet data as of December 31, 2002,
2001 and 2000, and the statements of operations data for the
years ended December 31, 2001 and 2000 have been derived
from our audited financial statements, which are not included in
this registration statement. The selected consolidated balance
sheet data as of September 30, 2005, and the selected
consolidated statements of operations data for the nine months
ended September 30, 2005 and 2004 have been derived from
our unaudited condensed consolidated financial statements
included elsewhere in this registration statement. The selected
consolidated balance sheet data as of September 30, 2004
has been derived from our unaudited condensed consolidated
financial statements as of such date, which have not been
included in this registration statement. The unaudited interim
period financial information, in our opinion, includes all
adjustments, which are normal and recurring in nature, necessary
for a fair presentation for the periods shown. Results for the
nine months ended September 30, 2005 are not necessarily
indicative of the results to be expected for the full year.
Historical results are not necessarily indicative of the results
to be expected in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
Ended
|
|
|
|
Years Ended December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues
|
|
$
|
182,711
|
|
|
$
|
101,950
|
|
|
$
|
59,183
|
|
|
$
|
33,868
|
|
|
$
|
15,751
|
|
|
$
|
191,731
|
|
|
$
|
125,169
|
|
|
ATM product sales and other revenues(1)
|
|
|
10,204
|
|
|
|
8,493
|
|
|
|
9,603
|
|
|
|
11,220
|
|
|
|
10,283
|
|
|
|
7,457
|
|
|
|
5,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
192,915
|
|
|
|
110,443
|
|
|
|
68,786
|
|
|
|
45,088
|
|
|
|
26,034
|
|
|
|
199,188
|
|
|
|
130,941
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of ATM operating revenues
|
|
|
143,504
|
|
|
|
80,286
|
|
|
|
49,134
|
|
|
|
29,121
|
|
|
|
11,960
|
|
|
|
148,528
|
|
|
|
98,211
|
|
|
Cost of ATM product sales and other revenues
|
|
|
8,703
|
|
|
|
7,903
|
|
|
|
8,984
|
|
|
|
12,089
|
|
|
|
10,219
|
|
|
|
6,976
|
|
|
|
4,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues (exclusive of depreciation shown
separately below)
|
|
|
152,207
|
|
|
|
88,189
|
|
|
|
58,118
|
|
|
|
41,210
|
|
|
|
22,179
|
|
|
|
155,504
|
|
|
|
103,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
40,708
|
|
|
|
22,254
|
|
|
|
10,668
|
|
|
|
3,878
|
|
|
|
3,855
|
|
|
|
43,684
|
|
|
|
27,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses(2)(3)(4)
|
|
|
13,571
|
|
|
|
7,229
|
|
|
|
6,142
|
|
|
|
4,925
|
|
|
|
2,190
|
|
|
|
11,552
|
|
|
|
8,851
|
|
|
Depreciation and accretion expense
|
|
|
6,785
|
|
|
|
3,632
|
|
|
|
1,650
|
|
|
|
957
|
|
|
|
528
|
|
|
|
8,530
|
|
|
|
4,257
|
|
|
Amortization expense
|
|
|
5,508
|
|
|
|
3,842
|
|
|
|
1,641
|
|
|
|
554
|
|
|
|
|
|
|
|
5,689
|
|
|
|
4,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,864
|
|
|
|
14,703
|
|
|
|
9,433
|
|
|
|
6,436
|
|
|
|
2,718
|
|
|
|
25,771
|
|
|
|
17,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
14,844
|
|
|
|
7,551
|
|
|
|
1,235
|
|
|
|
(2,558
|
)
|
|
|
1,137
|
|
|
|
17,913
|
|
|
|
10,533
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(5)
|
|
|
7,050
|
|
|
|
3,346
|
|
|
|
881
|
|
|
|
478
|
|
|
|
278
|
|
|
|
14,224
|
|
|
|
5,211
|
|
|
Minority interest in subsidiary
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
9
|
|
|
Other(6)
|
|
|
209
|
|
|
|
106
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
865
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
7,278
|
|
|
|
3,452
|
|
|
|
939
|
|
|
|
478
|
|
|
|
278
|
|
|
|
15,106
|
|
|
|
5,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
7,566
|
|
|
|
4,099
|
|
|
|
296
|
|
|
|
(3,036
|
)
|
|
|
859
|
|
|
|
2,807
|
|
|
|
5,085
|
|
Income tax provision (benefit)
|
|
|
2,956
|
|
|
|
1,511
|
|
|
|
154
|
|
|
|
(997
|
)
|
|
|
317
|
|
|
|
972
|
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of a change in accounting
principle
|
|
|
4,610
|
|
|
|
2,588
|
|
|
|
142
|
|
|
|
(2,039
|
)
|
|
|
542
|
|
|
|
1,835
|
|
|
|
3,154
|
|
Cumulative effect of change in accounting principle for asset
retirement obligations, net of related income tax benefit of
$80(7)
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
4,610
|
|
|
|
2,454
|
|
|
|
142
|
|
|
|
(2,039
|
)
|
|
|
542
|
|
|
|
1,835
|
|
|
|
3,154
|
|
Preferred stock dividends and accretion expense(8)
|
|
|
2,312
|
|
|
|
2,089
|
|
|
|
1,880
|
|
|
|
741
|
|
|
|
|
|
|
|
1,328
|
|
|
|
1,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
2,298
|
|
|
$
|
365
|
|
|
$
|
(1,738
|
)
|
|
$
|
(2,780
|
)
|
|
$
|
542
|
|
|
$
|
507
|
|
|
$
|
1,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
Ended
|
|
|
|
Years Ended December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
(in thousands, except ratios and numbers of ATMs)
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(9)
|
|
|
1.3
|
x
|
|
|
1.1
|
x
|
|
|
|
|
|
|
|
|
|
|
3.8
|
x
|
|
|
1.1
|
x
|
|
|
1.3x
|
|
Cash flows from operating activities
|
|
$
|
20,466
|
|
|
$
|
21,629
|
|
|
$
|
4,491
|
|
|
$
|
(1,929
|
)
|
|
$
|
(255
|
)
|
|
$
|
32,751
|
|
|
$
|
20,493
|
|
Cash flows from investing activities
|
|
|
(118,926
|
)
|
|
|
(29,663
|
)
|
|
|
(15,023
|
)
|
|
|
(7,496
|
)
|
|
|
(794
|
)
|
|
|
(133,344
|
)
|
|
|
(115,958
|
)
|
Cash flows from financing activities
|
|
|
94,318
|
|
|
|
10,404
|
|
|
|
10,741
|
|
|
|
12,066
|
|
|
|
1,184
|
|
|
|
101,883
|
|
|
|
95,915
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total number of ATMs (at period end)
|
|
|
24,581
|
|
|
|
12,021
|
|
|
|
8,298
|
|
|
|
6,707
|
|
|
|
3,339
|
|
|
|
26,417
|
|
|
|
24,803
|
|
Total transactions
|
|
|
111,577
|
|
|
|
64,605
|
|
|
|
36,212
|
|
|
|
19,865
|
|
|
|
8,622
|
|
|
|
115,152
|
|
|
|
76,712
|
|
Total surcharge transactions
|
|
|
82,087
|
|
|
|
48,778
|
|
|
|
28,978
|
|
|
|
16,027
|
|
|
|
7,400
|
|
|
|
79,943
|
|
|
|
56,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
As of December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|
|
2000
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
(in thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,412
|
|
|
$
|
5,554
|
|
|
$
|
3,184
|
|
|
$
|
2,975
|
|
|
$
|
333
|
|
|
$
|
2,517
|
|
|
$
|
6,004
|
|
Total assets
|
|
|
195,309
|
|
|
|
64,434
|
|
|
|
34,840
|
|
|
|
25,373
|
|
|
|
8,864
|
|
|
|
340,506
|
|
|
|
184,759
|
|
Total long-term debt, including current portion
|
|
|
128,541
|
|
|
|
31,371
|
|
|
|
18,475
|
|
|
|
8,620
|
|
|
|
2,373
|
|
|
|
243,567
|
|
|
|
130,041
|
|
Preferred stock(10)
|
|
|
23,634
|
|
|
|
21,322
|
|
|
|
19,233
|
|
|
|
15,453
|
|
|
|
|
|
|
|
76,263
|
|
|
|
23,031
|
|
Total stockholders equity (deficit)
|
|
|
(2,164
|
)
|
|
|
(6,959
|
)
|
|
|
(8,909
|
)
|
|
|
(7,065
|
)
|
|
|
2,094
|
|
|
|
(49,173
|
)
|
|
|
(4,105
|
)
|
|
|
(1)
|
ATM product sales and other revenues consist primarily of
revenues from the sale of equipment to our merchant-owned
customer base and our associate value added resellers, or VARs,
as well as other miscellaneous non-transaction based revenues.
|
|
(2)
|
Reflects a stock compensation charge in 2001 of
$1.5 million after taxes related to the vesting of all
stock options in connection with changes in our ownership
structure.
|
|
(3)
|
Reflects non-cash stock compensation charges of
$0.4 million and $0.8 million for the nine months
ended September 30, 2005 and 2004, respectively, and
$0.9 million and $1.6 million for the years ended
December 31, 2004 and 2003, respectively, related to a
restricted stock grant made to our chief executive officer in
2003 and certain options granted in 2004. Additionally, the 2004
full year results include a one-time bonus of $1.8 million
made to our chief executive officer related to the tax liability
associated with such restricted stock grant. See note 4 to
our consolidated financial statements.
|
|
(4)
|
Reflects the write-off in 2004 of approximately
$1.8 million in costs associated with our terminated
initial public offering and related costs.
|
|
(5)
|
Reflects the amortization and write-off of $2.9 million and
$1.7 million in financing costs associated with the
amendment of our bank credit facilities during the years ended
December 31, 2004 and 2003, respectively. Additionally,
reflects the amortization and write-off of financing costs of
$4.3 million during the nine months ended
September 30, 2005 related to the amendment of our bank
credit facilities in May 2005 and the issuance of our senior
subordinated notes in August 2005, and the amortization and
write-off of financing costs of $2.8 million during the
nine months ended September 30, 2004 related to the
amendment of our bank credit facility in June 2004.
|
|
(6)
|
Other primarily consists of losses on the sale or disposal of
assets.
|
|
(7)
|
Reflects the effect of our adoption of SFAS No. 143.
See note 1(m) to our consolidated financial statements.
|
|
(8)
|
Reflects non-cash dividends on our Series A Preferred
Stock, which was redeemed in February 2005. Subsequent to the
redemption of the Series A Preferred Stock, the amount
reflects the accretion of the Series B Preferred Stock
issuance costs.
|
|
(9)
|
For purposes of determining the ratio of earnings to fixed
charges, earnings are defined as our income from operations
before income taxes and fixed charges (excluding the effects of
any preferred stock dividends and related accretion expense).
Fixed charges consist of interest expense on all indebtedness,
amortization of debt issuance costs, the interest portion of
lease payments, and preferred stock dividends and accretion
expense. Earnings were insufficient to cover fixed charges by
approximately $3.6 million for the year ended
December 31, 2002 and $4.1 million for the year ended
December 31, 2001. The pro forma effect of the refinancing
of our existing term loans with the senior subordinated notes
did not change our historical ratios of earnings to fixed
charges for the nine months ended September 30, 2005 or the
year ended December 31, 2004, by more than 10 percent.
Accordingly, no pro forma ratios have been presented herein.
|
|
|
(10)
|
The amount reflected on our balance sheet is shown net of
issuance costs of $1.7 million as of September 30,
2005. The aggregate redemption price for the preferred stock was
approximately $78.0 million as of September 30, 2005.
|
29
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the
financial statements and the related notes included elsewhere in
this registration statement. This discussion contains
forward-looking statements that are based on managements
current expectations, estimates and projections about our
business and operations. Our actual results may differ
materially from those currently anticipated and expressed in
such forward-looking statements as a result of a number of
factors, including those we discuss under Risk
Factors and elsewhere in this registration statement.
Overview
We operate a network of over 26,000 ATMs operating in all
50 states and within the United Kingdom. Our extensive ATM
network is strengthened by multi-year contractual relationships
with a wide variety of nationally and internationally known
merchants pursuant to which we operate ATMs in their locations.
ATM Management Programs
We deploy ATMs under two distinct arrangements with our merchant
partners:
|
|
|
|
|
Company-owned.
Under a company-owned arrangement, we own
or lease the ATM and are responsible for controlling
substantially all aspects of its operation. These
responsibilities include what we refer to as first line
maintenance, such as replacing paper, clearing paper or bill
jams, resetting the ATM and any telecommunications and power
issues or other maintenance that do not require a trained
service technician. We are also responsible for what we refer to
as second line maintenance, or more complex maintenance
procedures that require trained service technicians and often
involve replacing component parts. In addition to first and
second line maintenance, we are responsible for arranging for
cash, cash loading, supplies, telecommunications service and all
other services required for the operation of the ATM, other than
electricity. We typically pay a fee, either periodically, on a
per-transaction
basis
or a combination of both, to the merchant on whose premises the
ATM is physically located. We operate a limited number of our
company-owned ATMs on a merchant-assisted basis. In these
arrangements, we own or lease the ATM and provide all
transaction processing services, but the merchant generally is
responsible for providing and loading cash for the ATM and first
line maintenance. Typically, we deploy ATMs under company-owned
arrangements for our national and regional merchant customers,
such as Amerada Hess, BP Amoco, Chevron, Circle K, Costco, CVS
Pharmacy, Duane Reade, ExxonMobil, Mills Malls, Sunoco, Target
and Walgreens in the United States, and Alfred Jones, Co-Op,
Mitchells & Butlers, the U.K. Post Office, Tates and
Tesco in the United Kingdom. Because company-owned locations are
controlled by us, are usually located in major national chains,
and are thus more likely candidates for additional sources of
revenue such as bank branding, company-owned locations generally
offer higher transaction volumes and greater profitability,
which we consider necessary to justify the upfront capital cost
of installing such machines. As of September 30, 2005, we
operated approximately 11,728 ATMs under company-owned
arrangements.
|
|
|
|
Merchant-owned.
Under a merchant-owned arrangement, the
merchant owns the ATM and is responsible for its maintenance and
most of the operating costs. We typically provide all
transaction processing services and, in some cases, retain
responsibility for providing and loading cash. We typically
operate ATMs with our independent merchant customers under
merchant-owned arrangements. A merchant who purchases an ATM
from us is responsible for providing cash for the ATM and all
maintenance. The merchant is also responsible for cash loading,
supplies, telecommunication and electrical services. Under these
arrangements, we sometimes retain responsibility for second line
maintenance for an additional fee, and we provide all
transaction processing services. Because the merchant bears more
of the costs associated with operating ATMs under this
arrangement, the merchant typically receives a higher fee on a
per-transaction basis than is the case under a
company-owned
arrangement. In a limited number of our merchant-owned
arrangements, we have assumed responsibility for providing and
loading cash. Accordingly, under
|
30
|
|
|
|
|
these arrangements, the merchant receives a smaller fee on a
per-transaction basis than in the typical merchant-owned
arrangement. As of September 30, 2005, we operated
approximately 14,689 ATMs under merchant-owned arrangements.
|
In the future, we expect the percentage of our company-owned and
merchant-owned arrangements will continue to fluctuate in
response to the mix of ATMs we add through internal growth and
acquisitions. While we may continue to add merchant-owned ATMs
to our network as a result of acquisitions, our focus for
internal growth will remain on expanding the number of
company-owned ATMs in our network.
The table below reflects the split of our revenues and gross
profit amounts between company-owned and merchant-owned ATMs,
for the years ended December 31, 2004 and 2003, and for the
nine months ended September 30, 2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Years Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Company-owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
55%
|
|
|
|
61%
|
|
|
|
53%
|
|
|
Gross profit
|
|
|
68%
|
|
|
|
73%
|
|
|
|
66%
|
|
Merchant-owned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
45%
|
|
|
|
39%
|
|
|
|
47%
|
|
|
Gross profit
|
|
|
32%
|
|
|
|
27%
|
|
|
|
34%
|
|
As noted in the table above, the percentage of our total
revenues and gross margin attributable to merchant-owned
arrangements increased in 2004 (with a corresponding decrease in
the percentage of our total revenues and gross margin
attributable to company-owned arrangements) due to the large
number of merchant-owned ATMs we acquired in the E*TRADE Access
acquisition. The further decline in the percentage of our total
revenues and gross margin attributable to company-owned
arrangements during the nine months ended September 30,
2005 was due to the fact that the results for the year ended
December 31, 2004 only reflect the effects of the E*TRADE
Access acquisition for the last six months of the year, thus
diluting the impact of the acquired merchant-owned ATMs on the
entire years results. We expect that the above trend will
begin to reverse in 2006 due to our Bank Machine acquisition and
the two acquisitions consummated in March and April 2005, which
were primarily comprised of company-owned ATMs, and as a result
of the continued expected growth in our existing company-owned
merchant portfolio base.
We have generally experienced very little turnover among our
customers with whom we typically enter into company-owned
arrangements. We have historically been very successful in
negotiating contract renewals with these customers and have not
renewed only two of our 50 most significant merchant contracts
over the past four years. Additionally, we have experienced some
turnover among our smaller merchant customers operating under
merchant-owned arrangements. However, these losses have
historically been partially offset by the addition of other
similar customers, with the level of ATMs operated under these
arrangements trending downward slightly (excluding the effects
of acquisitions). In each year prior to 2003, we experienced an
increase in the number of ATMs operated under merchant-owned
arrangements. However, in 2003, excluding the effect of
acquisitions, we experienced a net loss of approximately 3.5% of
our ATMs operated under merchant-owned arrangements. This net
loss primarily reflected the loss of ATMs with monthly
transaction volumes significantly lower than the average for all
ATMs operated under similar arrangements, a situation that often
indicates an ATM is no longer economically feasible for the
owner to operate. In addition, this net loss also reflects our
reduction in sales and marketing efforts directed at placing
ATMs under these types of arrangements in favor of increasing
our focus on company-owned accounts and acquisitions of existing
portfolios of ATMs. For the year ended December 31, 2004,
and without giving effect to our E*TRADE Access acquisition, we
experienced a net loss of less than 2.5% of our ATMs operated
under merchant-owned arrangements, generally due to
circumstances similar to those described for prior periods. If
we continue to acquire primarily ATMs operated under
company-owned arrangements, this downward trend in the absolute
number of ATMs operated under these types of merchant-owned
arrangements may continue. However, we
31
have recently implemented an internal initiative to analyze our
merchant-owned arrangements in an attempt to reduce the amount
of turnover associated with such accounts. However, because such
initiative was just implemented, we cannot accurately predict
the results of such efforts and whether the initiative will be
successful in reducing the aforementioned downward trend.
Components of Revenues, Cost of Revenues and Expenses
Revenues.
We derive our revenues primarily from providing
ATM services and, to a lesser extent, from our branding
arrangements and our sales of ATM equipment. Our revenues from
ATM services have increased rapidly in recent years due to the
acquisitions we completed since 2001, as well as through
internal expansion of our existing and acquired ATM networks.
In our consolidated statements of operations, we present
revenues from ATM services and branding arrangements as
ATM operating revenues. These revenues include the
fees we earn per transaction completed on our network and fees
we generate from network and bank branding arrangements. We
present revenues from the sale of ATMs and other non-transaction
based revenues as ATM product sales and other
revenues. These revenues consist primarily of sales of
ATMs and related equipment to merchants operating under
merchant-owned arrangements, as well as sales under our value
added reseller (VAR) program with NCR.
Our ATM operating revenues primarily consist of the three
following components: surcharge revenue, interchange revenue and
branding revenue. The following table sets forth information on
our surcharge and interchange revenues per surcharge-bearing
transaction and on our interchange revenues per total
transaction. The following table also includes pro forma
information that gives effect to our E*TRADE Access and Bank
Machine acquisitions as if they had occurred on January 1,
2004. Total transactions represents all transactions made at our
ATMs, including transactions on which we do not earn surcharge
revenue but do earn varying amounts of interchange revenue, such
as balance inquiries, fund transfers, transactions on ATMs
included in surcharge-free networks and branded ATMs, and some
denials.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Year Ended
|
|
|
Nine Months
|
|
|
Pro Forma
|
|
|
Nine Months
|
|
|
|
December 31,
|
|
|
Ended
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2005
|
|
|
2004
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per surcharge-bearing transaction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surcharge revenue
|
|
$
|
1.53
|
|
|
$
|
1.43
|
|
|
$
|
1.42
|
|
|
$
|
1.69
|
|
|
$
|
1.67
|
|
|
$
|
1.73
|
|
|
Interchange revenue
|
|
|
0.63
|
|
|
|
0.60
|
|
|
|
0.57
|
|
|
|
0.62
|
|
|
|
0.60
|
|
|
|
0.61
|
|
Per total transaction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interchange revenue
|
|
|
0.46
|
|
|
|
0.45
|
|
|
|
0.46
|
|
|
|
0.43
|
|
|
|
0.43
|
|
|
|
0.42
|
|
|
|
|
|
|
Surcharge revenue.
A surcharge fee represents a
convenience fee paid by the cardholder for making a cash
withdrawal from an ATM. Surcharge fees are most typically
associated with cash withdrawal transactions and generally are
not generated by balance inquiries, fund transfers and, in some
cases, cash withdrawals from ATMs from which we earn branding
revenues. Surcharge fees often vary by the type of arrangement
under which we place our ATMs. Our transaction surcharges
averaged approximately $1.53 per surcharge-bearing
transaction during the year ended December 31, 2004 ($1.67
on a pro forma basis for the E*TRADE Access and Bank Machine
acquisitions), and approximately $1.43 during the year ended
December 31, 2003. Our transaction surcharges averaged
approximately $1.69 per surcharge-bearing transaction
during the nine months ended September 30, 2005 ($1.73 on a
pro forma basis for the Bank Machine acquisition). Surcharge
fees can vary widely based on the location of the ATM and the
nature of the contracts negotiated with our merchants.
Furthermore, surcharge fees in the United Kingdom are typically
higher than the surcharge fees received in the
U.S. Accordingly, we expect that our surcharge fees per
surcharge-bearing transaction will increase slightly in the near
term as a result of the Bank Machine acquisition. Longer term, we
|
32
|
|
|
|
|
expect that surcharge fees per surcharge-bearing transaction
will vary depending upon negotiated surcharge fees at newly
deployed ATMs and future negotiations with existing merchant
partners, and our ongoing efforts to improve profitability
through improved pricing.
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Interchange revenue.
An interchange fee is a fee paid by
the cardholders financial institution for the use of the
applicable electronic funds transfer, or EFT, network that
transmits data between the ATM and the cardholders
financial institution in connection with any ATM transaction,
including balance inquiries, transfers and surcharge-free
transactions, including those under branding arrangements. We
receive a portion of the interchange fee paid to the EFT
network. In the U.S., interchange fees are earned not only on
cash withdrawal transactions, but also on other ATM transactions
such as balance inquiries and fund transfers. In the United
Kingdom, interchange fees are earned on all ATM transactions
other than surcharge-bearing cash withdrawals. Interchange fees
are set by the EFT networks and vary according to EFT network
arrangements with financial institutions, as well as the type of
transaction. Interchange fees are typically lower for balance
inquiries and fund transfers and higher for withdrawals. For the
year ended December 31, 2004, we received
$51.7 million in interchange fees ($68.8 million on a
pro forma basis for the E*TRADE Access and Bank Machine
acquisitions). For the year ended December 31, 2003, we
received $29.1 million in interchange fees. For the nine
months ended September 30, 2005, we received
$49.4 million in interchange fees ($50.6 million on a
pro forma basis for the Bank Machine acquisition). Interchange
fees per surcharge-bearing transaction increased in 2003 and
2004 due to the increase in the number of transactions on ATMs
included in surcharge-free networks and branded ATMs, which
generate interchange fees, but do not generate surcharge fees
and, as a result, are not included in the number of
surcharge-bearing transactions. However, on a pro forma basis,
interchange fees per surcharge-bearing transaction were slightly
lower in 2004 and 2005 (when compared to the corresponding
historical amounts for the same periods), due to the fact that
interchange fees in the United Kingdom are only earned on non
surcharge-bearing transactions, as previously discussed. We
believe that our future interchange fees per surcharge-bearing
transaction will be consistent with the pro forma amounts
reflected above. On an absolute basis we expect that our
interchange fees will decrease slightly in the future due to the
fact that certain ATM processing networks adjusted their
interchange rates downward in 2005. We currently estimate that
such reduction will average approximately $50,000 per month
during 2006 and approximately $25,000 per month thereafter.
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Branding revenue.
We generate branding revenue in a
variety of ways. We allow financial institutions to place
signage on, or brand, our ATMs. Under this arrangement, we allow
the branding financial institutions customers to use
branded ATMs without paying a surcharge fee. In exchange, the
branding financial institution pays us a fixed monthly fee per
branded ATM. We believe that this type of branding arrangement
will typically result in an increase in transaction levels at
the branded ATMs as existing customers continue to use the ATMs
and new customers of the branding financial institution are
attracted by the surcharge-free service. We also believe that
having a major bank brand on an ATM leads to increased
surchargable transactions from customers other than those of the
branding bank.
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We also generate branding revenue from the ATMs we include in a
nationwide surcharge-free ATM alliance of which we are the
largest member and owner (effective December 21, 2005).
Under this arrangement, cardholders of the institutions that are
members of the alliance use our ATMs included in the alliance
free of surcharge fees in exchange for a payment to us of a
fixed monthly fee per cardholder, which is paid by such
cardholders financial institution. Fees paid for branding
an ATM vary widely within our industry, as well as within our
own operations. We expect that this variance in branding fees
will continue in the future, but, because our strategy is to set
branding fees at least sufficient to offset lost surcharge
revenue, we do not expect any such variance to cause a decrease
in our total revenues. However, because we have only recently
begun to enter into branding arrangements, we are currently
unable to meaningfully quantify this anticipated offset to lost
surcharge revenue.
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The profitability of any particular ATM location, and of our
entire ATM services operation, is driven by a combination of
surcharge, interchange and branding revenues, as well as the
level of our related costs.
33
Accordingly, material changes in our average surcharge fee or
average interchange fee may be offset by branding or other
ancillary revenues, or by changes in our cost structure. Because
a variance in our average surcharge fee or our average
interchange fee is not necessarily indicative of a commensurate
change in our profitability, you should consider these measures
only in the context of our overall financial results.
Our other revenues are primarily comprised of revenues from the
sale of ATMs and related equipment to merchant customers
operating under merchant-owned arrangements and associate VARs,
and other non transaction-based revenues. While we expect to
continue to derive a portion of our revenues from direct sales
of ATMs in the future, we expect that this source of revenue
will continue to decrease slightly as a percentage of our total
revenues in future periods.
Cost of revenues.
Our cost of revenues associated with
ATM transactions completed on our ATM network includes:
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Merchant fees.
We pay our merchants a fee that depends on
a variety of factors, including the type of arrangement under
which the ATM is placed and the number of transactions at that
ATM.
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Processing fees.
We pay fees to third-party vendors for
processing transactions originated at our ATMs. These vendors,
which include Star Systems, Fiserv, Inc. and Genpass,
communicate with the cardholders financial institution
through EFT networks to gain transaction authorization and to
settle transactions.
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Cost of cash.
Cost of cash includes all costs associated
with the provision of cash by us for ATMs, including fees for
the use of cash, armored courier services, insurance, cash
reconciliation and associated wire fees. Changes in interest
rates could affect our cost of cash, though we have entered into
a number interest rate swap transactions to hedge our exposure
through 2007 on approximately two-thirds of our current
outstanding domestic ATM cash balances.
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Communications.
Under our company-owned arrangements, we
are responsible for expenses associated with providing
telecommunications capabilities to the ATMs, allowing the ATMs
to connect with the applicable EFT network.
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Repairs and maintenance.
Depending on the type of
arrangement with the merchant, we may be responsible for first
and/or second line maintenance for the ATM. We typically manage
the provision of these services by third parties with national
operations. Our primary maintenance vendors are Diebold, NCR and
EFMARK.
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Direct operations.
These expenses consist of costs
associated with managing our ATM network, including expenses for
program managers, technicians and customer service
representatives.
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Cost of equipment revenue.
In connection with the sale of
equipment to merchants and VARs, we incur costs associated with
purchasing equipment from manufacturers, as well as delivery and
installation expenses.
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We define variable costs as those incurred on a per transaction
basis. Processing fees and the majority of merchant fees fall
under this category. Processing fees and merchant fees accounted
for approximately 61% of our cost of ATM revenues in 2004.
Therefore, we estimate that approximately 39% of our cost of ATM
revenues is generally fixed in nature, meaning that any
significant decrease in transaction volumes would lead to a
decrease in the profitability of our ATM service operations,
unless there were an offsetting increase in per-transaction
revenues. See Results of Operations below for
additional information.
Our indirect operating expenses include general and
administrative expenses related to administration, salaries,
benefits, advertising and marketing, depreciation of the ATMs we
own, amortization of our acquired merchant contracts, and
interest expense related to borrowings under our bank credit
facility and our senior subordinated notes. We depreciate our
capital equipment on a straight-line basis over the estimated
life of such equipment and amortize the value of acquired
merchant contracts over the estimated lives of such assets.
Because we repaid certain of our lower interest rate bank credit
facilities with the net proceeds received under
34
the higher interest rate senior subordinated notes offering in
August 2005, our overall level of interest expense will increase
in the future. See Liquidity and Capital
Resources.
Acquisitions
Since May 2001, we have acquired 12 ATM networks and one
operator of a surcharge-free ATM alliance. Prior to our E*TRADE
Access acquisition, we acquired only assets consisting of ATMs
and, in certain cases, contractual rights to place and operate
ATMs in certain locations. In our E*TRADE Access acquisition, we
acquired approximately 13,155 ATMs and related placement
agreements, vendor agreements, operating software relating to
the E*TRADE Access ATMs and E*TRADE Accesss interest in a
joint venture. We also assumed certain liabilities and
contingencies related to the operations of E*TRADE Access. In
addition, we hired four employees from E*TRADE Access and agreed
to maintain the E*TRADE Access brand on approximately 8,900 of
the acquired ATMs until June 30, 2006.
With respect to the Bank Machine acquisition, we acquired the
entire company, including the related ATMs and underlying
placement agreements as well as the entire infrastructure
associated with the business. Additionally, as part of this
acquisition, we retained Bank Machines existing employee
base of approximately 50 employees, including Bank
Machines existing senior management team, who became
shareholders in Cardtronics.
In addition to the above, we also acquired two domestic ATM
networks in March and April of 2005, totaling approximately 805
ATMs and related placement agreements, for an aggregate cost of
approximately $17.2 million in cash. Furthermore, in
December 2005, we acquired all of the outstanding shares of ATM
National, Inc., the owner and operator of a nationwide
surcharge-free ATM alliance. The consideration for such
acquisition totaled $4.4 million, and was comprised of
$2.6 million in cash and 21,111 shares of our common
stock. Additionally, we agreed to assume approximately
$1.3 million in liabilities associated with such
acquisition. Furthermore, the merger agreement allows for the
issuance of up to 10,000 additional shares of our common stock
within 105 days of the closing date based on the occurrence
of certain events.
We have historically funded our acquisitions through a
combination of borrowings under our credit facilities, capital
contributions from our equity investors and cash generated from
operations. Other than in our Bank Machine and our E*TRADE
Access acquisitions, we have not acquired any legal entities and
generally do not assume employees, physical facilities, sales
forces or trade names. As of the date of this registration
statement, excluding the Bank Machine acquisition, all
supporting activities, including supply of cash, communications,
network processing services, maintenance services, customer
service, sales and administration, have been changed to our
operating platform and service providers subsequent to the
closing of the transaction. With respect to the Bank Machine
acquisition, Bank Machines existing operating platform is
expected to remain intact and serve as a platform for future
growth within the United Kingdom and possibly Europe.
Once we purchase a portfolio of ATMs and merchant contracts and
integrate them into our operating platform, operating expenses
are typically reduced, thus enhancing the profitability of the
portfolio. Our ability to reduce operating expenses and improve
ATM profitability is largely the result of the better pricing
terms we enjoy from our service providers. For example, in
connection with an acquisition in 2003, we were able to reduce
the cost of communications service for the acquired ATMs by
approximately 83% when we transitioned the ATMs to a different
communications configuration with our existing communications
service provider. Additionally, in connection with our
acquisitions in 2003, we were able to reduce our processing
costs at the time of closing by amounts ranging from 3.6% to
42.5%. As of December 31, 2004, processing costs on ATMs
from the same acquisitions had been reduced by amounts ranging
from 39.3% to 72.5% as a result of additional improvements in
pricing under our transaction processing agreement.
Similarly, in connection with our E*TRADE Access acquisition in
2004, we have been able to reduce operating expenses associated
with the acquired operations in a number of areas, including:
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The transfer of cash management and vault cash services for
approximately 2,500 ATMs to our preferred cash management and
vault cash providers;
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The transfer of maintenance services for approximately 10,000
E*TRADE Access ATMs from the existing provider to our preferred
maintenance service provider;
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The transfer of processing services for approximately 1,600 ATMs
to our preferred service provider; and
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The transfer of armored car service used in the transportation
of cash for approximately 1,000 ATMs to our preferred service
provider.
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The majority of the above cost savings initiatives were
implemented during 2004, and we expect to complete the remaining
initiatives by early 2006.
As previously discussed, the existing platform associated with
the Bank Machine acquisition will largely remain intact
subsequent to the acquisition due to the geographic disparities
between the acquired platform and our existing domestic
platform. Accordingly, the opportunities to reduce operating
expenses by converting the acquired platform to our operating
platform are expected to be more limited than what we have
experienced historically with our domestic acquisitions.
In addition to changes in operating expenses as discussed above,
the revenues produced by the acquired ATM portfolios may also
change as we alter the mix between surcharge, interchange and
branding arrangements with our merchant clients and financial
sponsors. For example, if we are successful in negotiating
branding arrangements for some of our acquired ATMs, there may
be a shift in the revenue mix between surcharge revenue,
interchange revenue and branding revenue. Under a branding
arrangement, we do not charge surcharge fees to the branding
financial institutions customers. On the other hand, total
withdrawal transactions at the branded ATMs typically increase,
as existing customers continue to use the ATMs and new customers
of the branding financial institution are attracted by the
surcharge-free service. Accordingly, we typically expect
interchange revenue to increase since we receive interchange
fees on all withdrawal transactions. In addition, we would also
receive a negotiated branding fee.
Our acquisitions have significantly increased the size of our
operations over the periods discussed in Results of
Operations below and, accordingly, fundamentally affect
the comparability of our results of operations for the periods
discussed in this discussion and analysis. For example, revenues
increased from $26.0 million in 2000 to $192.9 million
in 2004, while our gross profit increased from $3.9 million
to $40.7 million over the same period. Moreover, because we
completed the E*TRADE Access acquisition on June 30, 2004
and the Bank Machine acquisition on May 17, 2005, the
impact of these acquisitions is not fully reflected in our
historical operating results. The addition of approximately
13,155 ATMs from the E*TRADE Access acquisition has had a
significant effect on our results of operations, and we expect
the Bank Machine acquisition of approximately 1,000 ATMs in the
United Kingdom will have a significant effect going forward.
Information with respect to the pro forma impact of the E*TRADE
Access and Bank Machine acquisitions on our prior financial
periods can be evaluated by reviewing the pro forma condensed
consolidated financial information and the historical
consolidated financial information of the E*TRADE Access and
Bank Machine ATM businesses included elsewhere in this
registration statement. These and any future acquisitions will
continue to affect our results of operations.
Consistent with our business strategy, we engage from time to
time in discussions with potential sellers regarding the
possible purchase by us of their ATM portfolios. Such
acquisition efforts may involve participation by us in processes
that have been made public, involve a number of potential buyers
and are commonly referred to as auction processes,
as well as situations where we believe we are the only party or
one of a limited number of potential buyers in negotiations with
the potential seller. These acquisition efforts could involve
assets which, if acquired, would have a material effect on our
financial condition and results of operations. We can give no
assurance that our current or future acquisition efforts will be
successful or that any such acquisition will be completed on
terms considered favorable to us. We have set forth below a
summary of our acquisition activity from May 2001 through
December 2003. After acquiring a network of ATMs, we track its
growth and operating performance on a stand-alone basis, as well
as on a consolidated basis with our results as a whole. We
believe this information is helpful in understanding the effect
of these
36
acquisitions on our growth, as well as the growth experienced
through increased deployment of ATMs with the acquired merchant
base in each of these ATM networks following its acquisition and
integration.
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Number of ATMs
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As of
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At Closing
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September 30, 2005
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Increase
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2001 Acquisitions
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878
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1,210
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332
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2002 Acquisitions
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1,195
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1,390
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195
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2003 Acquisitions
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3,689
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4,465
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776
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Total
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5,692
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7,065
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1,303
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The following table reflects the results of the E*TRADE Access
portfolio that was acquired in June 2004.
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Number of ATMs
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As of
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At Closing
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September 30, 2005
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Decrease
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Total
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13,155
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11,899
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(1,256
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As noted above, the number of ATMs we acquired as part of the
E*TRADE Access acquisition has decreased by 1,256 machines.
This decrease was due to the loss of merchant-owned accounts
primarily as a result of our efforts to eliminate certain
underperforming contracts and locations from the acquired
portfolio. Additionally, a number of merchant-owned contracts
expired during the first six months after the acquisition, and
were not renewed at the discretion of one or both parties.
Because the portfolio acquired from E*TRADE Access was primarily
comprised of merchant-owned accounts, we believe such contract
attrition rates are unique to this portfolio (relative to our
past acquisitions).
We value acquisitions based on historical and expected cash flow
and the remaining terms of merchant contracts rather than the
number of ATMs or a benchmark value per ATM. ATMs at different
locations vary significantly in terms of transaction volume and
cash flow. The equipment is in some cases owned by the merchant
and in others by the seller. As a result, the purchase price per
ATM we pay and the allocation of consideration between equipment
and intangibles varies from acquisition to acquisition.
Industry Trends
During the three months ended March 31, 2005 and
June 30, 2005, total domestic transaction revenues
(including surcharge, interchange and branding fees) declined by
approximately 2.7% and 2.4%, respectively (versus prior year
levels) for our ATMs that were transacting throughout the same
periods in both 2005 and 2004. We attribute such declines to a
number of factors, including (i) the increased use of debit
cards as a means of payment, (ii) an increase in free
cash back
point-of
-sale
transactions, and (iii) increased competition associated
with the increased number of off-premise, surcharging ATMs
within the United States. However, during the three months ended
September 30, 2005, total domestic transaction revenues
were essentially flat when compared to the prior year for ATMs
that were transacting throughout the same periods in both years.
While the results for the most recent quarter are encouraging
and appear to indicate that the gradual decline experienced
during the first two quarters has slowed, it is too soon to draw
a conclusion with respect to whether the gradual decline
experienced during the first two quarters has in fact ended.
However, there are a number of factors that could help to
mitigate the potential negative impact on our financial results
if such a trend were to continue, including (i) increasing
surcharge rates in selected accounts to help offset the
potential decline in transaction revenues, (ii) continued
growth in our network and bank branding initiatives, which tend
to increase transactions at branded locations and for which we
receive a fee from the network or
37
branding bank in lieu of a surcharge fee,
(iii) implementing certain operating cost savings
initiatives for selected accounts, and (iv) the development
and deployment of new products and features within selected
merchant accounts. It appears that a combination of higher
surcharge rates in selected accounts and the continued growth in
our network and bank branding initiatives were the primary
reasons behind the improvement seen in the year-over-year
comparative transaction revenues during the third quarter.
However, if the downward transaction trend seen during the first
two quarters of this year resumes, and we are unsuccessful in
our attempts to mitigate the impact of such trend, as outlined
above, our transaction revenues may continue to decline in the
future.
Recent Events
In connection with the acquisition of Bank Machine in May 2005,
we replaced our existing bank credit facility with new
facilities provided by BNP Paribas and Bank of America, N.A.
Such facilities were comprised of (i) a revolving credit
facility of up to $100.0 million, (ii) a first lien
term facility of up to $125.0 million, and (iii) and a
second lien term facility of up to $75.0 million.
Borrowings under the facilities were utilized to repay our
existing bank credit facility in full and to fund the
acquisition of Bank Machine. As of September 30, 2005, the
first and second lien term facilities were fully repaid, as
discussed below, and approximately $41.8 million was
outstanding under the new revolving credit facility.
On August 12, 2005, we sold $200.0 million in senior
subordinated notes pursuant to Rule 144A of the Securities
Act of 1933, and utilized the net proceeds from such offering,
along with approximately $7.1 million in borrowings under
our new revolving credit facility, to repay all of the
outstanding borrowings under our recently executed first and
second lien term loan facilities, including all accrued and
unpaid interested related thereto. Additionally, the revolving
credit facility was increased to a maximum borrowing capacity of
$150.0 million immediately following this transaction. See
Liquidity and Capital Resources included elsewhere
in this registration statement.
On February 21, 2005, Winn-Dixie, a merchant customer with
which we had approximately 849 ATMs deployed as of June 30,
2005, and which accounted for approximately 2.4% of our total
revenues for the six months ended June 30, 2005, filed for
bankruptcy protection. As part of its bankruptcy restructuring
efforts, Winn-Dixie announced that it was planning to close
approximately 326 of its existing 913 stores. Of the
326 locations identified for closure by Winn-Dixie,
approximately 307 were locations in which we had deployed ATMs.
Accordingly, during the months of July and August 2005, all 307
ATMs were deinstalled from those locations, leaving us with
approximately 542 remaining operating locations as of
September 30, 2005.
We are contractually obligated to pay certain lease payments for
279 of the ATMs that have been deinstalled, with such leases
expiring at varying dates between November 30, 2005 and
December 31, 2007. The estimated undiscounted amount of the
remaining lease payments for the deinstalled ATMs as of
September 30, 2005 was approximately $1.0 million.
Pursuant to the ATM management agreement that we assumed in
connection with acquisition of the Winn-Dixie ATM portfolio in
2003, Winn-Dixie was required to provide us with a rebate for
most ATMs that were removed due to its store closures.
Additionally, as part of our acquisition agreement with the
former owner of the Winn-Dixie ATM portfolio, we were designated
as the beneficiary of a letter of credit under which we could
make draws in the event Winn-Dixie refused to pay such rebates.
As of the date of this filing, we have fully drawn
$3.6 million under such letter of credit, the proceeds of
which have been and will continue to be utilized to help defray
a portion of the ongoing lease costs mentioned above, as well as
the costs associated with removing the aforementioned ATMs from
the closed store locations.
As of September 30, 2005, there was an arbitration action
pending against us by the former owner of the Winn-Dixie ATM
portfolio for restitution of a portion of the funds drawn by us
under the aforementioned
38
letter of credit. See Business Legal
Proceedings. However, such arbitration action was settled
in January 2006, the result of which had no material impact on
our financial condition or results of operations.
Finally, if Winn-Dixies restructuring efforts are
unsuccessful and additional store closings are announced or
current transaction levels decline, we may be required to record
an impairment charge related to the tangible and intangible
assets associated with the Winn-Dixie contract. At this point,
we believe that no impairment is warranted based upon the
operating performance of the remaining installed ATMs. As of
September 30, 2005, the carrying amount of such assets
totaled approximately $3.7 million. Additionally, we have
approximately $1.8 million in future contractual operating
lease payments associated with many of the ATMs that are still
operating within the remaining Winn-Dixie store locations.
In August and September 2005, Hurricanes Katrina and Rita struck
the Gulf Coast of the United States, and in the process,
temporarily disrupted our ATM operations in portions of Alabama,
Florida, Louisiana, Mississippi and Texas. Approximately 500
ATMs were initially impacted by the storms.
While we saw a noticeable decline in transactions in the
impacted areas immediately after the storms, we also saw a
corresponding increase in transactions in areas adjacent to the
impacted locations, including an increase in transactions
associated with ATMs located in neighboring cities and states.
Accordingly, the lost transactions associated with the impacted
ATMs did not have a material impact on our ongoing operations.
However, we did record an approximately $0.1 million
pre-tax charge during the three months ended September 30,
2005, related to the costs incurred under our insurance policies
to replace the ATMs (and in some cases the related cash
balances) that were lost or damaged as a result of the storms.
On October 24, 2005, Hurricane Wilma struck the Gulf Coast
of the United States, and in the process, temporarily disrupted
our ATM operations in portions of South Florida. Immediately
following the storm, approximately 311 ATMs were not transacting
primarily due to power outages and communication issues
resulting from the storm. However, unlike Hurricanes Katrina and
Rita, many of the impacted ATMs suffered no physical damage and
were back up and transacting within a very short period of time
following the storm. Accordingly, Hurricane Wilma did not have a
material impact on our results of operations or financial
condition.
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United Kingdom Transaction Declines
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During the three months ended September 30, 2005, our
United Kingdom ATM portfolio experienced a slight year-over-year
decline in withdrawal transactions. After additional research,
we determined that such decline was essentially limited to those
ATMs in which new, non-motorized card readers had recently been
installed to bring such ATMs into compliance with recently
enacted security upgrade requirements in the United Kingdom. We
believe that the design of the new card reader installed on such
ATMs makes it difficult for ATM users to fully insert their ATM
cards, thus resulting in an increased number of declined and
aborted transactions.
We are currently in the process of speaking with the ATM
manufacturer that utilizes the aforementioned card reader system
to determine if there is a manufacturing solution to this issue.
In the meantime, we are modifying the signage and screen
messages on the impacted ATMs to provide additional information
to the ATM users on how to properly insert their cards in the
new card readers. At this point, we are unable to accurately
predict whether these actions will fully resolve this issue, and
if so, when such resolution will occur.
Critical Accounting Policies and Estimates
Our consolidated financial statements included elsewhere in this
registration statement have been prepared in accordance with
accounting principles generally accepted in the United States,
which require that management make numerous estimates and
assumptions. Actual results could differ from those estimates
and assumptions, impacting our reported results of operations
and financial position. We describe our significant
39
accounting policies more fully in note 1 to our
consolidated financial statements included elsewhere in this
registration statement. The significant accounting policies and
estimates described here are those that are most important to
the depiction of our financial condition and results of
operations and the application of which requires
managements most subjective judgments in making estimates
about the effect of matters that are inherently uncertain.
Goodwill and intangible assets.
Historical goodwill
represents the excess of the amount paid over the fair value of
the assets acquired and liabilities assumed in connection with
our past business combinations. As of September 30, 2005,
such goodwill balance totaled $160.6 million,
$82.1 million of which related to our acquisition of the
E*TRADE Access, Inc. ATM portfolio in June 2004, and
$78.5 million of which related to our acquisition of Bank
Machine in May 2005. Intangible assets, net, consists primarily
of acquired merchant contracts and relationships, deferred
financing costs, exclusive license agreements and the Bank
Machine trade name acquired as part of the Bank Machine
acquisition. Our intangible assets totaled $74.8 million,
net of accumulated amortization, as of September 30, 2005.
SFAS No. 142,
Goodwill and Other Intangible
Assets,
provides that goodwill and other intangible assets
that have indefinite useful lives will not be amortized, but
instead must be tested at least annually for impairment, and
intangible assets that have finite useful lives should continue
to be amortized over their estimated useful lives. SFAS 142
also provides specific guidance for testing goodwill and other
non-amortized intangible assets for impairment. SFAS 142
requires management to make certain estimates and assumptions in
order to allocate goodwill to reporting units and to determine
the fair value of a reporting units net assets and
liabilities, including, among other things, an assessment of
market condition, projected cash flows, interest rates and
growth rates, which could significantly impact the reported
value of goodwill and other intangible assets. Furthermore,
SFAS 142 exposes us to the possibility that changes in
market conditions could result in potentially significant
impairment charges in the future.
We evaluate the recoverability of our goodwill and intangible
assets by estimating the future discounted cash flows of the
businesses or portfolios of contracts to which the goodwill and
intangible assets relate. We use discount rates corresponding to
our cost of capital, risk adjusted as appropriate, to determine
such discounted cash flows, and consider current and anticipated
business trends, prospects and other market and economic
conditions when performing our evaluations. Such evaluations are
performed at minimum on an annual basis, or more frequently
based on the occurrence of events that might indicate a
potential impairment. Such events include, but are not limited
to, items such as the loss of a significant contract or a
material change in the terms or conditions of a significant
contract.
Valuation of long-lived assets.
In accordance with
SFAS No. 144,
Accounting for the Disposal or
Impairment of Long-Lived Assets,
long-lived assets, such as
property, plant, and equipment, and purchased intangibles
subject to amortization, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. The recoverability of
assets to be held and used is measured by a comparison of the
carrying amount of an asset to the estimated undiscounted future
cash flows expected to be generated by the asset. If the
carrying amount of an asset exceeds its estimated undiscounted
future cash flows, an impairment charge would be recognized by
the amount that the carrying amount of the asset exceeds the
fair value of the asset. Our determination that an adverse event
or change in circumstance has occurred will generally involve
(1) a greater attrition rate compared to estimated
renewals, (2) an unexpected decline in transactions without
any offsetting incremental revenues (i.e., bank branding), or
(3) a change in strategy affecting the utility of the
asset. Our measurement of the fair value of an impaired asset
will generally be based on an estimate of discounted future cash
flows.
Income taxes.
Income tax provisions are based on taxes
payable or refundable for the current year and deferred taxes on
temporary differences between the amount of taxable income and
income before income taxes and between the tax basis of assets
and liabilities and their reported amounts in our financial
statements. We include deferred tax assets and liabilities in
our financial statements at currently enacted income tax rates.
As changes in tax laws or rates are enacted, we adjust our
deferred tax assets and liabilities through income tax
provisions.
40
In assessing the realizability of deferred tax assets, we
consider whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The
ultimate realization of deferred tax assets is dependent on the
generation of future taxable income during the periods in which
those temporary differences become deductible. We consider the
scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income
and projections for future taxable income over the periods in
which the deferred tax assets are deductible, we believe it is
more likely than not that we will realize the benefits of these
deductible differences. If we do not generate future taxable
income, we will not realize these tax assets and the write-off
of those assets will adversely affect our results.
Results of Operations
The following table sets forth our statement of operations
information as a percentage of total revenues for the period
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Years Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues
|
|
|
94.7
|
%
|
|
|
92.3
|
%
|
|
|
86.0
|
%
|
|
|
96.3
|
%
|
|
|
95.6
|
%
|
ATM product sales and other revenues
|
|
|
5.3
|
|
|
|
7.7
|
|
|
|
14.0
|
|
|
|
3.7
|
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
|
|
100.0
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of ATM operating revenues
|
|
|
74.4
|
|
|
|
72.7
|
|
|
|
71.4
|
|
|
|
74.6
|
|
|
|
75.0
|
|
|
Cost of ATM product sales and other revenues
|
|
|
4.5
|
|
|
|
7.2
|
|
|
|
13.1
|
|
|
|
3.5
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues (exclusive of depreciation shown
separately below)
|
|
|
78.9
|
|
|
|
79.9
|
|
|
|
84.5
|
|
|
|
78.1
|
|
|
|
78.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
21.1
|
|
|
|
20.1
|
|
|
|
15.5
|
|
|
|
21.9
|
|
|
|
21.2
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
7.0
|
|
|
|
6.5
|
|
|
|
8.9
|
|
|
|
5.8
|
|
|
|
6.8
|
|
|
Depreciation and accretion expense
|
|
|
3.5
|
|
|
|
3.3
|
|
|
|
2.4
|
|
|
|
4.3
|
|
|
|
3.2
|
|
|
Amortization expense
|
|
|
2.9
|
|
|
|
3.5
|
|
|
|
2.4
|
|
|
|
2.9
|
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
13.4
|
|
|
|
13.3
|
|
|
|
13.7
|
|
|
|
13.0
|
|
|
|
13.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
7.7
|
|
|
|
6.8
|
|
|
|
1.8
|
|
|
|
8.9
|
|
|
|
8.1
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
3.7
|
|
|
|
3.0
|
|
|
|
1.3
|
|
|
|
7.1
|
|
|
|
4.0
|
|
|
Minority interest in subsidiary
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
Other
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
3.8
|
|
|
|
3.1
|
|
|
|
1.4
|
|
|
|
7.5
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
3.9
|
|
|
|
3.7
|
|
|
|
0.4
|
|
|
|
1.4
|
|
|
|
3.9
|
|
Income tax provision
|
|
|
1.5
|
|
|
|
1.4
|
|
|
|
0.2
|
|
|
|
0.5
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle
|
|
|
2.4
|
|
|
|
2.3
|
|
|
|
0.2
|
|
|
|
0.9
|
|
|
|
2.4
|
|
Cumulative effect of change in accounting principle for asset
retirement obligations, net of related income tax benefit
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2.4
|
%
|
|
|
2.2
|
%
|
|
|
0.2
|
%
|
|
|
0.9
|
%
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
The following table sets forth, for the years ended
December 31, 2004, 2003 and 2002, and the nine months ended
September 30, 2005 and 2004, information concerning key
measures we rely on to gauge our operating performance,
including total surcharge-bearing transactions,
surcharge-bearing transactions per ATM, and gross profit and
gross profit margin per surcharge-bearing transaction.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
Ended
|
|
|
|
Years Ended December 31,
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of ATMs
|
|
|
18,429
|
|
|
|
10,662
|
|
|
|
7,417
|
|
|
|
26,099
|
|
|
|
17,216
|
|
Total transactions (in thousands)
|
|
|
111,577
|
|
|
|
64,605
|
|
|
|
36,212
|
|
|
|
115,152
|
|
|
|
76,712
|
|
Monthly total transactions per ATM
|
|
|
505
|
|
|
|
505
|
|
|
|
407
|
|
|
|
490
|
|
|
|
495
|
|
Total surcharge-bearing transactions (in thousands)
|
|
|
82,087
|
|
|
|
48,778
|
|
|
|
28,978
|
|
|
|
79,943
|
|
|
|
56,733
|
|
Monthly surcharge-bearing transactions per ATM (in thousands)(1)
|
|
|
371
|
|
|
|
381
|
|
|
|
326
|
|
|
|
340
|
|
|
|
366
|
|
Per surcharge-bearing transaction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Surcharge revenues
|
|
$
|
1.53
|
|
|
$
|
1.43
|
|
|
$
|
1.42
|
|
|
$
|
1.69
|
|
|
$
|
1.52
|
|
|
Interchange revenues
|
|
|
0.63
|
|
|
|
0.60
|
|
|
|
0.57
|
|
|
|
0.62
|
|
|
|
0.63
|
|
|
Other transaction revenues(2)
|
|
|
0.06
|
|
|
|
0.06
|
|
|
|
0.05
|
|
|
|
0.09
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total transaction revenues
|
|
$
|
2.23
|
|
|
$
|
2.09
|
|
|
$
|
2.04
|
|
|
$
|
2.40
|
|
|
$
|
2.21
|
|
|
Cost of transaction revenues
|
|
|
1.75
|
|
|
|
1.65
|
|
|
|
1.70
|
|
|
|
1.86
|
|
|
|
1.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction gross profit(3)
|
|
$
|
0.48
|
|
|
$
|
0.44
|
|
|
$
|
0.34
|
|
|
$
|
0.54
|
|
|
$
|
0.48
|
|
|
Transaction gross profit margin
|
|
|
21.5
|
%
|
|
|
21.1
|
%
|
|
|
16.7
|
%
|
|
|
22.5
|
%
|
|
|
21.5
|
%
|
|
|
(1)
|
Monthly surcharge-bearing transactions per ATM for the nine
month period ended September 30, 2005 were lower than in
the nine month period September 30, 2004 largely because
the ATMs acquired from E*TRADE Access, Inc. on June 30,
2004 were primarily merchant-owned machines with lower average
transactions per ATM.
|
|
(2)
|
Other transaction revenues consist primarily of bank and network
branding fees (for periods subsequent to 2002), and other
transaction-based fees.
|
|
(3)
|
Transaction gross profit is a measure of profitability that uses
only the revenue and expenses that are transaction based. The
revenue and expenses from ATM equipment sales and other
ATM-related services are not included.
|
|
|
|
Nine Months Ended September 30, 2005 and
September 30, 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
ATM operating revenues
|
|
$
|
191,731
|
|
|
$
|
125,169
|
|
|
|
53.2
|
%
|
ATM product sales and other revenues
|
|
|
7,457
|
|
|
|
5,772
|
|
|
|
29.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
199,188
|
|
|
$
|
130,941
|
|
|
|
52.1
|
%
|
|
|
|
|
|
|
|
|
|
|
As indicated in the table above, total revenues increased by
52.1% for the nine months ended September 30, 2005 when
compared to the same period in 2004. Such increase was primarily
driven by the acquisition of the E*TRADE Access, Inc. ATM
portfolio in June 2004, and to a lesser extent, the Bank
Machine, BAS Communications, Inc. and Neo Concepts, Inc. ATM
acquisitions consummated in 2005. Additionally, higher overall
network and bank branding revenues contributed to the
year-over-year increase.
ATM product sales and other revenues increased approximately
29.2% for the nine months ended September 30, 2005, when
compared to the same period in 2004. Such increase was primarily
due to higher
42
overall ATM equipment sales associated with the acquired E*TRADE
Access ATM portfolio, which was in place for the entire nine
months in 2005 but only three months in 2004.
Surcharge-bearing transactions increased approximately 40.9% to
79.9 million transactions for the nine months ended
September 30, 2005 from 56.7 million transactions
during the same period in 2004. This growth in transaction
volume was driven largely by the E*TRADE Access ATM portfolio
acquisition. While interchange revenue per transaction remained
relatively unchanged from 2004 to 2005, surcharge revenue per
transaction increased approximately 11.2% from $1.52 in 2004 to
$1.69 in 2005. Such increase was primarily due to a concerted
effort on our part to increase the surcharge rates for selected
merchants whose rates have historically been below market, and
the impact of the higher surcharge rates associated with the
acquired Bank Machine operations (which, on a US Dollar
converted basis, average roughly $2.60 per transaction).
However, despite the above increases, surcharge-bearing
transactions per ATM decreased from 366 in 2004 to 340 in 2005.
Such decrease was primarily due to the E*TRADE Access ATM
portfolio acquisition, which, as previously discussed, included
primarily merchant-owned ATMs with lower average
surcharge-bearing transactions per ATM.
|
|
|
Cost of Revenues and Gross Margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Cost of ATM operating revenues
|
|
$
|
148,528
|
|
|
$
|
98,211
|
|
|
|
51.2
|
%
|
Cost of ATM product sales and other revenues
|
|
|
6,976
|
|
|
|
4,997
|
|
|
|
39.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
$
|
155,504
|
|
|
$
|
103,208
|
|
|
|
50.7
|
%
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues gross margin
|
|
|
22.5
|
%
|
|
|
21.5
|
%
|
|
|
|
|
ATM product sales and other revenues gross margin
|
|
|
6.5
|
%
|
|
|
13.4
|
%
|
|
|
|
|
Total gross margin
|
|
|
21.9
|
%
|
|
|
21.2
|
%
|
|
|
|
|
As indicated in the table above, total cost of revenues
increased by 50.7% for the nine months ended September 30,
2005 when compared to the same period in 2004. Such increase was
primarily due to the higher overall cost of ATM operating
revenues as a result of the E*TRADE Access, Inc. ATM portfolio
acquisition in June 2004 and, to a lesser extent, the three
acquisitions consummated in 2005. Because the majority of the
ATMs acquired in the E*TRADE Access, Inc. ATM portfolio
acquisition were merchant-owned machines, the related merchant
fees are higher than those paid under company-owned
arrangements. Overall, domestic merchant fees increased by
approximately $31.2 million, or 58.5%, during the nine
months ended September 30, 2005, when compared to the same
period in 2004.
The other primary components of cost of ATM operating
revenues maintenance fees, cost of cash, and armored
courier fees also contributed to the domestic cost
increases for the
year-to
-date periods.
Such costs increased by $10.3 million, or 37.4% for the
nine months ended September 30, 2005, when compared to the
prior year.
Our total gross margin for the nine months ended
September 30, 2005, totaled 21.9%, up slightly from the
21.2% level achieved during the nine months ended
September 30, 2004. Such increase was primarily
attributable to higher than normal operating costs incurred
during the three months ended September 30, 2004, as we
worked to transition the acquired E*TRADE Access, Inc. ATM
portfolio on to our existing operating platform.
While our recent acquisitions of predominantly company-owned ATM
portfolios, including Bank Machine, should have a positive
long-term impact on our overall gross margin percentage, we
currently expect that our near term gross margin percentage will
remain relatively consistent with the level achieved during the
most recent quarter. This is primarily due to the recent
deployment of approximately 1,000 company-owned ATMs in
certain Walgreens and CVS locations throughout the United
States. We currently expect that many of these ATMs will
generate negative gross margins during the first 6-12 months
43
following their initial deployment. However, despite the initial
negative returns associated these deployments, we expect that
such locations will become profitable as the transaction levels
increase over time and the underlying ATMs become subject to
anticipated future bank branding arrangements.
|
|
|
Selling, General and Administrative Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Selling, general and administrative expense
|
|
$
|
11,552
|
|
|
$
|
8,851
|
|
|
|
30.5
|
%
|
Percentage of revenues
|
|
|
5.8
|
%
|
|
|
6.8
|
%
|
|
|
|
|
As indicated in the table above, selling, general and
administrative expense increased by 30.5% for the nine months
ended September 30, 2005 when compared to the same period
in 2004. Such increase was primarily due to the hiring of
additional employees over the past year and higher overall
professional fees, both of which were the result of the
acquisitions consummated in 2004 and 2005.
We expect that our selling, general and administrative expense
will increase slightly in the future due to higher accounting,
legal and professional fees resulting from our becoming subject
to the reporting requirements of the Securities and Exchange
Commission, including those under the Sarbanes-Oxley Act of
2002, following the registration of our recently issued senior
subordinated notes.
|
|
|
Depreciation and Accretion Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Depreciation and accretion expense
|
|
$
|
8,530
|
|
|
$
|
4,257
|
|
|
|
100.4
|
%
|
Percentage of revenues
|
|
|
4.3
|
%
|
|
|
3.2
|
%
|
|
|
|
|
As indicated in the table above, depreciation and accretion
expense increased by 100.4% for the nine months ended
September 30, 2005 when compared to the same period in
2004. Such increase was primarily due to the incremental ATMs
acquired through the E*TRADE Access transaction in June 2004,
and, to a lesser extent, the incremental ATMs associated with
the acquisitions consummated in 2005 and the current year
company-owned ATM rollouts.
In the future, we expect that our depreciation and accretion
expense will grow in proportion to the increase in the number of
ATMs we own and deploy throughout our company-owned portfolio.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Amortization expense
|
|
$
|
5,689
|
|
|
$
|
4,092
|
|
|
|
39.0
|
%
|
Percentage of revenues
|
|
|
2.9
|
%
|
|
|
3.1
|
%
|
|
|
|
|
As indicated in the table above, amortization expense, which is
primarily comprised of amortization of intangible merchant
contracts and relationships associated with our past
acquisitions, increased by 39.0% for the nine months ended
September 30, 2005 when compared to the same period in
2004. Such increase was primarily due to the incremental
amortization expense associated with the merchant contracts and
relationships acquired in the E*TRADE Access transaction in June
2004, and, to a lesser extent, the incremental merchant
contracts and relationships acquired in 2005.
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Interest expense, net
|
|
$
|
14,224
|
|
|
$
|
5,211
|
|
|
|
173.0
|
%
|
Percentage of revenues
|
|
|
7.1
|
%
|
|
|
4.0
|
%
|
|
|
|
|
As indicated in the table above, interest expense increased by
173.0% for the nine months ended September 30, 2005 when
compared to the same period in 2004. Such increase was primarily
attributable to the additional borrowings under our bank credit
facilities in June 2004 and May 2005 to finance the E*TRADE
Access ATM portfolio acquisition and the Bank Machine
acquisition, respectively, and the incremental interest expense
associated with our senior subordinated notes offering in August
2005. Additionally, the interest expense amount for the
nine-months ended September 30, 2005 included the pre-tax
write-off of approximately $3.4 million in deferred
financing costs associated with the repayment of, and amendments
to, our existing bank credit facilities. For the nine months
ended September 30, 2004, we wrote off approximately
$2.5 million in deferred financing costs associated with
the amendment of our then existing bank credit facility.
We expect that our future interest expense levels will increase
as a result of the issuance of the senior subordinated notes in
August 2005. Such notes, which carry an effective interest rate
of approximately 9.375%, were utilized to retire our outstanding
first and second lien term loans, which carried a
weighted-average interest rate of approximately 7.1% at the time.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Income tax provision
|
|
$
|
972
|
|
|
$
|
1,931
|
|
|
|
(49.7
|
)%
|
Effective tax rate
|
|
|
34.6
|
%
|
|
|
38.0
|
%
|
|
|
|
|
As indicated in the table above, our income tax provision
decreased by 49.7% for the nine months ended September 30,
2005 when compared to the same period in 2004. On an absolute
basis, the
year-over
-year change
was driven by a corresponding decrease in our pre-tax income.
While we expect that our effective tax rate will remain
relatively consistent in future periods, such rate could vary
from quarter to quarter depending on the mix of pre-tax income
and loss amounts generated in our domestic and foreign tax
jurisdictions. Additionally, we expect that our cash tax rate
may increase in the future as a result of the recently
consummated Bank Machine acquisition.
|
|
|
Years Ended December 31, 2004 (2004) and
December 31, 2003 (2003)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
ATM operating revenues
|
|
$
|
182,711
|
|
|
$
|
101,950
|
|
|
|
79.2
|
%
|
ATM product sales and other revenues
|
|
|
10,204
|
|
|
|
8,493
|
|
|
|
20.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
192,915
|
|
|
$
|
110,443
|
|
|
|
74.7
|
%
|
|
|
|
|
|
|
|
|
|
|
As indicated in the table above, total revenues increased by
74.7% for the year ended December 31, 2004, when compared
to 2003. ATM operating revenues, the largest component of total
revenues, increased
45
79.2% in 2004 and accounted for approximately 94.7% of our total
revenues in 2004 versus approximately 92.3% in 2003. The
significant year-over-year increase in ATM operating revenues
was primarily driven by an increase in the number of ATMs and
related transactions resulting from the E*TRADE Access ATM
portfolio acquisition in June 2004, and to a lesser extent,
several other ATM portfolio acquisitions consummated during
2003, including XtraCash (February 2003), National Bank
Equipment (May 2003), and American Express (August 2003).
Additionally, the award of a new contract by ExxonMobil also
helped contribute to the
year-over
-year
increase. Surcharge fees and interchange fees were consistent on
a percentage basis in both periods, representing approximately
97.1% of ATM operating revenues for both 2004 and 2003. The
remaining portion of ATM operating revenues was comprised of
bank and network branding revenues, which accounted for
approximately 1.3% of our ATM operating revenues in 2004 and
1.1% in 2003, and revenues from a variety of individually
insignificant sources that together accounted for approximately
1.6% of our ATM operating revenues in 2004 and 1.8% of our ATM
operating revenues in 2003.
ATM product sales and other revenues increased approximately
20.1% for the year ended December 31, 2004, when compared
to 2003, and represented approximately 5.3% of our total
revenues in 2004 versus approximately 7.7% in 2003. The
year-over-year increase in ATM product sales and other revenues
was primarily driven by higher overall equipment sales
associated with the acquired E*TRADE Access ATM portfolio
acquisition, offset somewhat by a lower VAR sales as a result of
a decrease in the number of associate VARs to whom we sold
products to in 2004. The reduction in the number of associate
VARs resulted from several factors, including the promotion by
NCR of several associate VARs to master VAR status, meaning
those entities no longer needed to buy products through us
because they could buy directly from NCR, the increased sales
efforts of these new master VARs directed at some of our
existing associate VARs, and our decision to cease doing
business with some of our associate VARs due to credit concerns.
Surcharge-bearing transactions increased approximately 68.2% to
82.1 million transactions in 2004, from 48.8 million
transactions in 2003. This growth in transaction volume was
driven largely by an approximately 105% increase in the number
of ATMs that we owned or operated at year end 2004 when compared
to year end 2003. While interchange revenue per transaction
remained relatively unchanged from 2003 to 2004, surcharge
revenues per transaction of $1.53 in 2004 increased
approximately 7.0% from the surcharge revenues per transaction
of $1.43 in 2003. Such increase was primarily due to a concerted
effort on our part to increase the surcharge rates for selected
merchants whose rates have historically been below market.
However, despite the above increases, surcharge-bearing
transactions per ATM decreased from 381 in 2003 to 371 in 2004.
Such decrease was primarily due to the E*TRADE Access ATM
portfolio acquisition, which, as previously discussed, included
primarily merchant-owned portfolio of ATMs with lower average
surcharge-bearing
transactions per ATM.
|
|
|
Cost of Revenues and Gross Margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Cost of ATM operating revenues
|
|
$
|
143,504
|
|
|
$
|
80,286
|
|
|
|
78.7
|
%
|
Cost of ATM product sales and other revenues
|
|
|
8,703
|
|
|
|
7,903
|
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
$
|
152,207
|
|
|
$
|
88,189
|
|
|
|
72.6
|
%
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues gross margin
|
|
|
21.5
|
%
|
|
|
21.2
|
%
|
|
|
|
|
ATM product sales and other revenues gross margin
|
|
|
14.7
|
%
|
|
|
6.9
|
%
|
|
|
|
|
Total gross margin
|
|
|
21.1
|
%
|
|
|
20.1
|
%
|
|
|
|
|
As indicated in the table above, total cost of revenues
increased by approximately 72.6% in 2004 when compared to 2003.
The primary driver of this increase was a 78.7% year-over-year
increase in the cost of ATM operating revenues. In 2004, the
largest component of cost of ATM operating revenues, merchant
fees, increased $42.8 million, or approximately 112.6%, to
$80.8 million, from $38.0 million for 2003, and
accounted for approximately 56.3% of total cost of ATM operating
revenues. This increase was the result of
46
the increased merchant fees paid with respect to the
aforementioned ATM contracts that were acquired during 2003 and
2004. The three other primary components of the cost of ATM
operating revenues, maintenance contracts, cost of cash, and
armored courier fees, increased $13.2 million, or
approximately 67.3%, to $32.8 million for 2004, from
$19.6 million for the same period in 2003, and accounted
for 22.9% of total cost of ATM operating revenues. On an
absolute basis, this increase was due to the increase in the
number of ATMs operated by us, primarily as a result of the
aforementioned acquisitions. Of the $64.0 million increase
in total costs of revenues, $48.8 million was attributable
to such acquisitions and the new ExxonMobil contract,
$16.0 million was attributable to other internal growth
efforts and the effects of a full years worth of results
from the prior year acquisitions, and $(0.8) million was
attributable to lower costs as a result of the previously
mentioned reduced VAR sales.
On a per surcharge-bearing transaction basis, merchant fees
increased approximately 25.6%, from $0.78 in 2003 to $0.98 in
2004. This was primarily the result of a shift in the mix of
ATMs we operate to more merchant-owned arrangements as a result
of the E*Trade Access ATM portfolio acquisition, as previously
discussed. The other components of cost of ATM operating
revenues increased on a per surcharge-bearing transaction basis
largely as a result of the increase in the proportion of our
ATMs operated under
company-owned
arrangements, where we retain almost total operational
responsibility of the ATMs. However, such increases were
partially offset by more favorable pricing from our vendors as a
result of our increased size.
Gross profit represented approximately 21.1% of total revenues
for 2004, compared to approximately 20.1% for 2003. Gross profit
as a percentage of total revenues increased slightly due to
reductions in certain operating costs as a result of our
increased size and scope and our move towards higher-margin
company-owned
ATM
arrangements. Additionally, the reduction in VAR sales as a
percentage of total revenues in 2004, which operate with lower
gross margins, also contributed to the year-over-year increase.
|
|
|
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Selling, general and administrative expense
|
|
$
|
13,571
|
|
|
$
|
7,229
|
|
|
|
87.7
|
%
|
Percentage of revenues
|
|
|
7.0
|
%
|
|
|
6.5
|
%
|
|
|
|
|
As indicated in the table above, selling, general and
administrative expenses increased 87.7% in 2004 when compared to
2003. Such increase was attributable to a number of items,
including (1) approximately $1.8 million in costs
associated with our terminated initial public offering in 2004,
(2) approximately $2.8 million in compensation related
costs associated with a restricted stock grant made to our chief
executive officer in 2004, including a related bonus to cover
the tax liability associated with such grant, and
(3) incremental headcount costs associated with the
increased size and scope of our operations.
|
|
|
Depreciation and Accretion Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Depreciation and accretion expense
|
|
$
|
6,785
|
|
|
$
|
3,632
|
|
|
|
86.8
|
%
|
Percentage of revenues
|
|
|
3.5
|
%
|
|
|
3.3
|
%
|
|
|
|
|
As indicated in the table above, depreciation of property and
equipment increased approximately 86.8% in 2004 when compared to
2003. Such increase was primarily due to capital expenditures
associated with the aforementioned acquisitions, increases in
ATMs deployed through internal growth initiatives, and the
replacement of ATMs under expired operating leases.
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Amortization expense
|
|
$
|
5,508
|
|
|
$
|
3,842
|
|
|
|
43.4
|
%
|
Percentage of revenues
|
|
|
2.9
|
%
|
|
|
3.5
|
%
|
|
|
|
|
As indicated in the table above, amortization of intangible
assets increased by approximately 43.4% in 2004 when compared to
2003. Such increase was almost entirely due to an increase in
overall intangible assets (primarily merchant contracts) as a
result of our aforementioned acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Interest expense
|
|
$
|
7,050
|
|
|
$
|
3,346
|
|
|
|
110.7
|
%
|
Percentage of revenues
|
|
|
3.7
|
%
|
|
|
3.0
|
%
|
|
|
|
|
As indicated in the table above, interest expense increased
110.7% in 2004 when compared to 2003. Such increase was
primarily attributable to the additional borrowings under our
bank credit facilities as a result of the E*TRADE Access ATM
portfolio acquisition in June 2004, and the write-off of
previously deferred financing costs of approximately
$0.8 million as a result of the amendment of our bank
credit facilities. Additionally, we incurred approximately
$1.7 million in fees that were expensed immediately as
interest expense as part of the refinancing.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Income tax provision
|
|
$
|
2,956
|
|
|
$
|
1,511
|
|
|
|
95.6
|
%
|
Effective tax rate
|
|
|
39.1
|
%
|
|
|
36.9
|
%
|
|
|
|
|
As indicated in the table above, our income tax provision
increased by approximately 95.6% in 2004 when compared to 2003.
Such increase was essentially due to a corresponding increase in
income over the same period. The increase in our effective tax
rate from 36.9% in 2003 to 39.1% in 2004 was due primarily to
higher estimated state tax rates.
|
|
|
Cumulative Effect of Change in Accounting Principle (Net)
|
For 2004, our cumulative effect of change in accounting
principle was $0, compared to $0.1 million in 2003. There
were no new accounting pronouncements adopted during 2004 that
would require a cumulative effect change computation. In 2003,
the adoption of SFAS 143 resulted in the aforementioned
charge.
48
|
|
|
Years Ended December 31, 2003 (2003) and
December 31, 2002 (2002)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
ATM operating revenues
|
|
$
|
101,950
|
|
|
$
|
59,183
|
|
|
|
72.3
|
%
|
ATM product sales and other revenues
|
|
|
8,493
|
|
|
|
9,603
|
|
|
|
(11.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
110,443
|
|
|
$
|
68,786
|
|
|
|
60.6
|
%
|
|
|
|
|
|
|
|
|
|
|
As indicated in the table above, total revenues increased
approximately 60.6% in 2003 when compared to 2002. ATM operating
revenues, the largest component of total revenues, increased
72.3% in 2003 and accounted for approximately 92.3% of our total
revenues in 2003, compared to approximately 86.0% in 2002. In
2003, surcharge and interchange fees accounted for approximately
97.1% of our ATM operating revenues, compared to approximately
97.4% in 2002. The remaining portion of ATM operating revenues
is comprised of branding revenues, which accounted for
approximately 1.1% of our ATM operating revenues in 2003, and
revenues from a variety of individually insignificant sources
that together accounted for approximately 1.8% of our ATM
operating revenues in 2003. The year-over-year growth in ATM
operating revenues was primarily due to increased ATM
transaction volumes and ATM service revenues associated with
several acquired ATM networks, including Diebold (September
2002), XtraCash (February 2003), National Bank Equipment (May
2003), and American Express (August 2003). Additionally, the
award of a new contract by ExxonMobil (May 2003) also
contributed to the year-over-year growth.
ATM product sales and other revenues decreased 11.6% in 2003
when compared to 2002, and represented approximately 7.7% of our
total revenues in 2003 versus 14.0% in 2002. The year-over-year
decrease was primarily the result of a decrease in the number of
associate VARs to whom we sold products. This reduction in the
number of associate VARs resulted from several factors,
including the promotion by NCR of several associate VARs to
master VAR status, meaning those entities no longer needed to
buy products through us because they could buy directly from
NCR, the increased sales efforts of these new master VARs
directed at some of our existing associate VARs, and our
decision to cease doing business with some of our associate VARs
due to credit concerns.
Surcharge-bearing transactions increased approximately 68.3% to
48.8 million transactions in 2003, from 29.0 million
transactions in 2002. This growth in transaction volume was
driven largely by an approximately 45% increase in the number of
ATMs that we owned or operated at year-end 2003 when compared to
2002. While surcharge revenue and interchange revenue per
transaction remained relatively unchanged from 2002 to 2003,
surcharge-bearing transactions per ATM increased with the
increase in the number and percentage of ATMs we operate under
company-owned arrangements. ATMs added through acquisitions and
internal growth included 2,993 under company-owned arrangements
and 730 under merchant-owned arrangements.
|
|
|
Cost of Revenues and Gross Margins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Cost of ATM operating revenues
|
|
$
|
80,286
|
|
|
$
|
49,134
|
|
|
|
63.4
|
%
|
Cost of ATM product sales and other revenues
|
|
|
7,903
|
|
|
|
8,984
|
|
|
|
(12.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
$
|
88,189
|
|
|
$
|
58,118
|
|
|
|
51.7
|
%
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues gross margin
|
|
|
21.2
|
%
|
|
|
17.0
|
%
|
|
|
|
|
ATM product sales and other revenues gross margin
|
|
|
6.9
|
%
|
|
|
6.4
|
%
|
|
|
|
|
Total gross margin
|
|
|
20.1
|
%
|
|
|
15.5
|
%
|
|
|
|
|
49
As indicated in the table above, total cost of revenues
increased by approximately 51.7% in 2003 when compared to 2002.
The primary driver of this increase was a 63.4% year-over-year
increase in the cost of ATM operating revenues. In 2003, the
largest component of cost of ATM operating revenues, merchant
fees, increased $9.7 million, or approximately 34.3%, to
$38.0 million, from $28.3 million for 2002, and
accounted for approximately 47.3% of total cost of ATM operating
revenues. Such increase was the result of the merchant fees paid
with respect to the 3,723 additional ATMs we operated in 2003
compared to 2002. Two other primary components of the cost of
ATM operating revenues, cost of cash and armored courier fees,
increased $5.5 million, or approximately 93.2%, to
$11.4 million for 2003, from $5.9 million for 2002,
and accounted for approximately 14.2% of total cost of ATM
operating revenues. On an absolute basis, this increase
primarily resulted from the increase in the number of ATMs we
operated. Of the $30.1 million increase in total costs of
revenues, $19.8 million was attributable to new network
acquisitions, $2.2 million was attributable to the new
ExxonMobil contract and $8.1 million was attributable to
other internal growth and the effect of a full years
results and growth from prior year acquisitions. The cost of ATM
product sales and other revenues decreased 12.0% year-over-year
primarily due to a decrease in equipment sales, as we placed
less emphasis on such sales during 2003.
On a per surcharge-bearing transaction basis, merchant fees
decreased approximately 20.4%, from $0.98 in 2002 to $0.78 in
2003. This was primarily the result of a shift in the mix of
ATMs we operate to more company-owned arrangements, in which
merchant fees are typically lower than under merchant-owned
arrangements. The other components of cost of ATM operating
revenues increased on a per surcharge-bearing transaction basis
largely as a result of the increase in the proportion of our
ATMs operated under
company-owned
arrangements, where we retain almost total operational
responsibility. These increases were partially offset by more
favorable pricing from our vendors as a result of our increased
size.
Gross profit represented approximately 20.1% of total revenues
for 2003, compared to approximately 15.5% for 2002. Gross profit
as a percentage of total revenues increased primarily due to
higher margins from acquired company-owned ATMs and negotiated
reductions in operating costs due to our increased size and
scope.
|
|
|
Selling, General and Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Selling, general and administrative expense
|
|
$
|
7,229
|
|
|
$
|
6,142
|
|
|
|
17.7
|
%
|
Percentage of revenues
|
|
|
6.5
|
%
|
|
|
8.9
|
%
|
|
|
|
|
As indicated in the table above, selling, general and
administrative expenses increased approximately 17.7% in 2003
when compared to 2002. Such increase was primarily due to the
addition of employees and related expenses necessary to support
our growth. Although we have historically added very few
employees in connection with our acquisitions of ATM networks,
the overall growth in the size and scope of our operations over
the last several years has required us to add some additional
personnel. The increase in selling, general and administrative
expenses in 2003 primarily reflects the addition of our new
chief executive officer, the transition period of four and a
half months where the new and old chief executive officers
overlapped, and expenses related to stock compensation awards
made in connection with his hiring.
|
|
|
Depreciation and Accretion Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Depreciation and accretion expense
|
|
$
|
3,632
|
|
|
$
|
1,650
|
|
|
|
120.1
|
%
|
Percentage of revenues
|
|
|
3.3
|
%
|
|
|
2.4
|
%
|
|
|
|
|
50
As indicated in the table above, depreciation of property and
equipment increased approximately 120.1% in 2003 when compared
to 2002. Such increase was primarily due to capital expenditures
associated with our acquisition of several ATM networks,
increases in ATMs deployed through internal growth initiatives,
the replacement of ATMs under expired operating leases and the
increase in the proportion of our ATMs operated under
company-owned arrangements as compared to merchant-owned
arrangements. In 2003, we also began recognizing an accretion
expense to offset the increasing value of the liability
associated with expected future cash outflows for expected
equipment de-installations, as required by SFAS 143.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Amortization expense
|
|
$
|
3,842
|
|
|
$
|
1,641
|
|
|
|
134.1
|
%
|
Percentage of revenues
|
|
|
3.5
|
%
|
|
|
2.4
|
%
|
|
|
|
|
As indicated in the table above, amortization of intangible
assets increased approximately 134.1% in 2003 when compared to
2002. Such increase was almost entirely due to an increase in
overall intangible assets (primarily merchant contracts) as a
result of our aforementioned acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Interest expense
|
|
$
|
3,346
|
|
|
$
|
881
|
|
|
|
279.8
|
%
|
Percentage of revenues
|
|
|
3.0
|
%
|
|
|
1.3
|
%
|
|
|
|
|
As indicated in the table above, interest expense increased
approximately 279.8% in 2003 when compared to 2002. Such
increase was attributable to additional outstanding amounts
under our prior bank credit facility. In addition, a significant
portion of the increase was related to the write-off of prior
loan origination costs in conjunction with negotiated increases
in our borrowing base in 2003.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
% Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Income tax provision
|
|
$
|
1,511
|
|
|
$
|
154
|
|
|
|
881.2
|
%
|
Effective tax rate
|
|
|
36.9
|
%
|
|
|
52.0
|
%
|
|
|
|
|
As indicated in the table above, our income tax provision
increased by approximately 881.2% in 2003 when compared to 2002.
Such increase was essentially due to a corresponding increase in
income over the same period. The higher effective tax rate in
2002 was primarily due to higher state income taxes relative to
our federal income tax obligation during the period.
|
|
|
Cumulative Effect of Change in Accounting Principle (Net)
|
For 2003, our cumulative effect of change in accounting
principle was $0.1 million, compared to $0 in 2002. This
increase resulted from the adoption of SFAS 143 as of
January 1, 2003, as previously discussed.
51
Liquidity and Capital Resources
We have historically funded our operations primarily through
cash flow from operations and borrowings under our credit
facilities as well as private placements of equity securities.
We have historically used cash to invest in additional operating
ATMs, either through the acquisition of ATM networks or through
internally generated growth. We have also used cash to fund
increases in working capital and to pay interest and repay
principal, on our borrowings.
At September 30, 2005, we had approximately
$2.5 million in cash and cash equivalents on hand and
approximately $243.6 million in outstanding long-term debt
and notes payable, including the current portion related
thereto. The following table sets forth information from our
statements of cash flows for the years ended December 31,
2004, 2003 and 2002 and the nine months ended September 30,
2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
Nine Months
|
|
|
|
|
|
|
Ended
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
September 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
Net cash provided by operating activities
|
|
$
|
20,466
|
|
|
$
|
21,629
|
|
|
$
|
4,491
|
|
|
$
|
32,751
|
|
Net cash used in investing activities
|
|
|
(118,926
|
)
|
|
|
(29,663
|
)
|
|
|
(15,023
|
)
|
|
|
(133,344
|
)
|
Net cash provided by financing activities
|
|
|
94,318
|
|
|
|
10,404
|
|
|
|
10,741
|
|
|
|
101,833
|
|
Net cash provided by operating activities was $32.8 million
for the nine months ended September 30, 2005, and
$20.5 million for the year ended December 31, 2004.
The increase during
year-to
-date period in
2005 is primarily attributable to the acquisition of the E*TRADE
Access ATM portfolio in June 2004 and, to a lesser extent, the
acquisitions consummated during the first nine months of 2005.
Net cash provided by operating activities was $21.6 million
for the year ended December 31, 2003, and $4.5 million
for the year ended December 31, 2002, again reflecting the
growth in our ATM portfolio resulting from the acquisitions
consummated during 2003.
Our surcharge and interchange revenues are typically collected
in cash on a daily basis or within a very short period of time
subsequent to the end of each month. We typically pay our
vendors, including certain of our merchant customers, within
30 days subsequent to the end of each month. Accordingly,
we will typically utilize the excess cash flow generated from
such timing differences to fund our capital expenditure needs or
to repay amounts outstanding under our revolving line of credit
agreement (which is reflected as a long-term liability in the
accompanying consolidated balance sheets). We will therefore
typically reflect net working capital deficit positions and
minimal book cash balances in our financial statements as a
result of these cash flow timing differences, and consider such
occurrences to be a normal part of our ongoing operations.
Net cash used in investing activities totaled
$133.3 million for the nine months ended September 30,
2005, $118.9 million in 2004, $29.7 million in 2003,
and $15.0 million in 2002. During these periods, a majority
of the cash used in investing activities was utilized to fund
the acquisition of a number of ATM portfolios and businesses,
including the E*TRADE Access ATM portfolio in 2004 and the Bank
Machine acquisition in 2005. Additionally, such cash was
utilized to make capital expenditures related to such
acquisitions, to install additional ATMs in connection with
acquired merchant relationships, and to deploy ATMs in
additional locations of merchants with which we had existing
relationships. Total capital expenditures were
$27.5 million for the nine months ended September 30,
2005, $19.7 million for the year ended December 31,
2004, $7.3 million for 2003 and $2.3 million for 2002.
We currently have no material purchase commitments, but we
continually evaluate opportunities to acquire additional ATM
networks.
In future periods, we expect to make capital expenditures to
upgrade our ATMs to be both Encrypting PIN Pad (EPP)
and Triple DES compliant. We have budgeted approximately
$10.5 million to accomplish these upgrades on all of our
ATMs by the end of 2007. Of this total, we spent approximately
$0.1 million during the remaining three months of 2005, and
anticipate spending $1.4 million in 2006 and
$9.0 million in 2007. We believe this time frame will be
acceptable to the major processing networks. However, if we must
accelerate our upgrade schedule, we would also be required to
significantly accelerate our capital expenditures with respect
to these upgrades.
52
In addition to the above, we may be required to make additional
capital expenditures in future periods to comply with
anticipated new regulations resulting from the Americans with
Disabilities Act (ADA). Furthermore, in connection
with our E*TRADE Access portfolio acquisition, we assumed
responsibility for the outcome of a lawsuit instituted in
Massachusetts Federal District Court by the National Foundation
for the Blind and the Commonwealth of Massachusetts. In this
lawsuit, the plaintiffs initially sought to require E*TRADE
Access to make all of the ATMs in its network
voice-enabled, or capable of providing audible
instructions to a visually-impaired person upon that person
inserting a headset plug into an outlet at the ATM. We
acknowledge that recently proposed accessibility guidelines
under the ADA would require
voice-enabling
technology for newly installed ATMs and for ATMs that are
otherwise retrofitted or substantially modified. However, these
new rules have not yet been adopted by the Department of
Justice. Assuming the proposed guidelines will be adopted in
substantially their current form, we currently estimate that we
would incur approximately $2.7 million in capital
expenditures over the next three years to retrofit all of our
company-owned ATMs. Business Legal
Proceedings.
Net cash provided by financing activities was
$101.9 million for the nine months ended September 30,
2005, $94.3 million for year ended December 31, 2004,
$10.4 million for 2003, and $10.7 million for 2002.
For all periods presented, substantially all of the cash
provided by financing activities resulted from our issuances of
additional long-term debt, offset, in each period, by our
repayments of other long-term debt and capital leases. Such
borrowings were primarily made in connection with the previously
discussed ATM portfolio acquisitions, including the Bank Machine
acquisition in 2005 and the E*TRADE Access acquisition in 2004.
Additionally, during the nine months ended September 30,
2005, we issued $75.0 million worth of Series B
preferred stock to a new investor, TA Associates. The net
proceeds from such offering were utilized to redeem our existing
Series A preferred stock, including all accrued and unpaid
dividends related thereto, and to redeem approximately 24% of
our outstanding common stock.
As of September 30, 2005, we had approximately
$243.6 million in outstanding long-term debt and current
notes payable, which was comprised of (i) approximately
$198.6 million (net of discount of $1.4 million) of
senior subordinated notes due August 2013,
(ii) approximately $41.8 million in borrowings under
our existing revolving and swing line credit facilities, and
(iii) approximately $3.2 million in notes payable due
to certain former shareholders of Bank Machine. There are no
principal payments required under the senior subordinated notes
until the notes mature in August 2013. Interest payments
associated with the senior subordinated notes will total
$18.5 million on an annual basis, and are due in
semi-annual installments of $9.25 million in February and
August of each year. Amounts outstanding under the revolving
credit facility are not due until the facilitys maturity
date in May 2010. Interest payments associated with such
borrowings are due monthly, quarterly or annually, depending on
the types of borrowings made under the facility. The
$3.2 million in notes payable represent notes that were
issued to certain former shareholders of Bank Machine as part of
that acquisition in May 2005. Such notes, which mature in 2008,
may be repaid in part or in whole at any time at the option of
each individual note holder beginning in November 2005. We have
set aside an amount of cash to repay the notes in total,
including any accrued interest related thereto, as the amounts
come due. Such cash is reflected as Restricted cash,
short-term in the accompanying condensed consolidated
balance sheet included elsewhere in this registration statement.
We believe that our cash on hand and our current bank credit
facilities will be sufficient to meet our working capital
requirements and contractual commitments for the next
12 months. We expect to fund our working capital needs from
revenues generated from our operations and borrowings under our
revolving line of credit, to the extent needed. However,
although we believe that we have sufficient flexibility under
our current revolving credit facility to pursue and finance our
expansion plans, such facility does contain certain covenants,
including covenants related to limitations on capital
expenditures and on the ratio of outstanding debt to EBITDA (as
defined in the facility), that could preclude us from drawing
down the full amount currently available for borrowing under
such facility. Accordingly, if we expand faster than planned,
need to respond to competitive pressures, or acquire additional
ATM networks, we may be required to seek additional sources of
financing. Such sources may come through the sale of equity or
debt securities. We cannot assure you that we will be able to
raise additional funds on terms favorable to us or at all. If
future financing sources are not available or are not available
on acceptable terms, we may not be able to fund our future
53
needs. This may prevent us from increasing our market share,
capitalizing on new business opportunities, or remaining
competitive in our industry.
|
|
|
Our Bank Credit Facilities
|
On May 17, 2005, in connection with the acquisition of Bank
Machine, we replaced our existing bank credit facility with new
facilities provided by BNP Paribas and Bank of America, N.A.
Such facilities were comprised of (i) a revolving credit
facility of up to $100.0 million, (ii) a first lien
term facility of up to $125.0 million, and (iii) and a
second lien term facility of up to $75.0 million.
Borrowings under the facilities were utilized to repay our
existing bank credit facility in full and to fund the
acquisition of Bank Machine. As of September 30, 2005, the
first and second lien term facilities were fully repaid, as
discussed below, and approximately $41.8 million was
outstanding under the new revolving credit facility.
On August 12, 2005, we sold $200.0 million in senior
subordinated notes pursuant to Rule 144A of the Securities
Act of 1933, and utilized the net proceeds from such offering,
along with approximately $7.1 million in borrowings under
our new revolving credit facility, to repay all of the
outstanding borrowings under our recently executed first and
second lien term loan facilities, including all accrued and
unpaid interested related thereto. Additionally, the revolving
credit facility was increased to a maximum borrowing capacity of
$150.0 million immediately following this transaction.
However, such capacity is limited in practice by certain
financial covenants contained in the facility. As of
September 30, 2005, we had approximately $41.8 million
outstanding under the facility, and the ability to borrow an
additional $37.1 million based on the covenants contained
in such facility. Any amounts drawn under such facility are not
due until the facilitys maturity date in May 2010.
Borrowings under our new bank credit facility bear interest at a
variable rate based upon LIBOR or prime rate, at our option. At
September 30, 2005, the weighted average interest rate on
our outstanding facility borrowings was approximately 6.8%.
Borrowings are secured by a lien on substantially all of our
domestic subsidiaries assets (excluding equity interests
in foreign subsidiaries). The borrowings are also secured by the
equity interests in our direct foreign subsidiaries and the
direct subsidiaries of our domestic subsidiaries (limited to 66%
of the voting interests in the direct foreign subsidiaries and
100% of the
non-voting
interests in such direct foreign subsidiaries), and contain
customary covenants and events of default.
In addition to the above domestic credit facility, Bank Machine
has a £2.0 million unsecured overdraft and borrowing
facility that expires in July 2006. Such facility, which bears
interest at 1.75% over the banks base rate (currently
4.50%), will be utilized for general corporate purposes for our
United Kingdom operations. No borrowings were outstanding under
such facility as of September 30, 2005. However, on
September 22, 2005, Bank Machine posted a £275,000
bond under such facility, and in return received the same amount
in cash back from the bank. Such cash amount was previously held
by the bank as collateral for one of Bank Machines
existing vault cash programs. The outstanding bond is akin to a
letter of credit, and as such, reduces the amount available for
future borrowings under the facility to £1.725 million.
Tabular Disclosure of Contractual Obligations
The following table and discussion reflect our significant
contractual obligations and other commercial commitments as of
September 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
Total
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Long-term debt(a)(b)
|
|
$
|
241,800
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
241,800
|
|
Notes payable
|
|
|
3,146
|
|
|
|
|
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
5,461
|
|
|
|
950
|
|
|
|
2,742
|
|
|
|
893
|
|
|
|
391
|
|
|
|
364
|
|
|
|
121
|
|
Merchant space lease obligations
|
|
|
13,518
|
|
|
|
1,126
|
|
|
|
4,376
|
|
|
|
3,453
|
|
|
|
3,242
|
|
|
|
982
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual obligations
|
|
$
|
263,925
|
|
|
$
|
2,076
|
|
|
$
|
10,264
|
|
|
$
|
4,346
|
|
|
$
|
3,633
|
|
|
$
|
1,346
|
|
|
$
|
242,260
|
|
54
|
|
|
(a)
|
|
Includes the face value of our senior subordinate notes of
$200.0 million, which is reflected net of unamortized
discount of approximately $1.4 million in our consolidated
financial statements included elsewhere in this registration
statement.
|
|
(b)
|
|
Amount does not include any related interest payments associated
with such borrowing.
|
In May 2005, we issued certain guaranteed notes payable to a
number of former Bank Machine shareholders as part of that
acquisition. Such notes totaled approximately $3.2 million
as of September 30, 2005, and are reflected in the table
above as Notes payable. Although the notes
contractually mature in May 2008, they may be repaid in part or
in whole at any time at the option of each individual note
holder beginning in November 2005. At this point, we anticipate
that such notes will be repaid in full during 2006. We have set
aside an amount of cash to serve as collateral for the guarantee
and to repay the notes in total, including any accrued interest
related thereto, as the amounts come due. Such restricted cash
balance is currently reflected in the Restricted cash,
short-term line item in our consolidated balance sheet
included elsewhere in this registration statement.
The Company is subject to various legal proceedings and claims
arising in the ordinary course of business, including certain
proceedings which were previously associated with the acquired
E*TRADE ATM portfolio. The Companys management does not
expect that the outcome in any of these legal proceedings,
individually or collectively, will have a material adverse
effect on the Companys financial condition, results of
operations or cash flows.
Effects of Inflation
Our monetary assets, consisting primarily of cash and
receivables, are not significantly affected by inflation. Our
non-monetary assets, consisting primarily of tangible and
intangible assets, are not affected by inflation. We believe
that replacement costs of equipment, furniture and leasehold
improvements will not materially affect our operations. However,
the rate of inflation affects our expenses, such as those for
employee compensation and telecommunications, which may not be
readily recoverable in the price of services offered by us.
Disclosure About Market Risk
Our interest expense and our cash rental expense are sensitive
to changes in the general level of interest rates in the United
States and the United Kingdom, particularly because a
substantial portion of our indebtedness accrues interest at
floating rates and our ATM cash rental expense is based on
market rates of interest. Our outstanding vault cash, which
represents the cash we rent and place in our ATMs in cases where
the merchant does not provide the cash, totaled approximately
$389.4 million in the United States and approximately
$45.3 million in the United Kingdom as of
September 30, 2005. We pay a monthly fee on the average
amount outstanding to our primary vault cash providers in the
United States and the United Kingdom under a formula based on
the London Interbank Offered Rate, or LIBOR.
We have entered into a number of interest rate swaps to fix the
rate of interest we pay on $300.0 million of our current
and anticipated outstanding domestic vault cash balances through
December 31, 2008, $200.0 million through
December 31, 2009, and $100.0 million through
December 31, 2010. We have not currently entered into any
derivative financial instruments to hedge our variable interest
rate exposure in the
55
United Kingdom. The effect of the domestic swaps mentioned above
was to fix the interest rate paid on the following notional
amounts for the periods identified (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Notional
|
|
|
|
Weighted Average
|
|
|
|
Amount
|
|
|
|
Fixed Rate
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
$200,000
|
|
|
|
|
3.19
|
%
|
|
|
Through September 30, 2005
|
|
$300,000
|
|
|
|
|
3.57
|
%
|
|
|
October 1, 2005 December 31, 2005
|
|
$300,000
|
|
|
|
|
3.63
|
%
|
|
|
January 1, 2006 December 31, 2006
|
|
$300,000
|
|
|
|
|
3.86
|
%
|
|
|
January 1, 2007 December 31, 2007
|
|
$300,000
|
|
|
|
|
4.35
|
%
|
|
|
January 1, 2008 December 31, 2008
|
|
$200,000
|
|
|
|
|
4.36
|
%
|
|
|
January 1, 2009 December 31, 2009
|
|
$100,000
|
|
|
|
|
4.34
|
%
|
|
|
January 1, 2010 December 31, 2010
|
|
Net amounts paid or received under such swaps are recorded as
adjustments to our cost of ATM revenues in the accompanying
condensed consolidated statements of operations. During the nine
months ended September 30, 2005, there were no gains or
losses recorded in the condensed consolidated statement of
operations as a result of any ineffectiveness associated with
our existing interest rate swaps.
Our existing interest rate swaps have been classified as cash
flow hedges pursuant to SFAS No. 133,
Accounting
for Derivative Instruments and Hedging Activities.
Accordingly, changes in the fair values of such swaps have been
reported in accumulated other comprehensive income in the
accompanying condensed consolidated balance sheet. As of
September 30, 2005, the accumulated unrealized gain on such
swaps totaled approximately $4.0 million, net of tax.
Based on the $389.4 million in vault cash outstanding in
the United States as of September 30, 2005, and assuming no
benefits from the existing interest rate hedges that are
currently in place, for every interest rate increase of
100 basis points, we would incur an additional
$3.9 million of vault cash rental expense on an annualized
basis. Factoring in the $300.0 million in interest rate
swaps discussed above, for every interest rate increase of
100 basis points, we would incur an additional
$0.9 million of vault cash rental expense on an annualized
basis. Based on the $45.3 million in vault cash outstanding
in the United Kingdom as of September 30, 2005, for every
interest rate increase of 100 basis points, we would incur
an additional $0.5 million of vault cash rental expense on
an annualized basis.
In addition to the above, we are exposed to variable interest
rate risk on borrowings under our domestic revolving credit
facility. Based on the $41.8 million in floating rate debt
outstanding under such facility as of September 30, 2005,
for every interest rate increase of 100 basis points, we
would incur an additional $0.4 million of interest expense.
Recent upward pressure on short-term interest rates in the
United States has resulted in slight increases in our interest
expense under our bank credit facilities and our vault cash
rental expense. Although we currently hedge a substantial
portion of our vault cash interest rate risk over the next five
years, as noted above, we may not be able to enter into similar
arrangements for similar amounts in the future. Any significant
increase in interest rates in the future could have an adverse
impact on our business, financial condition and results of
operations by increasing our operating costs and expenses.
We intend to continue to review economic and market conditions
on a regular basis and may enter into additional interest rate
swap agreements from time to time.
|
|
|
Foreign Currency Exchange Risk
|
Due to our recent acquisition of Bank Machine, we are exposed to
market risk from changes in foreign currency exchange rates,
specifically with changes in the U.S. Dollar relative to
the British Pound. Our United Kingdom subsidiaries are
consolidated into our financial results and are subject to risks
typical of an international business including, but not limited
to, differing economic conditions, changes in political climate,
differing tax structures, other regulations and restrictions,
and foreign exchange rate volatility. Furthermore, we are
required to translate Bank Machines financial condition
and results of operations from British Pounds into
U.S. Dollars, with any corresponding translation gains or
losses being recorded in other
56
comprehensive income or loss in our consolidated financial
statements. As of September 30, 2005, such translation
losses totaled approximately $3.9 million.
Our future results could be materially impacted by changes in
the value of the British Pound relative to the U.S. Dollar.
At this time, we have not deemed it to be cost effective to
engage in a program of hedging the effect of foreign currency
fluctuations on our operating results using derivative financial
instruments. A sensitivity analysis indicates that, if the
U.S. dollar uniformly strengthened or weakened 10% against
the British Pound, the effect upon Bank Machines operating
income for the three months ended September 30, 2005 would
have been an unfavorable or favorable adjustment, respectively,
of approximately $0.1 million.
We do not hold derivative commodity instruments and all of our
cash and cash equivalents are held in money market and checking
funds.
New Accounting Standards
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150,
Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity
, or SFAS 150. SFAS 150 requires that
mandatorily redeemable financial instruments issued in the form
of shares be classified as liabilities, and specifies certain
measurement and disclosure requirements for such instruments.
The provisions of SFAS 150 were effective at the beginning
of the first interim period beginning after June 15, 2003.
The adoption of SFAS 150 did not have an impact on our
financial statements.
In December 2004, the FASB issued SFAS No. 123R,
Share-Based Payment
, a revision of
SFAS No. 123. SFAS 123R eliminates the intrinsic
value method of accounting for stock-based compensation, as
currently allowed under APB Opinion No. 25, and requires
companies to recognize the cost of employee services received in
exchange for awards of equity instruments based on the fair
value of such awards on their grant date (with limited
exceptions). Because we have historically utilized the minimum
value method of measuring equity share option values for pro
forma disclosure purposes under SFAS 123, we will adopt the
provisions of SFAS 123R effective January 1, 2006
using the prospective transition method. Accordingly, we will
recognize compensation expense for all new awards that are
granted and existing awards that are modified subsequent to
December 31, 2005. For those awards issued and still
outstanding prior to December 31, 2005, we will continue to
account for such awards pursuant to APB Opinion No. 25 and
its related interpretive guidance.
We estimate that the effect on net income and earnings per share
in the periods following adoption of SFAS 123R will be
consistent with the pro forma disclosures under SFAS 123,
except that estimated forfeitures will be considered in the
calculation of compensation expense under SFAS 123R.
Additionally, the actual effect on net income and earnings per
share will vary depending upon the number of options granted
subsequent to December 31, 2005, as compared to prior
years. Further, we have not yet determined the actual model that
will be used to calculate the fair value of awards under
SFAS 123R.
57
THE ATM INDUSTRY
History of the ATM Industry
The first ATMs in the United States were installed in the early
1970s and by 1980 approximately 18,500 ATMs were in use
throughout the nation. These ATMs initially were located at
financial institution branches. As of September 2005, there were
estimated to be approximately 396,000 ATMs in the United States,
the majority of which were located at non-bank locations
according to
ATM&Debit News
. A non-bank is a company
that is not a federal or state chartered bank, savings and loan,
credit union or other financial institution.
Early in the development of the ATM industry, regional and
national electronic authorization data networks, or EFT
networks, connected ATMs to financial institutions that were
members of a particular EFT network. Regional EFT networks in
different parts of the United States were not electronically
connected to each other. For example, customers of a bank in New
York could not travel to Los Angeles and access their cash at an
ATM because the networks serving New York and Los Angeles were
not connected. During the 1990s, many regional EFT networks
merged or entered into reciprocal processing agreements with
other networks, which helped to increase ATM usage and spur
consumer demand for ATM services.
Although ATMs were originally located only at financial
institution branches, they soon began to appear in a variety of
off-premise locations, such as convenience stores, supermarkets,
drug stores, shopping malls, hotels and airports. Deployment of
off-premise ATMs, however, was impeded by the prevailing
strategy among financial institutions not to charge their
cardholders surcharge fees for the convenience of accessing
their financial institution accounts at non-financial
institution locations. Until 1996, most EFT networks did not
allow surcharge fees for ATM transactions that were routed over
their networks. However, beginning in that year, the two largest
EFT networks, Cirrus and Plus, began to allow surcharge fees and
other networks followed. Surcharging revenue made the deployment
of off-premise ATMs economically feasible and attractive for
non-financial institutions. Following this shift, the number of
off-premise ATMs in the United States grew at a rapid pace.
A Typical ATM Transaction
A typical ATM transaction involves the withdrawal of cash from
an ATM. The cardholder presents an ATM card, issued by his or
her financial institution, at an ATM that may or may not be
owned by the same financial institution. The cardholder then
enters a personal identification number, or PIN, to verify
identity, the cardholders account is checked for adequate
funds and, if everything is satisfactory, cash is dispensed. All
of these communications are routed across one or more EFT
networks that electronically connect ATMs and financial
institutions and allow transactions to appear seamless and
nearly instantaneous.
When a cardholder withdraws cash from an ATM that is not owned
by the cardholders financial institution, there are two
charges applied. The first charge is the surcharge fee paid by
the cardholder for using the ATM. The second charge is an
interchange fee that the EFT network charges the
cardholders financial institution for routing a
transaction over its network. This fee is divided between the
EFT network routing the transaction and the ATM operator. Often,
the cardholders financial institution also charges the
cardholder a fee called a foreign fee for using an ATM not owned
by that financial institution. This charge helps the financial
institution defray the cost of the interchange fee it pays.
Developing Trends in the ATM Industry
International Opportunities.
In many regions of the
world, ATMs are less common than in the U.S. We believe the
ATM industry will grow faster in international markets than in
the U.S., as the number of ATMs per capita in those markets
approaches the U.S. levels. We believe some of these
markets (such as the United Kingdom where we recently
completed our Bank Machine acquisition) may provide attractive
expansion opportunities for us.
58
The United Kingdom is the third largest ATM market in Europe,
after Germany and Spain. Until the late 1990s, most U.K. ATMs
were installed at bank and building society branches. Non-bank
operators began to deploy ATMs in the United Kingdom in December
1998 when LINK (which connects together the ATM networks of all
U.K. ATM operators) allowed them entry into its network via
arrangements between non-bank operators and U.K. financial
institutions. We believe that non-bank ATM operators have
benefited in recent years from customer demand for more
conveniently located cash machines, the emergence of internet
banking with no established point of presence and the closure of
bank branches due to consolidation. According to
APACS
2005
, a total of approximately 54,400 ATMs were deployed in
the United Kingdom as of December 2004, of which approximately
21,800 were operated by non-banks. This has grown from
approximately 36,700 in 2001, with less than 7,000 operated by
non-banks.
Bank and Network Branding Opportunities.
Our primary
assets are our contracts with merchants that allow us to operate
ATMs in 26,000 retail locations, many of which are on prime,
high-traffic real estate. Many U.S. banks serving the
market for consumer banking services are aggressively competing
for market share, and part of their competitive strategy is to
increase their number of customer touch points and to make
themselves more convenient to their customers. We believe that a
large owned-ATM network would be a key strategic asset for a
bank, but we also believe it would be uneconomical for all but
the very largest banks to build and operate an extensive ATM
network, and even the largest banks do not operate nationwide
ATM networks. We believe that these factors, when combined,
create significant revenue and profit opportunities for us.
|
|
|
|
|
Bank branding is a scenario in which ATMs owned and operated by
us are branded, signed, and operated as if they were owned by
the branding bank, and customers of the branding bank can use
those machines without paying a surcharge. The bank pays us a
monthly per-machine fee for such branding. Although we forego
the surcharge fee on ATM transactions by the branding
banks customers, we continue to earn interchange fees on
those transactions and the monthly branding fee, and typically
enjoy an increase in surchargable transactions from users who
are not customers of the branding bank. We believe that a
branding arrangement can substantially increase the
profitability of an ATM versus operating the same machine in an
unbranded mode.
|
|
|
|
Network branding is an arrangement where a banks customers
are allowed to use our nationwide ATM network on a
surcharge-free basis. Each bank pays a fee to the network, and
we in turn receive a large portion of that fee. Although we
forego surcharge revenue on those transactions, we do earn
interchange revenues in addition to network branding revenues,
and believe that many of these transactions are incremental.
Consequently, we believe that branding arrangements can enable
us to profitably operate in the significant portion of the ATM
transaction market that does not involve a surcharge.
|
Bank and Other Financial Institution Outsourcing
Opportunities.
Our industry experience, vendor relationships
and economy of scale advantages provide us with the opportunity
to offer outsourced ATM services to banks and other financial
institutions. Today, many banks and other financial institutions
own significant networks of ATMs that serve as extensions of
their branch networks and increase the level of service offered
to their customers. Large ATM networks, however, are costly to
operate and typically do not provide significant revenue for
banks and other financial institutions. Large banks and other
financial institutions typically incur a monthly operating
expense of approximately $1,500 per off-premise ATM. On
average, large non-bank ATM operators are able to operate
off-premise ATMs at an approximate cost of $1,000 per
month. We believe there is an opportunity for large non-bank ATM
operators with low costs and an established operating history to
contract with financial institutions to manage their ATM
networks. Such an outsourcing arrangement could reduce a
financial institutions operational costs while extending
their customer service.
59
BUSINESS
Company Overview
We operate the largest network of ATMs in the United States and
we are a leading ATM operator in the United Kingdom. As of
September 30, 2005, our network included approximately
26,400 ATMs. For the year ended December 31, 2004, and pro
forma for our E*TRADE Access and Bank Machine acquisitions, our
ATMs dispensed over $9.1 billion in cash and processed more
than 161.4 million transactions. We deploy and operate ATMs
under two distinct arrangements with our merchant partners:
company-owned and
merchant-owned.
Under
company-owned arrangements, we provide the ATM and are typically
responsible for all aspects of its operation, including
procuring cash, supplies and telecommunications as well as
routine and technical maintenance. Under merchant-owned
arrangements, the merchant owns the ATM and is responsible for
providing cash and performing simple maintenance tasks, while we
provide more complex maintenance services, transaction
processing and connection to electronic funds transfer networks.
As of September 30, 2005, approximately 44% of our ATMs
were company-owned and 56% were merchant-owned. Because our
margins are significantly higher on our company-owned machines
as a result of the value of the breadth of services we provide,
our internal and acquisition growth strategy will focus on
increasing the number of company-owned ATMs in our network.
Our domestic ATM network is strengthened by contractual
relationships with leading retail merchants in a variety of
businesses. Amerada Hess, BP Amoco, Chevron, Circle K, Costco,
CVS Pharmacy, Duane Reade, ExxonMobil, Mills Malls, Sunoco,
Target and Walgreens are among our largest domestic merchants in
terms of our revenues. Alfred Jones, Co-Op, Mitchells &
Butlers, the U.K. Post Office, Tates and Tesco are among our
largest United Kingdom merchants in terms of our revenues. Our
merchant customers operate high consumer traffic locations, such
as convenience stores, supermarkets, membership warehouses, drug
stores, shopping malls and airports. Our merchant relationships
are typically governed by multi-year contracts with initial
terms of five years or more. On a pro forma basis for the year
ended December 31, 2004, we generated $278.4 million
of revenues and $2.3 million of net income.
Our revenue is recurring in nature and is primarily derived from
ATM surcharge fees paid by cardholders and interchange fees paid
by their banks and other financial institutions. We generate
additional revenue by branding our ATMs with signage from banks
and other financial institutions, resulting in added convenience
for their customers and increased usage of our ATMs. We
typically provide our merchant customers with all of the
services required to operate an ATM, which include transaction
processing, cash management, maintenance and monitoring. We
believe that we are among the low-cost providers in our industry
due primarily to our substantial network of ATMs, which provides
us significant scale advantages. Our focus on customer service,
together with our experience and scale, has contributed to
strong relationships with leading national and regional
merchants in the United States and we expect to develop the same
strong relationships in the United Kingdom.
Since May 2001, we have acquired 12 networks of ATMs,
increasing the number of ATMs we operate from approximately
4,100 to approximately 26,400 as of September 30, 2005. On
June 30, 2004, we acquired the ATM business of E*TRADE
Access, adding approximately 13,155 ATMs to our network, and on
May 17, 2005, we acquired Bank Machine, which expanded our
operations to the United Kingdom and added approximately 1,000
ATMs to our network. From 2001 to 2004, the total number of
annual transactions processed within our network increased from
approximately 19.9 million to approximately
111.6 million.
Our Market Opportunity
The ATM industry has undergone significant expansion in recent
years, largely from growth in the number of ATMs installed as
off-premise ATMs. The number of off-premise ATMs in the United
States outnumbered banking branches by nearly three to one as of
December 2004. Off-premise ATMs are found at locations such as
convenience stores, supermarkets, membership warehouses, drug
stores, shopping malls, hotels and airports. These locations
offer a convenient alternative to obtaining cash from bank
tellers or drive-through facilities. Both merchants and their
customers benefit from the presence of an ATM in a store.
60
Merchants benefit from increased consumer traffic, reduced
check-writing and credit card processing fees and merchant fees
received from us, while cardholders benefit from increased
access to their cash.
We believe significant growth opportunities exist for the
leaders in the ATM industry for the following reasons:
Continued industry growth.
We expect that the
number of transactions at off-premise ATMs will continue to grow
as cardholders take advantage of the convenience and added
functionality of ATMs. Approximately 78% of all ATM transactions
are cash withdrawals, with the remainder representing other
basic banking functions, such as balance inquiries, transfers
and deposits. We believe significant opportunities exist for ATM
owners and operators to provide advanced functionality, such as
check cashing, off-premise deposits, withdrawals of cash from
payroll cards, pre-paid cell phone replenishment and bill
payment, all of which should result in increased ATM usage. We
believe that these services will be attractive to that section
of the U.S. population that does not have a bank account.
We anticipate that we will participate in this growth as our key
merchants permit us to deploy and operate ATMs in more of their
existing stores and in new store locations, and as we offer more
advanced functions at our ATMs.
Bank branding and outsourcing opportunities.
We
believe that our large ATM network is attractive to banks and
other financial institutions seeking to extend their brand and
provide convenient ATM access to their customers at a lower
cost. By branding our ATMs with their logos, banks and other
financial institutions can interact with their customers more
frequently, increase brand awareness and provide their customers
increased service. A branding arrangement typically involves our
receiving a monthly branding fee and results in higher
profitability for us from the branded ATMs. In addition, while
banks and other financial institutions have historically owned
and operated most of their ATMs, some banks and other financial
institutions have outsourced certain ATM management functions in
order to simplify operations and lower costs. We believe that
increased off-premise branding and the outsourcing of ATM
management functions for banks and other financial institutions
should provide substantial opportunities for additional
long-term growth.
Surcharge-free network opportunities.
We believe
that a majority of ATM transactions in the U.S. occur
without the customer paying a surcharge, indicating that our
primary surcharge-based business model addresses only a minority
of the total ATM market. We believe this creates an opportunity
for companies to become actively involved in surcharge-free ATM
networks, in which financial institutions pay ATM operators to
provide surcharge-free access to their ATM customers. This
provides ATM operators with a profitable means of addressing
that portion of customers who generally avoid paying surcharges.
Industry consolidation.
The ownership and
operation of ATMs is a fragmented industry with the top ten
operators accounting for approximately 25% of ATMs in the United
States. Some ATM operators may lack the operational scale and
financial resources required to compete effectively with us and
other operators of large ATM networks for business and growth
opportunities, which may result in sales of smaller networks by
ATM operators. We believe that the existing fragmented ownership
and the potential for divestitures will provide continuing
acquisition opportunities for ATM operators with significant
economies of scale.
International opportunities.
Many international
markets are beginning to experience an increase in
off-premise
ATMs as
surcharging becomes more prevalent and accepted in markets
outside of the United States. We believe that significant
growth opportunities exist in selected international markets as
merchants and
non-bank
ATM operators seek to capitalize on growth opportunities for
off-premise ATMs. For example, our recent acquisition of Bank
Machine has positioned us for future growth in the United
Kingdom, where
off-premise
ATMs have
accounted for approximately 75% of the total ATM growth since
2000.
61
Our Strengths
Leading market position.
We operate the largest
network of ATMs in the United States, and we are a leading ATM
operator in the United Kingdom. As of September 30, 2005,
our network included approximately 26,000 ATMs, approximately
11,700 of which were company-owned. The following table sets
forth our leading position in the U.S. ATM market:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rank
|
|
|
U.S. ATM Network
|
|
ATMs
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
Cardtronics
|
|
|
25,346
|
|
|
|
6.4%
|
|
|
2
|
|
|
Bank of America
|
|
|
16,714
|
|
|
|
4.2%
|
|
|
3
|
|
|
TRM
|
|
|
15,348
|
|
|
|
3.9%
|
|
|
4
|
|
|
NetBank
|
|
|
8,445
|
|
|
|
2.1%
|
|
|
5
|
|
|
JPMorgan Chase
|
|
|
7,136
|
|
|
|
1.8%
|
|
|
6
|
|
|
Wells Fargo
|
|
|
6,363
|
|
|
|
1.6%
|
|
|
7
|
|
|
International Merchant Services
|
|
|
5,900
|
|
|
|
1.5%
|
|
|
8
|
|
|
7-Eleven Stores
|
|
|
5,341
|
|
|
|
1.3%
|
|
|
9
|
|
|
Wachovia
|
|
|
5,100
|
|
|
|
1.3%
|
|
|
10
|
|
|
U.S. Bancorp
|
|
|
4,999
|
|
|
|
1.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Top 10)
|
|
|
100,692
|
|
|
|
25.4%
|
|
|
|
|
|
U.S. Market
|
|
|
396,000
|
|
|
|
100.0%
|
|
Source: ATM&Debit News, public filings and company
websites, as of September 2005
Nationwide network of leading retail merchants under
multi-year contracts.
Our focus on customer service,
together with our experience and size, has enabled us to develop
and expand relationships with national and regional merchants,
such as Amerada Hess, BP Amoco, Chevron, Circle K, Costco, CVS
Pharmacy, Duane Reade, ExxonMobil, Mills Malls, Sunoco, Target
and Walgreens, among others. Through our Bank Machine
acquisition, we have recently established relationships in the
United Kingdom with Alfred Jones, Co-Op, Mitchells &
Butlers, the U.K. Post Office, Tates and Tesco, among others.
These merchants typically operate high traffic locations, which
we have found to result in increased ATM activity and
profitability. In addition, these relationships can provide
opportunities to deploy additional ATMs in new locations. No
single customer accounted for more than 6% of our total pro
forma revenues for both the year ended December 31, 2004
and the nine months ended September 30, 2005, with our ten
largest merchant customers cumulatively representing less than
25% of our total pro forma revenues for the year ended
December 31, 2004. We believe our merchant customers value
our high level of service, our 24 hour per day
accessibility and our average 99% up time availability in
the U.S. Due to these and other factors, we have not
renewed only two of our 50 most significant merchant contracts
over the last four years.
Recurring and stable revenue and operating cash
flow.
We generally operate our large base of ATMs under
multi-year contracts that provide us with a recurring and stable
source of transaction-based revenue and typically have an
initial term of five to seven years. As of September 30,
2005, our top 10 merchants had an average of approximately
3.9 years remaining on their contracts. Our recurring
revenue base, relatively low and predictable maintenance capital
expenditure requirements and minimal working capital
requirements allow us to maintain predictable and consistent
operating cash flows. On a pro forma basis, these sources of
revenue accounted for approximately 96% of our total revenues
for both the nine months ended September 30, 2005 and the
year ended December 31, 2004.
Low-cost provider.
We believe the size of our
network combined with our operating infrastructure allows us to
be among the low-cost providers in our industry. In addition, we
believe our operating costs per ATM are approximately half of
the operating costs incurred by bank ATM operators. We outsource
some functions, such as
on-site
maintenance and
cash management, and can take advantage of our size and market
position to obtain favorable pricing from our service vendors
and for the purchase of new ATMs. We believe our success to date
is largely attributable to our exclusive focus on the ATM
industry and our ability to provide reliable customer service in
a cost-effective manner.
Experienced and committed management team.
We have
a strong senior management team with a combined average of over
20 years of financial services and payment
processing-related experience. Our
62
senior management team has developed extensive relationships and
a leadership position in the industry, including directorships
on several industry association boards. We believe this
leadership role helps us to attract new merchant customers and
provides us with increased acquisition and bank branding
opportunities. Our management team owns approximately 21% of our
outstanding common stock on a fully diluted basis.
Disciplined acquisition and integration
performance.
Since May 2001, we have acquired
12 networks of ATMs, increasing the number of ATMs we
operate from approximately 4,100 to approximately 26,400.
Because we do not typically assume significant numbers of
employees, nor import new operating systems in connection with
our acquisitions, we believe our acquisition growth is lower
risk than acquisition growth involving more substantial
integration concerns. We believe our acquisition risk is also
reduced because the financial performance of ATMs we acquire is
relatively predictable given our access to third-party data on
the transaction history and revenues of the ATMs we acquire.
Predictability is also enhanced by the well understood nature of
our operating costs per machine and per transaction. In
addition, we have often significantly improved the operating
cash flow of our acquired networks of ATMs and achieved high
returns on capital in such transactions.
Our Strategy
Our strategy is to enhance our position as the leading owner and
operator of ATMs in the United States and to expand our network
further into select foreign markets. In order to execute this
strategy we will endeavor to:
Increase penetration and ATM count with leading
merchants.
We have two principal opportunities to
increase the number of ATM sites with our existing merchants:
first, by deploying ATMs in our merchants existing
locations that currently do not have, but where traffic volumes
justify installing, an ATM and second, as our merchants open new
locations, by installing ATMs in those locations. From the
beginning of 2001 through 2004, we increased the number of ATMs
operated by us in the United States through internal growth by
approximately 2,350. We believe our expertise, national
footprint, strong record of customer service with leading
merchants and our significant scale position us to successfully
market to, and enter into long-term contracts with, other
leading national and regional merchants.
Capitalize on bank branding and outsourcing
opportunities.
We believe we are strongly positioned to
work with financial institutions to fulfill their ATM
requirements. Our ATM services offered to financial institutions
include branding our ATMs with their logos, managing their
off-premise ATM networks on an outsourced basis or buying their
off-premise networks in combination with branding arrangements.
We recently added JPMorgan Chases brand and signage to our
ATMs located in approximately 250 Duane Reade drug stores in New
York City. For operating these machines, we receive a monthly
branding fee from Chase and, in return, we provide
surcharge-free transactions to Chase cardholders at these ATMs
while continuing to receive a surcharge from non-Chase
cardholders. As of September 30, 2005, we had bank branding
arrangements for approximately 950 of our ATMs.
Capitalize on surcharge-free network
opportunities.
We plan to continue to pursue
opportunities to create or participate in surcharge-free
networks, where financial institutions pay us to allow
surcharge-free access to our ATM network. We believe these
arrangements will enable us to increase transaction counts and
profitability on our existing machines.
Pursue selected acquisition opportunities.
We plan
to continue to pursue selected acquisitions that complement our
existing ATM network using our proven, disciplined acquisition
and integration methodology. Determination of attractive
acquisition targets is based on many factors, including existing
merchant contract terms, potential operating efficiencies and
cost savings, the quality of associated merchant relationships
and our anticipated return on investment. We believe that
significant expansion opportunities continue to exist in the
United Kingdom and other international markets, and we are
actively considering several such opportunities at the present
time.
Explore new geographic markets.
In conjunction
with our entry into the United Kingdom ATM market, we plan to
take advantage of opportunities to reach under-penetrated
markets worldwide where we
63
can leverage the significant economies of scale, operating
expertise and superior customer service capabilities we have
developed domestically.
Recent Transactions
Bank Machine Acquisition.
On May 17, 2005, we
acquired the ATM business of Bank Machine Limited, an
independent operator of ATMs in the United Kingdom, for
approximately $92.0 million in cash and 35,221 shares
of our Series B Convertible Preferred Stock valued by us at
approximately $3.0 million. Through this transaction, we
acquired approximately 1,000 ATMs and related site agreements,
of which approximately 850 are company-owned and 150 are
merchant-owned ATMs. On average, these ATMs process twice the
number of surcharge-bearing transactions and have approximately
40% higher revenue per surcharge-bearing transaction than our
domestic ATMs. This acquisition also allowed us to expand our
business to the United Kingdom and positions us for further
expansion to other European markets.
E*TRADE Access Acquisition.
On June 30, 2004,
we acquired the ATM business of E*TRADE Access, Inc., an
indirect wholly owned subsidiary of E*TRADE Financial Corp., for
approximately $106.9 million in cash. Through this
transaction we acquired 13,155 ATMs and related placement
agreements, of which approximately 2,450 were company-owned and
10,705 were merchant-owned. As a result of this acquisition, we
increased the number of ATM machines that we own or manage from
approximately 12,000 to over 25,000 ATMs. This acquisition also
allowed us to expand our relationships with national merchants,
including Albertsons, Chevron, CVS Pharmacy and Target, through
the placement agreements that we acquired.
Other Acquisitions.
On March 1, 2005, we
acquired a portfolio of approximately 475 ATMs and related
contracts located in independent grocery stores in and around
the New York metropolitan area for approximately
$8.2 million in cash. On April 21, 2005, we acquired a
portfolio of approximately 330 ATMs and related contracts, at BP
Amoco locations throughout the Midwest, for approximately
$9.0 million in cash. Such acquisitions were funded with
cash on hand and borrowings under our bank credit facilities.
Substantially all of the ATMs acquired in these transactions are
company-owned.
On December 21, 2005, we acquired all of the outstanding
shares of ATM National, Inc., the owner and operator of a
nationwide surcharge-free ATM alliance. The consideration for
such acquisition totaled $4.4 million, and was comprised of
$2.6 million in cash and 21,111 shares of our common
stock. Additionally, we agreed to assume approximately
$1.3 million in liabilities associated with such
acquisition. Furthermore, the merger agreement allows for the
issuance of up to 10,000 additional shares of our common stock
within 105 days of the closing date based on the occurrence
of certain events.
Preferred Stock Offering.
On February 10,
2005, we issued 894,568 shares of our Series B
Convertible Preferred Stock to investment funds controlled by TA
Associates, Inc. for gross proceeds of $75.0 million,
representing a 30.6% equity interest on a fully diluted basis as
of such date. The net proceeds of this offering were used to
redeem all of the outstanding shares of our Series A
Preferred Stock and to repurchase approximately 24% of our
outstanding shares of common stock and vested options to
purchase our common stock. In connection with that offering, we
also appointed two designees of TA Associates, Inc. to our board
of directors.
Amended and Restated Credit Facilities and Senior
Subordinated Notes Offering.
On May 17, 2005,
in connection with our Bank Machine acquisition, we amended and
restated our bank credit facilities with BNP Paribas and Bank of
America, N.A. We used borrowings from these secured facilities
to finance our Bank Machine acquisition and repay amounts under
our prior facilities. Our bank credit facilities, as amended and
restated, consisted of a revolving credit facility of up to
$100.0 million, a first lien term facility of up to
$125.0 million and a second lien term facility of up to
$75.0 million. Substantially all of our domestic assets and
65% of the capital stock of our United Kingdom subsidiaries are
pledged to secure borrowings under our bank credit facilities.
Furthermore, each of our domestic subsidiaries has guaranteed
our obligations under the bank credit facilities.
64
On August 12, 2005, we sold $200.0 million in senior
subordinated notes pursuant to Rule 144A of the Securities
Act of 1933, and utilized the net proceeds from such offering,
along with approximately $7.1 million in borrowings under
our new revolving credit facility, to repay all of the
outstanding borrowings under our recently executed first and
second lien term loan facilities, including all accrued and
unpaid interested related thereto. Additionally, the revolving
credit facility was increased to a maximum borrowing capacity of
$150.0 million immediately following this transaction.
However, such capacity is limited in practice by certain
financial covenants contained in the facility. As of
September 30, 2005, we had approximately $41.8 million
outstanding under the facility, and the ability to borrow an
additional $37.1 million based on the covenants contained
in such facility. Any amounts drawn under such facility are not
due until the facilitys maturity date in May 2010.
Our Products and Services
We typically provide our leading merchant customers with all of
the services required to operate an ATM, which include
transaction processing, cash management, maintenance and
monitoring. In connection with the operations of our or our
customers ATMs, we generate revenue on a per-transaction
basis from the surcharge fees charged to cardholders for the
convenience of using ATMs and from interchange fees charged to
such cardholders financial institutions for processing the
ATM transactions. We also take advantage of the preferential
pricing we receive from NCR due to our Master VAR status and
resell equipment to smaller equipment resellers and others.
During 2004, we processed approximately 82.1 million
surcharge-bearing ATM transactions, and we received interchange
fees in connection with approximately 111.6 million
transactions, which results do not give effect to the
23.2 million surcharge-bearing transactions and the
31.5 million transactions that generated interchange fees
attributable to the E*TRADE Access ATM business for the first
six months of 2004. During 2004, the Bank Machine business
processed approximately 8.9 million surcharge-bearing ATM
transactions, and received interchange fees in connection with
approximately 9.4 million transactions.
The following table provides detail relating to the number of
ATMs we owned and operated on a pro forma basis under our
various arrangements as of September 30, 2005.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
|
|
|
Merchant-Owned
|
|
|
|
|
|
ATMs
|
|
|
ATMs
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Number of ATMs
|
|
|
11,728
|
|
|
|
14,689
|
|
|
|
26,417
|
|
Percent of total ATMs
|
|
|
44
|
%
|
|
|
56
|
%
|
|
|
100
|
%
|
Average monthly surcharge transactions per ATM
|
|
|
476
|
|
|
|
265
|
|
|
|
353
|
|
Recently, we have entered into arrangements with financial
institutions and others to brand certain of our company-owned
ATMs. A branding arrangement allows a bank to expand its
geographic presence for a fraction of the cost of building a
branch location, and typically for less than the cost of placing
one of its own ATMs at that location, allowing a bank to rapidly
increase its number of branded ATM sites and, defensively,
prevent other financial institutions from entering into these
locations. Under these arrangements, the branding banks
customers are typically allowed to use the branded ATM without
paying a surcharge fee to us. In return, we receive monthly fees
on a per-ATM basis from the branding bank, while retaining our
standard fee schedule for other cardholders using the branded
ATM. In addition, we typically receive increased interchange
revenue as a result of increased usage of our ATMs by the
branding banks customers. We intend to pursue additional
opportunities to enter into bank branding arrangements as part
of our growth strategy. We currently have branding arrangements
in place with seven domestic financial institutions involving
950 ATMs. Another branding arrangement is our participation in a
nationwide surcharge-free ATM alliance. Cardholders of the
financial institutions that are members of the alliance can use
our ATMs free of surcharges in exchange for a payment of a fixed
monthly fee per cardholder included in the alliance. We acquired
all of the outstanding shares of ATM National, Inc., the owner
and operator of this alliance, in December 2005. Finally, we
have also allowed EFT networks to place signage on our ATMs for
which we receive a fixed fee per ATM.
65
We have found that the primary factor affecting transaction
volume at a given ATM is its location. Our strategy in deploying
our ATMs, particularly those placed under company-owned
arrangements, is to identify and deploy ATMs at locations that
provide high visibility and high transaction volume. Our
experience has demonstrated that the following locations often
meet these criteria: convenience stores and combination
convenience stores and gas stations, grocery stores, airports
and major regional and national retail outlets. We have entered
into multi-year agreements with a number of merchants with these
types of locations, including A&P, Albertsons, Amerada Hess,
Chevron, Circle K, Costco, CVS Pharmacy, Duane Reade,
ExxonMobil, Giant, Kroger, R.H. Macy and Company, Inc.
(Macys), Mills Malls, Rite Aid, Sears, Roebuck &
Co. (Sears), Sunoco, Target and Walgreens in the United States,
and Alfred Jones, Co-Op, Mitchells & Butlers, the U.K.
Post Office, Tates and Tesco in the United Kingdom. We believe
that once a cardholder establishes a pattern of using a
particular ATM, the cardholder will generally continue to use
that ATM.
Sales and Marketing
Our sales and marketing team focuses on developing new
relationships with national and regional merchants and on
building and maintaining relationships with our existing
merchants. The team is organized into groups that specialize in
marketing to specific merchant industry segments, which allows
us to tailor our offering to the specific requirements of each
merchant customer. Our sales and marketing team is composed of
16 employees, who receive a combination of incentive-based
compensation and a base salary.
In addition to targeting new business opportunities, our sales
and marketing team supports our acquisition initiatives by
building and maintaining relationships with newly acquired
merchants. We seek to identify growth opportunities within each
merchant account by analyzing the merchants sales at each
of its locations, foot traffic and various demographic data to
determine the best opportunities for new ATM placements. We also
pursue branding and outsourcing opportunities with financial
institutions to manage and operate their ATM networks.
Primary Vendor Relationships
To maintain an efficient and flexible operating structure, we
outsource certain aspects of our operations, including
transaction processing, cash management and maintenance. Due to
the number of ATMs we operate, we believe we have obtained
favorable pricing terms from most of our major vendors. We
contract for the provision of the services described below in
connection with our operations.
Transaction processing.
We contract with and pay fees to
third parties who process transactions originating from our
ATMs. These processors communicate with the cardholders
financial institution through an EFT network to obtain
transaction authorization and settle transactions. These
transaction processors include Star Systems, Fiserv and Genpass
in the United States and LINK in the United Kingdom, with a
majority of transactions being handled by Star Systems under a
newly extended agreement that runs until August 31, 2007
and features pricing that provides discounts for higher
transaction volumes.
EFT network services.
Our transactions are routed over
various EFT networks, such as Star, Pulse, NYCE, Cirrus and Plus
in the United States and LINK in the United Kingdom, to obtain
authorization for a cash disbursement and provide account
balances. EFT networks set the interchange fees that they charge
to the financial institutions, as well as the amount paid to us.
We attempt to maximize the utility of our ATMs to cardholders by
participating in as many EFT networks as practical.
ATM equipment.
We purchase substantially all of our ATMs
from national manufacturers, including NCR, Diebold, Tidel
Technologies Inc., Triton Systems, Inc. and Wincor/ Nixdorf. The
large quantity of ATMs that we purchase from these manufacturers
enables us to receive favorable pricing and payment terms. In
addition, we maintain close working relationships with these
manufacturers in the course of our business, allowing us to stay
informed regarding product updates and to minimize technical
problems with purchased equipment. Under our company-owned
arrangements, we deploy high quality, multi-function ATMs,
typically purchased from NCR, Diebold and Wincor/ Nixdorf. Under
our merchant-owned arrangements, we deploy ATMs that are
cost-effective and appropriate for the merchant. These are
purchased from a variety of ATM vendors. Although we currently
purchase a substantial majority of our ATMs from NCR, we believe
our
66
relationships with our other ATM suppliers are good and that we
would be able to purchase the ATMs we require for our
company-owned operations from other ATM manufacturers if we were
no longer able to purchase ATMs from NCR.
ATM maintenance.
In the United States, we typically
contract with third-party service providers for the provision of
on-site
maintenance
services. We have multi-year maintenance agreements with
Diebold, NCR and EFMARK in the United States. In the United
Kingdom, maintenance services are provided by in-house
technicians.
Cash management.
We obtain cash to fill our
company-owned, and in some cases merchant-owned, ATMs under
arrangements with our cash providers, Bank of America, N.A. and
Palm Desert National Bank in the United States and ALCB and the
U.K. Post Office in the United Kingdom. We pay a LIBOR based fee
on the daily outstanding cash balances. As of September 30,
2005, we had $389.4 million in cash in our domestic ATMs
under these arrangements, with over 98% of this cash provided by
Bank of America, N.A. under a newly extended vault cash
agreement that runs until August 2, 2007. In the United
Kingdom, the balance of cash held in our ATMs at
September 30, 2005, was approximately $45.3 million,
over 80% of which was supplied by ALCB.
Bank of America also contracts with third parties to provide us
with cash management services, which include reporting, armored
courier coordination, cash ordering, cash insurance,
reconciliation of ATM cash balances, ATM cash level monitoring
and claims processing with armored couriers, financial
institutions and processors.
Cash replenishment.
We contract with armored courier
services to transport and transfer cash to our ATMs. We use
leading armored couriers such as Brinks Incorporated,
Loomis, Fargo & Co., EFMARK, Premium Armored Services,
Inc. and Bantek West, Inc. in the United States and Brinks
and Securicor in the United Kingdom. Under these arrangements,
the armored couriers pick up the cash in bulk and, using
instructions received from our cash providers, prepare the cash
for delivery to each ATM on the designated fill day. Following a
predetermined schedule, the armored couriers visit each location
on the designated fill day, load cash into each ATM by either
adding additional cash into a cassette, or by swapping out the
remaining cash for a new fully loaded cassette, and then balance
the machine and provide cash reporting to the applicable cash
provider.
Technology
Our technology and operations platform consists of ATM
equipment, ATM and internal network infrastructure, cash
management and customer service. This platform is designed to
provide our merchant customers with what we believe is a high
quality suite of services.
ATM equipment.
We use ATMs from national manufacturers,
including NCR, Diebold, Tidel Technologies and Triton Systems.
The wide range of advanced technology available from these ATM
manufacturers provides our merchant customers with advanced
features and reliability through sophisticated diagnostics and
self-testing routines. The different machine types can perform
basic functions, such as dispensing cash and displaying account
information. Some of our ATMs are modular and upgradeable so
they can be adapted to provide additional services in response
to changing technology and consumer demand. For example, a
portion of our ATMs can be upgraded to accept deposits through
the installation of additional hardware and software components.
We operate three basic types of ATMs in the United Kingdom:
(1) convenience, which are internal to a
merchants premises, (2) through the wall,
which are external to a merchants premises, and
(3) pods, a free-standing kiosk style ATM, also
located external to a merchants premises. The ATMs are
principally manufactured by NCR.
Transaction processing.
We place significant emphasis on
providing quality service with a high level of security and
minimal interruption. We have carefully selected support vendors
to optimize the performance of our ATM network. In addition, our
transaction processors provide sophisticated security analysis
and monitoring 24 hours a day.
67
Internal systems.
Our internal systems include multiple
layers of security to help protect them from unauthorized
access. Protection from external sources is provided by the use
of hardware and software-based security features that isolate
our sensitive systems. We also use the most effective
commercially available encryption technology to protect
communications. On our internal network, we employ user
authentication and anti-virus tools at multiple levels. These
systems are protected by detailed security rules to limit access
to all critical systems and, to our knowledge, our security
systems have never been breached. Our systems components are
directly accessible by a limited number of employees on a need-
only basis. Our gateway connections to our EFT network service
providers provide us with real-time access to transaction
details, such as cardholder verification, authorization and
funds transfer. We have installed these communications circuits
with backup connectivity to help protect us from
telecommunications problems in any particular circuit.
We use custom software that continuously monitors the
performance of the ATMs in our network, including details of
transactions at each ATM and expenses relating to that ATM,
including fees payable to the merchant. This software permits us
to generate detailed financial information for each ATM
location, allowing us to monitor each locations
profitability. We analyze transaction volume and profitability
data to determine whether to continue operating at a given site,
how to price various operating arrangements with merchants and
branding arrangements, and to create a profile of successful ATM
locations so as to assist us in deciding the best locations for
additional ATM deployments.
Cash management.
We have our own internal cash management
department that utilizes data generated by our cash providers,
internally generated data and a proprietary methodology to
confirm daily orders, audit delivery of cash to armored couriers
and ATMs, monitor cash balances for cash shortages, coordinate
and manage emergency cash orders and audit costs from both
armored couriers and cash providers.
Our cash management department uses proprietary analytical
models to determine the necessary fill frequency and load amount
for each ATM. Based on location, day of the week, upcoming
holidays and events and other factors, we project cash
requirements for each ATM on a daily basis. After receiving a
cash order from us, the cash provider transfers the requested
amount of cash to a bank near the ATM where the designated
armored courier can access the cash and subsequently transport
it to the ATM.
Customer service.
We believe one of the factors that
differentiates us from our competitors is our customer service
responsiveness and proactive approach to managing any ATM
downtime. We use proprietary software that continuously monitors
the performance of our ATMs for service interruptions and
notifies our maintenance vendors for prompt dispatch of
necessary service calls.
We also offer our merchant customers customized ATM activity
reporting that includes daily, weekly or monthly transaction and
uptime reporting. Our standard reporting to our merchants
includes summary transaction reports that are made available in
the first week of every month. In addition, in the U.S. we
have developed an interactive website that allows our merchant
customers to access real-time information.
We maintain a proprietary database of transactions made on and
performance metrics for all of our ATM locations. This data is
aggregated into individual merchant customer profiles that are
readily accessible by our customer service representatives and
managers. We believe our proprietary database enables us to
provide superior quality and accessible and reliable customer
support.
Merchant Customers
In the United States, we have contracts with approximately 50
major national and regional merchants, including convenience
stores, supermarkets, drug stores and other high traffic retail
chains, and approximately 15,000 independent merchants. Most of
our merchant customers are non-exclusive partners with us. In
addition, we have not renewed only two of our 50 most
significant merchant contracts over the last four years. For the
year ended December 31, 2004 and the nine months ended
September 30, 2005, both on an actual and pro forma basis,
no single merchant customer accounted for 10% or more of our
total revenues.
68
The terms of our merchant contracts vary as a result of
negotiations at the time of execution. In the case of
company-owned arrangements, which are typically employed with
our major national and regional merchants, the contact terms
vary, but typically include the following:
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an initial term of five to seven years;
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|
ATM exclusivity at locations where we install an ATM;
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|
protection for us against underperforming locations by
permitting us to increase the surcharge fee or remove ATMs;
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|
in the United States, provisions permitting us to terminate or
remove ATMs or renegotiate the fees paid to the merchant if
surcharge fees are generally reduced or eliminated by
law; and
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|
provisions making the merchants fee dependent on the
number of ATM transactions.
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Our contracts under merchant-owned arrangements typically
include similar terms, as well as the following additional terms:
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|
in the United States, provisions prohibiting in-store check
cashing by the merchant and, in the United States and
United Kingdom, the operation of any other cash-back devices;
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|
provisions imposing an obligation on the merchant to operate the
ATM at any time his or her store is open to the public; and
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|
provisions, when possible, that require a merchant to have a
purchaser of the merchants store assume our contract.
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Seasonality
Our overall business is somewhat seasonal in nature with
generally fewer transactions occurring in the first quarter. We
typically experience increased transaction levels during the
holiday buying season at our ATMs located in shopping malls and
lower volumes in the months following the holiday season.
Similarly, we have seen increases in transaction volumes in the
spring at our ATMs located near popular spring-break
destinations. Conversely, transaction volumes at our ATMs
located in regions affected by strong winter weather patterns
typically decline as a result of decreases in the amount of
consumer traffic through the locations in which we operate our
ATMs. These declines, however, have been offset somewhat by
increases in the number of our ATMs located in shopping malls
and other retail locations that benefit from increased consumer
traffic during the holiday buying season. We expect these
location-specific and regional fluctuations in transaction
volumes to continue in the future.
In the United Kingdom, seasonality in transaction patterns tends
to be similar to the seasonal patterns in the general retail
market. Generally, the highest transaction volumes occur on
weekend days and, thus, monthly transaction volumes will
fluctuate based on the number of weekends in a given month.
However, we, like other independent ATM operators, experience a
drop in the number of transactions we process during the
Christmas season due to consumers greater tendency to shop
in the vicinity of free ATMs and our closure of some of our ATM
sites over the Christmas break. We expect these
location-specific and regional fluctuations in transaction
volumes to continue in the future.
Competition
We compete with financial institutions and other independent ATM
companies for additional ATM placements, new merchant accounts
and acquisitions. Several of our competitors are larger, more
established and have greater financial and other resources than
us. For example, our major domestic competitors include banks
such as Bank of America, US Bancorp and PNC Corp., as well
as non-banks such as TRM. In the United Kingdom, we compete with
several large non-bank ATM operators, including Moneybox,
Cardpoint, TRM, Scott Tod and Hanco, as well as banks such as
the Royal Bank of Scotland and Lloyds, among others. However,
many of our competitors do not have a singular focus on ATM
management, and we believe this
69
focus gives us a significant competitive advantage. In addition,
we believe the scale of our extensive ATM network and our focus
on customer service also provide significant competitive
advantages.
U.S. Government and Industry Regulation
Our principal business, ATM network ownership and operation, is
not subject to significant government regulation. However,
various aspects of our business are subject to state regulation.
Our failure to comply with applicable laws and regulations could
result in restrictions on our ability to provide our products
and services in such states, as well as the imposition of civil
fines.
Americans with Disabilities Act.
The ADA currently
prescribes provisions that ATMs be made accessible to and
independently usable by persons with vision impairments. The
Department of Justice may adopt new accessibility guidelines
under the ADA that will include provisions addressing ATMs and
how to make them more accessible to the disabled. Under the
proposed guidelines that have been published for comment, but
not yet adopted, ATM height and reach requirements would be
shortened, keypads would be required to be laid out in the
manner of telephone keypads, and ATMs would be required to
possess speech capabilities, among other modifications. If
adopted, these new guidelines would affect the manufacture of
ATM equipment going forward, and could require us to retrofit
ATMs in our network as those ATMs are refurbished or updated for
other purposes. We are committed to ensuring that all of our
ATMs comply with all applicable ADA laws. Therefore, we have
been developing plans which would bring all of our ATMs into
compliance with the new guidelines within the allocated time
period. In connection with our E*TRADE Access acquisition, we
assumed obligations related to litigation instituted by the
National Foundation for the Blind relating to these matters. See
Legal Proceedings. It is possible that through
either a settlement or judgment entered in this lawsuit, our
obligations to implement the new accessibility guidelines may be
accelerated, but we do not believe such acceleration will result
in significant additional costs over our current ADA upgrade
effort.
EPP and Triple DES.
Data encryption makes ATMs more
tamper-resistant. Two of the more recently developed advanced
data encryption methods are commonly referred to as EPP and
Triple DES. We have adopted a policy that any new ATMs that we
acquire from a manufacturer must be EPP and Triple DES
compliant. We have budgeted $10.5 million to accomplish
this encryption upgrade all of our ATMs by the end of 2007. We
believe this time frame will be acceptable to the major
processing networks. However, if we must accelerate our upgrade
schedule, we would also be required to significantly accelerate
our capital expenditures with respect to these upgrades.
Surcharge regulation.
The imposition of surcharges is not
currently subject to federal regulation. There have been,
however, various state and local efforts to ban or limit
surcharges, generally as a result of activities of consumer
advocacy groups that believe that surcharges are unfair to
cardholders. Generally, United States federal courts have ruled
against these efforts. We are not aware of any existing
surcharging bans or limits applicable to us in any of the
jurisdictions in which we currently do business. Nevertheless,
there can be no assurance that surcharges will not be banned or
limited in the cities and states where we operate. Such a ban or
limit would have a material adverse effect on us and other ATM
operators.
EFT network regulations.
EFT regional networks have
adopted extensive regulations that are applicable to various
aspects of our operations and the operations of other ATM
network operators. The Electronic Fund Transfer Act,
commonly known as Regulation E, is the major source of EFT
network regulations. The regulations promulgated under
Regulation E establish the basic rights, liabilities, and
responsibilities of consumers who use electronic fund transfer
services and of financial institutions that offer these
services. The services covered include, among other services,
ATM transactions. Generally, Regulation E requires us to
provide notice of the fee to be charged the consumer, establish
limits on the consumers liability for unauthorized use of
his card, provide receipts to the consumer, and establish
protest procedures for the consumer. We believe that we are in
material compliance with these regulations and, if any
deficiencies were discovered, that we would be able to correct
them before they had a material adverse impact on our business.
70
U.K. Government and Industry Regulation
Surcharge regulation.
In the United Kingdom, the Treasury
Select Committee of the House of Commons recently heard evidence
from interested parties with respect to surcharges in the ATM
industry. This committee was formed to investigate public
concerns regarding the ATM industry. We understand that the
areas of focus included adequacy of disclosure to ATM customers
regarding surcharges, whether ATM providers should be required
to provide free services in low-income areas and whether to
limit the level of surcharges. The Committee recommended to
Parliament that ATMs should be subject to the Banking Code,
which is a voluntary code of practice adopted by all financial
institutions in the United Kingdom. The U.K. government has yet
to signal its acceptance of the Committees report. There
is no certainty the report will be accepted. Should the report
be accepted, the main impact of the Banking Code will be that
ATM operators will be required to provide 30 days
notice to the public prior to converting a surcharge-free ATM to
one which charges surcharges. In practice, this notice will be
achieved through the posting of signage beside the ATM for the
30 days prior to the change.
EFT network regulations.
The LINK network rules require
that ATM machines display an on-screen message notifying the
cardholder of applicable fees before a transaction is completed,
thus allowing the customer to cancel the transaction without
incurring a charge. In addition, effective July 1, 2005, a
new Link network rule went into effect requiring ATMs to carry a
screen message that notifies potential users prior to card
insertion that they will be charged for Link cash withdrawals.
From that same date, it became a requirement under Link network
rules that a sign, carrying the same message and with lettering
of a 14 point minimum size, be located in clear view adjacent to
the ATM screen.
Legal Proceedings
In connection with our E*TRADE Access acquisition, we assumed
responsibility for the outcome of a lawsuit instituted in
Massachusetts Federal District Court (the Court) by
the National Foundation for the Blind and the Commonwealth of
Massachusetts. In this lawsuit, the plaintiffs initially sought
to require us to make all of the ATMs in our network
voice-enabled, or capable of providing audible
instructions to a visually-impaired person upon that person
inserting a headset key into an outlet at the ATM. In response
to a motion filed by us, on February 22, 2005, the Court
ruled that the plaintiffs were not entitled to this relief.
Following the Courts order, the plaintiffs filed an
amended petition stating that we have failed to make ATM banking
services fully accessible and independently usable by
individuals who are blind. We believe that by failing to
precisely define what reasonable accommodation the plaintiffs
wish to have us implement, the plaintiffs amended petition
is fatally defective. We have filed a motion for summary
judgment on this point requesting the Court to dismiss the case.
Likewise the plaintiffs have filed a motion for summary
judgment requesting the Court to issue an injunction requiring
us to make our ATMs independently usable by the visually
impaired. The Court has conducted an oral hearing on these
motions and a ruling is expected at any time.
Pursuant to the ATM management agreement that we assumed in
connection with the acquisition of the Winn-Dixie portfolio in
2003, Winn-Dixie was required to provide us with a rebate for
most ATMs that were removed due to its store closures.
Additionally, as part of that acquisition, we were designated as
the beneficiary of a letter of credit under which we could make
draws in the event Winn-Dixie refused to pay such rebates.
Subsequent to drawing down the full $3.6 million available
under such letter of credit, the former owner of the Winn-Dixie
ATM portfolio initiated an arbitration action against us for
restitution of a portion of such funds drawn by us. However,
such arbitration action was settled in January 2006, the result
of which had no material impact on our financial condition or
results of operations.
In the ordinary course of our business, we are subject to
periodic lawsuits, investigations and claims. Although we cannot
predict with certainty the ultimate resolution of lawsuits,
investigations and claims asserted against us, we do not believe
that any currently pending legal proceeding to which we are a
party, other than the litigation discussed above, will have a
material adverse effect on our business, results of operations,
cash flows or financial condition.
71
Employees
As of December 31, 2005, we had approximately
240 employees, including approximately 46 employees
that were acquired as part of the Bank Machine acquisition in
May 2005. None of our employees is represented by a union or
covered by a collective bargaining agreement. We believe that
our relations with our employees are good.
Facilities
Our principal executive offices are located at 3110 Hayes Road,
Suite 300, Houston, Texas 77082, and our telephone number
is (281) 596-9988. We lease approximately
26,000 square feet of space under our Houston office lease
and approximately 11,000 square feet in warehouse space in
Houston, Texas and our satellite office in Temple, Texas. In
addition we lease approximately 6,000 square feet of office
space in Hatfield, Hertfordshire, England. Our facilities are
leased pursuant to operating leases for various terms. We
believe that our leases are at competitive or market rates and
do not anticipate any difficulty in leasing suitable additional
space upon expiration of our current lease terms.
72
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and positions of
our executive officers and directors.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
|
Position
|
|
|
|
|
|
|
Jack Antonini
|
|
|
52
|
|
|
Chief Executive Officer, President and Director
|
J. Chris Brewster
|
|
|
56
|
|
|
Chief Financial Officer and Treasurer
|
Michael H. Clinard
|
|
|
38
|
|
|
Chief Operating Officer
|
Thomas E. Upton
|
|
|
49
|
|
|
Chief Administrative Officer
|
Drew Soinski
|
|
|
46
|
|
|
Chief Marketing Officer
|
Fred R. Lummis
|
|
|
52
|
|
|
Director and Chairman of the Board of Directors
|
Robert P. Barone
|
|
|
68
|
|
|
Director
|
Frederick W. Brazelton
|
|
|
34
|
|
|
Director
|
Ralph H. Clinard
|
|
|
72
|
|
|
Director
|
Ron Coben
|
|
|
48
|
|
|
Director
|
Jorge M. Diaz
|
|
|
41
|
|
|
Director
|
Roger B. Kafker
|
|
|
43
|
|
|
Director
|
Michael A. R. Wilson
|
|
|
38
|
|
|
Director
|
Ronald Delnevo
|
|
|
51
|
|
|
Director and Chief Executive of Bank Machine Limited
|
The following biographies describe the business experience of
our executive officers and directors.
Jack Antonini
has served as our President and Chief
Executive Officer and as a director since January 2003. From
November 2000 to December 2002, Mr. Antonini served as a
consultant for JMA Consulting, providing consulting services to
the financial industry. During 2000, Mr. Antonini served as
chief executive officer and president of Globeset, Inc., an
electronic payment products and services company. From August
1997 to February 2000, Mr. Antonini served as executive
vice president of consumer banking at First Union Corporation of
Charlotte, N.C. From September 1995 to July 1997, he served as
vice chairman and chief financial officer of First USA
Corporation, which was acquired by Bank One in June 1997.
Mr. Antonini held various positions from March 1985 to
August 1995 at San Antonio-based USAA Federal Savings Bank,
serving as vice chairman, president and chief executive officer
from August 1991 to August 1995. He is a certified public
accountant and holds a bachelor of science degree in business
and accounting from Ferris State University in Michigan.
Mr. Antonini also serves as a director of the Electronic
Funds Transfer Association, or EFTA.
J. Chris Brewster
has served as our Chief Financial
Officer and Treasurer since joining us in February 2004. From
September 2002 until February 2004, Mr. Brewster provided
consulting services to various businesses. From October 2001
until September 2002, Mr. Brewster served as executive vice
president and chief financial officer of Imperial Sugar Company,
a Nasdaq-quoted refiner and marketer of sugar and related
products. From March 2000 to September 2001, Mr. Brewster
served as chief executive officer and chief financial officer of
WorldOil.com, a privately-held Internet, trade magazine, book
and catalog publishing business. From January 1997 to February
2000, Mr. Brewster served as a partner of Bellmeade Capital
Partners, LLC, a merchant banking firm specializing in the
consolidation of fragmented industries. From March 1992 to
September 1996, he served as Chief Financial Officer of
Sanifill, Inc., a New York Stock Exchange-listed environmental
services company. From May 1984 to March 1992, he served as
Chief Financial Officer of National Convenience Stores, Inc., a
New York Stock Exchange-listed operator of 1,100 convenience
stores. He holds a bachelor of science degree in industrial
management from the Massachusetts Institute of Technology and a
master of business administration from Harvard Business School.
Michael H. Clinard
has served as our Chief Operating
Officer since he joined the company in August 1997. He holds a
bachelor of science degree in business management from Howard
Payne University. Mr. Clinard also serves as a director and
treasurer of the ATM Industry Association.
73
Thomas E. Upton
has served as our Chief Administrative
Officer since February 2004. From June 2001 to February 2004,
Mr. Upton served as our Chief Financial Officer and
Treasurer. From February 1998 to May 2001, Mr. Upton was
the chief financial officer of Allegis Group LLC, a national
collections firm. Prior to joining Allegis, Mr. Upton
served as a financial executive for several companies. He is a
certified public accountant with membership in the Texas Society
of Certified Public Accountants, and holds a bachelor of
business administration degree from the University of Houston.
Drew Soinski
has served as our Chief Marketing Officer
since August 2005. Prior to joining Cardtronics, Mr. Soinski
headed up the national sales organization for First Horizon
Merchant Services, a leading provider of transaction processing
and bankcard acquiring services. Prior to that, Mr. Soinski held
various sales and marketing management positions with companies
such as National Processing, Inc., TransGlobal, and National
Bancard Corporation. He holds a bachelor of science degree in
business administration from the University of Central Florida.
Fred R. Lummis
has served as a director and our Chairman
of the board since June 2001. Mr. Lummis is a co-founder
and managing partner of The CapStreet Group, LLC,
CapStreet II, L.P. and CapStreet Parallel II, L.P.
From June 1998 to May 2000, Mr. Lummis served as chairman
and chief executive officer of Advantage Outdoor Company, an
outdoor advertising company. From September 1994 to June 1998,
Mr. Lummis served as chairman and chief executive officer
of American Tower Corporation, a nationwide communication tower
owner and operator. Mr. Lummis now serves as a director of
American Tower Corporation, Amegy Bancorporation Inc. and
several private companies. Mr. Lummis holds a bachelor of
arts degree in economics from Vanderbilt University and a master
of business administration degree from the University of Texas
at Austin.
Robert P. Barone
has served as a director since September
2001. Mr. Barone has more than 40 years of sales,
marketing and executive leadership experience in various
positions at Diebold, NCR, Xerox and the EFTA. Since December
1999, Mr. Barone has served as a consultant for SmartNet
Associates, Inc., a private financing service. Additionally,
from May 1997 to November 1999, Mr. Barone served as
Chairman of the Board of PetsHealth Insurance, Inc., a pet
health insurance provider. From September 1988 to September
1994, he served as board vice-chairman, president and chief
operating officer at Diebold. He holds a bachelor of business
administration degree from Western Michigan University and a
master of business administration degree from Indiana
University. A founder and past chairman of the EFTA,
Mr. Barone is now chairman emeritus of the EFTA.
Frederick W. Brazelton
has served as a director since
June 2001. Mr. Brazelton is a partner of The CapStreet
Group, which he joined in August 2000. From July 1996 to July
1998, Mr. Brazelton worked for Hicks, Muse, Tate &
Furst, a private equity firm in Dallas, and from June 1994 to
June 1995, he worked for Willis, Stein & Partners, a
private equity firm in Chicago. He holds a bachelor of business
administration from the Business Honors Program at the
University of Texas at Austin and a master of business
administration degree from Stanford Graduate School of Business.
Mr. Brazelton also serves as the chairman of the board of
directors of River Oaks Imaging and Diagnostic Group, Inc., a
provider of diagnostic imaging services.
Ralph H. Clinard
has served as a director since June
2001. Mr. Clinard founded the predecessor to our company in
1989 and was with us until he retired as president and chief
executive officer in January 2003. Prior to founding our
predecessor, Mr. Clinard served with Exxon Corporation, an
integrated oil company, working in various positions for almost
30 years. Mr. Clinard holds a bachelor of science
degree in mathematics from Muskingum College and a bachelor of
science degree in mechanical engineering from Pennsylvania State
University. Mr. Clinard is currently retired.
Ron Coben
has served as a director since July 2002. Mr.
Coben is currently the president of Think So, LLC, a marketing
and business process consulting firm serving financial
institutions and
non-banking
entities.
Mr. Coben also served as the President and CEO of
MessagePro, Inc. from November 2001 to May 2005. From October
1989 to June 1996, Mr. Coben was senior vice president, and
from June 1996 to November 2001, Mr. Coben was executive
vice president of consumer and business banking for Bank United
Corp., which was acquired by Washington Mutual, Inc. in February
2001. Mr. Coben also served as executive vice
74
president at Washington Mutual, Inc. from February 2001 to
November 2001. Mr. Coben holds a bachelor of business
administration degree from the University of Texas at Austin.
Jorge M. Diaz
has served as a director since December
2004. Mr. Diaz has served as President and Chief Executive
Officer of Personix, a division of Fiserv, since April 1994. In
January 1985, Mr. Diaz
co-founded
National
Embossing Company, a predecessor company to Personix.
Mr. Diaz sold National Embossing Company to Fiserv in April
1994.
Roger B. Kafker
has served as a director since February
2005. Mr. Kafker is a Managing Director at
TA Associates and concentrates on management-led buyouts
and recapitalizations in growth service businesses in the
financial, consumer and healthcare services industries. He
serves as a Director of Clayton Holdings, CompBenefits
Corporation, Florida Career College and Preferred Freezer
Services. Mr. Kafker has served on the Boards of Affiliated
Managers Group, Allegis Realty Investors (now UBS Realty
Investors), And 1, ANSYS, Boron, LePore &
Associates, Cupertino Electric, EYP Mission Critical Facilities,
HVL, Monarch Dental Corporation and Thomson Advisory Group (now
PIMCO Advisors). Prior to joining TA in 1989, he was employed by
Bankers Trust Company of New York, where he worked on leveraged
acquisitions. Mr. Kafker received a BA degree, magna cum
laude, Phi Beta Kappa, in History from Haverford College and an
MBA degree, with Honors, from the Harvard Business School.
Michael A. R. Wilson
has served as a director since
February 2005. Mr. Wilson is a Managing Director at TA
Associates where he focuses on growth investments and leveraged
buyouts of financial services, business services and consumer
products companies. He also serves on the Boards of Advisory
Research, Inc., Chartered Marketing Services, EYP Mission
Critical Facilities and Numeric Investors. He formerly served on
the Board of United Pet Group. Prior to joining TA in 1992,
Mr. Wilson was a Financial Analyst in Morgan Stanleys
Telecommunications Group. In 1994, he joined Affiliated Managers
Group, a TA-backed financial services
start-up,
as Vice
President and a member of the founding management team.
Mr. Wilson received a BA degree, with Honors, in Business
Administration from the University of Western Ontario and an MBA
degree, with Distinction, from the Harvard Business School.
Ronald Delnevo
has served as Managing Director of Bank
Machine for four years and has been with Bank Machine (formerly
the ATM division of Euronet) since 1998. Prior to joining Bank
Machine, Mr. Delnevo served in various consulting roles in
the retail sector, served as a board director of Tie Rack PLC
for five years and spent seven years with British Airports
Authority in various commercial roles. Mr. Delnevo was
educated at Heriot Watt University in Edinburgh, and currently
holds a degree in business organization and a diploma in
personnel management.
Our Board of Directors and Executive Officers
Our board of directors consists of ten persons. Members of our
board are elected at our annual meeting of stockholders for
terms expiring upon their resignation or until their successor
is duly elected.
Our executive officers are appointed by the board on an annual
basis and serve until removed by the board or their successors
have been duly appointed.
Committees of the Board
Our board of directors has appointed an audit committee, a
compensation committee and a nominating committee. The audit
committee currently consists of Messrs. Barone, Coben and
Clinard with Mr. Barone serving as the committees chairman
and designated financial expert. The compensation committee
currently consists of Messrs. Lummis, Wilson and Diaz and
the nominating committee currently consists of
Messrs. Lummis, Brazelton, Wilson and Kafker.
On an annual basis, the audit committee selects, on behalf of
our board of directors, an independent public accounting firm to
be engaged to audit our financial statements, discuss with the
independent auditors their independence, review and discuss the
audited financial statements with the independent auditors and
management and, once subject to the SEC rules and regulations,
will recommend to our board of directors
75
whether such audited financials should be included in our Annual
Reports on
Form 10-K
to be
filed with the SEC.
The compensation committee reviews and either approves, on
behalf of our board of directors, or recommends to the board of
directors for approval (1) the annual salaries and other
compensation of our executive officers and (2) individual
stock and stock option grants. The compensation committee also
provides assistance and recommendations with respect to our
compensation policies and practices and assists with the
administration of our compensation plans.
The nominating committee assists our board of directors in
fulfilling its responsibilities by identifying and approving
individuals qualified to serve as members of our board of
directors, selecting director nominees for our annual meetings
of stockholders, subject to the nominating requirements
contained in our investors agreement.
We do not have a corporate governance committee. The independent
directors of our board fulfill the responsibilities of a
corporate governance committee by developing and recommending to
our board of directors corporate governance guidelines and
oversight with respect to corporate governance and ethical
conduct.
Director Compensation
We pay each of our non-employee directors $1,000 per board
meeting attended. Directors who are also are employed by us do
not receive fees for attending board or committee meetings. All
of our directors are reimbursed for their reasonable expenses in
attending board and committee meetings. In addition, we are in
the process of establishing a plan which would permit each
director to receive compensation for board service in the form
of common shares and to defer receipt of this compensation for a
period of time selected by the director that terminates no later
than the date he ceases to be a director.
Executive Compensation
The table below sets forth summary information concerning the
compensation awarded to our chief executive officer and our four
other most highly paid executive officers in the year ended
December 31, 2005. The individuals listed below are
referred to in this registration statement as our named
executive officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
Annual
|
|
|
|
Compensation
|
|
|
|
|
|
Name and Principal Position
|
|
Salary
|
|
|
Bonus
|
|
|
|
|
|
|
|
|
Jack Antonini
|
|
$
|
330,750
|
|
|
$
|
|
(1)
|
|
Chief Executive Officer, President and Director
|
|
|
|
|
|
|
|
|
J. Chris Brewster
|
|
|
236,250
|
|
|
|
|
(1)
|
|
Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
Michael H. Clinard
|
|
|
220,500
|
|
|
|
|
(1)
|
|
Chief Operating Officer
|
|
|
|
|
|
|
|
|
Thomas E. Upton
|
|
|
210,000
|
|
|
|
|
(1)
|
|
Chief Administrative Officer
|
|
|
|
|
|
|
|
|
Ronald Delnevo(2)
|
|
|
164,232
|
(3)
|
|
|
|
(1)
|
|
Chief Executive of Bank Machine Limited and Director
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Bonuses earned for the year ended December 31, 2005 were
not finalized as of the date of this filing.
|
|
(2)
|
Mr. Delnevo joined us in May 2005 as part of the Bank
Machine acquisition.
|
|
(3)
|
Amount converted at an average exchange rate of $1.7818 to
£1.00.
|
76
Option Grants in Last Fiscal Year
The following table sets forth information with respect to all
stock options granted by the Company in 2005 to the named
executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
% of Total
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Granted to
|
|
|
Exercise or
|
|
|
|
|
Grant Date
|
|
|
|
Options
|
|
|
Employees in
|
|
|
Base Price
|
|
|
Expiration
|
|
|
Present
|
|
|
|
Granted(1)
|
|
|
Fiscal Year
|
|
|
($/Share)
|
|
|
Date
|
|
|
Value $(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald Delnevo
|
|
|
40,000
|
|
|
|
19.0%
|
|
|
$
|
83.84
|
|
|
|
5/17/2015
|
|
|
$
|
311,384
|
|
|
|
(1)
|
The ten-year options granted in 2005 vest ratably over four
years beginning one year following the date of grant.
|
|
(2)
|
The Black-Scholes option pricing model was utilized to determine
the grant date present value of the stock options granted in
2005. Under the Black-Scholes option pricing model, the grant
date present value of the stock options referred to in the table
above was calculated to be $7.78 per share. The following
facts and assumptions were utilized in making such calculation:
(a) an unadjusted exercise price $83.84 per share;
(b) a fair market value of $83.84 per share on the
date of grant; (c) no dividend yield; (d) a term of
five years; (e) no volatility; and (f) an assumed
risk-free interest rate of 3.82%, which approximated the yield
on the five year treasury note on the date of grant. No other
discounts or restrictions related to the vesting or the
likelihood of vesting of the stock options were applied. The
resulting grant date present value per share amount was
multiplied by the total number of stock options granted to
determine the total grant date present value figure above.
|
Option Exercises in Last Fiscal Year and Year-End Option
Values
The following table presents information concerning the stock
options exercised during the last fiscal year by each of our
named executive officers and the fiscal year-end value of
unexercised options held by each of our named officers as of
December 31, 2005.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Value of Unexercised
|
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|
|
|
|
|
|
Underlying Unexercised
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|
In-the-Money
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|
Shares
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|
|
|
|
Options at Year-End
|
|
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Options at Year-End(1)
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|
Acquired
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|
Value
|
|
|
|
|
|
|
|
|
|
on Exercise
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|
|
Realized
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack Antonini(2)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
J. Chris Brewster
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
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30,000
|
|
|
$
|
477,591
|
|
|
$
|
955,182
|
|
Michael H. Clinard
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|
|
|
|
|
|
|
|
|
|
18,683
|
|
|
|
|
|
|
$
|
1,419,859
|
|
|
$
|
|
|
Thomas E. Upton
|
|
|
|
|
|
|
|
|
|
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22,354
|
|
|
|
1,250
|
|
|
$
|
1,728,278
|
|
|
$
|
90,137
|
|
Ronald Delnevo
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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40,000
|
|
|
$
|
|
|
|
$
|
|
|
|
|
(1)
|
There was no public market for our common stock on
December 31, 2005. Accordingly, we calculated these values
based on an estimated price per share of $83.84, as determined
by management, less the applicable exercise prices.
|
|
(2)
|
Mr. Antonini only owns restricted shares in the Company and
has not been granted any options to purchase the Companys
common stock.
|
Employment-Related Agreements of Named Executive Officers
Employment Agreement with Jack Antonini.
In January 2003,
we entered into an employment agreement with Jack Antonini.
Mr. Antoninis January 2003 employment agreement was
last amended in January 2005. Under his employment agreement,
Mr. Antonini receives a monthly salary of $27,562 and his
term of employment runs through January 31, 2008. In
addition, subject to our achieving certain performance standards
set by our compensation committee, Mr. Antonini may be
entitled to an annual bonus of up to 40% of his base salary.
This bonus will be determined in the sole discretion of our
compensation committee. Further, should we terminate
Mr. Antonini without cause, he will be entitled to receive
severance pay equal to his base salary for the lesser of twelve
months or the number of months remaining under his employment
contract.
Employment Agreement with Michael H. Clinard.
In June
2001, we entered into an employment agreement with Michael H.
Clinard. Mr. Clinards June 2001 employment agreement
was amended in January 2005. Under his employment agreement,
Mr. Clinard receives a monthly salary of $18,375 and his
term of
77
employment runs through January 31, 2008. On each
anniversary of the agreement, Mr. Clinards annual
compensation is subject to increases as determined by our
compensation committee in its sole discretion, with such
increases being targeted to be 5% of the previous years
base salary. In addition, subject to our achieving certain
performance standards set by our compensation committee,
Mr. Clinard may be entitled to an annual bonus of up to 15%
of his base salary. This bonus will be determined in the sole
discretion of our compensation committee. Further, (a) if
he terminates his employment for good reason, as defined in the
employment agreement, then he is entitled to continue to receive
payments of base salary from us for the lesser of twelve months
or the number of months remaining under his employment contract
following his termination, and (b) if he dies or becomes
totally disabled, as defined in the employment agreement, then
he is entitled to receive the difference between his base salary
and any disability benefits received by him under our disability
benefit plans for the lesser of twelve months or the number of
months remaining under his employment contract following his
death or disability, as applicable.
Employment Agreement with Thomas E. Upton.
In June 2001,
we entered into an employment agreement with Thomas E. Upton.
Mr. Uptons June 2001 employment agreement was amended
in January 2005. Under his employment agreement, Mr. Upton
receives a monthly salary of $17,500 and his term of employment
runs through January 31, 2008. In addition, subject to our
achieving certain performance standards set by our compensation
committee, Mr. Upton may be entitled to an annual bonus of
up to 15% of his base salary. This bonus will be determined in
the sole discretion of our compensation committee.
Employment Agreement with J. Chris Brewster.
In March
2004, we entered into an employment agreement with J. Chris
Brewster which was amended on February 10, 2005. The
amended agreement provides for an initial term ending
January 31, 2008. Under the amended employment agreement,
Mr. Brewster is entitled to receive a current monthly base
salary of $19,687, subject, on each anniversary of the
agreement, to increases as determined by our board of directors
in its sole discretion, with such increases being targeted to be
5% of the previous years base salary. In addition, subject
to our achieving certain performance standards set by our
compensation committee, Mr. Brewster may be entitled to an
annual bonus of up to 40% of his base salary. This bonus will be
determined in the sole discretion of our compensation committee.
Further, should we terminate Mr. Brewster without cause, or
should Mr. Brewster terminate his employment with us for
good reason, as defined in the employment agreement, he will be
entitled to receive severance pay equal to his base salary for
twelve months.
Employment Agreement with Ronald Delnevo.
In May 2005, we
entered into an employment agreement with Ronald Delnevo. Such
agreement provides for an initial term ending May 17, 2009.
Under the agreement, Mr. Delnevo is entitled to receive a
current monthly base salary of £11,250, subject, on an
annual basis, to increases as determined by our board of
directors in its sole discretion, with such increases being
targeted at 5% of the previous years base salary.
Mr. Delnevo is also entitled to the payment of a car
allowance totaling £12,000 per annum. In addition, subject
to the achievement of certain performance standards as set by
our board of directors, Mr. Delnevo may be entitled to an
annual bonus of up to 40% of his base salary. Furthermore,
Mr. Delnevo is also party to a separate long-term bonus
agreement that, upon the achievement of certain financial goals,
as outlined in such agreement, would require the payment of an
additional bonus amount to Mr. Delnevo subsequent to
December 31, 2008. Further, should we terminate
Mr. Delnevo without cause, or should Mr. Delnevo
terminate his employment with us for good reason, as defined in
the agreement, he will be entitled to receive severance pay
equal to his base salary for twelve months.
Common Provisions of Employment-Related Agreements of Named
Executive Officers.
Several provisions are common to the
employment agreements of our named executive officers. For
example:
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|
|
|
|
Each employment agreement requires the employee to protect the
confidentiality of our proprietary and confidential information.
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|
|
Each employment agreement requires that the employee not compete
with us or solicit our employees or customers for a period of
24 months following the term of his employment.
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78
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|
|
|
|
Each employment agreement provides that the employee may be paid
an annual bonus based on certain factors and objectives set by
our compensation committee, with the ultimate amount of any
bonus paid determined at the direction of our compensation
committee.
|
Compensation Committee Interlocks and Insider
Participation
None of our executive officers has served as a director or
member of the compensation committee of any other entity whose
executive officers served as a director or member of our
compensation committee.
79
RELATED PARTY TRANSACTIONS
Preferred Stock Private Placement
In February 2005, we issued 894,568 shares of our
Series B Convertible Preferred Stock to investment funds
controlled by TA Associates, Inc. for aggregate gross proceeds
of $75.0 million. In connection with this offering, we also
appointed Michael Wilson and Roger Kafker, who are designees of
TA Associates, Inc. to our board of directors. Approximately
$24.8 million of the net proceeds of this offering were
used to redeem all of the outstanding shares of our
Series A Preferred Stock from affiliates of The CapStreet
Group, LLC. The remaining net proceeds were used to repurchase
approximately 24% of our outstanding shares of common stock, and
vested options to purchase our common stock, at a price per
share of $83.8394, pursuant to an offer to purchase such shares
of stock from all of our stockholders on a pro rata basis. As
part of this transaction, we repurchased 353,878 shares of
our common stock from affiliates of The CapStreet Group for
$29.7 million. We also repurchased shares of common stock
from our executive officers and directors as described below
under Transactions with Our Directors and
Officers.
After the maturity of the notes offered hereby, or
February 10, 2012 in the event the notes are no longer
outstanding, holders of a majority of the outstanding shares of
our Series B Convertible Preferred Stock may cause us to
redeem all of the outstanding shares of preferred stock at the
original issuance price less any dividends or distributions
previously paid on such shares. In the event that we do not have
sufficient funds legally available to redeem all outstanding
shares of preferred stock upon an election of redemption, we
would be required to pay interest on such unpaid amounts of
10% per annum, increasing 0.5% each quarter. If we are
unable to redeem all shares of preferred within 180 days of
an election of redemption, the holders of our preferred stock
would be entitled to appoint a majority of our board of
directors.
Investors Agreement
On June 4, 2001, we entered into an investors agreement
with CapStreet II, L.P., CapStreet Parallel II, L.P.,
Ralph H. Clinard, a current director and our then president and
chief executive officer, Michael H. Clinard, our chief operating
officer, Brian R. Archer, our executive vice president of
marketing, and the other stockholders of the company. We amended
and restated our investors agreement in connection with our
February 2005 preferred stock offering and further amended our
investors agreement in connection with our acquisition of Bank
Machine in April 2005. All of our stockholders are parties to
the investors agreement.
The following description of the investors agreement, as
amended, may be helpful to your understanding of the
relationships among our stockholders. You should be aware that
the investors agreement, other than the provisions relating to
registration rights, will be terminated in connection with an
initial public offering of our common stock.
Board Composition.
Our board of directors consists of ten
individuals designated in accordance with our investors
agreement. Our stockholders agreed to vote their shares to elect
to the board of directors two nominees designated by CapStreet;
two nominees designated by TA Associates; Ralph Clinard, for so
long as he owns 10% or more of our stock; our Chief Executive
Officer; Ronald Delnevo, the Chief Executive Officer of our
United Kingdom operations; and up to three additional
independent directors nominated by our nominating committee.
CapStreet designated Fred R. Lummis and Frederick W. Brazelton
as its board nominees and TA Associates designated Michael
Wilson and Roger Kafker as its board nominees. Our investors
agreement also requires our board of directors to maintain a
nominating committee comprised of the CapStreet and TA
Associates board nominees and a compensation committee comprised
of one CapStreet board nominee, one TA Associate nominee and one
independent director.
Preemptive Rights and Transfer Provisions.
Under our
investors agreement, if we propose to issue shares of our common
stock, other than in connection with a public offering,
issuances to employees and directors and certain corporate
transactions, we must provide each of our stockholders who is an
accredited investor the opportunity to purchase a pro rata
amount of such securities. In addition, in the event a
stockholder proposes to transfer any of our shares of common
stock, each of our other stockholders has the
80
right to purchase such shares. We have a right of first refusal
to purchase any such shares that are not purchased by our
stockholders.
Repurchase Option.
Under the investors agreement, if any
employee who is employed pursuant to a written employment
agreement is terminated from employment with us for cause (as
defined in their respective employment agreements with us), then
we, at our option, may purchase all of the securities held by
such person for a purchase price equal to the fair market value
of such securities.
Business Opportunities.
CapStreet and TA Associates are
private equity funds, and they invest in, have representatives
who serve on the board of directors and other governing boards
of, serve as officers of, provide services to and have minority
and controlling ownership interests in existing and future
portfolio companies. We have agreed that, except for
opportunities that come to the attention of any of the board
designees of CapStreet or TA Associates, in his or her capacity
as a director of the company, the relationship between us and
CapStreet and TA Associates will not prohibit any of them from
engaging in activities related to their operations as private
equity fund for their own account, or require any of them to
make any business opportunities available to us, even if any of
their activities or business opportunities competes with the our
business.
Registration Rights.
The investors agreement grants each
of CapStreet and TA Associates the right to demand that we file
a registration statement with the SEC to register the sale of
all or a portion of their shares of common stock. Subject to
certain limitations, we will be obligated to register these
shares upon the demand of CapStreet or TA Associates, for which
we will be required to pay the registration expenses. In
connection with any such demand registration, the other
stockholders who are parties to the investors agreement may be
entitled to include their shares in that registration under
certain piggyback registration rights granted under the
investors agreement to these other stockholders. In addition, if
we propose to register equity securities for our own account,
the stockholders who are parties to the investors agreement may
be entitled to include their shares in that registration as
well. In connection with any registration, we will pay the
expenses of any such selling stockholders and indemnify each
holder of registrable securities covered by a registration
statement against liabilities arising out of or related to such
registration statement or the preliminary registration statement
or registration statement included as part of such registration
statement.
Transactions with our Directors and Officers
Fred R. Lummis, the chairman of our board of directors, is also
a managing director of The CapStreet Group, LLC, the ultimate
general partner of CapStreet II, L.P. and CapStreet
Parallel II, L.P., our shareholders. Frederick W.
Brazelton, one of our directors, is also a partner of The
CapStreet Group, LLC. CapStreet II, L.P. and CapStreet
Parallel II, L.P. together own a majority interest in
MessagePro, Inc., and Fred R. Lummis and Frederick W. Brazelton
are each members of the board of directors of MessagePro, Inc.
Michael Wilson and Roger Kafker, our directors, are each
managing directors of TA Associates, affiliates of which are our
shareholders and own a majority of our outstanding shares of
Series B Preferred Stock.
Prior to the completion of this exchange offer, we had loans
outstanding to the following executive officers:
Mr. Antonini, who borrowed $940,800 from us during 2003 to
purchase 80,000 of our restricted shares, of which $867,314 is
currently outstanding, including accrued interest;
Mr. Michael Clinard, who borrowed $292,342 from us during
2003 to exercise stock options and purchase 43,484 shares
of our common stock, of which $233,298 is currently outstanding,
including accrued interest; and Mr. Upton, who borrowed
$131,205 from us during 2003 to exercise stock options and
purchase 21,104 shares of our common stock, of which
$104,708 is currently outstanding, including accrued interest.
Additionally, Mr. Ralph Clinard borrowed $442,319 from us
during 2003 to exercise stock options and purchase
64,938 shares of our common stock. Mr. Ralph Clinard
repaid his loan in full on January 15, 2004. The rate of
interest on each of these loans is 5% per annum.
Additionally, during 2003 we made loans in an aggregate amount
of approximately $500,000 to some of our non-executive officers
sufficient for those non-executive officers to exercise stock
options, of which approximately $323,790 is currently
outstanding. The interest rate on these loans is 5% per
annum. It is currently anticipated that the above-referenced
loans with our executive officers will be repaid in full,
including any accrued but unpaid interest related thereto, on or
before February 28, 2006. Such repayments
81
shall be made either in cash or by the tendering of shares of
our common stock, as currently held by such executive officers,
at fair market value as determined by an independent third-party
appraisal firm.
In 2003, our board of directors approved the issuance of
80,000 shares of restricted stock to Jack Antonini in
exchange for a promissory note in the amount of $940,800, or
$11.76 per share. The terms of his restricted stock award
are set forth in a restricted stock agreement between us and
Mr. Antonini. Beginning on the date of grant,
Mr. Antonini, as the owner of the shares, has the right to
vote his shares. Under the restricted stock agreement, we may
repurchase a portion of Mr. Antoninis shares prior to
January 20, 2007 in some circumstances such as the
termination of his employment for cause. The agreement also
contained a provision allowing Mr. Antonini to
put to us an amount of his restricted shares
sufficient to retire the entire unpaid principal balance of the
promissory note plus accrued interest. On February 4, 2004,
we and Mr. Antonini amended the restricted stock agreement
to remove Mr. Antoninis put right.
Mr. Antonini is a signatory to our investors agreement and
has tag-along rights thereunder with respect to the restricted
shares, meaning that if any securityholder that is a party to
the investors agreement proposes to transfer greater than 5% of
our outstanding securities, Mr. Antonini will have the
right to transfer a pro rata portion of his restricted shares.
Pursuant to our offer to repurchase shares of our common stock
using a portion of the net proceeds from our February 2005
preferred stock offering, we purchased shares of our common
stock from each of our executive officers and directors at a
price per share of $83.8394. We purchased 9,492 shares from
Jack Antonini, 23,453 shares from Michael Clinard,
7,956 shares from Thomas Upton, and 130,737 shares
from Ralph Clinard.
82
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the
beneficial ownership of our common stock as of December 31,
2005:
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|
|
|
|
each person known to us to beneficially own more than 5% of the
outstanding shares of our common stock;
|
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|
|
each of the executive officers identified in the summary
compensation table;
|
|
|
|
each of our directors; and
|
|
|
|
all directors and named executive officers as a group.
|
Footnote 1 below provides a brief explanation of what is
meant by the term beneficial ownership. Except as
indicated in the footnotes to this table and subject to
applicable community property laws, the persons named in this
table have the sole voting power with respect to all shares of
common stock listed as beneficially owned by them. The address
for each executive officer and director set forth below, unless
otherwise indicated, is c/o Cardtronics, Inc., 3110 Hayes
Road, Suite 300, Houston, Texas 77082. The address of each
of CapStreet II, L.P., CapStreet Parallel II, L.P., and
Messrs. Lummis and Brazelton is c/o The CapStreet
Group, LLC, 600 Travis Street, Suite 6110, Houston, Texas
77002. The address of TA Associates, Inc. and
Messrs. Wilson and Kafker is c/o TA Associates, High
Street Tower, 125 High Street, Suite 2500, Boston,
Massachusetts 02110.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Percent of
|
|
|
|
of Common Stock
|
|
|
Common Stock
|
|
Name of Beneficial Owner(1)
|
|
Beneficially Owned
|
|
|
Beneficially Owned
|
|
|
|
|
|
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
CapStreet II, L.P.
|
|
|
1,017,958
|
|
|
|
35.1
|
%
|
CapStreet Parallel II, L.P.
|
|
|
119,501
|
|
|
|
4.1
|
%
|
TA Associates, Inc.(2)
|
|
|
894,568
|
|
|
|
30.9
|
%
|
Ralph H. Clinard(3)
|
|
|
420,225
|
|
|
|
14.5
|
%
|
Directors and Executive Officers:
|
|
|
|
|
|
|
|
|
Fred R. Lummis(4)
|
|
|
1,137,459
|
|
|
|
39.2
|
%
|
Michael Wilson(5)
|
|
|
894,568
|
|
|
|
30.9
|
%
|
Roger Kafker(6)
|
|
|
894,568
|
|
|
|
30.9
|
%
|
Jack Antonini
|
|
|
70,508
|
|
|
|
2.4
|
%
|
Michael H. Clinard(7)
|
|
|
75,382
|
|
|
|
2.6
|
%
|
Thomas E. Upton(8)
|
|
|
35,502
|
|
|
|
1.2
|
%
|
J. Chris Brewster(9)
|
|
|
15,000
|
|
|
|
*
|
|
Ronald Delnevo(10)
|
|
|
13,209
|
|
|
|
*
|
|
Robert P. Barone(11)
|
|
|
4,316
|
|
|
|
*
|
|
Frederick W. Brazelton
|
|
|
|
|
|
|
|
|
Ron Coben(12)
|
|
|
4,316
|
|
|
|
*
|
|
Jorge M. Diaz(13)
|
|
|
1,250
|
|
|
|
*
|
|
All executive officers and directors as a group
(13 persons)
|
|
|
2,898,941
|
|
|
|
90.8
|
%
|
83
|
|
|
*
|
|
Less than 1% of the outstanding common stock.
|
|
(1)
|
|
Beneficial ownership is a term broadly defined by
the SEC in
Rule 13d-3
under
the Exchange Act, and includes more than the typical forms of
stock ownership, that is, stock held in the persons name.
The term also includes what is referred to as indirect
ownership, meaning ownership of shares as to which a
person has or shares investment or voting power. For the purpose
of this table, a person or group of persons is deemed to have
beneficial ownership of any shares as of
December 31, 2005 that such person or group has the right
to acquire within 60 days after such date.
|
|
(2)
|
|
The shares owned by TA Associates, Inc. through certain of its
affiliated funds, including TA IX L.P., TA/ Atlantic and
Pacific IV L.P., TA/ Atlantic and Pacific V L.P., TA
Strategic Partners Fund A L.P., TA Strategic Partners
Fund B L.P., TA Investors II, L.P., which we
collectively refer to as the TA Funds, are Series B
Preferred shares which are convertible into our common stock on
a share for share basis.
|
|
(3)
|
|
Mr. Clinard is a member of our board of directors.
|
|
(4)
|
|
The shares indicated as being beneficially owned by
Mr. Lummis are owned directly by CapStreet II, L.P.
and CapStreet Parallel II, L.P. Mr. Lummis serves as a
Managing Director of The CapStreet Group, the ultimate general
partner of both CapStreet II, L.P. and CapStreet
Parallel II, L.P. As such, Mr. Lummis may be deemed to
have a beneficial ownership of the shares owned by
CapStreet II, L.P. and CapStreet Parallel II, L.P.
Mr. Lummis disclaims beneficial ownership of such shares.
|
|
(5)
|
|
Mr. Wilson serves as a Managing Director of TA Associates,
Inc., the ultimate general partner of the TA Funds. As
such, Mr. Wilson may be deemed to have a beneficial
ownership of the shares owned by the TA Funds. Mr. Wilson
disclaims beneficial ownership of such shares.
|
|
(6)
|
|
Mr. Kafker serves as a Managing Director of
TA Associates, Inc., the ultimate general partner of the
TA Funds. As such, Mr. Kafker may be deemed to have a
beneficial ownership of the shares owned by the TA Funds.
Mr. Kafker disclaims beneficial ownership of such shares.
|
|
(7)
|
|
Includes options to purchase 18,683 shares of common stock
exercisable by Michael H. Clinard.
|
|
(8)
|
|
Includes options to purchase 22,354 shares of common stock
exercisable by Thomas E. Upton.
|
|
(9)
|
|
Represents options to purchase 15,000 shares of common
stock exercisable by J. Chris Brewster.
|
|
(10)
|
|
Represents Series B Preferred shares which are convertible
into our common stock on a share for share basis.
|
|
(11)
|
|
Represents options to purchase 4,316 shares of common stock
exercisable by Robert P. Barone.
|
|
(12)
|
|
Represents options to purchase 4,316 shares of common stock
exercisable by Ron Coben.
|
|
(13)
|
|
Represents options to purchase 1,250 shares of common stock
exercisable by Jorge Diaz.
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84
DESCRIPTION OF OTHER INDEBTEDNESS
Bank Credit Facilities
In connection with the Bank Machine acquisition, we amended our
existing bank credit facilities with BNP Paribas and Bank of
America, N.A. and certain other lenders as a first lien senior
credit facility and entered into a second lien facility with
Banc of America Bridge LLC, as agent. A portion of the proceeds
of these new credit facilities were used to finance the Bank
Machine acquisition. The revolving credit facility under the
first lien credit facility can be used for financing
acquisitions, capital expenditures and general corporate
purposes, including working capital needs. The commitments under
these credit facilities totaled $300.0 million, consisting
of (1) a $125.0 million five-year first lien senior
term loan facility, (2) a $100.0 million five-year
first lien revolving credit facility, and (3) a
$75.0 million second lien bridge facility.
In August 2005, the first lien senior term loan facility and the
second lien facility were repaid in full with the net proceeds
from our senior subordinated notes offering and additional
borrowings under our revolving credit facility. Additionally,
the revolving credit facility was increased to a maximum
borrowing capacity of $150.0 million immediately following
such offering. However, such borrowing capacity is limited in
practice by certain financial covenants contained in the
facility. As of September 30, 2005, we had approximately
$41.8 million outstanding under the facility, and the
ability to borrow an additional $37.1 million based on the
covenants contained in such facility. Any amounts drawn under
such facility are not due until the facilitys maturity
date in May 2010.
Borrowings under the bank credit facility bear interest at a
variable rate based upon LIBOR or prime rate, at our option. At
September 30, 2005, the weighted average interest rate on
our borrowings was approximately 6.8%. Borrowings are secured by
a lien on substantially all of our domestic subsidiaries
assets (excluding equity interests in foreign subsidiaries). The
borrowings are also secured by the equity interests in our
direct foreign subsidiaries and the direct subsidiaries of our
domestic subsidiaries (limited to 66% of the voting interests in
direct foreign subsidiaries and 100% of the non-voting interests
in such direct foreign subsidiaries).
The bank credit facility contains various restrictive covenants
and other usual and customary terms and conditions of facilities
of the same type, including prohibitions on payment of cash
dividends, restrictions on certain other distributions and
restricted payments, and limitations on selling assets and
transferring property, entering into mergers or similar
transactions, incurrence of debt, creation of liens, making
investments, engaging in transactions with affiliates, making
capital expenditures and entering into sale and leaseback
transactions. We are also required to maintain certain financial
ratios.
The bank credit facility also contains customary events of
default, including any defaults by us or any of our subsidiaries
in the payment or performance of any other indebtedness over
certain threshold levels. Upon an occurrence of an event of
default under our bank credit facilities, a majority of the
lenders under such bank credit facilities may cause the agent
to, among other things, terminate the commitment to lend credit,
if any, and declare the outstanding indebtedness immediately due
and payable.
In addition to the above domestic credit facility, Bank Machine
has a £2.0 million unsecured overdraft and borrowing
facility that expires in July 2006. Such facility, which bears
interest at 1.75% over the banks base rate (currently
4.50%), will be utilized for general corporate purposes for our
United Kingdom operations. No borrowings were outstanding under
such facility as of September 30, 2005. However, on
September 22, 2005, Bank Machine posted a £275,000
bond under such facility, and in return received the same amount
in cash back from the bank. Such cash amount was previously held
by the bank as collateral for one of Bank Machines
existing vault cash programs. The outstanding bond is akin to a
letter of credit, and as such, reduces the amount available for
future borrowings under the facility to £1.725 million.
85
DESCRIPTION OF THE NEW NOTES
The New Notes will be issued, and the outstanding notes were
issued, under an Indenture dated as of August 12, 2005 (the
Indenture) among the Company, the Initial Guarantors
and Wells Fargo Bank, National Association, as trustee (the
Trustee), in a private transaction that is not
subject to the registration requirements of the Securities Act.
See Notice to Investors. The terms of the New Notes
include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as
amended (the Trust Indenture Act).
The following description is a summary of the material
provisions of the Indenture. It does not restate that agreement
in its entirety. We urge you to read the Indenture because it,
and not this description, defines your rights as holders of the
New Notes. The Company has filed the Indenture for an exhibit to
the registration statement of which this prospectus is a part.
You can find the definitions of certain terms used in this
description below under the caption Certain
Definitions. Certain defined terms used in this
description but not defined below under the caption
Certain Definitions have the meanings
assigned to them in the Indenture. In this description, the word
Company refers only to Cardtronics, Inc. and not to
any of its subsidiaries and the Notes refer to the
New Notes and the outstanding notes.
If the exchange offer contemplated by this prospectus (the
Exchange Offer) is consummated, Holders of
outstanding notes who do not exchange those notes for new notes
in the Exchange Offer will vote together with Holders of new
notes for all relevant purposes under the Indenture. In that
regard, the Indenture requires that certain actions by the
Holders thereunder (including acceleration following an Event of
Default) must be taken, and certain rights must be exercised, by
specified minimum percentages of the aggregate principal amount
of the outstanding securities issued under the Indenture. In
determining whether Holders of the requisite percentage in
principal amount have given any notice, consent or waiver or
taken any other action permitted under the Indenture, any
outstanding notes that remain outstanding after the Exchange
Offer will be aggregated with the new notes, and the Holders of
such outstanding notes and the new notes will vote together as a
single series for all such purposes. Accordingly, all references
herein to specified percentages in aggregate principal amount of
the notes outstanding shall be deemed to mean, at any time after
the Exchange Offer is consummated, such percentages in aggregate
principal amount of the outstanding notes and the new notes then
outstanding.
Brief Description of the Notes
The Notes:
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are general unsecured obligations of the Company;
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are subordinated in right of payment to all existing and future
Senior Debt of the Company, including the Indebtedness of the
Company under the Credit Agreement;
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are
pari passu
in right of payment with all existing and
any future senior subordinated Indebtedness of the Company;
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are senior in right of payment to all existing and any future
subordinated Indebtedness of the Company;
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are guaranteed by the Guarantors as described under
Note Guarantees; and
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are effectively subordinated to all existing and any future
Indebtedness and other liabilities of the Companys
Subsidiaries that are not Guarantors.
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As of September 30, 2005, the Company and Initial
Guarantors had outstanding Indebtedness of approximately
$41.8 million, all of which was Senior Debt, and the
Companys subsidiaries that are not guaranteeing the Notes
had approximately $15.1 million of indebtedness and other
liabilities, not including intercompany liabilities.
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As of the date of this prospectus, all of our subsidiaries are
Restricted Subsidiaries. However, under the
circumstances described below under the caption
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries, we will be
permitted to designate certain of our subsidiaries as
Unrestricted Subsidiaries. Any Unrestricted
Subsidiaries will not be subject to any of the restrictive
covenants in the Indenture and will not guarantee the Notes.
Any outstanding notes that remain outstanding after the
completion of the Exchange Offer, together with the new notes
issued in connection with the Exchange Offer and any other notes
issued under the indenture then outstanding, will be treated as
a single class of securities under the Indenture.
Principal, Maturity and Interest
The Indenture provides for the issuance by the Company of Notes
with an unlimited principal amount, of which $200.0 million
were issued on August 12, 2005. The Company may issue
additional notes (the Additional Notes) from time to
time. Any offering of Additional Notes is subject to all of the
covenants of the Indenture, including the covenant described
below under the caption Certain
Covenants Incurrence of Indebtedness. The
Notes and any Additional Notes subsequently issued under the
Indenture would be treated as a single class for all purposes
under the Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. The Company will
issue Notes in denominations of $1,000 and integral multiples of
$1,000. The Notes will mature on August 15, 2013.
Interest on the Notes will accrue at the rate of 9.250% per
annum and will be payable semi-annually in arrears on February
15 and August 15, commencing on February 15, 2006. The
Company will make each interest payment to the Holders of record
on the immediately preceding February 1 and August 1. Any
Additional Interest due will be paid on the same dates as
interest on the Notes. See Registration
Rights; Additional Interest.
Interest on the New Notes will accrue from August 12, 2005
or, if interest has already been paid, on the Notes, from the
date it was most recently paid. Interest will be computed on the
basis of a
360-day
year
comprised of twelve
30-day
months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Company,
the Company will pay all principal, interest and premium and
Additional Interest, if any, on that Holders Notes in
accordance with those instructions. All other payments on Notes
will be made at the office or agency of the Paying Agent and
Registrar within The City and State of New York unless the
Company elects to make interest payments by check mailed to the
Holders at their addresses set forth in the register of Holders.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar.
The Company may change the Paying Agent or Registrar without
prior notice to the Holders, and the Company or any of its
Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture and the procedures described in Notice to
Investors. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Holder to
pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not
required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of
it for all purposes.
87
Note Guarantees
The Notes are guaranteed, jointly and severally, by the Initial
Guarantors. Each Note Guarantee:
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is a general unsecured obligation of that Guarantor;
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is subordinated in right of payment to all existing and future
Senior Debt of that Guarantor, including the Guarantee by that
Guarantor of Indebtedness under the Credit Agreement;
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is
pari passu
in right of payment with all existing and
any future senior subordinated Indebtedness of that
Guarantor; and
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is senior in right of payment to all existing and any future
subordinated Indebtedness of that Guarantor.
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Each Note Guarantee will be subordinated to the prior payment in
full of all Senior Debt of that Guarantor. The obligations of
each Guarantor under its Note Guarantee will be limited as
necessary to prevent that Note Guarantee from constituting a
fraudulent conveyance under applicable law. See Risk
Factors The guarantees may not be enforceable
because of fraudulent conveyance laws. As of
September 30, 2005, the Initial Guarantors had outstanding
Indebtedness of approximately $41.8 million, all of which
was Guarantees of Indebtedness under the Credit Agreement, and
the Companys subsidiaries that are not guaranteeing the
Notes had approximately $15.1 million of indebtedness and
other liabilities, not including intercompany liabilities. See
Certain Covenants Guarantees.
Subordination
The payment of principal, interest and premium and Additional
Interest, if any, on the Notes is subordinated to the prior
payment in full in cash or Cash Equivalents of all Senior Debt
of the Company, including Senior Debt of the Company Incurred
after the Issue Date.
The holders of Senior Debt of the Company are entitled to
receive payment in full in cash or Cash Equivalents of all
Obligations due in respect of Senior Debt of the Company
(including interest after the commencement of any bankruptcy
proceeding at the rate specified in the documentation for the
applicable Senior Debt of the Company) before the Holders of
Notes are entitled to receive any payment with respect to the
Notes (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trusts
described below under the captions Legal
Defeasance and Covenant Defeasance or
Satisfaction and Discharge), in the
event of any distribution to creditors of the Company in
connection with:
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(1) any liquidation or dissolution of the Company;
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(2) any bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or
its property;
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(3) any assignment for the benefit of creditors; or
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(4) any marshaling of the Companys assets and
liabilities.
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The Company also may not make any payment in respect of the
Notes (except in Permitted Junior Securities or from the trusts
described under the captions Legal Defeasance
and Covenant Defeasance) if:
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(1) a default (a payment default) in the
payment of principal, premium or interest on Designated Senior
Debt of the Company occurs and is continuing; or
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(2) any other default (a nonpayment default)
occurs and is continuing on any series of Designated Senior Debt
of the Company that permits holders of that series of Designated
Senior Debt of the Company to accelerate its maturity, and the
Trustee receives a notice of such default (a Payment
Blockage Notice) from a representative of the holders of
such Designated Senior Debt.
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88
Payments on the Notes may and will be resumed:
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(1) in the case of a payment default on Designated Senior
Debt of the Company, upon the date on which such default is
cured or waived; and
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(2) in case of a nonpayment default on Designated Senior
Debt of the Company, the earlier of (x) the date on which
such default is cured or waived, (y) 179 days after
the date on which the applicable Payment Blockage Notice is
received and (z) the date the Trustee receives notice from
the representative for such Designated Senior Debt rescinding
the Payment Blockage Notice, unless, in each case, the maturity
of such Designated Senior Debt of the Company has been
accelerated.
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No new Payment Blockage Notice may be delivered unless and until:
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(1) 360 days have elapsed since the delivery of the
immediately prior Payment Blockage Notice; and
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(2) all scheduled payments of principal, interest and
premium and Additional Interest, if any, on the Notes that have
come due have been paid in full in cash or Cash Equivalents.
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No nonpayment default that existed or was continuing on the date
of delivery of any Payment Blockage Notice to the Trustee will
be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default has been cured or waived for a period
of not less than 90 days.
If the Trustee or any Holder of the Notes receives a payment in
respect of the Notes (except in Permitted Junior Securities or
from the trusts described below under the captions
Legal Defeasance and Covenant
Defeasance) when:
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(1) the payment is prohibited by these subordination
provisions; and
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(2) the Trustee or the Holder has actual knowledge that the
payment is prohibited (
provided
that such actual
knowledge will not be required in the case of any payment
default on Designated Senior Debt),
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the Trustee or the Holder, as the case may be, will hold such
payment in trust for the benefit of the holders of Senior Debt
of the Company. Upon the proper written request of the holders
of Senior Debt of the Company or, if there is any payment
default on any Designated Senior Debt, the Trustee or the
Holder, as the case may be, will deliver the amounts in trust to
the holders of Senior Debt of the Company or their proper
representative.
The Company must promptly notify holders of its Senior Debt if
payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in
the event of a bankruptcy, liquidation or reorganization of the
Company, Holders of Notes may recover less ratably than other
creditors of the Company.
Payments under the Note Guarantee of each Guarantor are
subordinated to the prior payment in full of all Senior Debt of
such Guarantor, including Senior Debt of such Guarantor Incurred
after the Issue Date, on the same basis as provided above with
respect to the subordination of payments on the Notes by the
Company to the prior payment in full of Senior Debt of the
Company. See Risk Factors Your right to
receive payments on the notes will be junior to our existing and
future senior debt, and the guarantees of the notes are junior
to all of the guarantors existing and future senior
debt.
Designated Senior Debt
means:
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(1) any Indebtedness outstanding under the Credit
Agreement; and
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(2) to the extent permitted under the Credit Agreement, any
other Senior Debt permitted under the Indenture the amount of
which is $25.0 million or more and that has been designated
by the Company as Designated Senior Debt.
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89
Permitted Junior Securities
means:
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(1) Equity Interests in the Company or any Guarantor or any
other business entity provided for by a plan or
reorganization; and
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(2) debt securities of the Company or any Guarantor or any
other business entity provided for by a plan of reorganization
that are subordinated to all Senior Debt and any debt securities
issued in exchange for Senior Debt to the same extent as, or to
a greater extent than, the Notes and the Note Guarantees are
subordinated to Senior Debt under the Indenture.
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Senior Debt
of any Person means:
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(1) all Indebtedness of such Person outstanding under the
Credit Agreement and all Hedging Obligations with respect
thereto, whether outstanding on the Issue Date or Incurred
thereafter;
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(2) any other Indebtedness of such Person permitted to be
Incurred under the terms of the Indenture, unless the instrument
under which such Indebtedness is Incurred expressly provides
that it is on a parity with or is subordinated in right of
payment to the Notes or any Note Guarantee; and
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(3) all Obligations with respect to the items listed in the
preceding clauses (1) and (2) (including any interest
accruing subsequent to the filing of a petition of bankruptcy at
the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under
applicable law).
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Notwithstanding anything to the contrary in the preceding
paragraph, Senior Debt will not include:
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(1) any liability for federal, state, local or other taxes
owed or owing by the Company or any Guarantor;
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(2) any Indebtedness of the Company or any Guarantor to any
of their Subsidiaries or other Affiliates;
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(3) any trade payables;
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(4) the portion of any Indebtedness that is Incurred in
violation of the Indenture, provided that a good faith
determination by the Board of Directors of the Company evidenced
by a Board Resolution, or a good faith determination by the
Chief Financial Officer of the Company evidenced by an
officers certificate, that any Indebtedness being incurred
under the Credit Agreement is permitted by the Indenture will be
conclusive;
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(5) any Indebtedness of the Company or any Guarantor that,
when Incurred, was without recourse to the Company or such
Guarantor;
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(6) any repurchase, redemption or other obligation in
respect of Disqualified Stock or Preferred Stock; or
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(7) any Indebtedness owed to any employee of the Company or
any of its Subsidiaries.
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Optional Redemption
At any time prior to August 15, 2008, the Company may
redeem up to 35% of the aggregate principal amount of Notes
issued under the Indenture (including any Additional Notes) at a
redemption price of 109.250% of the principal amount thereof,
plus accrued and unpaid interest and Additional Interest, if
any, thereon to the redemption date, with the net cash proceeds
of one or more Equity Offerings;
provided
that:
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(1) at least 65% of the aggregate principal amount of Notes
issued under the Indenture (including any Additional Notes)
remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company or its
Affiliates); and
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(2) the redemption must occur within 45 days of the
date of the closing of such Equity Offering.
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At any time prior to August 15, 2009, the Company may
redeem all or part of the Notes upon not less than 30 nor more
than 60 days prior notice at a redemption price equal
to the sum of (1) 100% of the principal amount thereof,
plus
(2) the Applicable Premium as of the date of
redemption,
plus
accrued and unpaid interest, if any, to
the date of redemption.
Except pursuant to the preceding paragraphs, the Notes will not
be redeemable at the Companys option prior to
August 15, 2009.
On or after August 15, 2009, at any time or from time to
time, the Company may redeem all or a part of the Notes upon not
less than 30 nor more than 60 days notice, at the
redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Additional
Interest, if any, thereon, to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15
of the years indicated below:
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Year
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Percentage
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2009
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104.625
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%
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2010
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102.313
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%
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2011 and thereafter
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100.000
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%
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If less than all of the Notes are to be redeemed at any time,
the Trustee will select Notes for redemption as follows:
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(1) if the Notes are listed on any national securities
exchange, in compliance with the requirements of such principal
national securities exchange; or
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(2) if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee will deem fair and
appropriate.
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No Notes of $1,000 or less will be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address.
Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of
redemption that relates to that Note will state the portion of
the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original
Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption
will become due on the date fixed for redemption. On and after
the redemption date, interest will cease to accrue on Notes or
portions of them called for redemption.
Mandatory Redemption
The Company is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Repurchase at the Option of Holders
If a Change of Control occurs, each Holder of Notes will have
the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of that
Holders Notes pursuant to an offer (a Change of
Control Offer) on the terms set forth in the Indenture. In
the Change of Control Offer, the Company will offer a payment (a
Change of Control Payment) in cash equal to not less
than 101% of the aggregate principal amount of Notes repurchased
plus accrued and unpaid interest and Additional Interest, if
any, thereon, to the date of repurchase (the Change of
Control Payment Date, which date will be no earlier than
the date of such Change of Control). No later than 30 days
following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase
Notes on the Change of Control Payment Date specified in such
notice, which date will be no earlier than 30 days and no
later than 60 days from the date
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such notice is mailed, pursuant to the procedures required by
the Indenture and described in such notice. The Company will
comply with the requirements of
Rule 14e-1
under
the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a
result of a Change of Control. To the extent that the provisions
of any securities laws or regulations conflict with the Change
of Control provisions of the Indenture, the Company will comply
with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the Change of
Control provisions of the Indenture by virtue of such compliance.
On the Change of Control Payment Date, the Company will, to the
extent lawful:
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(1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
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(2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all Notes or portions
thereof so tendered; and
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(3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers Certificate
stating the aggregate principal amount of Notes or portions
thereof being purchased by the Company.
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The Paying Agent will promptly mail or wire transfer to each
Holder of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new
Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any;
provided
that each such new
Note will be in a principal amount of $1,000 or an integral
multiple thereof.
Prior to complying with the provisions of this covenant, but in
any event no later than 30 days following a Change of
Control, the Company will either repay all outstanding Senior
Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Company will
publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment
Date.
The Credit Agreement currently prohibits the Company from
purchasing any Notes, and also provides that certain change of
control events with respect to the Company would constitute a
default under the Credit Agreement. Any future credit agreements
or other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions.
In the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes, the Company could
seek the consent of its senior lenders to the purchase of Notes
or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Companys failure to
purchase tendered Notes would constitute an Event of Default
under the Indenture which would, in turn, constitute a default
under such Senior Debt. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to
the Holders of Notes.
The provisions described above that require the Company to make
a Change of Control Offer following a Change of Control will be
applicable regardless of whether any other provisions of the
Indenture are applicable. Except as described above with respect
to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
The Company will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, transfer, conveyance or other
disposition of all or substantially all of the
properties or assets of the Company and its Restricted
Subsidiaries taken as a whole. Although there is a limited body
of case law interpreting the
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phrase substantially all, there is no precise
established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the
Company to repurchase such Notes as a result of a sale,
transfer, conveyance or other disposition of less than all of
the assets of the Company and its Restricted Subsidiaries taken
as a whole to another Person or group may be uncertain.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
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(1) the Company (or the Restricted Subsidiary, as the case
may be) receives consideration at the time of such Asset Sale at
least equal to the Fair Market Value of the assets or Equity
Interests issued or sold or otherwise disposed of; and
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(2) at least 75% of the consideration therefor received by
the Company or such Restricted Subsidiary is in the form of
cash, Cash Equivalents or Replacement Assets or a combination of
both. For purposes of this provision, each of the following will
be deemed to be cash:
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(a) any liabilities (as shown on the Companys or such
Restricted Subsidiarys most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent
liabilities, Indebtedness that is by its terms subordinated to
the Notes or any Note Guarantee and liabilities to the extent
owed to the Company or any Affiliate of the Company) that are
assumed by the transferee of any such assets or Equity Interests
pursuant to a written novation agreement that releases the
Company or such Restricted Subsidiary from further liability
therefor;
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(b) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that
conversion); and
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(c) any Designated Non-Cash Consideration received by the
Company or any of its Restricted Subsidiaries in such Asset Sale
having an aggregated Fair Market Value, taken together with all
other Designated Non-Cash consideration received pursuant to
this clause (c) that is at that time outstanding, not to
exceed the greater of (x) 5.0% of the Companys
Consolidated Net Assets as of the date or receipt of such
Designated Non-Cash Consideration and
(y) $15.0 million (with the Fair Market Value of each
item of Designated Non-Cash Consideration being measured at the
time received and without giving effect to subsequent changes in
value).
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Within 540 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds at its
option:
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(1) to repay Senior Debt and, if the Senior Debt repaid is
revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto; or
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(2) to purchase Replacement Assets (or enter into a binding
agreement to purchase such Replacement Assets; provided that
(x) such purchase is consummated within 90 days after
the date of such binding agreement and (y) if such purchase
is not consummated, within the period set forth in
subclause (x), the Net Proceeds not so applied will be
deemed to be Excess Proceeds (as defined below)).
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Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture.
On the 541st day after an Asset Sale or such earlier date,
if any, as the Company determines not to apply the Net Proceeds
relating to such Asset Sale as set forth in the preceding
paragraph (each such date being referred to as an
Excess Proceeds Trigger Date), such aggregate amount
of Net Proceeds that has not been applied on or before the
Excess Proceeds Trigger Date as permitted in the preceding
paragraph (Excess Proceeds) will be applied by
the Company to make an offer (an Asset Sale Offer) to
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all Holders of Notes and all holders of other Indebtedness that
ranks
pari passu
in right of payment with the Notes or
any Note Guarantee containing provisions similar to those set
forth in the Indenture with respect to offers to purchase with
the proceeds of sales of assets, to purchase the maximum
principal amount of Notes and such other
pari passu
Indebtedness that may be purchased using the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal
to 100% of the principal amount of the Notes and such other
pari passu
Indebtedness plus accrued and unpaid interest
and Additional Interest, if any, to the date of purchase, and
will be payable in cash.
The Company may defer the Asset Sale Offer until there are
aggregate unutilized Excess Proceeds equal to or in excess of
$10.0 million resulting from one or more Asset Sales, at
which time the entire unutilized amount of Excess Proceeds (not
only the amount in excess of $10.0 million) will be applied
as provided in the preceding paragraph. If any Excess Proceeds
remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount
of Notes and such other
pari passu
Indebtedness tendered
into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Notes and such other
pari passu
Indebtedness will be purchased on a pro rata basis based on
the principal amount of Notes and such other
pari passu
Indebtedness tendered. Upon completion of each Asset Sale Offer,
Excess Proceeds subject to such Asset Sale and still held by the
Company will no longer be deemed to be Excess Proceeds.
The Company will comply with the requirements of
Rule 14e-1
under
the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are
applicable in connection with each repurchase of Notes pursuant
to an Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company will comply with the
applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Asset Sale
provisions of the Indenture by virtue of such compliance.
The Credit Agreement currently prohibits the Company from
purchasing any Notes, and also provides that certain asset sale
events with respect to the Company would constitute a default
under the Credit Agreement. Any future credit agreements or
other agreements relating to Senior Debt to which the Company
becomes a party may contain similar restrictions and provisions.
In the event an Asset Sale occurs at a time when the Company is
prohibited from purchasing Notes, the Company could seek the
consent of its senior lenders to the purchase of Notes or could
attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Companys failure to
purchase tendered Notes would constitute an Event of Default
under the Indenture which would, in turn, constitute a default
under such Senior Debt. In such circumstances, the subordination
provisions in the Indenture would likely restrict payments to
the Holders of Notes.
Certain Covenants
(A) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly:
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(1) declare or pay (without duplication) any dividend or
make any other payment or distribution on account of the
Companys or any of its Restricted Subsidiaries
Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the
Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Companys or any of its
Restricted Subsidiaries Equity Interests in their capacity
as such (other than dividends, payments or distributions
(x) payable in Equity Interests (other than Disqualified
Stock) of the Company or (y) to the Company or a Restricted
Subsidiary of the Company);
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(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving the Company or any of its
Restricted
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Subsidiaries) any Equity Interests of the Company, or any
Restricted Subsidiary thereof held by Persons other than the
Company or any of its Restricted Subsidiaries;
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(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or any Note
Guarantees, except (a) a payment of interest or principal
at the Stated Maturity thereof or (b) the purchase,
repurchase or other acquisition of any such Indebtedness in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year
of the date of such purchase, repurchase or other
acquisition; or
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(4) make any Restricted Investment (all such payments and
other actions set forth in clauses (1) through
(4) above being collectively referred to as
Restricted Payments),
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unless, at the time of and after giving effect to such
Restricted Payment:
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(1) no Default or Event of Default will have occurred and
be continuing or would occur as a consequence thereof; and
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(2) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to Incur at
least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption
Incurrence of Indebtedness; and
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(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and
its Restricted Subsidiaries after the Issue Date (excluding
Restricted Payments permitted by clauses (3), (4), (5),
(6) and (10) of the next succeeding
paragraph (B)), is less than the sum, without duplication,
of:
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(a) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning
of the first fiscal quarter commencing after the Issue Date to
the end of the Companys most recently ended fiscal quarter
for which internal financial statements are available at the
time of such Restricted Payment (or, if such Consolidated Net
Income for such period is a deficit, less 100% of such deficit),
plus
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(b) 100% of the aggregate net cash proceeds and the Fair
Market Value of assets other than cash received by the Company
since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests (other
than Disqualified Stock) of the Company or from the Incurrence
of Indebtedness of the Company that has been converted into or
exchanged for such Equity Interests (other than Equity Interests
sold to, or Indebtedness held by, a Subsidiary of the Company),
plus
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(c) with respect to Restricted Investments made by the
Company and its Restricted Subsidiaries after the Issue Date, an
amount equal to the net reduction in such Restricted Investments
in any Person resulting from repayments of loans or advances, or
other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the net cash proceeds from the
sale of any such Restricted Investment (except, in each case, to
the extent any such payment or proceeds are included in the
calculation of Consolidated Net Income), from the release of any
Guarantee (except to the extent any amounts are paid under such
Guarantee) or from redesignations of Unrestricted Subsidiaries
as Restricted Subsidiaries, not to exceed, in each case, the
amount of Restricted Investments previously made by the Company
or any Restricted Subsidiary in such Person or Unrestricted
Subsidiary after the Issue Date;
plus
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(d) the amount by which Indebtedness of the Company is
reduced on the Companys most recent quarterly balance
sheet upon the conversion or exchange subsequent to the Issue
Date of any Indebtedness of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock)
of the Company (less the amount of any cash or the Fair Market
Value of any other property distributed by the Company upon such
conversion or exchange) plus the amount of any cash
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received by the Company upon such conversion or exchange;
provided, however,
that such amount may not exceed the
net proceeds received by the Company or any of its Restricted
Subsidiaries from the conversion or exchange of such
Indebtedness (excluding net proceeds from conversion or exchange
by a Subsidiary of the Company or by an employee ownership plan
or by a trust established by the Company or any of its
Subsidiaries for the benefit of their employees).
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(B) The preceding provisions will not prohibit, so long as,
in the case of clauses (7) and (12) below, no Default
has occurred and is continuing or would be caused thereby:
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(1) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration
such payment would have complied with the provisions of the
Indenture;
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(2) the payment of any dividend by a Restricted Subsidiary
of the Company to the holders of its Common Stock on a pro rata
basis;
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(3) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness or
Disqualified Stock of the Company or any Guarantor or of any
Equity Interests of the Company or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of a contribution
to the Equity Interests (other than Disqualified Stock) of the
Company or a substantially concurrent sale (other than to a
Subsidiary of the Company) of, Equity Interests (other than
Disqualified Stock) of the Company;
provided
that the
amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other
acquisition will be excluded from clause (3) (b) of the
preceding paragraph (A);
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(4) the defeasance, redemption, repurchase or other
acquisition of Indebtedness subordinated to the Notes or the
Note Guarantees with the net cash proceeds from an Incurrence of
Permitted Refinancing Indebtedness;
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(5) Investments acquired as a capital contribution to, or
in exchange for, or out of the net cash proceeds of a
substantially concurrent offering of, Equity Interests (other
than Disqualified Stock) of the Company;
provided
that
the amount of any such net cash proceeds that are utilized for
any such acquisition or exchange will be excluded from
clause (3) (b) of the preceding paragraph (A);
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(6) the repurchase of Capital Stock deemed to occur upon
the exercise of options or warrants to the extent that such
Capital Stock represents all or a portion of the exercise price
thereof;
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(7) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company held
by any current or former employee or director of the Company (or
any of its Restricted Subsidiaries) pursuant to the terms of any
employee equity subscription agreement, stock option agreement
or similar agreement entered into in the ordinary course of
business; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests in a
calendar year does not exceed $2.0 million (with unused
amounts in any calendar year being carried over to succeeding
calendar years (without giving effect to the following proviso))
and does not exceed $6.0 million in aggregate;
provided
further
that such amount in any calendar year may be
increased by an amount not to exceed (A) the net cash
proceeds received by the Company from the sale of Equity
Interests (other than Disqualified Stock) of the Company to
members of management or directors of the Company and its
Restricted Subsidiaries that occurs after the Issue Date (to the
extent such cash proceeds from the sale of such Equity Interests
have not otherwise been applied to the payment of Restricted
Payments) plus (B) the net cash proceeds of key man life
insurance policies received by the Company and its Restricted
Subsidiaries after the Issue Date, less (C) the amount of
any Restricted Payments made pursuant to
clauses (A) and (B) of this clause (7);
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(8) payments in respect of management fees to any of the
Principals pursuant to agreements in effect on the Issue Date as
described in this Registration statement in an amount not to
exceed an aggregate amount of $500,000 in any calendar year;
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(9) payments of dividends on Disqualified Stock otherwise
permitted under Indenture;
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(10) cash payments in lieu of the issuance of fractional
shares in connection with the exercise of warrants, options or
other securities convertible into or exchangeable for Capital
Stock of the Company;
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(11) payments of dividends on the Companys common
stock following the first bona fide underwritten public offering
of common stock of the Company after the Closing Date, of up to
6% per annum of the net cash proceeds received by the
Company from such public offering;
provided however,
that
(A) at the time of payment of any such dividend, no Default will
have occurred and be continuing (or result therefrom), and
(B) the aggregate amount of all dividends paid under this
clause (11) will not exceed the aggregate amount of
net proceeds received by the Company from such public
offering; and
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(12) other Restricted Payments in an aggregate amount not
to exceed $10.0 million.
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The amount of all Restricted Payments (other than cash) will be
the Fair Market Value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
to or by the Company or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the date of
making any Restricted Payment, the Company will deliver to the
Trustee an Officers Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon
which the calculations required by this Restricted
Payments covenant were computed, together with a copy of
any opinion or appraisal required by the Indenture.
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Incurrence of Indebtedness
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The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness;
provided, however,
that the Company or any Guarantor may
Incur Indebtedness or Disqualified Stock if the Fixed Charge
Coverage Ratio for the Companys most recently ended four
full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such
additional Indebtedness or Disqualified Stock is Incurred would
have been at least 2.0 to 1, determined on a pro forma
basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness or Disqualified
Stock had been Incurred at the beginning of such four-quarter
period.
The first paragraph of this covenant will not prohibit the
Incurrence of the following items of Indebtedness (collectively,
Permitted Debt):
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(1) the Incurrence by the Company or any Guarantor of
Indebtedness under Credit Facilities (including, without
limitation, the Incurrence by the Company and the Guarantors of
Guarantees thereof) in an aggregate amount at any one time
outstanding pursuant to this clause (1) not to exceed
$200.0 million,
less
the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any Restricted
Subsidiary thereof to permanently repay any such Indebtedness
pursuant to the covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales; provided that a
Restricted Subsidiary that is not a Domestic Subsidiary or a
Guarantor of Indebtedness under the Credit Facilities may incur
Indebtedness pursuant to this clause (1), together with
Indebtedness Incurred pursuant to clause (9) of this
Incurrence of Indebtedness covenant, in an aggregate
amount, after giving effect to such Incurrence, at any time
outstanding not to exceed the greater of
(a) $25.0 million or (b) 40% of the aggregate
Consolidated Net Assets of such Restricted Subsidiaries;
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(2) the Incurrence of Existing Indebtedness;
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(3) the Incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes and the related Note
Guarantees to be issued on the Issue Date;
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(4) the Incurrence by the Company or any Guarantor of
Indebtedness represented by Capital Lease Obligations, mortgage
financings, construction loans or purchase money obligations for
property acquired in the ordinary course of business, in each
case Incurred for the purpose of financing all or any part of
the purchase price or cost of construction or improvement of
property, plant or equipment used by the Company or any such
Guarantor, in an aggregate amount, including all Permitted
Refinancing Indebtedness Incurred to refund, refinance or
replace any Indebtedness Incurred pursuant to this
clause (4), not to exceed 7.5% of the Companys
Consolidated Net Assets at any time outstanding;
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(5) the Incurrence by the Company or any Restricted
Subsidiary of the Company of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to
refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture
to be Incurred under the first paragraph of this covenant or
clause (2), (3), (4), (5), or (10) of this paragraph;
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(6) the Incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness owing to and held by
the Company or any of its Restricted Subsidiaries;
provided,
however,
that:
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(a) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be unsecured and expressly
subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, in the case of the
Company, or the Note Guarantee, in the case of a Guarantor;
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(b) Indebtedness owed to the Company or any Guarantor must
be evidenced by an unsubordinated promissory note, unless the
obligor under such Indebtedness is the Company or a
Guarantor; and
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(c) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof
and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary thereof, will be deemed, in each case, to
constitute an Incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
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(7) the Guarantee by the Company or any of the Guarantors
of Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be Incurred by another provision
of this covenant; or
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(8) the Incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are Incurred for the
purpose of fixing, hedging or swapping interest rate, commodity
price or foreign currency exchange rate risk (or to reverse or
amend any such agreements previously made for such purposes),
and not for speculative purposes, and that do not increase the
Indebtedness of the obligor outstanding at any time other than
as a result of fluctuations in interest rates, commodity prices
or foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
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(9) the Incurrence by any Restricted Subsidiary other than
a Domestic Subsidiary of Indebtedness in an aggregate amount at
any time outstanding, after giving effect to such Incurrence and
together with any Indebtedness Incurred under the proviso in
clause (1) of this Incurrence of Indebtedness
covenant, not to exceed the greater of (a) $25 million
or (b) 40% of the Consolidated Net Assets of any such
Restricted Subsidiaries; or
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(10) the Incurrence by the Company or any Guarantor of
additional Indebtedness in an aggregate amount at any time
outstanding, including all Permitted Refinancing Indebtedness
Incurred to refund, refinance or replace any Indebtedness
Incurred pursuant to this clause (10), not to exceed the
greater of (a) $15.0 million or (b) 5% of the
Consolidated Net Assets of the Company.
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For purposes of determining compliance with this covenant, in
the event that any proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in
clauses (1) through (10) above, or is entitled to be
Incurred pursuant to the first paragraph of this covenant, the
Company will be permitted to classify such item of Indebtedness
at the time of its Incurrence in any manner that complies with
this covenant. In addition, any Indebtedness originally
classified as Incurred pursuant to clauses (1) through
(10) above may later be reclassified by the Company such
that it will be deemed as having been Incurred pursuant to
another of such clauses to the extent that such reclassified
Indebtedness could be incurred pursuant to such new clause at
the time of such reclassification. Notwithstanding the
foregoing, Indebtedness under the Credit Agreement outstanding
on the Issue Date will be deemed to have been Incurred on such
date in reliance on the exception provided by clause (1) of
the definition of Permitted Debt.
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Notwithstanding any other provision of this covenant, the
maximum amount of Indebtedness that may be Incurred pursuant to
this covenant will not be deemed to be exceeded with respect to
any outstanding Indebtedness due solely to the result of
fluctuations in the exchange rates of currencies.
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Limitation on Senior Subordinated Debt
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The Company will not Incur any Indebtedness that is subordinate
in right of payment to any Senior Debt of the Company unless it
ranks
pari passu
or subordinate in right of payment to
the Notes. No Guarantor will Incur any Indebtedness that is
subordinate or junior in right of payment to the Senior Debt of
such Guarantor unless it ranks
pari passu
or subordinate
in right of payment to such Guarantors Note Guarantee. For
purposes of the foregoing, no Indebtedness will be deemed to be
subordinated in right of payment to any other Indebtedness of
the Company or any Guarantor, as applicable, solely by reason of
Liens or Guarantees arising or created in respect of such other
Indebtedness of the Company or any Guarantor or by virtue of the
fact that the holders of any secured Indebtedness have entered
into intercreditor agreements giving one or more of such holders
priority over the other holders in the collateral held by them.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind
securing Indebtedness (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired,
unless all payments due under the Indenture and the Notes are
secured on an equal and ratable basis with the obligations so
secured (or, in the case of Indebtedness subordinated to the
Notes or the Note Guarantees, prior or senior thereto, with the
same relative priority as the Notes will have with respect to
such subordinated Indebtedness) until such time as such
obligations are no longer secured by a Lien.
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Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries
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The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
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(1) pay dividends or make any other distributions on its
Capital Stock (or with respect to any other interest or
participation in, or measured by, its profits) to the Company or
any of its Restricted Subsidiaries or pay any liabilities owed
to the Company or any of its Restricted Subsidiaries;
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(2) make loans or advances to the Company or any of its
Restricted Subsidiaries; or
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(3) transfer any of its properties or assets to the Company
or any of its Restricted Subsidiaries.
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However, the preceding restrictions will not apply to
encumbrances or restrictions:
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(1) existing under, by reason of or with respect to the
Credit Agreement, Existing Indebtedness or any other agreements
in effect on the Issue Date and any amendments, modifications,
restatements, renewals, extensions, supplements, refundings,
replacements or refinancings thereof,
provided
that the
encumbrances and restrictions in any such amendments,
modifications, restatements, renewals, extensions, supplements,
refundings, replacement or refinancings are no more restrictive,
taken as a whole, than those contained in the Credit Agreement,
Existing Indebtedness or such other agreements, as the case may
be, as in effect on the Issue Date;
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(2) set forth in the Indenture, the Notes and the Note
Guarantees;
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(3) existing under, by reason of or with respect to
applicable law;
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(4) with respect to any Person or the property or assets of
a Person acquired by the Company or any of its Restricted
Subsidiaries existing at the time of such acquisition and not
incurred in connection with or in contemplation of such
acquisition, which encumbrance or restriction is not applicable
to any Person or the properties or assets of any Person, other
than the Person, or the property or assets of the
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Person so acquired and any amendments, modifications,
restatements, renewals, extensions, supplements, refundings,
replacements or refinancings thereof;
provided
that the
encumbrances and restrictions in any such amendments,
modifications, restatements, renewals, extensions, supplements,
refundings, replacement or refinancings are no more restrictive,
taken as a whole, than those in effect on the date of the
acquisition;
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(5) in the case of clause (3) of the first paragraph
of this covenant:
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(A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset,
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(B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary
thereof not otherwise prohibited by the Indenture;
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(C) any encumbrance or restriction arising or existing by
reason of construction loans or purchase money obligations for
property acquired in the ordinary course of business and Capital
Lease Obligations, in each case to the extent permitted under
the Indenture;
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(D) customary restrictions imposed on the transfer of
intellectual property in connection with licenses of such
intellectual property in the ordinary course of business;
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(E) encumbrances or restrictions existing under or by
reason of provisions with respect to the disposition or
distribution of assets or property in joint venture agreements
and other similar agreements, in each case to the extent
permitted under the Indenture, so long as any such encumbrances
or restrictions are not applicable to any Person (to its
property or assets) other than such joint venture or a
Subsidiary thereof; or
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(F) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of
property or assets of the Company or any Restricted Subsidiary
thereof in any manner material to the Company or any Restricted
Subsidiary thereof;
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(6) existing under, by reason of or with respect to any
agreement for the sale or other disposition of all or
substantially all of the Capital Stock of, or property and
assets of, a Restricted Subsidiary that restrict distributions
by that Restricted Subsidiary pending such sale or other
disposition; and
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(7) on cash or other deposits or net worth imposed by
customers or required by insurance, surety or bonding companies,
in each case, under contracts entered into in the ordinary
course of business.
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Merger, Consolidation or Sale of Assets
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The Company will not, directly or indirectly:
(1) consolidate or merge with or into another Person
(whether or not the Company is the surviving Person) or
(2) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties and assets of the
Company and its Restricted Subsidiaries taken as a whole, in one
or more related transactions, to another Person, unless:
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(1) either: (a) the Company is the surviving Person;
or (b) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which
such sale, assignment, transfer, conveyance or other disposition
will have been made (i) is a Person organized or existing
under the laws of the United States, any state thereof or the
District of Columbia and (ii) assumes all the obligations
of the Company under the Notes, the Indenture and, to the extent
applicable, the Registration Rights Agreement pursuant to
agreements reasonably satisfactory to the Trustee;
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(2) immediately after giving effect to such transaction no
Default or Event of Default exists;
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(3) immediately after giving effect to such transaction on
a pro forma basis, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer,
conveyance or other disposition will have been made, will be
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permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the
caption Incurrence of Indebtedness.
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(4) each Guarantor, unless such Guarantor is the Person
with which the Company has entered into a transaction under this
covenant, will have by amendment to its Note Guarantee confirmed
that its Note Guarantee will apply to the obligations of the
Company or the surviving Person in accordance with the Notes and
the Indenture.
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(5) the Company delivers to the Trustee an Officers
Certificate (attaching the arithmetic computation to demonstrate
compliance with clause (3) above) and Opinion of Counsel,
in each case stating that such transaction and such agreement
complies with this covenant and that all conditions precedent
provided for in this covenant relating to such transaction have
been complied with.
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Upon any consolidation or merger, or any sale, assignment,
transfer, conveyance or other disposition of all or
substantially all of the assets of the Company in accordance
with this covenant, the successor corporation formed by such
consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, conveyance or other
disposition is made will succeed to, and be substituted for (so
that from and after the date of such consolidation, merger,
sale, assignment, conveyance or other disposition, the
provisions of the Indenture referring to the Company
will refer instead to the successor corporation and not to the
Company), and may exercise every right and power of, the Company
under the Indenture with the same effect as if such successor
Person had been named as the Company in the Indenture.
In addition, the Company and its Restricted Subsidiaries may
not, directly or indirectly, lease all or substantially all the
properties or assets of the Company and its Restricted
Subsidiaries considered as one enterprise, in one or more
related transactions, to any other Person. Clause (3) above
of this covenant will not apply to any merger, consolidation or
sale, assignment, transfer, conveyance or other disposition of
assets between or among the Company and any of its Restricted
Subsidiaries.
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Transactions with Affiliates
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The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into, make,
amend, renew or extend any transaction, contract, agreement,
understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each, an Affiliate
Transaction), unless:
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(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
arms-length transaction by the Company or such Restricted
Subsidiary with a Person that is not an Affiliate of the Company
or any of its Restricted Subsidiaries; and
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(2) the Company delivers to the Trustee:
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(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $5.0 million, a Board Resolution set forth in
an Officers Certificate certifying that such Affiliate
Transaction or series of related Affiliate Transactions complies
with this covenant, and that such Affiliate Transaction or
series of related Affiliate Transactions has been approved by a
majority of the disinterested members of the Board of Directors
of the Company; and
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(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $25.0 million, an opinion as to the fairness
to the Company or such Restricted Subsidiary of such Affiliate
Transaction or series of related Affiliate Transactions from a
financial point of view issued by an independent accounting,
appraisal or investment banking firm of national standing.
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101
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
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(1) transactions between or among the Company and/or its
Restricted Subsidiaries;
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(2) payment of reasonable and customary fees to, and
reasonable and customary indemnification and similar payments on
behalf of, directors of the Company;
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(3) Restricted Payments that are permitted by the
provisions of the Indenture described above under the covenants
described under the caption Restricted
Payments including, without limitation, payments included
in the definition of Permitted Investments; and
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(4) any sale of Equity Interests (other than Disqualified
Stock) of the Company;
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(5) the receipt by the Company of any capital contribution
from its shareholders;
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(6) transactions pursuant to agreements or arrangements in
effect on the Issue Date and described in this registration
statement, or any amendment, modification, or supplement thereto
or replacement thereof, as long as such agreement or
arrangement, as so amended, modified or supplemented or
replaced, taken as a whole, is not more disadvantageous to the
Company and its Restricted Subsidiaries than the original
agreements or arrangements in existence on the Issue Date;
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(7) payment by the Company of management or other similar
fees to any of the Principals pursuant to any agreement or
arrangement in an aggregate amount not to exceed $500,000 in any
calendar year; and
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(8) any employment, consulting, service or termination
agreement, or reasonable and customary indemnification
arrangements, entered into by the Company or any of its
Restricted Subsidiaries with officers and employees of the
Company or any of its Restricted Subsidiaries and the payment of
compensation to officers and employees of the Company or any of
its Restricted Subsidiaries (including amounts paid pursuant to
employee benefit plans, employee stock option or similar plans),
so long as such agreement or payment has been approved by the
Board of Directors of the Company.
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Designation of Restricted and Unrestricted
Subsidiaries
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The Board of Directors of the Company may designate any
Restricted Subsidiary of the Company to be an Unrestricted
Subsidiary;
provided
that:
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(1) any Guarantee by the Company or any Restricted
Subsidiary thereof of any Indebtedness of the Subsidiary being
so designated will be deemed to be an Incurrence of Indebtedness
by the Company or such Restricted Subsidiary (or both, if
applicable) at the time of such designation, and such Incurrence
of Indebtedness would be permitted under the covenant described
above under the caption Incurrence of
Indebtedness, and any lien on the property of the
Restricted Subsidiary will be permitted to exist under the
covenant described above under the caption
Liens;
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(2) the aggregate Fair Market Value of all outstanding
Investments owned by the Company and its Restricted Subsidiaries
in the Subsidiary being so designated (including any Guarantee
by the Company or any Restricted Subsidiary of any Indebtedness
of such Subsidiary) will be deemed to be a Restricted Investment
made as of the time of such designation and that such Investment
would be permitted under the covenant described above under the
caption Restricted Payments;
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(3) the Subsidiary being so designated:
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(a) except as permitted by the covenant described above
under the caption Transaction with
Affiliates, is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less
favorable to the Company or such Restricted Subsidiary than
those that might be obtained at the time from Persons who are
not Affiliates of the Company;
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(b) is a Person with respect to which neither the Company
nor any of its Restricted Subsidiaries has any direct or
indirect obligation (i) to subscribe for additional Equity
Interests or (ii) to maintain or preserve such
Persons financial condition or to cause such Person to
achieve any specified levels of operating results; and
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(c) has not Guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries, except to the extent such
Guarantee or credit support would be released upon such
designation; and
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(4) no Default or Event of Default would be in existence
following such designation.
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Any designation of a Restricted Subsidiary of the Company as an
Unrestricted Subsidiary will be evidenced to the Trustee by
filing with the Trustee the Board Resolution giving effect to
such designation and an Officers Certificate certifying
that such designation complied with the preceding conditions and
was permitted by the Indenture. If, at any time, any
Unrestricted Subsidiary would fail to meet any of the preceding
requirements and such failure continues for a period of
30 days, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness,
Investments, or Liens on the property, of such Subsidiary will
be deemed to be Incurred or made by a Restricted Subsidiary of
the Company as of such date and, if such Indebtedness,
Investments or Liens are not permitted to be Incurred or made as
of such date under the Indenture, the Company will be in default
under the Indenture.
The Board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided
that:
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(1) such designation will be deemed to be an Incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and
such designation will only be permitted if such Indebtedness is
permitted under the covenant described under the caption
Incurrence of Indebtedness;
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(2) all outstanding Investments owned by such Unrestricted
Subsidiary will be deemed to be made as of the time of such
designation and such designation will only be permitted if such
Investments would be permitted under the covenant described
above under the caption Restricted
Payments;
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(3) all Liens upon property or assets of such Unrestricted
Subsidiary existing at the time of such designation would be
permitted under the covenant described under the caption
Liens; and
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(4) no Default or Event of Default would be in existence
following such designation.
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Limitation on Issuances and Sales of Preferred Stock in
Restricted Subsidiaries
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The Company will not, and will not permit any Restricted
Subsidiary to, transfer, convey, sell, lease or otherwise
dispose of any Preferred Stock in any Restricted Subsidiary of
the Company that is not a Guarantor to any Person (other than
the Company or a Restricted Subsidiary of the Company), unless:
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(1) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interest in such Restricted
Subsidiary owned by the Company and its Restricted
Subsidiaries; and
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(2) the cash Net Proceeds from such transfer, conveyance,
sale, lease or other disposition are applied in accordance with
the covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales.
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In addition, the Company will not permit any Restricted
Subsidiary of the Company that is not a Guarantor to issue any
of its Preferred Stock (other than, if necessary, shares of its
Capital Stock constituting directors qualifying shares or
issuances of shares of Capital Stock of foreign Restricted
Subsidiaries to foreign nationals, to the extent required by
applicable law) to any Person other than to the Company or a
Restricted Subsidiary of the Company.
103
If the Company or any of its Restricted Subsidiaries acquires or
creates another Domestic Subsidiary (other than an Immaterial
Subsidiary) on or after the Issue Date, then that newly acquired
or created Domestic Subsidiary must become a Guarantor of the
Notes and execute a supplemental indenture and deliver an
Opinion of Counsel with respect to such Guarantee. Any
Immaterial Subsidiary that no longer meets the definition of
Immaterial Subsidiary must become a Guarantor of the Notes in
accordance with the following paragraph.
The Company will not permit any Domestic Subsidiary (including
any Immaterial Subsidiary), directly or indirectly, to Guarantee
or pledge any assets to secure the payment of any other
Indebtedness of the Company or any other Restricted Subsidiary
thereof unless such Restricted Subsidiary is a Guarantor or
simultaneously executes and delivers to the Trustee an Opinion
of Counsel and a supplemental indenture providing for the
Guarantee of the payment of the Notes by such Restricted
Subsidiary, which Guarantee will be senior to, or
pari passu
with, such Subsidiarys Guarantee of such other
Indebtedness unless such other Indebtedness is Senior Debt, in
which case the Guarantee of the Notes may be subordinated to the
Guarantee of such Senior Debt to the same extent as the Notes
are subordinated to such Senior Debt.
A Guarantor may not sell or otherwise dispose of all or
substantially all of its assets to, or consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person), another Person, other than the Company or another
Guarantor, unless:
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(1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and
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(2) either:
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(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) is
organized or existing under the laws of the United States, any
state thereof or the District of Columbia and assumes all the
obligations of that Guarantor under the Indenture, its Note
Guarantee and the Registration Rights Agreement pursuant to a
supplemental indenture satisfactory to the Trustee; or
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(b) such sale or other disposition or consolidation or
merger complies with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales.
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The Note Guarantee of a Guarantor will be released:
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(1) in connection with any sale or other disposition of all
of the Capital Stock of a Guarantor to a Person that is not
(either before or after giving effect to such transaction) a
Restricted Subsidiary of the Company, if the sale of all such
Capital Stock of that Guarantor complies with the covenant
described above under the caption Repurchase
at the Option of Holders Asset Sales;
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(2) if the Company properly designates any Restricted
Subsidiary that is a Guarantor as an Unrestricted Subsidiary
under the Indenture; or
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(3) solely in the case of a Note Guarantee created pursuant
to the second paragraph of this covenant, upon the release or
discharge of the Guarantee which resulted in the creation of
such Note Guarantee pursuant to this covenant, except a
discharge or release by or as a result of payment under such
Guarantee.
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The Company will not, and will not permit any Restricted
Subsidiary thereof to, engage in any business other than
Permitted Businesses, except to such extent as would not be
material to the Company and its Restricted Subsidiaries taken as
a whole.
104
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to
all Holders of the Notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
The Company will furnish to the Trustee and, upon request, to
the Holders a copy of all of the information and reports
referred to in clauses (1) and (2) below, if such
information and reports are not filed electronically with the
Commission, within the time periods specified in the
Commissions rules and regulations:
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(1) all quarterly and annual financial information that
would be required to be contained in a filing with the
Commission on
Forms 10-Q
and 10-K
if the
Company were required to file such Forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of Operations and, with respect to
the annual information only, a report on the annual financial
statements by the Companys certified independent
accountants; and
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(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if the
Company were required to file such reports.
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After consummation of this Exchange Offer, whether or not
required by the Commission, the Company will comply with the
periodic reporting requirements of the Exchange Act and will
file the reports specified in the preceding paragraph with the
Commission within the time periods specified above unless the
Commission will not accept such a filing. The Company agrees
that it will not take any action for the purpose of causing the
Commission not to accept any such filings. If, notwithstanding
the foregoing, the Commission will not accept the Companys
filings for any reason, the Company will post the reports
referred to in the preceding paragraph on its website within the
time periods that would apply if the Company were required to
file those reports with the Commission.
If the Company has designated any of its Subsidiaries as
Unrestricted Subsidiaries or if any of the Companys
Subsidiaries are not Guarantors, then the Company will include a
reasonably detailed discussion of the financial condition and
results of operations of such Unrestricted Subsidiary, or if
more than one, of such Unrestricted Subsidiaries, taken as a
whole and of such non-Guarantor Subsidiaries taken as a whole,
separately in each case, in the section of the Companys
quarterly and annual financial information required by this
covenant under the caption Managements Discussion
and Analysis of Financial Condition and Results of
Operations, and further, in the case of the non-Guarantor
Subsidiaries, also include a presentation of the financial
condition and results of operations of such non-Guarantor
Subsidiaries on the face of the financial statements or in the
footnotes thereto, separate from the financial condition and
results of operations of the Company and its Restricted
Subsidiaries.
In addition, the Company and the Guarantors have agreed that,
for so long as any Notes remain outstanding, they will furnish
to the Holders and to prospective investors, upon their request,
the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
Each of the following is an Event of Default:
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(1) default for 30 days in the payment when due of
interest on, or Additional Interest with respect to, the Notes
whether or not prohibited by the subordination provisions of the
Indenture;
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105
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(2) default in payment when due (whether at maturity, upon
acceleration, redemption or otherwise) of the principal of, or
premium, if any, on the Notes, whether or not prohibited by the
subordination provisions of the Indenture;
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(3) failure by the Company or any of its Restricted
Subsidiaries to consummate a purchase of the Notes when required
by the provisions described under the captions
Repurchase at the Option of
Holders Change of Control, or
Repurchase at the Option of
Holders Asset Sales or failure to comply with
Certain Covenants Merger,
Consolidation or Sale of Assets;
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(4) failure by the Company or any of its Restricted
Subsidiaries for 60 days after written notice by the
Trustee or Holders representing 25% or more of the aggregate
principal amount of Notes outstanding to comply with any of the
other agreements in the Indenture;
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(5) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company
or any of its Restricted Subsidiaries that is a Significant
Subsidiary (or any Restricted Subsidiaries that together would
constitute a Significant Subsidiary) (or the payment of which is
Guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or Guarantee now exists, or is created
after the Issue Date, if that default:
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(a) is caused by a failure to make any payment when due at
the final maturity of such Indebtedness (a Payment
Default); or
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(b) results in the acceleration of such Indebtedness prior
to its express maturity,
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and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$10.0 million or more;
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(6) failure by the Company or any of its Restricted
Subsidiaries that is a Significant Subsidiary (or any Restricted
Subsidiaries that together would constitute a Significant
Subsidiary) to pay final judgments (to the extent such judgments
are not paid or covered by insurance provided by a reputable
carrier that has the ability to perform and has acknowledged
coverage in writing) aggregating in excess of
$10.0 million, which judgments are not paid, discharged or
stayed for a period of 60 days;
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(7) except as permitted by the Indenture, any Note
Guarantee will be held in any judicial proceeding to be
unenforceable or invalid or will cease for any reason to be in
full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, will deny or disaffirm its obligations
under its Note Guarantee; and
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(8) certain events of bankruptcy or insolvency with respect
to the Company, any Guarantor or any Restricted Subsidiary that
is a Significant Subsidiary of the Company (or any Restricted
Subsidiaries that together would constitute a Significant
Subsidiary).
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In the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to the Company, any
Guarantor or any Restricted Subsidiary that is a Significant
Subsidiary of the Company (or any Restricted Subsidiaries that
together would constitute a Significant Subsidiary), all
outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least
25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately by
notice in writing to the Company specifying the event of
default;
provided, however,
that so long as any
Indebtedness permitted to be Incurred pursuant to the Credit
Agreement will be outstanding, that acceleration will not be
effective until the earlier of (1) an acceleration of
Indebtedness under the Credit Agreement; or (2) five
Business Days after receipt by the Company, and Agent under the
Credit Agreement of written notice of the acceleration of the
Notes.
In the event of a declaration or acceleration of the Notes
because an Event of Default described in clause (5) above
has occurred and is continuing, the declaration of acceleration
of the notes will be
106
automatically annulled if the payment default or other default
triggering such Event of Default pursuant to clause (5)
above is remedied or cured by the Company or any of its
Restricted Subsidiaries or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of
acceleration with respect thereto and if (a) annulment of
the acceleration of the Notes would not conflict with any
judgment or decree of a court of competent jurisdiction and
(b) all existing Events of Default, except nonpayment of
principal, premium or interest on the notes that became due
solely because of the acceleration of the Notes, have been cured
or waived.
Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of the
Notes notice of any Default or Event of Default (except a
Default or Event of Default relating to the payment of principal
or interest or Additional Interest) if it determines that
withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or
Event of Default and its consequences under the Indenture except
a continuing Default or Event of Default in the payment of
interest or Additional Interest on, or the principal of, the
Notes. The Holders of a majority in principal amount of the then
outstanding Notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the Trustee. However, the Trustee may refuse to
follow any direction that conflicts with law or the Indenture,
that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to
the rights of Holders of Notes not joining in the giving of such
direction and may take any other action it deems proper that is
not inconsistent with any such direction received from Holders
of Notes. A Holder may not pursue any remedy with respect to the
Indenture or the Notes unless:
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(1) the Holder gives the Trustee written notice of a
continuing Event of Default;
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(2) the Holders of at least 25% in aggregate principal
amount of outstanding Notes make a written request to the
Trustee to pursue the remedy;
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(3) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or
expense;
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(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity; and
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(5) during such
60-day
period, the
Holders of a majority in aggregate principal amount of the
outstanding Notes do not give the Trustee a direction that is
inconsistent with the request.
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However, such limitations do not apply to the right of any
Holder of a Note to receive payment of the principal of, premium
or Additional Interest, if any, or interest on, such Note or to
bring suit for the enforcement of any such payment, on or after
the due date expressed in the Notes, which right will not be
impaired or affected without the consent of the Holder.
In the case of any Event of Default occurring by reason of any
willful action or inaction taken or not taken by or on behalf of
the Company with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company
then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium
will also become and be immediately due and payable to the
extent permitted by law upon the acceleration of the Notes. If
an Event of Default occurs during any time that the Notes are
outstanding, by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes, then the
premium specified in the first paragraph of
Optional Redemption will also become
immediately due and payable to the extent permitted by law upon
the acceleration of the Notes.
The Company is required to deliver to the Trustee annually
within 90 days after the end of each fiscal year a
statement regarding compliance with the Indenture. Upon becoming
aware of any Default or Event of
107
Default, the Company is required to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator, stockholder,
member, manager or partner of the Company or any Guarantor, as
such, will have any liability for any obligations of the Company
or the Guarantors under the Notes, the Indenture, the Note
Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have
all of its obligations discharged with respect to the
outstanding Notes and all obligations of the Guarantors
discharged with respect to their Note Guarantees (Legal
Defeasance) except for:
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(1) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, or interest or premium
and Additional Interest, if any, on such Notes when such
payments are due from the trust referred to below;
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(2) the Companys obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
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(3) the rights, powers, trusts, duties and immunities of
the Trustee, and the Companys and the Guarantors
obligations in connection therewith; and
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(4) the Legal Defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time,
elect to have the obligations of the Company and the Guarantors
released with respect to certain covenants that are described in
the Indenture (Covenant Defeasance) and all
obligations of the Guarantors with respect to the Guarantees
discharged, and; thereafter any omission to comply with those
covenants will not constitute a Default or Event of Default with
respect to the Notes or the Guarantees. In the event Covenant
Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events)
described under Events of Default will no longer
constitute Events of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
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(1) the Company must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, or interest and
premium and Additional Interest, if any, on the outstanding
Notes on the Stated Maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether
the Notes are being defeased to maturity or to a particular
redemption date;
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(2) in the case of Legal Defeasance, the Company will have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal
Revenue Service a ruling or (b) since the Issue Date, there
has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion
of Counsel will confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
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108
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(3) in the case of Covenant Defeasance, the Company will
have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
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(4) no Default or Event of Default will have occurred and
be continuing either: (a) on the date of such deposit; or
(b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period
ending on the 123rd day after the date of deposit (other
than a Default resulting from the borrowing of funds to be
applied to such deposit);
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(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the
Indenture) to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is
bound;
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(6) the Company must have delivered to the Trustee an
Opinion of Counsel to the effect that, (1) assuming no
intervening bankruptcy of the Company or any Guarantor between
the date of deposit and the 123rd day following the deposit
and assuming that no Holder or the Trustee is deemed to be an
insider of the Company under the United States
Bankruptcy Code and the New York Debtor and Creditor Law, and
assuming that the deposit is not otherwise deemed to be to or
for the benefit of an insider of the Company under
the United States Bankruptcy Code and the New York Debtor and
Creditor Law, and assuming that no Holder or the Trustee is
deemed to be an initial transferee or mediate
transferee of a transfer within the meaning of
Section 550 of the United States Bankruptcy Code, after the
123rd day following the deposit, the transfer of the trust
funds pursuant to such deposit will not be subject to avoidance
pursuant to Section 547 of the United States Bankruptcy
Code or Section 15 of the New York Debtor and Creditor Law
and (2) the creation of the defeasance trust does not
violate the Investment Company Act of 1940;
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(7) the Company must deliver to the Trustee an
Officers Certificate stating that the deposit was not made
by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of
defeating, hindering, delaying or defrauding creditors of the
Company or others; and
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(8) the Company must deliver to the Trustee an
Officers Certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
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Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes and the Guarantees may be amended or
supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for,
Notes), and any existing default or compliance with any
provision of the Indenture, the Notes and the Guarantees may be
waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including,
without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any Notes held by a
non-consenting Holder):
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(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of
any Note or alter the provisions, or waive any payment, with
respect to the redemption of the Notes (other than any provision
with respect to the covenant described under the caption
Repurchase at the Options of Holders Asset
Sales or
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109
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Repurchase at the Option of Holders Change of
Control or Merger, Consolidation and Sale of
Assets);
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(3) reduce the rate of, or change the time for payment of,
interest on any Note;
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(4) waive a Default or Event of Default in the payment of
principal of, or interest, or premium or Additional Interest, if
any, on, the Notes (except a rescission of acceleration of the
Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
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(5) make any Note payable in money other than
U.S. dollars;
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(6) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of, or interest or
premium or Additional Interest, if any, on, the Notes;
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(7) release any Guarantor from any of its obligations under
its Note Guarantee or the Indenture, except in accordance with
the terms of the Indenture;
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(8) impair the right to institute suit for the enforcement
of any payment on or with respect to the Notes or the Note
Guarantees;
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(9) except as otherwise permitted under the covenants
described under the captions Certain
Covenants Guarantees, consent to the
assignment or transfer by the Company or any Guarantor of any of
their rights or obligations under the Indenture; or
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(10) make any change in the preceding amendment and waiver
provisions.
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In addition, any amendment to or waiver of, any of the
provisions of the Indenture or the related definitions affecting
the subordination or ranking of the Notes or any Note Guarantee
in any manner adverse to the Holders will require the consent of
the Holders of at least 75% in the aggregate amount of the Notes
then outstanding, otherwise the Company may not amend or waive
any such provisions.
Notwithstanding the preceding, without the consent of any Holder
of Notes, the Company, the Guarantors and the Trustee may amend
or supplement the Indenture or the Notes:
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(1) to cure any ambiguity, defect or inconsistency;
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(2) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
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(3) to provide for the assumption of the Companys or
any Guarantors obligations to Holders of Notes in the case
of a merger or consolidation or sale of all or substantially all
of the Companys or such Guarantors assets;
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(4) to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not
materially adversely affect the legal rights under the Indenture
of any such Holder, including the addition of any new Note
Guarantee;
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(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under
the Trust Indenture Act;
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(6) to comply with the provisions described under
Certain Covenants
Guarantees, including to reflect the release of a
Guarantee of the Notes in accordance with the Indenture;
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(7) to secure the Notes and/or Guarantees of the Notes;
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(8) to evidence and provide for the acceptance of
appointment by a successor Trustee; or
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(9) to provide for the issuance of Additional Notes in
accordance with the Indenture.
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110
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further
effect as to all Notes issued thereunder, when:
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(a) all Notes that have been authenticated (except lost,
stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment money has theretofore been deposited in
trust and thereafter repaid to the Company) have been delivered
to the Trustee for cancellation; or
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(b) all Notes that have not been delivered to the Trustee
for cancellation have become due and payable by reason of the
mailing of a notice of redemption or otherwise or will become
due and payable within one year and the Company or any Guarantor
has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust solely for the benefit of the
Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the
Notes not delivered to the Trustee for cancellation for
principal, premium and Additional Interest, if any, and accrued
interest to the date of maturity or redemption;
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(2) no Default or Event of Default will have occurred and
be continuing on the date of such deposit or will occur as a
result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which the Company or any Guarantor is a party or
by which the Company or any Guarantor is bound;
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(3) the Company or any Guarantor has paid or caused to be
paid all sums payable by it under the Indenture; and
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(4) the Company has delivered irrevocable instructions to
the Trustee under the Indenture to apply the deposited money
toward the payment of the Notes at maturity or the redemption
date, as the case may be.
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In addition, the Company must deliver an Officers
Certificate and an Opinion of Counsel to the Trustee stating
that all conditions precedent to satisfaction and discharge have
been satisfied.
Concerning the Trustee
If the Trustee becomes a creditor of the Company or any
Guarantor, the Indenture and the Trust Indenture Act limit its
right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue
or resign.
The Indenture provides that in case an Event of Default will
occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request
of any Holder of Notes, unless such Holder will have offered to
the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Additional Interest
means all additional
interest owing on the Notes pursuant to the Registration Rights
Agreement.
111
Affiliate
of any specified Person means
(1) any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with
such specified Person or (2) any executive officer or
director of such specified Person. For purposes of this
definition, control, as used with respect to any
Person, will mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise;
provided
that
beneficial ownership of 10% or more of the Voting Stock of a
Person will be deemed to be control. For purposes of this
definition, the terms controlling, controlled
by and under common control with will have
correlative meanings.
Applicable Premium
means, with respect to a
Note at any date of redemption, the greater of (1) 1.0% of
the principal amount of such Note and (2) the excess of
(A) the present value at such date of redemption of
(i) the redemption price of such Note at August 15,
2009 (such redemption price being described under
Optional Redemption)
plus
(ii) all remaining required interest payments due on
such Note through August 15, 2009 (excluding accrued but
unpaid interest to the date of redemption), computed using a
discount rate equal to the Treasury Rate plus 50 basis
points, over (B) the principal amount of such Note.
Asset Sale
means:
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(1) the sale, lease, conveyance or other disposition of any
assets, other than a transaction governed by the provisions of
the Indenture described above under the caption
Repurchase at the Option of
Holders Change of Control and/or the
provisions described above under the caption
Certain Covenants Merger,
Consolidation or Sale of Assets; and
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(2) the issuance of Equity Interests by any of the
Companys Restricted Subsidiaries or the sale by the
Company or any Restricted Subsidiary thereof of Equity Interests
in any of its Subsidiaries (other than directors
qualifying shares and shares issued to foreign nationals to the
extent required by applicable law).
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Notwithstanding the preceding, the following items will be
deemed not to be Asset Sales:
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(1) any single transaction or series of related
transactions that involves assets or Equity Interests having a
Fair Market Value of less than $1.0 million;
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(2) a transfer of assets or Equity Interests between or
among the Company and its Restricted Subsidiaries;
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(3) an issuance or sale of Equity Interests by a Restricted
Subsidiary of the Company to the Company or to another
Restricted Subsidiary;
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(4) the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of business;
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(5) the sale or other disposition of Cash Equivalents;
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(6) dispositions of accounts receivable in connection with
the compromise, settlement or collection thereof in the ordinary
course of business or in bankruptcy or similar proceedings;
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(7) a Restricted Payment that is permitted by the covenant
described above under the caption Certain
Covenants Restricted Payments and any
Permitted Investments;
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(8) any sale or disposition of any property or equipment
that has become damaged, worn out, or obsolete; and
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(9) the creation of a Lien not prohibited by the Indenture.
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Beneficial Owner
has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under
the Exchange Act, except that in calculating the beneficial
ownership of any particular person (as that term is
used in Section 13(d)(3) of the Exchange Act), such
person will be deemed to have beneficial ownership
of all securities that such person has the right to
acquire by conversion or exercise of other securities, whether
such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent
112
condition. The terms Beneficial Owners,
Beneficially Owns and Beneficially Owned
will have a corresponding meaning.
Board of Directors
means:
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(1) with respect to a corporation, the board of directors
of the corporation or, except in the context of the definitions
of Change of Control and Continuing
Directors, a duly authorized committee thereof;
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(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership; and
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(3) with respect to any other Person, the board or
committee of such Person serving a similar function.
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Board Resolution
means a resolution certified
by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board of Directors of the Company
and to be in full force and effect on the date of such
certification.
Business Day
means any day other than a Legal
Holiday.
Capital Lease Obligation
means, at the time
any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at that time
be required to be capitalized on a balance sheet in accordance
with GAAP.
Capital Stock
means:
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(1) in the case of a corporation, any corporate stock;
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(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
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(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
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(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
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Cash Equivalents
means:
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(1) United States dollars, or in the case of a Subsidiary
other than a Domestic Subsidiary, such local currencies held by
it in the ordinary course of business;
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(2) securities issued or directly and fully guaranteed or
insured by the United States government, or any member state of
the European Union in which the Company or any Subsidiary
operates or anticipates operating within the 12 months, or
any agency or instrumentality thereof (
provided
that the
full faith and credit of the United States is pledged in support
thereof) maturing, unless such securities are deposited to
defease any Indebtedness, not more than one year from the date
of acquisition;
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(3) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of
acquisition, bankers acceptances with maturities not
exceeding one year and overnight bank deposits, in each case,
with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a rating at the time of
acquisition thereof of P-1 or better from Moodys Investors
Service, Inc. or A-1 or better from Standard &
Poors Rating Services;
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(4) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in
clauses (2) and (3) above entered into with any
financial institution meeting the qualifications specified in
clause (3) above;
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(5) commercial paper having the highest rating obtainable
from Moodys Investors Service, Inc. or Standard &
Poors Rating Services and in each case maturing within one
year after the date of acquisition;
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113
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(6) securities issued and fully guaranteed by any state,
commonwealth or territory of the United States of America , or
any member state of the European Union in which the Company or
any Subsidiary operates or anticipates operating within the next
12 months, or by any political subdivision or taxing
authority thereof, rated at least A by Moodys
Investors Service, Inc. or Standard &Poors Rating
Services and having maturities of not more than six months from
the date of acquisition;
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(7) in the case of any Restricted subsidiary located in a
country that is outside the United States and the European Union
(in which the Company or its Restricted Subsidiary is operating
or anticipates operating within the next 12 months), any
substantially similar investment to the kinds described in
clauses (1) through (6) of this definition obtained in
the ordinary course of business and rated the lower of
(i) at least P-1 by Moodys or A-1 by S&P or the
equivalent thereof and (ii) the highest ranking obtainable
in the applicable jurisdiction; and
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(8) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in
clauses (1) through (6) of this definition.
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Change of Control
means the occurrence of any
of the following:
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(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Company and its Restricted Subsidiaries, taken as a whole, to
any person (as that term is used in
Section 13(d)(3) of the Exchange Act), other than to any of
the Principals or Related Parties;
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(2) the adoption of a plan relating to the liquidation or
dissolution of the Company;
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(3) prior to the first public offering of Common Stock of
the Company, the Principals or the Related Parties cease to be
the ultimate Beneficial Owners, directly or indirectly, of a
majority in the aggregate of the total voting power of the
Voting Stock of the Company, on a fully diluted basis, whether
as a result of issuance of securities of the Company, any
merger, consolidation, liquidation or dissolution of the Company
or a Parent, or any direct of indirect transfer of securities by
the Company, or otherwise (for the avoidance of doubt, pro rata
distributions in kind of Equity Interests of the Company by any
Principal to its general and/or limited partners will be
disregarded for this clause (3));
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(4) on and following the first public offering of Common
Stock of the Company, any person or
group (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), other than any of the Principals
or Related Parties, becomes the ultimate Beneficial Owner,
directly or indirectly, of 50% or more of the voting power of
the Voting Stock of the Company;
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(5) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing
Directors; or
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(6) the Company consolidates with, or merges with or into,
any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of the Company or
such other Person is converted into or exchanged for cash,
securities or other property, other than any such transaction
where the Voting Stock of the Company outstanding immediately
prior to such transaction is converted into or exchanged for
Voting Stock (other than Disqualified Stock) of the surviving or
transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance), and
any transaction where immediately after such transaction, no
person or group (as such terms are used
in Section 13(d) and 14(d) of the Exchange Act), becomes,
directly or indirectly, the ultimate Beneficial Owner of 50% or
more of the voting power of the Voting Stock of the surviving or
transferee Person.
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Commission
means the U.S. Securities and
Exchange Commission.
Common Stock
means, with respect to any
Person, any Capital Stock (other than Preferred Stock) of such
Person, whether outstanding on the Issue Date or issued
thereafter.
114
Consolidated Cash Flow
means, with respect to
any specified Person for any period, the Consolidated Net Income
of such Person for such period
plus
:
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(1) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income;
plus
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(2) Fixed Charges of such Person and its Restricted
Subsidiaries for such period, to the extent that any such Fixed
Charges were deducted in computing such Consolidated Net Income;
plus
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(3) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income;
minus
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(4) non-cash items increasing such Consolidated Net Income
for such period, other than the accrual of revenue consistent
with past practice;
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in each case, on a consolidated basis and determined in
accordance with GAAP.
Solely for the purpose of determining the amount available for
Restricted Payments under Certain
Covenants Restricted Payments, notwithstanding
the preceding, the provision for taxes based on the income or
profits of, the Fixed Charges of and the depreciation and
amortization and other non-cash expenses of, a Restricted
Subsidiary of the Company will be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company
(A) in the same proportion that the Net Income of such
Restricted Subsidiary was added to compute such Consolidated Net
Income of the Company and (B) only to the extent that a
corresponding amount would be permitted at the date of
determination to be dividended or distributed to the Company by
such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Subsidiary
or its stockholders.
Consolidated Net Assets
of any Person means,
as of any date, the amount which in accordance with GAAP, would
be set forth under the caption Total Assets (or any
like caption) on a consolidated balance sheet of such Person and
its Restricted Subsidiaries, as of the end of the most recently
ended fiscal quarter for which internal financial statements are
available, less current liabilities;
provided
that, for
purposes of determining Consolidated Net Assets, the principal
amount of any intercompany Indebtedness that would otherwise be
included in the definition of current liabilities
under GAAP, will not be so included to the extent that such
intercompany Indebtedness is expressly subordinated by its terms
to the Indebtedness evidenced by the Notes and the Guarantees.
Consolidated Net Income
means, with respect
to any specified Person for any period, the aggregate of the Net
Income of such Person and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP;
provided
that:
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(1) the Net Income (or loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of dividends or distributions or other payments that are
actually paid in cash (or to the extent converted into cash) to
the specified Person or a Restricted Subsidiary thereof;
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(2) Solely for the purpose of determining the amount
available for Restricted Payments under
Certain Covenants Restricted
Payments, the Net Income of any Restricted Subsidiary will
be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation
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applicable to that Restricted Subsidiary or its equity holders,
unless such restriction has been waived: provided that
Consolidated Net Income for such Restricted Subsidiary will be
increased by the amount of dividends or distributions or other
payments that are actually paid in cash (or to the extent
converted into cash) to such Restricted Subsidiary in respect to
such period, to the extent not already included therein;
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(3) the Net Income of any Person acquired during the
specified period for any period prior to the date of such
acquisition will be excluded;
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(4) the cumulative effect of a change in accounting
principles will be excluded;
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(5) the amortization or write off of fees and expenses
incurred in connection with the acquisition or integration of a
Permitted Business or assets used in a Permitted Business will
be excluded;
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(6) any net after tax gain (or loss) realized upon the sale
or other disposition of any assets of the Company, its
Consolidated Subsidiaries or any other Person (including
pursuant to any sale-and- leaseback arrangement) which is not
sold or otherwise disposed of in the ordinary course of business
and any net after tax gain (or loss) realized upon the sale or
other disposition of any Capital Stock of any Person will be
excluded;
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(7) extraordinary gains or losses will be excluded;
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(8) any non-cash compensation charge or expense realized
from grants of stock, stock appreciation or similar rights,
stock option or other rights to officers, directors and
employees or the Company or any of its Restricted Subsidiaries
will be excluded; and
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(9) any unusual, nonoperating or nonrecurring gain, loss,
charge or write-down of assets will be excluded.
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Continuing Directors
means, as of any date of
determination, any member of the Board of Directors of the
Company who:
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(1) was a member of such Board of Directors on the Issue
Date; or
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(2) was nominated for election or elected to such Board of
Directors (i) with the approval of a majority of the
Continuing Directors who were members of such Board of Directors
at the time of such nomination or election or (ii) the
nominating committee of the Board of Directors so long as it
consists of Continuing Directors appointed to serve on the
nominating committee in accordance with the First Amended and
Restated Investors Agreement dated February 10, 2005.
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Credit Agreement
means that certain Third
Amended and Restated First Lien Credit Agreement, dated as of
May 17, 2005, by and among the Company and the other
lenders named therein, providing for up to $30 million in
term loan borrowings and up to $150 million of revolving
credit borrowings, including any related notes, Guarantees,
collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated,
modified, renewed, refunded, replaced, restructured, increased,
supplemented or refinanced in whole or in part from time to
time, regardless of whether such amendment, restatement,
modification, renewal, refunding, replacement, restructuring,
increase, supplement or refinancing is with the same financial
institutions or otherwise.
Credit Facilities
means, one or more debt
facilities (including, without limitation, the Credit
Agreement), commercial paper facilities, in each case with banks
or other institutional lenders, providing for revolving credit
loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such
receivables), letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
Default
means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
116
Designated Non-Cash Consideration
means the
Fair Market Value of non-cash consideration received by the
Company or one of its Restricted Subsidiaries in connection with
an Asset Sale that is so designated as Designated Non-Cash
Consideration pursuant to an Officers Certificate, setting
forth the basis of such valuation, less the amount of Cash
Equivalents received in connection with a subsequent sale of
such Designated Non-Cash Consideration.
Disqualified Stock
means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case
at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior
to the date that is 123 days after the date on which the
Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the
Company to repurchase such Capital Stock upon the occurrence of
a change of control or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide
that the Company may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the
caption Certain Covenants
Restricted Payments. The term Disqualified
Stock will also include any options, warrants or other
rights that are convertible into Disqualified Stock or that are
redeemable at the option of the holder, or required to be
redeemed, prior to the date that is one year after the date on
which the Notes mature. For the avoidance of doubt, the existing
Preferred Stock is not Disqualified Stock.
Domestic Subsidiary
means any Restricted
Subsidiary of the Company other than a Restricted Subsidiary
that is (1) a controlled foreign corporation
under Section 957 of the Internal Revenue Code
(a) whose primary operating assets are located outside the
United States and (b) that is not subject to tax under
Section 882(a) of the Internal Revenue Code of the United
States because of a trade or business within the United States
or (2) a Subsidiary of an entity described in the preceding
clause (1).
Equity Offering
means any public or private
placement of Capital Stock (other than Disqualified Stock) of
the Company (other than pursuant to a registration statement on
Form S-8
or
otherwise relating to equity securities issuable under any
employee benefit plan of the Company) to any Person other than
any Subsidiary thereof.
Equity Interests
means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
European Union
means the European Union or
any successor thereto as constituted on the date of
determination.
Existing Indebtedness
means the aggregate
amount of Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement
or under the Notes and the related Note Guarantees) in existence
on the Issue Date after giving effect to the application of the
proceeds of (1) the Notes and (2) any borrowings made
under the Credit Agreement on the Issue Date, until such amounts
are repaid.
Existing Preferred Stock
means the
Companys Series B Convertible Preferred Stock.
Fair Market Value
means the price that would
be paid in an arms-length transaction between an informed
and willing seller under no compulsion to sell and an informed
and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors of the Company, whose
determination, unless otherwise specified below, will be
conclusive if evidenced by a Board Resolution. Notwithstanding
the foregoing, (1) the Board of Directors
determination of Fair Market Value must be evidenced by a Board
Resolution attached to an Officers Certificate delivered
to the Trustee if the Fair Market Value exceeds
$5.0 million and (2) the Board of Directors
determination of Fair Market Value must be based upon an opinion
or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the Fair Market Value
exceeds $25.0 million.
117
Fixed Charges
means, with respect to any
specified Person for any period, the sum, without duplication,
of:
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(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued, excluding amortization of debt issuance costs and the
expensing of any financing fees, but including original issue
discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, and net of
the effect of all payments made or received pursuant to Hedging
Obligations;
plus
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(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period;
plus
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(3) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon;
plus
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(4) all dividends, whether paid or accrued and whether or
not in cash, on any series of Disqualified Stock of such Person
or any of its Restricted Subsidiaries, other than dividends on
Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) of the Company or to the
Company or a Restricted Subsidiary of the Company, in each case,
on a consolidated basis and in accordance with GAAP.
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Fixed Charge Coverage Ratio
means with
respect to any specified Person for any period, the ratio of the
Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Restricted Subsidiaries
Incurs, repays, repurchases or redeems any Indebtedness or
issues, repurchases or redeems Preferred Stock subsequent to the
commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated and on or prior to the date on which
the event for which the calculation of the Fixed Charge Coverage
Ratio is made (the Calculation Date), then the Fixed
Charge Coverage Ratio will be calculated giving pro forma effect
to such Incurrence, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of
Preferred Stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of such period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
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(1) acquisitions and dispositions of business entities or
property and assets constituting a division or line of business
of any Person that have been made by the specified Person or any
of its Restricted Subsidiaries, including through mergers or
consolidations, during the four-quarter reference period or
subsequent to such reference period and on or prior to the
Calculation Date will be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period will be
calculated on a pro forma basis, but without giving effect to
clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
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(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, will be
excluded;
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(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP will be
excluded, but only to the extent that the obligations giving
rise to such Fixed Charges will not be obligations of the
specified Person or any of its Restricted Subsidiaries following
the Calculation Date; and
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(4) consolidated interest expense attributable to interest
on any Indebtedness (whether existing or being Incurred)
computed on a
pro forma
basis and bearing a floating
interest rate will be computed as if the average rate in effect
from the beginning of the applicable period to the Calculation
Date (taking into account any interest rate option, swap, cap or
similar agreement applicable to such Indebtedness if such
agreement has a remaining term in excess of 12 months or,if
shorter, at least equal to the remaining term of such
Indebtedness) had been the applicable rate for the entire
period; and
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(5) if any Indebtedness is incurred under a revolving
credit facility and is being given pro forma effect in such
calculation, the interest on such Indebtedness shall be
calculated based on the average daily balance of such
Indebtedness for the four fiscal quarters subject to the pro
forma calculation to the extent that such Indebtedness was
incurred solely for working capital purposes.
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GAAP
means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants, the opinions and pronouncements of
the Public Company Accounting Oversight Board and in the
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
Government Securities
means securities that
are direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged.
Guarantee
means, as to any Person, a
guarantee other than by endorsement of negotiable instruments
for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of
a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any
Indebtedness of another Person.
Guarantors
means:
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(1) the Initial Guarantors; and
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(2) any other subsidiary that executes a Note Guarantee in
accordance with the provisions of the Indenture;
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and their respective successors and assigns until released from
their obligations under their Note Guarantees and the Indenture
in accordance with the terms of the Indenture.
Hedging Obligations
means, with respect to
any specified Person, the obligations of such Person under:
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(1) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements
or arrangements with respect to interest rates;
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(2) commodity swap agreements, commodity option agreements,
forward contracts and other agreements or arrangements with
respect to commodity prices; and
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(3) foreign exchange contracts, currency swap agreements
and other agreements or arrangements with respect to foreign
currency exchange rates.
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Holder
means a Person in whose name a Note is
registered.
Immaterial Subsidiary
means, as of any date
of determination, any Restricted Subsidiary whose total assets
as of the most recently completed fiscal quarter were less than
$1.0 million and whose total revenues for the most recently
completed
12-month
fiscal period did not exceed $1.0 million;
provided
that a Restricted Subsidiary will not be deemed to be an
Immaterial Subsidiary if (1) such Restricted Subsidiary
directly or indirectly guarantees any Indebtedness of the
Company or any other Subsidiary or (2) either the total
assets or total revenues of such Restricted Subsidiary exceeds
the amount set forth above.
Incur
means, with respect to any
Indebtedness, to incur, create, issue, assume, guarantee or
otherwise become directly or indirectly liable for or with
respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness (and
Incurrence and Incurred will have
meanings correlative to the foregoing);
provided
that
(1) any Indebtedness of a Person existing at the time such
Person becomes a Restricted Subsidiary of the Company will be
deemed to be Incurred by such Restricted Subsidiary at the time
it becomes a Restricted Subsidiary of the Company and
(2) neither the accrual of interest nor the accretion of
original issue discount nor the payment of interest in the form
of additional Indebtedness with the same terms and the payment
of dividends on Disqualified Stock or Preferred Stock in the
form of additional shares of the same class of Disqualified
Stock or Preferred Stock (to the extent
119
provided for when the Indebtedness or Disqualified Stock or
Preferred Stock on which such interest or dividend is paid was
originally issued) will be considered an Incurrence of
Indebtedness;
provided
that, in each case, the amount
thereof is for all other purposes included in the Fixed Charges
and Indebtedness of the Company or its Restricted Subsidiary as
accrued.
Indebtedness
means, with respect to any
specified Person, any indebtedness of such Person, whether or
not contingent:
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(1) in respect of borrowed money;
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(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof);
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(3) in respect of bankers acceptances;
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(4) in respect of Capital Lease Obligations;
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(5) in respect of the balance deferred and unpaid of the
purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable;
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(6) representing Hedging Obligations;
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(7) representing Disqualified Stock valued at the greater
of its voluntary or involuntary maximum fixed repurchase price
plus accrued dividends;
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(8) in the case of a Subsidiary of such Person,
representing Preferred Stock valued at greater of its voluntary
or involuntary maximum fixed repurchase price plus accrued
dividends.
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In addition, the term Indebtedness includes
(x) all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person),
provided
that the
amount of such Indebtedness will be the lesser of (A) the
Fair Market Value of such asset at such date of determination
and (B) the amount of such Indebtedness, (y) to the
extent not otherwise included, the Guarantee by the specified
Person of any Indebtedness of any other Person, and
(z) Preferred Stock issued by any Restricted Subsidiary.
For purposes hereof, the maximum fixed repurchase
price of any Disqualified Stock or Preferred Stock which
does not have a fixed repurchase price will be calculated in
accordance with the terms of such Disqualified Stock or
Preferred Stock, as applicable, as if such Disqualified Stock or
Preferred Stock were repurchased on any date on which
Indebtedness will be required to be determined pursuant to the
Indenture.
The amount of any Indebtedness outstanding as of any date will
be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, and will be:
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(1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
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(2) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
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Notwithstanding the foregoing, the following items of
Indebtedness will be permitted:
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(1) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business, provided, however, that such Indebtedness is
extinguished within five Business Days of its Incurrence;
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(2) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness constituting reimbursement
obligations with respect to letters of credit in respect of
workers compensation claims or self-insurance obligations
or bid, performance or surety bonds (in each case, other than
for an obligation for borrowed money);
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120
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(3) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness constituting reimbursement
obligations with respect to letters of credit issued in the
ordinary course of business; provided that, upon the drawing of
such letters of credit or in the Incurrence of such
Indebtedness, such obligations are reimbursed within
30 days following such drawing or Incurrence;
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(4) the Incurrence by the Company of Indebtedness to the
extent that the net proceeds thereof are promptly deposited to
defease or to satisfy and discharge the Notes;
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(5) any Indebtedness which has been defeased in accordance
with GAAP; and
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(6) the Incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price or similar
obligations, or Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any
of its Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company (other
than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), so
long as the amount so indemnified or otherwise Incurred does not
exceed the gross proceeds actually received by the Company or
any Restricted Subsidiary thereof in connection with such
disposition.
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Initial Guarantors
means all of the Domestic
Subsidiaries of the Company.
Investments
means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the form of loans or
other extensions of credit (including Guarantees), advances,
capital contributions (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others), purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells
or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Company that is a
Guarantor such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of
the Company and a Guarantor, the Company will be deemed to have
made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of the Investment in such
Subsidiary not sold or disposed of. The acquisition by the
Company or any Restricted Subsidiary of the Company of a Person
that holds an Investment in a third Person will be deemed to be
an Investment by the Company or such Restricted Subsidiary in
such third Person in an amount equal to the Fair Market Value of
the Investment held by the acquired Person in such third Person.
Issue Date
means the date of original
issuance of the Notes under the Indenture.
Legal Holiday
means a Saturday, a Sunday or a
day on which banking institutions in The City of New York or at
a place of payment are authorized or required by law, regulation
or executive order to remain closed.
Lien
means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset, whether or not filed,
recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or
agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
Moodys
means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net Income
means, with respect to any
specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however:
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(1) any gain (or loss), together with any related provision
for taxes on such gain (or loss), realized in connection with:
(a) any sale of assets outside the ordinary course of
business of such Person; or
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121
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(b) the disposition of any securities by such Person or any
of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted
Subsidiaries; and
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(2) any extraordinary gain (or loss), together with any
related provision for taxes on such extraordinary gain (or loss).
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Net Proceeds
means the aggregate cash
proceeds, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not the interest component, thereof) received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale
or other disposition of any non-cash consideration received in
any Asset Sale), net of
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(1) the direct costs relating to such Asset Sale,
including, without limitation, legal, accounting, investment
banking and brokerage fees, and sales commissions, and any
relocation expenses incurred as a result thereof,
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(2) taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or
deductions and any tax sharing arrangements,
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(3) amounts required to be applied to the repayment of
Indebtedness or other liabilities, secured by a Lien on the
asset or assets that were the subject of such Asset Sale, or is
required to be paid as a result of such sale,
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(4) any reserve for adjustment in respect of the sale price
of such asset or assets established in accordance with GAAP,
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(5) in the case of any Asset Sale by a Restricted
Subsidiary of the Company, payments to holders of Equity
Interests in such Restricted Subsidiary in such capacity (other
than such Equity Interests held by the Company or any Restricted
Subsidiary thereof) to the extent that such payment is required
to permit the distribution of such proceeds in respect of the
Equity Interests in such Restricted Subsidiary held by the
Company or any Restricted Subsidiary thereof; and
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(6) appropriate amounts to be provided by the Company or
its Restricted Subsidiaries as a reserve against liabilities
associated with such Asset Sale, including, without limitation,
pension and other post- employment benefit liabilities,
liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset
Sale, all as determined in accordance with GAAP;
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provided
that (a) excess amounts set aside for
payment of taxes pursuant to clause (2) above remaining
after such taxes have been paid in full or the statute of
limitations therefor has expired and (b) amounts initially
held in reserve pursuant to clause (6) no longer so held,
will, in the case of each of subclause (a) and (b), at that
time become Net Proceeds.
Note Guarantee
means a Guarantee of the Notes
pursuant to the Indenture.
Obligations
means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Officer
means, with respect to any Person,
the Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
Officers Certificate
means a
certificate signed on behalf of the Company by at least two
Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the
treasurer or the principal accounting officer of the Company,
that meets the requirements of the Indenture.
Opinion of Counsel
means an opinion from
legal counsel who is reasonably acceptable to the Trustee (who
may be counsel to or an employee of the Company) that meets the
requirements of the Indenture.
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Permitted Business
means any business
conducted or proposed to be conducted (as described in the
offering memorandum) by the Company and its Restricted
Subsidiaries on the Issue Date and other businesses reasonably
related or ancillary thereto.
Permitted Investments
means:
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(1) any Investment in the Company or in a Restricted
Subsidiary of the Company;
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(2) any Investment in Cash Equivalents;
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(3) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such
Investment:
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(a) such Person becomes a Restricted Subsidiary of the
Company; or
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(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company;
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(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales;
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(5) Hedging Obligations that are Incurred for the purpose
of fixing, hedging or swapping interest rate, commodity price or
foreign currency exchange rate risk (or to reverse or amend any
such agreements previously made for such purposes), and not for
speculative purposes, and that do not increase the Indebtedness
of the obligor outstanding at any time other than as a result of
fluctuations in interest rates, commodity prices or foreign
currency exchange rates or by reason of fees, indemnifies and
compensation payable thereunder;
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(6) stock, obligations or securities received in
satisfaction of judgments;
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(7) advances to customers or suppliers in the ordinary
course of business that are, in conformity with GAAP, recorded
as accounts receivable, prepaid expenses or deposits on the
balance sheet of the Company or its Restricted Subsidiaries and
endorsements for collection or deposit arising in the ordinary
course of business;
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(8) commission, payroll, travel and similar advances to
officers and employees of the Company or any of its Restricted
Subsidiaries that are expected at the time of such advance
ultimately to be recorded as an expense in conformity with GAAP;
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(9) Investments in any Person received in settlement of
debts created in the ordinary course of business and owing to
the Company or any of its Subsidiaries or in satisfaction of
judgments or pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of any debtor;
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(10) Investments existing on the Issue Date;
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(11) endorsements of negotiable instruments and documents
in the ordinary course of business;
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(12) acquisitions of assets, Equity Interests or other
securities by the Company for consideration consisting of Equity
Interests (other than Disqualified Stock) of the Company;
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(13) Investments in the Notes;
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(14) Investments in a joint venture engaged in a Permitted
Business in an amount, together with any other amount under this
clause (14), not to exceed 7.5% of the Companys
Consolidated Net Assets; and
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(15) other Investments in any Person (provided that any
such Person is not an Affiliate of the Company or is an
Affiliate of the Company solely because the Company, directly or
indirectly, owns Equity Interests in, or controls, such Person)
having an aggregate Fair Market Value (measured on the date each
such Investment was made and without giving effect to subsequent
changes in value), when
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123
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taken together with all other Investments made pursuant to this
clause (15) since the Issue Date, not to exceed
$10.0 million.
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Permitted Liens
means:
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(1) Liens on the assets of the Company, any Guarantor and
any Restricted Subsidiary that is not a Domestic Subsidiary
securing Senior Debt that was permitted by the terms of the
Indenture to be Incurred;
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(2) Liens in favor of the Company or any Restricted
Subsidiary that is a Guarantor;
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(3) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Company
or any Restricted Subsidiary of the Company;
provided
that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with
the Company or the Restricted Subsidiary;
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(4) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the
Company,
provided
that such Liens were in existence prior
to the contemplation of such acquisition and do not extend to
any property other than the property so acquired by the Company
or the Restricted Subsidiary;
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(5) Liens securing the Notes and the Note Guarantees;
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(6) Liens existing on the Issue Date;
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(7) Liens securing Permitted Refinancing Indebtedness;
provided
that such Liens do not extend to any property or
assets other than the property or assets that secure the
Indebtedness being refinanced;
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(8) Liens on property or assets used to defease or to
satisfy and discharge Indebtedness;
provided
that
(a) the Incurrence of such Indebtedness was not prohibited
by the Indenture and (b) such defeasance or satisfaction
and discharge is not prohibited by the Indenture;
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(9) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance or other kinds of social security, or to
secure the payment or performance of tenders, bids, contracts
(other than contracts for the payment of Indebtedness) or leases
to which such Person is a party, statutory or regulatory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business (including lessee or operator obligations under
statutes, governmental regulations or instruments related to the
ownership, exploration and production of oil, gas and minerals
on state or federal lands or waters);
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(10) Liens for taxes, assessments or governmental charges
or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve
or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor;
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(11) statutory liens of landlords, mechanics, suppliers,
vendors, warehousemen, carriers or other like Liens arising in
the ordinary course of business;
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(12) prejudgment liens and judgment Liens not giving rise
to an Event of Default so long as such Lien is adequately bonded
and any appropriate legal proceeding that may have been duly
initiated for the review of such judgment has not been finally
terminated or the period within which such proceeding may be
initiated has not expired;
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(13) Liens constituting survey exceptions, encumbrances,
easements, and reservations of, and rights to others for,
rights-of
-way, zoning
and other restrictions as to the use of real properties, and
minor defects of title which, in the case of any of the
foregoing, do not secure the payment of borrowed money, and in
the aggregate do not materially adversely affect the value of
the assets of the Company and its Restricted Subsidiaries, taken
as a whole, or materially impair the use of such properties for
the purposes of which such properties are held by the Company or
such Subsidiaries;
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124
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(14) Liens securing Indebtedness incurred to finance the
construction, purchase or lease of, or repairs, improvements or
additions to, property, plant or equipment of such Person;
provided, however,
that the Lien may not extend to any
other property owned by such Person or any of its Restricted
Subsidiaries at the time the Lien is incurred or created (other
than assets and property affixed or appurtenant thereto), and
the Indebtedness (other than any interest thereon) secured by
the Lien may not be incurred or created more than 180 days
after the later of the date of acquisition, completion of
construction, repair, improvement, addition or commencement of
full operation of the property subject to the Lien; and
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(15) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at
any one time outstanding.
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Permitted Refinancing Indebtedness
means any
Indebtedness of the Company or any of its Restricted
Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness);
provided
that:
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(1) the principal amount (or accreted value or liquidation
preference, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the amount (or accreted value or
liquidation preference,if applicable) the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded
(plus all accrued and unpaid interest thereon and the amount of
any reasonably determined premium necessary to accomplish such
refinancing and such reasonable expenses incurred in connection
therewith);
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(2) such Permitted Refinancing Indebtedness has a final
maturity date (or redemption date, if applicable) later than the
final maturity date (or redemption date, if applicable) of, and
has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
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(3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the Notes or the Note Guarantees, such Permitted
Refinancing Indebtedness has a final maturity date later than
the final maturity date of the Notes, and is subordinated in
right of payment to, the Notes on terms at least as favorable,
taken as a whole, to the Holders of Notes as those contained in
the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
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(4) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is
pari passu
in
right of payment with the Notes or any Note Guarantees, such
Permitted Refinancing Indebtedness is
pari passu
with, or
subordinated in right of payment to, the Notes or such Note
Guarantees; and
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(5) such Indebtedness is Incurred by either (a) the
Restricted Subsidiary that is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded or (b) the Company;
provided, however,
that
a Restricted Subsidiary that is also a Guarantor may guarantee
Permitted Refinancing Indebtedness incurred by the Company,
whether or not such Restricted Subsidiary was an obligor or
guarantor of the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
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Person
means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Preferred Stock
means, with respect to any
Person, any Capital Stock of such Person that has preferential
rights to any other Capital Stock of such Person with respect to
dividends or redemptions upon liquidation.
Principals
means CapStreet II, L.P.,
CapStreet Parallel II, L.P. and TA Associates, Inc., TA IX
L.P., TA/ Atlantic and Pacific IV L.P., TA/ Atlantic and
Pacific V L.P., TA Strategic Partners Fund A L.P., TA
Strategic Partners Fund B L.P., TA Investors II, L.P.
125
Rating Agency
means Standard &
Poors and Moodys or if Standard &
Poors or Moodys, or both will not make a rating on
any series of Notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be,
selected by the Company (as testified by a resolution of the
Board of Directors of the Company), which agency will be
substituted for Standard & Poors or Moodys
or both, as the case may be.
Related Party
means (1) any Affiliate of
any Principal, including any controlling stockholder, partner,
member, Subsidiary or immediate family member (in the case of an
individual) of any Principal, and including any equity fund
advised by any such Person, but excluding any portfolio company
of any such Person and (2) limited partners or members of
any investment fund involved within the definition of
Principal with respect to Equity Interests of the
Company received as distributions in kind from such Principal;
provided that, as a result of such distribution, no such limited
partner or member will control the Company as such
term is defined under the definition of Affiliate.
Replacement Assets
means (1) non-current
assets that will be used or useful in a Permitted Business or
(2) substantially all the assets of a Permitted Business or
a majority of the Voting Stock of any Person engaged in a
Permitted Business that will become on the date of acquisition
thereof a Restricted Subsidiary that is a Guarantor.
Restricted Investment
means an Investment
other than a Permitted Investment.
Restricted Subsidiary
of a Person means any
Subsidiary of such Person that is not an Unrestricted Subsidiary.
Significant Subsidiary
means any Subsidiary
that would constitute a significant subsidiary
within the meaning of Article 1 of
Regulation S-X
of
the Securities Act.
Standard & Poors
means
Standard & Poors, a division of The McGraw-Hill
Companies, Inc., and any successor to its rating agency business.
Stated Maturity
means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment
thereof.
Subsidiary
means, with respect to any
specified Person:
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(1) any corporation, association or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
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(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
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Subsidiary Guarantors
means:
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(1) each direct or indirect Domestic Subsidiary of the
Company on the date of the Indenture; and
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(2) any other subsidiary that executes a Note Guarantee in
accordance with the provisions of the Indenture;
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Treasury Rate
means the yield to maturity at
the time of computation of United States Treasury securities
with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) which
has become publicly available at least two Business Days prior
to the date fixed for prepayment (or, if such Statistical
Release is no longer published, any publicly available source
for similar market data)) most nearly equal to the then
remaining term of the Notes to August 15, 2009;
provided, however,
that if the then remaining term of the
Notes to August 15, 2009 is not equal to the constant
126
maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the
then remaining term of the Notes to August 15, 2009 is less
than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year will be used.
Unrestricted Subsidiary
means any Subsidiary
of the Company that is designated by the Board of Directors of
the Company as an Unrestricted Subsidiary pursuant to a Board
Resolution in compliance with the covenant described under the
caption Certain Covenants
Designation of Restricted and Unrestricted Subsidiaries,
and any Subsidiary of such Subsidiary.
Voting Stock
of any Person as of any date
means the Capital Stock of such Person that is ordinarily
entitled to vote in the election of the Board of Directors of
such Person.
Weighted Average Life to Maturity
means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing:
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(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making
of such payment; by
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(2) the then outstanding principal amount of such
Indebtedness.
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127
FEDERAL INCOME TAX CONSIDERATIONS
Federal Income Tax Considerations of the Exchange of
Outstanding Notes for New Notes
The following discussion is a summary of certain federal income
tax considerations relevant to the exchange of outstanding notes
for new notes, but does not purport to be a complete analysis of
all potential tax effects. The discussion is based upon the
Internal Revenue Code of 1986, as amended, Treasury Regulations,
Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, all of which may be subject to change
at any time by legislative, judicial or administrative action.
These changes may be applied retroactively in a manner that
could adversely affect a holder of new notes. The description
does not consider the effect of any applicable foreign, state,
local or other tax laws or estate or gift tax considerations.
We believe that the exchange of outstanding notes for new notes
should not be an exchange or otherwise a taxable event to a
holder for United States federal income tax purposes.
Accordingly, a holder should have the same adjusted issue price,
adjusted basis and holding period in the new notes as it had in
the outstanding notes immediately before the exchange.
128
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the SEC in no action
letters issued to third parties, we believe that you may
transfer new notes issued under the exchange offer in exchange
for the outstanding notes if:
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you acquire the new notes in the ordinary course of your
business; and
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you are not engaged in, and do not intend to engage in, and have
no arrangement or understanding with any person to participate
in, a distribution of such new notes.
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You may not participate in the exchange offer if you are:
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our affiliate within the meaning of Rule 405
under the Securities Act; or
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a broker-dealer that acquired outstanding notes directly from us.
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Each broker-dealer that receives new notes for its own account
pursuant to the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such new
notes. To date, the staff of the SEC has taken the position that
broker-dealers may fulfill their prospectus delivery
requirements with respect to transactions involving an exchange
of securities such as this exchange offer, other than a resale
of an unsold allotment from the original sale of the outstanding
notes, with the prospectus contained in this registration
statement. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for outstanding
notes where such outstanding notes were acquired as a result of
market-making activities or other trading activities. We have
agreed that, for a period of up to 180 days after the
effective date of this registration statement, we will make this
prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In
addition, until such date, all dealers effecting transactions in
new notes may be required to deliver a prospectus.
If you wish to exchange new notes for your outstanding notes in
the exchange offer, you will be required to make representations
to us as described in Exchange Offer Purpose
and Effect of the Exchange Offer and
Procedures for Tendering Your
Representations to Us in this prospectus. As indicated in
the letter of transmittal, you will be deemed to have made these
representations by tendering your outstanding notes in the
exchange offer. In addition, if you are a broker-dealer who
receives new notes for your own account in exchange for
outstanding notes that were acquired by you as a result of
market-making activities or other trading activities, you will
be required to acknowledge, in the same manner, that you will
deliver a prospectus in connection with any resale by you of
such new notes.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their
own account pursuant to the exchange offer may be sold from time
to time in one or more transactions in the
over-the
-counter market:
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in negotiated transactions;
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through the writing of options on the new notes or a combination
of such methods of resale;
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at market prices prevailing at the time of resale; and
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at prices related to such prevailing market prices or negotiated
prices.
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Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the
form of commissions or concessions from any such broker-dealer
or the purchasers of any such new notes. Any broker-dealer that
resells new notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed
to be an underwriter within the meaning of the
Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
For a period of 180 days after the effective date of this
registration statement, we will promptly send additional copies
of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in
the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer (including the expenses of one
counsel for the holders of the outstanding notes) other than
commissions or concessions of any broker-dealers and will
indemnify the holders of the outstanding notes (including any
broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
129
LEGAL MATTERS
Certain legal matters in connection with the issuance of the
notes will be passed upon for us by Vinson & Elkins
L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of (i) Cardtronics,
Inc. as of December 31, 2004 and 2003, and for each of the
years in the three-year period ended December 31, 2004, and
(ii) ATM Company (as defined in the notes to those
financial statements) as of December 31, 2002 and 2003 and
June 30, 2004, and for each of the years in the two-year
period ended December 31, 2003 and for the six-month period
ended June 30, 2004, have been included herein in reliance
upon the reports of KPMG LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting. The audit reports covering the
December 31, 2004 financial statements of Cardtronics, Inc.
and the December 31, 2003 financial statements of ATM
Company refer to the adoption of Statement of Financial
Accounting Standards No. 143,
Accounting for Asset
Retirement Obligations,
on January 1, 2003.
The financial statements of Bank Machine (Acquisitions) Limited
and its subsidiary as of and for the years ended
December 31, 2004 and 2003, included in this prospectus,
have been audited by Deloitte & Touche LLP, independent
auditors, of London, England as stated in their report herein
(which report expresses an unqualified opinion on the financial
statements and includes an explanatory paragraph relating to the
differences between accounting principles generally accepted in
the United Kingdom and accounting principles generally accepted
in the United States of America, and the effect that the
application of the latter would have on the determination of
profit attributable to shareholders and of shareholders
equity) and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form S-4 with respect to the notes being offered by this
prospectus. This prospectus does not contain all of the
information found in the registration statement. For further
information regarding us and the notes offered by this
prospectus, please review the full registration statement,
including its exhibits. The registration statement, including
the exhibits, may be inspected and copied at the public
reference facilities maintained by the SEC at 100 F Street,
N.E., Washington D.C. 20549. Copies of this material can also be
obtained from the public reference section of the SEC at
prescribed rates, or accessed at the SECs website at
www.sec.gov
. Please call the SEC at 1-800-SEC-0330 for
further information on its public reference room.
Following the completion of the exchange offer, we will file
with or furnish to the SEC periodic reports and other
information. These reports and other information may be
inspected and copied at the public reference facilities
maintained by the SEC or obtained from the SECs website as
provided above. We have agreed that, whether or not we are
required to do so under the applicable rules and regulations,
for so long as any of the notes remain outstanding we will
comply with the reporting requirements of the Exchange Act and
will file the applicable reports and information with the SEC,
unless the SEC will not accept such filings. If the SEC will not
accept these filings, we will post the reports referred to above
on our website. Our website is located at
www.cardtronics.com,
and we expect to make our periodic
reports and other information filed with or furnished to the SEC
available free of charge through our website, as soon as
reasonably practicable after those reports and other information
are filed with or furnished to the SEC. Information on our
website is not a part of this prospectus. You may also request a
copy of these filings at no cost, by writing or telephoning us
at the following address: Cardtronics, Inc., Attention: Chief
Financial Officer, 3110 Hayes Road, Suite 300, Houston,
Texas 77082, (281) 596-9988.
In addition, for so long as any of the notes remain outstanding,
we have agreed to make available to any prospective purchaser of
the notes or beneficial owner of the notes, in connection with
any sale thereof, the information required by
Rule 144A(d)(4) under the Securities Act.
130
INDEX TO FINANCIAL STATEMENTS
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CARDTRONICS, INC. AND SUBSIDIARIES
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F-3
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F-5
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F-6
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F-7
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F-11
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F-12
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F-13
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F-14
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F-15
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F-16
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F-17
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F-36
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F-37
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F-38
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F-39
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F-40
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F-54
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F-55
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F-56
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F-57
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F-58
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F-58
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F-59
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F-76
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F-77
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F-78
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F-79
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F-79
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F-80
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F-1
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F-88
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F-88
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F-89
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F-90
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F-91
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F-92
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|
|
F-93
|
|
|
|
|
|
|
F-94
|
|
F-2
CARDTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The unaudited pro forma condensed consolidated financial
statements give effect to Cardtronics, Inc.s acquisition
of the ATM business of E*TRADE Access in June 2004, the
acquisition of Bank Machine in May 2005, and the issuance and
sale of the notes described in this registration statement.
On June 30, 2004, we acquired substantially all of the ATM
business of E*TRADE Access for approximately $106.9 million
in cash. Such acquisition was funded entirely with borrowings
under our existing bank credit facility in place at that time.
On May 17, 2005, we acquired Bank Machine, an independent
ATM operator in the United Kingdom, for approximately
$92.0 million in cash and 35,221 shares, which we
valued at $3.0 million, of our Series B Convertible
Preferred Stock. The cash portion of the Bank Machine
acquisition was funded entirely by borrowings under our recently
amended bank credit facilities.
The unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2004, gives
effect to the E*TRADE Access acquisition and the Bank Machine
acquisition as if each had occurred on January 1, 2004. The
unaudited pro forma condensed consolidated statement of
operations for the nine months ended September 30, 2005,
gives effect to the Bank Machine acquisition as if it had
occurred on January 1, 2004. No unaudited pro forma
condensed consolidated balance sheet has been presented as the
effects of the above transactions have been fully reflected in
our September 30, 2005 condensed consolidated balance sheet
included elsewhere in this registration statement.
The E*TRADE Access and Bank Machine acquisitions have been
accounted for using the purchase method of accounting and,
accordingly, the tangible and intangible assets acquired and
liabilities assumed in those transactions have been recorded at
their estimated fair values. As noted above, the E*TRADE Access
acquisition was consummated on June 30, 2004. Accordingly,
the final purchase price allocation for such transaction has
been reflected in our September 30, 2005 consolidated
balance sheet included elsewhere in this registration statement.
The preliminary purchase price allocation for the Bank Machine
acquisition has also been reflected in our September 30,
2005 consolidated balance sheet included elsewhere in this
registration statement. Such allocation is considered to be
preliminary as we are still in the process of finalizing our
valuation work on the acquired tangible and intangible assets.
As such, there may be changes to such initial allocation as
those efforts are finalized.
Cardtronics historical consolidated statement of
operations for the year ended December 31, 2004 was derived
from our audited consolidated financial statements included
elsewhere in this registration statement. Such audited
statements also include the results of operations of the
acquired E*TRADE Access business for the period from
July 1, 2004 to December 31, 2004. Cardtronics
historical condensed consolidated statement of operations for
the nine months ended September 30, 2005 was derived from
our unaudited interim condensed consolidated financial
statements included elsewhere in this registration statement,
and includes the results of operations of the acquired E*TRADE
Access business for the entire period and the results of
operations of the acquired Bank Machine business for the period
from May 1, 2005 to September 30, 2005.
The historical E*TRADE Access consolidated statement of
operations for the six months ended June 30, 2004, was
derived from the audited consolidated financial statements of
E*TRADE Access included elsewhere in this registration
statement. In accordance with an agreement with E*TRADE with
respect to name use, the consolidated financial statements for
the business formerly conducted by E*TRADE Access, Inc. appear
under the name ATM Company.
The historical Bank Machine consolidated statement of operations
for the year ended December 31, 2004 was derived from the
audited consolidated financial statements of Bank Machine
included elsewhere in this registration statement. The
historical Bank Machine consolidated statement of operations for
the four months ended April 30, 2005 was derived from the
unaudited consolidated financial statements of Bank Machine.
Bank Machines historical consolidated financial statements
were prepared using accounting principles generally accepted in
the United Kingdom (UK GAAP) and British Pounds
(UK £ or £), and have been
restated in U.S. dollars (US $ or
$) and in accordance with accounting principles
generally
F-3
CARDTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
accepted in the U.S. (US GAAP). Additionally,
certain line items reported by Bank Machine in its historical
consolidated financial statements have been reclassified and
presented to conform to the method of presentation utilized by
Cardtronics. Reference is made to the notes to the unaudited
condensed consolidated pro forma financial statements for more
information with respect to the UK to US GAAP adjustments.
In converting Bank Machines consolidated statement of
operations from UK £ to US $, all statement of
operations captions were translated at the average exchange
rates in effect for such periods. The average exchange rate
utilized for the year ended December 31, 2004, was
US $1.8315, and the average exchange rate utilized for the
four months ended April 30, 2005, was US $1.8912. For
the post-acquisition period from May 1, 2005 to
September 30, 2005, the weighted average exchange rate was
$1.8085.
The unaudited pro forma condensed consolidated financial
statements presented below are based on the assumptions and
adjustments described in the accompanying notes. Such unaudited
pro forma condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily
indicative of what our results of operations would have been had
the E*TRADE Access and Bank Machine acquisitions and the notes
offering been consummated on the dates indicated, nor are they
necessarily indicative of what our results of operations will be
in future periods. The unaudited pro forma condensed
consolidated financial statements contain only contractual cost
savings associated with the E*TRADE Access acquisition and do
not contain any adjustments to reflect anticipated cost savings
or additional synergies anticipated as a result of the E*TRADE
Access or Bank Machine acquisitions. Operating results for the
nine months ended September 30, 2005 are not indicative of
the results that may be expected for the year ending
December 31, 2005. The unaudited pro forma condensed
consolidated financial statements, and accompanying notes
thereto, should be read in conjunction with the historical
audited and unaudited financial statements, and accompanying
notes thereto, of Cardtronics, E*TRADE Access and Bank Machine,
all of which are included elsewhere in this registration
statement.
The unaudited pro forma condensed consolidated financial data
should be read in conjunction with Selected Historical
Consolidated Financial and Operating Data of Cardtronics,
Inc., Managements Discussion and Analysis of
Financial Condition and Results of Operations, and the
audited and unaudited consolidated financial statements and
related notes for Cardtronics, E*TRADE Access, and Bank Machine,
all of which are included elsewhere in this registration
statement.
F-4
CARDTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Machine
|
|
|
|
|
|
|
|
|
|
Cardtronics
|
|
|
E*TRADE
|
|
|
US GAAP ($)
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
Historical
|
|
|
Historical(a)
|
|
|
(See Note 1)
|
|
|
Adjustments
|
|
|
Notes
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
192,915
|
|
|
$
|
56,905
|
|
|
$
|
28,596
|
|
|
$
|
|
|
|
|
|
|
|
$
|
278,416
|
|
Cost of revenues
|
|
|
152,207
|
|
|
|
50,681
|
|
|
|
15,890
|
|
|
|
(3,642
|
)
|
|
|
3
|
|
|
|
215,136
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
40,708
|
|
|
|
6,224
|
|
|
|
12,706
|
|
|
|
3,642
|
|
|
|
|
|
|
|
63,280
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
13,571
|
|
|
|
4,359
|
|
|
|
3,294
|
|
|
|
|
|
|
|
|
|
|
|
21,224
|
|
|
Depreciation and accretion expense
|
|
|
6,785
|
|
|
|
2,015
|
|
|
|
2,410
|
|
|
|
(2,020
|
)
|
|
|
4
|
|
|
|
9,190
|
|
|
Amortization expense
|
|
|
5,508
|
|
|
|
2,835
|
|
|
|
2,666
|
|
|
|
(3,335
|
)
|
|
|
4
|
|
|
|
7,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,864
|
|
|
|
9,209
|
|
|
|
8,370
|
|
|
|
(5,355
|
)
|
|
|
|
|
|
|
38,088
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
14,844
|
|
|
|
(2,985
|
)
|
|
|
4,336
|
|
|
|
8,997
|
|
|
|
|
|
|
|
25,192
|
|
Interest expense
|
|
|
7,050
|
|
|
|
26
|
|
|
|
2,827
|
|
|
|
11,680
|
|
|
|
2
|
|
|
|
21,583
|
|
Other (income) expense
|
|
|
228
|
|
|
|
(180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
7,566
|
|
|
|
(2,831
|
)
|
|
|
1,509
|
|
|
|
(2,683
|
)
|
|
|
|
|
|
|
3,561
|
|
Income tax provision
|
|
|
2,956
|
|
|
|
|
|
|
|
348
|
|
|
|
(2,090
|
)
|
|
|
5
|
|
|
|
1,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
4,610
|
|
|
$
|
(2,831
|
)
|
|
$
|
1,161
|
|
|
$
|
(593
|
)
|
|
|
|
|
|
$
|
2,347
|
|
Dividends on preferred stock
|
|
|
2,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,312
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
2,298
|
|
|
$
|
(2,831
|
)
|
|
$
|
1,161
|
|
|
$
|
(593
|
)
|
|
|
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
For the six months ended June 30, 2004.
|
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
F-5
CARDTRONICS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Machine
|
|
|
|
|
|
|
|
|
|
Cardtronics
|
|
|
US GAAP ($)
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
Historical(a)
|
|
|
(See Note 1)(b)
|
|
|
Adjustments
|
|
|
Notes
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
199,188
|
|
|
$
|
10,184
|
|
|
$
|
|
|
|
|
|
|
|
$
|
209,372
|
|
Cost of revenues
|
|
|
155,504
|
|
|
|
6,035
|
|
|
|
|
|
|
|
|
|
|
|
161,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
43,684
|
|
|
|
4,149
|
|
|
|
|
|
|
|
|
|
|
|
47,833
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
11,552
|
|
|
|
1,621
|
|
|
|
|
|
|
|
|
|
|
|
13,173
|
|
|
Depreciation and accretion expense
|
|
|
8,530
|
|
|
|
1,080
|
|
|
|
(403
|
)
|
|
|
4
|
|
|
|
9,207
|
|
|
Amortization expense
|
|
|
5,689
|
|
|
|
730
|
|
|
|
(396
|
)
|
|
|
4
|
|
|
|
6,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,771
|
|
|
|
3,431
|
|
|
|
(799
|
)
|
|
|
|
|
|
|
28,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
17,913
|
|
|
|
718
|
|
|
|
799
|
|
|
|
|
|
|
|
19,430
|
|
Interest expense
|
|
|
14,224
|
|
|
|
1,010
|
|
|
|
953
|
|
|
|
2
|
|
|
|
16,187
|
|
Other (income) expense
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,807
|
|
|
|
(292
|
)
|
|
|
(154
|
)
|
|
|
|
|
|
|
2,361
|
|
Income tax provision
|
|
|
972
|
|
|
|
(53
|
)
|
|
|
(79
|
)
|
|
|
5
|
|
|
|
840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,835
|
|
|
$
|
(239
|
)
|
|
$
|
(75
|
)
|
|
|
|
|
|
$
|
1,521
|
|
Dividends on preferred stock
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
507
|
|
|
$
|
(239
|
)
|
|
$
|
(75
|
)
|
|
|
|
|
|
$
|
193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
For the nine months ended September 30, 2005. Includes the
results of the acquired Bank Machine business for the period
May 1, 2005 through September 30, 2005.
|
|
(b)
|
For the four months ended April 30, 2005.
|
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
F-6
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
|
(1)
|
The unaudited pro forma condensed consolidated financial
statements combine the historical results of Cardtronics,
E*TRADE Access and Bank Machine, and assume, for purposes of the
pro forma statements of operations, that the E*TRADE Access and
Bank Machine acquisitions, and the issuance and sale of the
notes described in this registration statement, all occurred on
January 1, 2004. The Company acquired E*TRADE Access on
June 30, 2004; therefore, amounts associated with this
acquisition are included in the Cardtronics historical
consolidated financial statements subsequent to this date.
Furthermore, the Company acquired Bank Machine on May 17,
2005, and utilized May 1, 2005 as the acquisition date for
accounting purposes. Accordingly, amounts associated with this
acquisition are included in Cardtronics historical
consolidated financial statements subsequent to May 1, 2005.
|
The historical audited and unaudited consolidated financial
statements of Bank Machine included elsewhere in this
registration statement have been prepared in accordance with UK
GAAP, which differs in certain significant respects from US
GAAP. Reference is made to note 24 of the audited
financials of Bank Machine for 2004 and note 12 of the
unaudited consolidated financial statements of Bank Machine for
more information on the differences between UK GAAP and US GAAP.
The historical financial information of Bank Machine included in
the unaudited pro forma condensed consolidated financial
statements above is reflected in accordance with US GAAP. The
following tables provide a reconciliation of the Bank Machine
historical audited and unaudited consolidated financial
statements prepared under UK GAAP to the Bank Machine financial
information presented above under US GAAP:
Bank Machine (Acquisitions) Ltd.
Reconciliation of UK GAAP to US GAAP
Consolidated Statement of Operations
Year Ended December 31, 2004
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Machine
|
|
|
US GAAP
|
|
|
Bank Machine
|
|
|
Bank Machine
|
|
|
|
UK GAAP (£)
|
|
|
Adjustments (£)
|
|
|
US GAAP (£)
|
|
|
US GAAP ($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
£
|
15,614
|
|
|
£
|
|
|
|
£
|
15,614
|
|
|
$
|
28,596
|
|
Cost of revenues
|
|
|
8,676
|
|
|
|
|
|
|
|
8,676
|
|
|
|
15,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
6,938
|
|
|
|
|
|
|
|
6,938
|
|
|
|
12,706
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
1,788
|
|
|
|
11
|
(b)
|
|
|
1,799
|
|
|
|
3,294
|
|
|
Depreciation and accretion expense
|
|
|
1,316
|
|
|
|
|
|
|
|
1,316
|
|
|
|
2,410
|
|
|
Amortization expense
|
|
|
806
|
|
|
|
650
|
(a)
|
|
|
1,456
|
|
|
|
2,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
3,910
|
|
|
|
661
|
|
|
|
4,571
|
|
|
|
8,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
3,028
|
|
|
|
(661
|
)
|
|
|
2,367
|
|
|
|
4,336
|
|
Interest expense
|
|
|
1,481
|
|
|
|
63
|
(c)
|
|
|
1,544
|
|
|
|
2,827
|
|
Other (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
1,547
|
|
|
|
(724
|
)
|
|
|
823
|
|
|
|
1,509
|
|
Income tax provision/(benefit)
|
|
|
649
|
|
|
|
(459
|
)(d)
|
|
|
190
|
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
£
|
898
|
|
|
£
|
(265
|
)
|
|
£
|
633
|
|
|
$
|
1,161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Converted to US $ at a rate of $1.8315 to £1.00 UK.
|
F-7
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Bank Machine (Acquisitions) Ltd.
Reconciliation of UK GAAP to US GAAP
Unaudited Condensed Consolidated Statement of Operations
Four Months Ended April 30, 2005
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank Machine
|
|
|
US GAAP
|
|
|
Bank Machine
|
|
|
Bank Machine
|
|
|
|
UK GAAP (£)
|
|
|
Adjustments (£)
|
|
|
US GAAP (£)
|
|
|
US GAAP ($)(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
£
|
5,385
|
|
|
£
|
|
|
|
£
|
5,385
|
|
|
$
|
10,184
|
|
Cost of revenues
|
|
|
3,191
|
|
|
|
|
|
|
|
3,191
|
|
|
|
6,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
2,194
|
|
|
|
|
|
|
|
2,194
|
|
|
|
4,149
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
842
|
|
|
|
15
|
(b)
|
|
|
857
|
|
|
|
1,621
|
|
|
Depreciation and accretion expense
|
|
|
571
|
|
|
|
|
|
|
|
571
|
|
|
|
1,080
|
|
|
Amortization expense
|
|
|
269
|
|
|
|
117
|
(a)
|
|
|
386
|
|
|
|
730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
1,682
|
|
|
|
132
|
|
|
|
1,814
|
|
|
|
3,431
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
512
|
|
|
|
(132
|
)
|
|
|
380
|
|
|
|
718
|
|
Interest expense
|
|
|
509
|
|
|
|
25
|
(c)
|
|
|
534
|
|
|
|
1,010
|
|
Other (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
3
|
|
|
|
(157
|
)
|
|
|
(154
|
)
|
|
|
(292
|
)
|
Income tax provision/(benefit)
|
|
|
100
|
|
|
|
(128
|
)(d)
|
|
|
(28
|
)
|
|
|
(53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
£
|
(97
|
)
|
|
£
|
(29
|
)
|
|
£
|
(126
|
)
|
|
$
|
(239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Converted to US $ at a rate of $1.8912 to £1.00 UK.
|
|
|
|
(a)
|
|
UK GAAP requires intangible assets to be separately recognized
in a business combination only if (i) they can be disposed
of separately without disposing of the business of the entity,
and (ii) if their value can be measured reliably on initial
measurement.
|
|
|
|
Under US GAAP, Statement of Financial Accounting Standards
(SFAS) No. 141,
Business Combinations
(SFAS 141), mandates the recognition of
intangible assets in a business combination if (i) they
arise from contractual rights or other legal rights or
(ii) they are capable of being separated or divided from
the acquired entity and sold, transferred, licensed, rented or
otherwise exchanged. Under SFAS 141, the Company
established an additional £8,100,000 in intangible assets
as part of the purchase price allocation process, with such
amount being comprised of £7,800,000 in acquired merchant
contract relationships and £300,000 for a covenant not to
compete.
|
|
|
|
Under US GAAP, SFAS No. 142,
Goodwill and Other
Intangible Assets
(SFAS 142), requires that
intangible assets with finite lives be amortized over their
estimated useful lives in a manner that reflects the pattern in
which the economic benefits of such intangible assets are
expected to be consumed or otherwise used up. Accordingly, under
US GAAP, the Company is amortizing the above merchant contract
relationship intangible on an accelerated basis over an
estimated useful life of approximately 12 years, and the
non-compete covenant on a straight-line basis over a period of
three years. Such amortization expense totaled £1,456,000
and £386,000 in 2004 and 2005, respectively.
|
|
|
|
Under FRS 10, UK GAAP requires that goodwill should be
amortized over its useful economic life, which is generally
presumed not to exceed 20 years. Accordingly, under UK GAAP
goodwill is being amortized on a straight-line basis over an
estimated useful life of 20 years.
|
F-8
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Under US GAAP, SFAS 142 requires that goodwill and
intangibles with an indefinite life no longer be amortized but
instead subject to an impairment test at least annually, and
more frequently if conditions warrant. Accordingly, under US
GAAP, no goodwill amortization was recorded during 2004 and 2005.
|
|
(b)
|
|
Under UK GAAP, there is no comprehensive requirement to accrue
for vacation pay or other compensated absences during the same
accounting period, although accrual in certain industries where
it is common for all staff to take holiday at the same time is
not prohibited.
|
|
|
|
Under US GAAP, in accordance with SFAS No. 43,
Accounting for Compensated Absences
(SFAS 43), an employer should accrue a
liability for employees compensation for future absences
if all of the following conditions are met: (i) the
employers obligation relating to employees rights to
receive compensation for future absences is attributable to
employees services already rendered; (ii) the
obligation relates to rights that vest or accumulate;
(iii) payment of the compensation is probable; and
(iv) the amount can be reasonably estimated. Under US GAAP,
the vacation accrual relating to compensated absences was
£26,000 as of April 30, 2005.
|
|
(c)
|
|
Under UK GAAP, payments made or received under the
Companys interest rate swap agreement are reflected as an
increase or decrease to interest expense when incurred, and the
fair market value of the swap is not reflected in the
Companys consolidated balance sheet.
|
|
|
|
Under US GAAP, the Company accounts for derivative financial
instruments in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
(SFAS 133). SFAS 133 requires that all
derivative instruments be recognized as assets or liabilities in
the consolidated balance sheet and measured at fair value,
regardless of the purpose or intent in holding them. Changes in
the fair value of derivative instruments are recognized
periodically either in earnings or equity (as a component of
other comprehensive income or loss), depending on whether the
derivative is designated as a hedge of changes in fair value or
cash flows. For derivatives designated as a fair value hedges,
changes in fair value of the hedged item and the derivative are
recognized currently in earnings. For derivatives designated as
cash flow hedges, fair value changes of the effective portion of
the hedging instrument are recognized in accumulated other
comprehensive income or loss in the consolidated balance sheet
until the hedged item is recognized in earnings. The ineffective
portion of the fair value changes is recognized in earnings
immediately. Changes in the fair value of the underlying debt
instrument are not recognized in net income or equity.
|
|
|
|
The Company has not designated its interest rate swap
transaction as a hedge under SFAS 133. As a result, under
US GAAP, such transaction is reflected in the consolidated
balance sheet at its fair market value, with any resulting
changes in that value being recorded in earnings in the
applicable period. As of April 30, 2005 a derivative asset
of £38,000 was reflected in the Companys consolidated
balance sheet. During the four months ended April 30, 2005,
a £29,000 loss was included in the Companys earnings
reflecting the change in the fair value of such swap during that
period. For the year ended December 31, 2004, such change
in value resulted in a loss of £63,000.
|
|
(d)
|
|
Reflects the deferred tax effects of the above adjustments.
|
|
|
(2)
|
Reflects the incremental interest expense associated with the
issuance and sale of the notes described in this registration
statement, and the subsequent repayment of a portion of our
existing bank debt, including the borrowings used to finance the
Bank Machine acquisition in May 2005. The unaudited pro forma
condensed consolidated statements of operations assume the
simultaneous issuance and repayment occurred on January 1,
2004.
|
The debt capitalization structure assumed to be outstanding for
all periods presented in the above pro forma financial
statements is as follows (in thousands):
|
|
|
|
|
Long-term fixed rate notes reflected in this registration
statement (net of discount)
|
|
$
|
198,610
|
|
Revolving credit facility
|
|
|
34,925
|
|
|
|
|
|
Total pro forma long-term debt
|
|
$
|
233,535
|
|
|
|
|
|
|
|
|
For purposes of computing the interest expense amounts
associated with the above debt structure, a weighted-average
rate of 8.92% has been utilized. Assuming an increase of
25 basis points in the floating borrowing rate under our
bank credit facilities, pro forma interest expense would have
increased by $87 and $65 for the year ended December 31,
2004 and nine months ended September 30, 2005, respectively.
|
F-9
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Future maturities of our pro forma long-term debt are as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2005
|
|
2006
|
|
|
2007
|
|
2008
|
|
|
2009
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
233,535
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
233,535
|
|
|
|
|
The pro forma interest expense figures also reflect the
amortization of approximately $6.0 million in deferred
financing costs associated with the sale of the notes described
in this registration statement. Such amount is reflected as
being amortized over the
8-year
estimated life
of the notes. The historical unaudited condensed consolidated
financial statements also reflect the subsequent pre-tax
write-off of approximately $2.5 million in deferred
financing costs which were incurred when we refinanced our
existing bank credit facilities in May 2005, and the pre-tax
write-off of approximately $0.9 million in deferred
financing costs upon the successful completion of the notes
offering in August 2005. However, such write-offs have been
excluded from the accompanying unaudited pro forma condensed
consolidated financial statements as such costs were incurred
directly as a result of the refinancings of our existing bank
credit facility as part of our Bank Machine acquisition and as a
result of the sale of the notes described in this registration
statement.
|
|
|
(3)
|
Reflects the contractual cost savings associated with
transferring certain operating activities from the historical
E*TRADE Access operating platform to our platform, effective
January 1, 2004. Within our industry, many of the operating
costs associated with running an ATM operation are easily
transferred from one provider to the next in an acquisition, and
such transfers typically occur within a very short period of
time following the consummation of the acquisition. In many
instances, the service providers are the same for both
companies, thus further contributing to the relatively seamless
transfer of service. In the case of the E*TRADE Access
acquisition, our contracts for services such as transaction
processing, armored courier service, cash management, and ATM
maintenance were lower than that of the acquired E*TRADE Access
operations. Additionally, because our contracts were already in
place at the time of the acquisition, the related pro forma cost
savings adjustments are considered to be factually supportable.
Furthermore, such cost savings amounts are expected to have a
continuing impact on our future results of operations.
|
|
(4)
|
Reflects the adjustments to the historical depreciation,
accretion and amortization expense resulting from the effects of
the purchase price allocations associated with the E*TRADE
Access and Bank Machine acquisitions. We acquired E*TRADE Access
as of June 30, 2004, therefore the pro forma adjustment
reflects an adjustment to the historical depreciation, accretion
and amortization expense for only the first six months of 2004.
With respect to the Bank Machine acquisition, the pro forma
adjustments relate to the 2004 results and the results for the
four months ended April 30, 2005. The acquired tangible
assets have a weighted-average remaining useful life of
approximately 3.7 years and are being depreciated on a
straight-line basis over such period of time. The acquired
intangible customer contracts and relationships are estimated to
have a
7-year
life,
after taking into consideration expected renewals, and are being
amortized over such period on a straight-line basis, consistent
with our past practice. Reference is made to the historical
condensed consolidated financial statements of Cardtronics, Inc.
as of September 30, 2005, included elsewhere in this
registration statement for additional information on the Bank
Machine purchase price allocation.
|
|
(5)
|
Reflects the adjustments to income taxes at the statutory rates
of 37.1% for our US operations (34.0% federal and 3.1% state)
and 30.0% for our UK operations.
|
F-10
CARDTRONICS, INC.
Annual Financial Statements
December 31, 2004 and 2003
(With Report of Independent Registered Public Accounting Firm)
F-11
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Cardtronics, Inc.:
We have audited the accompanying consolidated balance sheets of
Cardtronics, Inc. and subsidiaries as of December 31, 2004
and 2003, and the related consolidated statements of operations,
changes in stockholders deficit and comprehensive income,
and cash flows for each of the years in the three-year period
ended December 31, 2004. These consolidated financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Cardtronics, Inc. and subsidiaries as of
December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 2004, in conformity
with U.S. generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial
statements, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 143,
Accounting for
Asset Retirement Obligations
on January 1, 2003.
/s/ KPMG LLP
Houston, Texas
March 28, 2005
F-12
CARDTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2004 and 2003
(000s, except share and per share info)
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,412
|
|
|
$
|
5,554
|
|
|
Accounts receivable, net of allowance for doubtful accounts of
$558 and $69 as of December 31, 2004 and 2003, respectively
|
|
|
10,895
|
|
|
|
4,738
|
|
|
Notes receivable short-term, net of allowance for doubtful notes
short-term of $156 and $239 as of December 31, 2004 and
2003, respectively
|
|
|
578
|
|
|
|
785
|
|
|
Inventory
|
|
|
2,609
|
|
|
|
1,748
|
|
|
Prepaid, deferred costs, and other current assets
|
|
|
2,503
|
|
|
|
1,777
|
|
|
Deferred tax asset
|
|
|
2,412
|
|
|
|
1,303
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
20,409
|
|
|
|
15,905
|
|
Restricted cash
|
|
|
32
|
|
|
|
32
|
|
Notes receivable, net of allowance for doubtful notes of $7 and
$148 as of December 31, 2004 and 2003, respectively
|
|
|
155
|
|
|
|
706
|
|
Property and equipment, net
|
|
|
44,992
|
|
|
|
24,136
|
|
Intangible assets, net
|
|
|
43,077
|
|
|
|
23,361
|
|
Goodwill
|
|
|
84,977
|
|
|
|
|
|
Prepaid and other assets
|
|
|
1,667
|
|
|
|
294
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
195,309
|
|
|
$
|
64,434
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and notes payable
|
|
$
|
15,000
|
|
|
$
|
|
|
|
Current portion of other long-term liabilities
|
|
|
1,176
|
|
|
|
55
|
|
|
Accounts payable
|
|
|
2,397
|
|
|
|
992
|
|
|
Accounts payable to affiliates
|
|
|
308
|
|
|
|
300
|
|
|
Accrued liabilities
|
|
|
22,063
|
|
|
|
10,532
|
|
|
Income tax payable
|
|
|
46
|
|
|
|
28
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
40,990
|
|
|
|
11,907
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion and related discount
|
|
|
113,541
|
|
|
|
31,371
|
|
|
Deferred tax liability
|
|
|
6,231
|
|
|
|
2,060
|
|
|
Other long-term liabilities
|
|
|
13,047
|
|
|
|
4,733
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
173,809
|
|
|
|
50,071
|
|
|
|
|
|
|
|
|
Series A redeemable preferred stock, $0.0001 par
value; 17,500 shares authorized; 17,500 shares issued
and outstanding at December 31, 2004 and 2003 and
liquidation value of $24,521 and $22,209 at December 31,
2004 and 2003, respectively
|
|
|
23,634
|
|
|
|
21,322
|
|
Minority interest in subsidiary
|
|
|
30
|
|
|
|
|
|
Stockholders deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 2,500,000 shares
authorized; 2,373,398 shares issued at December 31,
2004 and 2003; 2,303,257 and 2,294,048 outstanding at
December 31, 2004 and 2003, respectively
|
|
|
|
|
|
|
|
|
|
Subscriptions receivable (at face value)
|
|
|
(1,862
|
)
|
|
|
(2,305
|
)
|
|
Additional paid-in capital
|
|
|
|
|
|
|
1,039
|
|
|
Accumulated other comprehensive income, net
|
|
|
886
|
|
|
|
|
|
|
Retained earnings (Accumulated deficit)
|
|
|
(329
|
)
|
|
|
(4,797
|
)
|
|
Treasury stock; 70,141 and 79,350 shares at cost at
December 31, 2004 and 2003, respectively
|
|
|
(859
|
)
|
|
|
(896
|
)
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(2,164
|
)
|
|
|
(6,959
|
)
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
195,309
|
|
|
$
|
64,434
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-13
CARDTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2004, 2003 and 2002
(000s, except share and per share info)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM operating revenues
|
|
$
|
182,711
|
|
|
$
|
101,950
|
|
|
$
|
59,183
|
|
|
ATM product sales and other revenues
|
|
|
10,204
|
|
|
|
8,493
|
|
|
|
9,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
192,915
|
|
|
|
110,443
|
|
|
|
68,786
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of ATM operating revenues
|
|
|
143,504
|
|
|
|
80,286
|
|
|
|
49,134
|
|
|
Cost of ATM product sales revenues
|
|
|
8,703
|
|
|
|
7,903
|
|
|
|
8,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
152,207
|
|
|
|
88,189
|
|
|
|
58,118
|
|
|
|
Gross profit (exclusive of depreciation shown separately below)
|
|
|
40,708
|
|
|
|
22,254
|
|
|
|
10,668
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses (includes
amortization of stock-based compensation of $0.9 million,
$1.6 million and $0 in 2004, 2003 and 2002, respectively,
and the write-off of $1.7 million in deferred registration
costs in 2004)
|
|
|
13,571
|
|
|
|
7,229
|
|
|
|
6,142
|
|
|
Depreciation and accretion expense
|
|
|
6,785
|
|
|
|
3,632
|
|
|
|
1,650
|
|
|
Amortization expense
|
|
|
5,508
|
|
|
|
3,842
|
|
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,864
|
|
|
|
14,703
|
|
|
|
9,433
|
|
Income from operations
|
|
|
14,844
|
|
|
|
7,551
|
|
|
|
1,235
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (includes amortization and write-off of
financing costs of $2.9 million, $1.7 million and
$0.2 million in 2004, 2003 and 2002, respectively
|
|
|
7,050
|
|
|
|
3,346
|
|
|
|
881
|
|
|
Minority interest in subsidiary
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
209
|
|
|
|
106
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
7,278
|
|
|
|
3,452
|
|
|
|
939
|
|
Income before income taxes and cumulative effect of change in
accounting principle
|
|
|
7,566
|
|
|
|
4,099
|
|
|
|
296
|
|
Income tax provision
|
|
|
2,956
|
|
|
|
1,511
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of change in accounting principle
|
|
|
4,610
|
|
|
|
2,588
|
|
|
|
142
|
|
Cumulative effect of change in accounting principle for asset
retirement obligations, net of related income tax benefit of $80
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,610
|
|
|
|
2,454
|
|
|
|
142
|
|
Preferred stock dividends and accretion expense
|
|
|
2,312
|
|
|
|
2,089
|
|
|
|
1,880
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
2,298
|
|
|
$
|
365
|
|
|
$
|
(1,738
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-14
CARDTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND
COMPREHENSIVE INCOME
For the Years Ended December 31, 2004, 2003 and 2002
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
|
|
Common
|
|
Paid-in
|
|
|
Treasury
|
|
|
(Accumulated
|
|
|
Comprehensive
|
|
|
Subscriptions
|
|
|
|
|
|
Stock
|
|
Capital
|
|
|
Stock
|
|
|
Deficit)
|
|
|
Income
|
|
|
Receivable
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2001
|
|
$
|
|
|
|
$
|
409
|
|
|
$
|
(6,257
|
)
|
|
$
|
(1,216
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(7,064
|
)
|
|
Issuance of capital stock
|
|
|
|
|
|
|
(370
|
)
|
|
|
2,361
|
|
|
|
(1,985
|
)
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
Repurchase of stock options
|
|
|
|
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
Repurchase of capital stock
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,880
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,880
|
)
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2002
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(3,970
|
)
|
|
$
|
(4,939
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(8,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock
|
|
|
|
|
|
|
|
|
|
|
941
|
|
|
|
|
|
|
|
|
|
|
|
(941
|
)
|
|
|
|
|
|
Issuance of capital stock
|
|
|
|
|
|
|
|
|
|
|
2,133
|
|
|
|
(769
|
)
|
|
|
|
|
|
|
(1,364
|
)
|
|
|
|
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
(546
|
)
|
|
|
|
|
|
|
(1,543
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,089
|
)
|
|
Non-cash compensation charges
|
|
|
|
|
|
|
1,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,585
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,454
|
|
|
|
|
|
|
|
|
|
|
|
2,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2003
|
|
$
|
|
|
|
$
|
1,039
|
|
|
$
|
(896
|
)
|
|
$
|
(4,797
|
)
|
|
$
|
|
|
|
$
|
(2,305
|
)
|
|
$
|
(6,959
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of capital stock
|
|
|
|
|
|
|
27
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
443
|
|
|
|
507
|
|
|
Dividends on preferred stock
|
|
|
|
|
|
|
(2,153
|
)
|
|
|
|
|
|
|
(159
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,312
|
)
|
|
Tax benefit from stock option exercises
|
|
|
|
|
|
|
184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
|
|
|
Non-cash compensation charges
|
|
|
|
|
|
|
903
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
956
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
(36
|
)
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,610
|
|
|
|
|
|
|
|
|
|
|
|
4,610
|
|
|
|
Unrealized gain on cash flow hedges, net of tax of $566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
886
|
|
|
|
|
|
|
|
886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances December 31, 2004
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(859
|
)
|
|
$
|
(329
|
)
|
|
$
|
886
|
|
|
$
|
(1,862
|
)
|
|
$
|
(2,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-15
CARDTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2003 and 2002
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
4,610
|
|
|
$
|
2,454
|
|
|
$
|
142
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion expense
|
|
|
12,293
|
|
|
|
7,474
|
|
|
|
3,291
|
|
|
|
Amortization of deferred financing costs
|
|
|
2,894
|
|
|
|
1,717
|
|
|
|
153
|
|
|
|
Non-cash compensation expense
|
|
|
956
|
|
|
|
1,585
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
2,887
|
|
|
|
1,429
|
|
|
|
154
|
|
|
|
Minority interest
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
Loss on sale of assets
|
|
|
209
|
|
|
|
106
|
|
|
|
58
|
|
|
|
Cumulative effect of change in accounting principle, net
|
|
|
|
|
|
|
134
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in accounts receivable, net
|
|
|
(4,344
|
)
|
|
|
(2,163
|
)
|
|
|
658
|
|
|
|
|
(Increase) decrease in prepaid, deferred costs and other current
assets
|
|
|
(407
|
)
|
|
|
(1,205
|
)
|
|
|
256
|
|
|
|
|
Decrease in inventory
|
|
|
487
|
|
|
|
523
|
|
|
|
1,293
|
|
|
|
|
Decrease in notes receivable, net
|
|
|
758
|
|
|
|
959
|
|
|
|
1,258
|
|
|
|
|
(Increase) decrease in other assets
|
|
|
79
|
|
|
|
(22
|
)
|
|
|
(248
|
)
|
|
|
|
Decrease in income tax receivable
|
|
|
|
|
|
|
|
|
|
|
307
|
|
|
|
|
Increase (decrease) in accounts payable
|
|
|
(4,349
|
)
|
|
|
413
|
|
|
|
(3,701
|
)
|
|
|
|
Increase in accrued liabilities
|
|
|
2,107
|
|
|
|
6,747
|
|
|
|
791
|
|
|
|
|
Increase in other liabilities
|
|
|
2,267
|
|
|
|
1,478
|
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
20,466
|
|
|
|
21,629
|
|
|
|
4,491
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(19,747
|
)
|
|
|
(7,300
|
)
|
|
|
(2,281
|
)
|
|
Sale of property and equipment
|
|
|
446
|
|
|
|
335
|
|
|
|
20
|
|
|
Acquisition of E*TRADE Access, Inc. ATM portfolio, net of cash
acquired
|
|
|
(98,730
|
)
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment related to acquisitions
|
|
|
|
|
|
|
(6,283
|
)
|
|
|
(5,923
|
)
|
|
Acquisition of merchant contracts and other intangibles
|
|
|
(895
|
)
|
|
|
(16,415
|
)
|
|
|
(6,839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(118,926
|
)
|
|
|
(29,663
|
)
|
|
|
(15,023
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
136,041
|
|
|
|
42,500
|
|
|
|
13,650
|
|
|
Repayments of long-term debt and capital leases
|
|
|
(38,925
|
)
|
|
|
(29,863
|
)
|
|
|
(4,206
|
)
|
|
Issuance of Series A preferred stock
|
|
|
|
|
|
|
|
|
|
|
1,900
|
|
|
Redemption of Series A preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Series B preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of capital stock
|
|
|
64
|
|
|
|
|
|
|
|
6
|
|
|
Purchase of capital stock
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
Purchase of stock options
|
|
|
|
|
|
|
|
|
|
|
(39
|
)
|
|
Repayment of subscription receivables
|
|
|
443
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
|
|
(3,269
|
)
|
|
|
(2,233
|
)
|
|
|
(497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
94,318
|
|
|
|
10,404
|
|
|
|
10,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(4,142
|
)
|
|
|
2,370
|
|
|
|
209
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
5,554
|
|
|
|
3,184
|
|
|
|
2,975
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
1,412
|
|
|
$
|
5,554
|
|
|
$
|
3,184
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
4,517
|
|
|
$
|
1,666
|
|
|
$
|
580
|
|
|
|
Cash paid (refunded) for income taxes
|
|
|
327
|
|
|
|
39
|
|
|
|
(329
|
)
|
See accompanying notes to consolidated financial statements.
F-16
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(1)
|
Business and Summary of Significant Accounting Policies
|
|
|
(a)
|
Description of Business
|
Cardtronics, Inc. (the Company) owns and operates approximately
24,500 automated teller machines (ATMs) in all 50 states.
The Company is the largest owner and operator of ATMs in the
United States and provides ATM management and equipment-related
services to national and regional retail chains as well as
smaller retailers and operators of facilities such as shopping
malls and airports. The Company typically enters into multi-year
contractual relationships with its merchant customers.
In June 2004, the Company acquired the majority of the ATM
operations of E*TRADE Access, Inc., an indirect wholly owned
subsidiary of E*TRADE Financial Corporation, for approximately
$106.9 million in cash (the E*TRADE acquisition). Such
acquisition more than doubled the Companys ATM portfolio
from approximately 12,000 ATMs to the 24,500 level noted above
(note 2).
|
|
(b)
|
Organizational History
|
The Company was originally formed in 1989 and operated under the
name Cardpro, Inc. In June 2001, CapStreet II, L.P. and
CapStreet Parallel II, L.P. (together with The CapStreet
Group, LLC, The CapStreet Group) acquired a majority of the
outstanding stock of Cardpro, Inc. At the time of The CapStreet
Group investment, Cardpro, Inc. was converted into a Delaware
limited partnership and renamed Cardtronics, LP. Also, in June
2001, Cardtronics Group, Inc. was incorporated under the laws of
the state of Delaware to act as a holding company, with
Cardtronics Group, Inc. indirectly owning 100% of the equity of
Cardtronics, LP. In January 2004, the Company changed its name
from Cardtronics Group, Inc. to Cardtronics, Inc.
At the time of The CapStreet Group investment, the Company also
issued $12.5 million of Series A preferred stock to
The CapStreet Group. During 2001 and 2002, the Company sold an
additional $5.0 million of Series A preferred stock to
The CapStreet Group (note 8).
In February 2005, the Company issued $75.0 million of
Series B preferred stock to a new investor, TA Associates.
The proceeds of the offering were utilized to redeem all of the
Companys outstanding Series A preferred stock,
including all accrued and unpaid dividends, redeem a portion of
the Companys outstanding common stock, and pay expenses
incurred in connection with the offering (note 20).
|
|
(c)
|
Principles of Consolidation
|
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries Cardtronics GP,
Inc., the general partner, and Cardtronics LP, Inc., the limited
partner, of Cardtronics, LP, a limited partnership and the
principal operating entity that holds all of the Companys
operating assets. The consolidated financial statements also
include the accounts of ATM Ventures LLC (ATM Ventures), a
limited liability company that the Company controls through a
50% ownership interest in such entity. The remaining 50%
ownership interest has been reflected as a minority interest in
the accompanying consolidated financial statements.
All significant accounts, transactions and profits between the
consolidated companies have been eliminated in consolidation.
Significant accounts and transactions between the Company,
including its subsidiaries, and its directors and officers are
disclosed as related party transactions (note 4).
Certain reclassifications have been made to previously reported
amounts in the accompanying consolidated financial statements to
conform to the current year presentation.
F-17
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(d)
|
Cash and Cash Equivalents
|
For purposes of reporting financial condition and cash flows,
cash and cash equivalents include cash in bank and short-term
deposit sweep accounts.
The Company had a restricted cash balance in the amount of
$32,084 and $31,660 at December 31, 2004 and 2003,
respectively, pursuant to an agreement that requires the Company
to maintain a $25,000 certificate of deposit at one of the banks
utilized to provide cash for the Companys ATMs.
|
|
(e)
|
ATM Cash Management Program
|
The Company relies on agreements with two banks to provide it
with the cash that it uses in those ATMs in which the related
merchants do not provide their own cash. The Company pays a fee
for its usage of this cash based on the total amount of cash
outstanding at any given time, as well as fees related to the
bundling and preparation of such cash prior to it being loaded
in the ATMs. At all times during its use, the cash remains the
sole property of the cash provider(s), and the Company is unable
to and prohibited from obtaining access to such cash. Pursuant
to the agreement under which the vast majority of the
Companys ATM cash needs are met, the cash provider must
provide 360 days prior written notice to the Company to
terminate the agreement and remove its cash from the ATMs. Under
the other agreement, the provider has the right to demand the
return of all or any portion of its cash at any point in time
upon the occurrence of certain events beyond the Companys
control. Based on the foregoing, such cash, and the related
obligations, are not reflected in the accompanying consolidated
financial statements.
The amount of cash in the Companys ATMs was approximately
$385.2 and $237.7 million at December 31, 2004 and
2003, respectively.
Accounts receivable are primarily comprised of amounts due from
the Companys clearing and settlement banks for ATM
transaction revenues earned on transactions processed during the
month ending on the balance sheet date. Trade accounts
receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the
Companys best estimate of the amount of probable credit
losses in the Companys existing accounts receivable. The
Company reviews its allowance for doubtful accounts monthly and
determines the allowance based on an analysis of its past due
accounts. All balances over 90 days past due are reviewed
individually for collectibility. Account balances are charged
off against the allowance after all means of collection have
been exhausted and the potential for recovery is considered
remote.
Notes receivable relate to ATM financing arrangements with terms
that typically exceed one year. At the beginning of 2002, the
Company discontinued financing the sale of ATMs through the
notes receivable program for periods greater than one year.
However, the Company will still, in limited circumstances,
finance the sale of ATMs for periods less than one year.
These notes typically bear interest at an implicit rate ranging
from 8% to 10% that is recognized over the life of the note. The
ATMs that are financed pursuant to these arrangements serve as
collateral for the notes receivable.
The allowance for doubtful notes is the Companys best
estimate of the amount of probable credit losses in the
Companys existing notes portfolio. The allowance is
determined by using historical rates of default and
extrapolating that data over the notes portfolio. Notes are
written off against the allowance when all possible means of
collection have been exhausted, and the potential for recovery
is considered remote.
F-18
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Inventory consists principally of used ATMs, ATM spare parts and
ATM supplies and is stated at the lower of cost or market. Cost
is determined using the average cost method. The following is a
breakdown of the Companys primary inventory components as
of December 31, 2004 and 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
ATMs
|
|
$
|
1,021
|
|
|
$
|
1,155
|
|
ATM parts and supplies
|
|
|
1,588
|
|
|
|
593
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,609
|
|
|
$
|
1,748
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Property and Equipment, net
|
Property and equipment are stated at cost and depreciation is
calculated using the straight-line method. Equipment is
depreciated over three to seven years. Leasehold improvements
and property acquired under capital leases are amortized over
the useful life of the asset or the lease term, whichever is
shorter. The cost of property and equipment held under capital
leases is equal to the lower of the net present value of the
minimum lease payments or the fair value of the leased property
at the inception of the lease. Also included in property and
equipment are new ATMs the Company has acquired for future
installation. Such ATMs are held as deployments in
process and are not depreciated until actually installed.
Depreciation expense for property and equipment for 2004, 2003
and 2002 was $6.5 million, $3.5 million, and
$1.7 million, respectively. See note 1(m) regarding
asset retirement obligations associated with the Companys
ATMs.
|
|
(j)
|
Intangible Assets, net
|
Intangible assets include portfolios of merchant
contracts/relationships acquired in connection with acquisitions
of ATM assets (
i.e.
, the right to receive future cash
flows related to ATM transactions occurring at these merchant
locations), exclusive license agreements (
i.e.
, the right
to be the exclusive ATM service provider, at specific locations,
for the time period under contract with a merchant customer),
and deferred financing costs relating to the Companys
credit agreements (note 11).
The purchase price of each acquired portfolio is based on the
pool of underlying contracts acquired. The estimated fair value
of each portfolio is based on a composite of the estimated net
cash flows and useful lives of the underlying pool of
contracts/relationships, including expected renewals. The
merchant contracts/relationships comprising each acquired
portfolio are typically homogenous in nature with respect to the
underlying contractual terms and conditions. Accordingly, the
Company pools the merchant contracts/relationships of each
acquired portfolio into a single intangible asset for purposes
of computing the related amortization expense and assessing the
need for any potential impairment charges. Each pool is then
amortized on a straight-line basis over its estimated remaining
useful life. The estimated useful life of each pool of merchant
contracts/relationships is determined by management of the
Company and is based on a review of the weighted average life of
the expected after-tax cash flows from the underlying merchant
contracts/relationships, including expected renewal rates, and
the terms of the contracts themselves. Because estimated renewal
terms are taken into consideration both in valuing and
estimating the remaining useful life of each pool, the
straight-line method of amortization most accurately reflects
the pattern in which the economic benefits of the pool (but not
necessarily each individual contract/relationship) are consumed.
Estimated useful lives for all intangibles range from four to
ten years. Amortized deferred financing costs are recognized as
interest expense.
F-19
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2004, 2003 and 2002, the Companys amortization of
intangible assets totaled $5.5 million, $3.8 million
and $1.6 million, respectively. As of December 31,
2004, estimated amortization expense for each of the five
succeeding years was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the next five Years
|
|
|
|
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract intangibles
|
|
$
|
5,697
|
|
|
$
|
5,588
|
|
|
$
|
5,543
|
|
|
$
|
5,543
|
|
|
$
|
5,172
|
|
Exclusive license agreements
|
|
|
209
|
|
|
|
209
|
|
|
|
209
|
|
|
|
148
|
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,906
|
|
|
$
|
5,797
|
|
|
$
|
5,752
|
|
|
$
|
5,691
|
|
|
$
|
5,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated future amortization expense is based on intangible
amounts recorded as of December 31, 2004.
The Company accounts for income taxes pursuant to the provisions
of Statement of Financial Accounting Standards
(SFAS) No. 109,
Accounting for Income Taxes.
Provisions for income taxes are based on taxes payable or
refundable for the current year and deferred taxes, which are
based on temporary differences between the amount of taxable
income and income before provision for income taxes and between
the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are included in the consolidated financial
statements at current income tax rates. As changes in tax laws
or rates are enacted, deferred tax assets and liabilities are
adjusted through the provision for income taxes.
|
|
(l)
|
Impairment of Long-Lived Assets and Goodwill
|
The Company places significant value on the installed ATMs that
it owns and manages in merchant locations and the portfolio of
merchant contracts/relationships. In accordance with
SFAS No. 144,
Accounting for Impairment or Disposal
of Long-Lived Assets,
long-lived assets, such as property,
plant and equipment, and purchased contract intangibles subject
to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
such assets may not be recoverable. A portfolio of purchased
contract intangibles could be impaired if the contract attrition
rate is materially more than the rate used to estimate its
present value, or there is a decline in the number of
transactions without a corresponding increase in the revenue
collected per transaction. Whenever events or changes in
circumstances indicate that a portfolio of merchant
contracts/relationships may be impaired, the Company evaluates
the recoverability of the portfolio by measuring its carrying
amount against the estimated undiscounted future cash flows
associated with it. Should the sum of the expected future net
cash flows be less than the carrying value of the asset being
evaluated, an impairment loss would be recognized. The
impairment loss would be calculated as the amount by which the
carrying value of the asset exceeds its fair value. The Company
does not believe that any impairment of its intangibles or other
long-lived assets has occurred.
In connection with the E*TRADE acquisition, the Company recorded
approximately $85.0 million in goodwill (note 2). In
accordance with SFAS No. 142,
Goodwill and Other
Intangible Assets,
the Company reviews the carrying amount
of its goodwill for impairment at least annually, and more
frequently if conditions warrant. Pursuant to
SFAS No. 142, goodwill should be tested for impairment
at the reporting unit level. In the Companys case, there
are no separate reporting units other than the consolidated
entity itself. Accordingly, the Companys 2004 goodwill
impairment test was performed at the consolidated entity level.
As part of that impairment process, the Company compared the
estimated fair value of the consolidated entity with the
carrying value of the Companys net assets, including
goodwill, as of December 31, 2004, and determined that no
goodwill impairment existed as of such date.
F-20
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(m)
|
Asset Retirement Obligations
|
The Company changed its method of accounting for asset
retirement obligations in accordance with
SFAS No. 143,
Accounting for Asset Retirement
Obligations,
effective January 1, 2003.
SFAS No. 143 requires the Company to estimate the fair
value of future retirement costs associated with its ATMs. The
fair value of a liability for an asset retirement obligation is
recognized in the period in which it is incurred and can be
reasonably estimated. Such asset retirement costs are
capitalized as part of the carrying amount of the related
long-lived asset and depreciated over the assets estimated
useful life. Fair value estimates of liabilities for asset
retirement obligations generally involve discounted future cash
flows. Periodic accretion of such liabilities due to the passage
of time is recorded as an operating expense in the accompanying
consolidated financial statements. Upon settlement of the
liability, the Company recognizes a gain or loss for any
difference between the settlement amount and the liability
recorded.
The initial adoption of SFAS No. 143 resulted in the
recognition of: (i) liabilities amounting to approximately
$1.6 million for contingent retirement obligations under
certain merchant contracts (included in other long-term
liabilities in the accompanying consolidated balance sheet);
(ii) asset retirement costs amounting to approximately
$1.6 million (included in property and equipment in the
accompanying consolidated balance sheet); and (iii) a
charge for the cumulative effect of the change in accounting
principle amounting to $0.1 million (net of related income
tax benefit of $0.08 million). Accretion expense related to
liabilities for contingent retirement obligations (included in
depreciation and accretion on the Companys consolidated
statement of operations) amounted to $0.3 million for the
year ended December 31, 2004 and $0.2 million for the
year ended December 31, 2003. At December 31, 2004,
the liability for contingent retirement obligations totaled
$5.3 million, and was reflected in other long-term
liabilities in the accompanying consolidated balance sheet.
|
|
(n)
|
Use of Estimates in the Preparation of Financial
Statements
|
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period.
Significant items subject to such estimates include the carrying
amount of intangibles and valuation allowances for receivables,
inventories and deferred income tax assets. Actual results could
differ from those assumed in the Companys estimates.
Substantially all of the Companys revenues are generated
from ATM transaction-based fees and services, which include
surcharge fees, interchange fees, branding fees and monthly
fees. Transaction-based fees are recognized at the time the ATM
transactions are processed and service fees are recognized at
the time the service is performed. The Company offers a
maintenance service agreement to certain customers purchasing
ATMs. The Company recognizes service agreement revenues monthly
as earned, and expenses relating to repairs under service
agreements as incurred. The Company recognizes revenues related
to the sale of ATMs when the equipment is delivered to the
merchant customer and the Company has completed all required
installation and
set-up
procedures.
The Companys other revenues are derived from sales of
equipment to associate value-added resellers (VARs). The Company
does not expect to generate future ATM service revenues from
these transactions, and, accordingly, segregates the
presentation of these revenues from the Companys ATM
transaction-based revenues. The Company recognizes and invoices
revenues related to the sale of equipment to VARs when the
equipment is shipped from the manufacturer to the VAR. The
Company extends
30-day
terms and receives payment directly from the VAR irrespective of
the ultimate sale to a third party.
F-21
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(p)
|
Stock Based Compensation
|
The Company currently accounts for its stock-based compensation
plan in accordance with the intrinsic value based method of
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,
and as
currently permitted by SFAS No. 123,
Accounting for
Stock-Based Compensation,
and SFAS No. 148,
Accounting for Stock-Based Compensation
Transition and Disclosure An Amendment of FASB
Statement No. 123.
Compensation cost related to stock
options issued to employees is calculated on the date of grant
only if the current market price of the underlying stock exceeds
the exercise price. Compensation expense is then recognized on a
graded basis over the vesting period, generally four years.
The accompanying consolidated financial statements include
compensation expense amounts relating to a restricted stock
grant that was granted in 2003 and subsequently modified in 2004
(note 4), and certain options granted in 2004. Such
compensation expense amounts totaled approximately
$0.9 million, $1.6 million, and $0 for the years ended
December 31, 2004, 2003 and 2002, respectively.
Had compensation cost for the Companys plan been
determined based on the fair value method at the grant dates, as
specified in SFAS No. 123, the Companys net
earnings would have been reduced to the following pro forma
amounts (in thousands, except per share info):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as reported
|
|
$
|
4,610
|
|
|
$
|
2,454
|
|
|
$
|
142
|
|
Add: Stock-based employer compensation expense included in
reported net income, net of tax
|
|
|
12
|
|
|
|
|
|
|
|
|
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
tax
|
|
|
(59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income, as adjusted
|
|
|
4,563
|
|
|
|
2,454
|
|
|
|
142
|
|
Dividends on preferred stock
|
|
|
2,312
|
|
|
|
2,089
|
|
|
|
1,880
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders, as adjusted
|
|
$
|
2,251
|
|
|
$
|
365
|
|
|
$
|
(1,738
|
)
|
|
|
|
|
|
|
|
|
|
|
Additional information regarding the Companys stock option
plan is included in note 3.
|
|
(q)
|
Derivative Instruments
|
The Company utilizes derivative financial instruments to hedge
its exposure to changing interest rates, especially as it
relates to the Companys ATM cash management activities.
The Company does not enter into derivative transactions for
speculative or trading purposes.
All derivatives are recognized on the consolidated balance sheet
at fair value. As of December 31, 2004 and March 31,
2005, all of the Companys derivative transactions were
considered to be cash-flow hedges in accordance with
SFAS No. 133,
Accounting for Derivative Instruments
and Hedging Activities.
Accordingly, changes in the fair
values of such derivatives have been reflected in the
accumulated other comprehensive income account in the
accompanying consolidated balance sheet. See note 15 for
more details on the Companys derivative financial
instrument transactions.
Comprehensive income includes unrealized gains associated with
the Companys interest rate hedging activities, and is
presented in the accompanying consolidated statements of
stockholders deficit.
F-22
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
SFAS No. 130,
Reporting Comprehensive Income,
establishes standards for reporting comprehensive income and
its components in the financial statements. Accumulated other
comprehensive income is displayed as a separate component of
stockholders deficit in the accompanying consolidated
balance sheets and consisted entirely of unrealized gains, net
of related income taxes, related to changes in the fair values
of the Companys interest rate swap derivative transactions.
|
|
(s)
|
New Accounting Pronouncements
|
In December 2004, the FASB issued SFAS No. 123R,
Share-Based Payment,
a revision of
SFAS No. 123. SFAS 123R eliminates the intrinsic
value method of accounting for stock-based compensation, as
currently allowed under APB Opinion No. 25, and requires
companies to recognize the cost of employee services received in
exchange for awards of equity instruments based on the fair
value of such awards on their grant date (with limited
exceptions). Because the Company has historically utilized the
minimum value method of measuring equity share option values for
pro forma disclosure purposes under SFAS 123, it will adopt
the provisions of SFAS 123R effective January 1, 2006
using the prospective transition method. Accordingly, the
Company will recognize compensation expense for all new awards
that are granted and existing awards that are modified
subsequent to December 31, 2005. For those awards issued
and still outstanding prior to December 31, 2005, the
Company will continue to account for such awards pursuant to APB
Opinion No. 25 and its related interpretive guidance.
The Company estimates that the effect on net income and earnings
per share in the periods following adoption of SFAS 123R
will be consistent with the pro forma disclosures under
SFAS 123, except that estimated forfeitures will be
considered in the calculation of compensation expense under
SFAS 123R. Additionally, the actual effect on net income
and earnings per share will vary depending upon the number of
options granted subsequent to December 31, 2005, as
compared to prior years. Further, the Company has not yet
determined the actual model that will be used to calculate fair
value under SFAS 123R.
|
|
(t)
|
Working Capital Deficit
|
The Companys surcharge and interchange revenues are
typically collected in cash on a daily basis or within a very
short period of time subsequent to the end of each month.
However, the Company typically pays its vendors, including
certain of its merchant customers, within 30 days
subsequent to the end of each month. Accordingly, the Company
will typically utilize the excess cash flow generated from such
timing differences to fund its capital expenditure needs or to
repay amounts outstanding under its revolving line of credit
(which is reflected as a long-term liability in the accompanying
consolidated balance sheets). Accordingly, this scenario, when
coupled with the fact that the Companys current
liabilities also reflect amounts due within the next twelve
months under the Companys term loan facility, will
typically cause the Companys balance sheet to reflect a
working capital deficit position. The Company considers such a
presentation to be a normal occurrence within the confines of
the Companys ongoing operations, as outlined above.
Acquisition of E*TRADE Access, Inc. ATM Portfolio
As mentioned in note 1, the Company completed the E*TRADE
acquisition on June 30, 2004, for approximately
$106.9 million in cash. Such amount was funded through
borrowings under the Companys amended and restated term
loan and revolving line of credit agreement (note 11).
As a result of the acquisition, the Company increased the number
of ATMs that it owns and operates to approximately 24,500
machines, making it the largest independent operator of ATMs in
the United States.
F-23
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The results of operations of the acquired E*TRADE ATM portfolio
have been included in the Companys consolidated statement
of operations for the period subsequent to the June 30,
2004 acquisition date.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed as of the acquisition
date (amounts in thousands). Pursuant to SFAS No. 141,
Business Combinations,
the total purchase consideration
was allocated to the assets acquired and liabilities assumed,
including identifiable intangible assets, based on their
respective fair values at the date of acquisition. Such
allocation resulted in goodwill of approximately
$85.0 million, which was assigned at the enterprise level.
Such goodwill is also expected to be deductible for income tax
purposes over a period of 15 years.
|
|
|
|
|
|
|
Cash
|
|
$
|
8,137
|
|
Trade accounts receivable, net
|
|
|
574
|
|
Surcharge and interchange receivable
|
|
|
1,240
|
|
Inventory
|
|
|
395
|
|
Other current assets
|
|
|
319
|
|
Property and equipment
|
|
|
8,496
|
|
Intangible assets subject to amortization (10 year
weighted-average life)
|
|
|
23,954
|
|
Goodwill
|
|
|
84,977
|
|
|
|
|
|
|
Total assets acquired
|
|
|
128,092
|
|
Accounts payable
|
|
|
(5,762
|
)
|
Accrued liabilities
|
|
|
(9,204
|
)
|
Other long-term liabilities
|
|
|
(6,258
|
)
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(21,224
|
)
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
106,868
|
|
|
|
|
|
The above purchase price allocation is preliminary pending the
resolution of certain contingent
pre-acquisition
items.
Such contingent items, which relate to certain pre-existing
legal disputes associated with the acquired E*TRADE ATM
portfolio, could result in changes to the above purchase price
allocation resulting from the establishment of additional
accruals. At this point, it is too soon to predict the outcome
of such disputes, or the amount (if any) of the potential
incremental accruals that may be necessary.
The intangible assets subject to amortization are comprised
entirely of the acquired merchant contracts/relationships
associated with the E*TRADE ATM portfolio. The
$24.0 million value assigned to such
contracts/relationships was determined by an independent
appraisal firm that specializes in such matters. The intangible
assets established as part of the E*TRADE acquisition are being
amortized on a straight-line basis, in accordance with the
Companys previously disclosed policy, over an estimated
useful life of 10 years.
F-24
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table presents the unaudited pro forma combined
results of operations of the Company and the acquired E*TRADE
ATM portfolio for the years ended December 31, 2004 and
2003, after giving effect to certain pro forma adjustments.
These unaudited pro forma results assume that the acquisition
occurred on January 1, 2003, and are not necessarily
indicative of the actual results that would have occurred had
the acquisition been consummated on such date. Furthermore, such
pro forma results are not necessarily indicative of the future
results to be expected for the consolidated operations (in
thousands, except per share data).
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
249,820
|
|
|
$
|
226,483
|
|
Income from continuing operations
|
|
|
18,021
|
|
|
|
13,654
|
|
Net income applicable to common shareholders
|
|
|
4,294
|
|
|
|
759
|
|
Basic income per share
|
|
$
|
1.87
|
|
|
$
|
0.37
|
|
2003 Portfolio Acquisitions
During 2003, the Company acquired more than 1,200 merchant
contracts/relationships representing approximately 3,690 ATMs
through four separate ATM asset acquisitions. The cost of the
acquisitions totaled $23.5 million and the purchase price
was allocated $6.3 million to ATM equipment,
$0.7 million to inventory and $16.5 million to
merchant contracts/relationships. Total consideration paid
represented the fair value of the ATM assets as of the
acquisition dates.
2002 Portfolio Acquisitions
During 2002, the Company acquired a total of 30 merchant
contracts/relationships representing approximately 1,125 ATMs
through two separate ATM asset acquisitions. The cost of the
acquisitions totaled $13.1 million and the purchase price
was allocated $5.9 million to ATM equipment,
$0.4 million to inventory and $6.8 million to merchant
contracts/relationships. Total consideration paid represented
the fair value of the ATM assets as of the acquisition dates.
In June 2001, the board of directors of the Company approved a
stock option plan that permits the Company to grant stock
options to employees. Stock options generally vest over a
four-year period and expire ten years after the grant date. The
Company has reserved 476,114 shares for issuance under the
2001 Stock Incentive Plan. A summary of the 2001 Stock Incentive
Plan is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
Weighted
|
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
Average
|
|
|
|
|
|
Exercise
|
|
|
|
|
Exercise
|
|
|
|
|
Exercise
|
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
Shares
|
|
|
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
|
|
210,736
|
|
|
$
|
6.62
|
|
|
|
392,556
|
|
|
$
|
7.03
|
|
|
|
357,483
|
|
|
$
|
5.41
|
|
Granted
|
|
|
109,500
|
|
|
|
52.00
|
|
|
|
|
|
|
|
|
|
|
|
70,839
|
|
|
|
11.73
|
|
Exercised
|
|
|
10,956
|
|
|
|
7.78
|
|
|
|
181,820
|
|
|
|
7.50
|
|
|
|
35,766
|
|
|
|
0.20
|
|
Forfeited
|
|
|
8,713
|
|
|
|
8.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
|
300,567
|
|
|
$
|
23.06
|
|
|
|
210,736
|
|
|
$
|
6.62
|
|
|
|
392,556
|
|
|
$
|
7.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average fair value of options granted during the year
|
|
$
|
4.36
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-25
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Additional information regarding options outstanding as of
December 31, 2004, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
Shares
|
|
Exercise Price
|
|
Shares
|
|
|
Remaining Life
|
|
|
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
$0.04
|
|
|
37,001
|
|
|
|
6.42 years
|
|
|
|
37,001
|
|
$0.20
|
|
|
10,484
|
|
|
|
6.42 years
|
|
|
|
10,484
|
|
$5.87-5.88
|
|
|
76,942
|
|
|
|
6.43 years
|
|
|
|
62,051
|
|
$11.73-11.76
|
|
|
66,640
|
|
|
|
6.94 years
|
|
|
|
35,840
|
|
$52.00
|
|
|
109,500
|
|
|
|
9.19 years
|
|
|
|
1,000
|
|
The weighted-average fair value at date of grant of options
granted during 2002 was $0.00. See note 1(q) for a tabular
presentation of the pro forma effect of the Companys net
income (loss) as if compensation had been recognized for stock
options issued at their fair value on the date of the grant.
Fair values were estimated using the Black-Scholes
option-pricing model with the weighted-average assumptions of
total fair value/total shares outstanding presented above.
Black-Scholes assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected stock price volatility
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
2.96
|
%
|
|
|
|
|
|
|
3.97
|
%
|
Expected life of options
|
|
|
5.00
|
|
|
|
|
|
|
|
5.00
|
|
|
|
(4)
|
Related Party Transactions
|
The CapStreet Group owns a minority interest in Susser Holdings,
LLC, and a majority interest in MessagePro, Inc. The Company
engages in business activities in the normal course of business
with each of these entities. Payments to MessagePro, a call
center company, represented less than one percent of the
Companys total operating expenses for the year ended
December 31, 2004. Susser Holdings, for whom the Company
provides ATM management services, accounted for less than 3% of
the Companys total revenues for the year ended
December 31, 2004.
Fred R. Lummis, the chairman of the Companys board of
directors, is also a managing director of The CapStreet Group,
LLC, the ultimate general partner of CapStreet II and
CapStreet Parallel II. Frederick W. Brazelton, one of the
Companys directors, is also a partner of The CapStreet
Group, LLC. Ron Coben, one of the Companys directors, is
also the president and chief executive officer of MessagePro,
Inc. The CapStreet Group owns a majority interest in MessagePro,
Inc., and Fred R. Lummis and Frederick W. Brazelton are each
members of the board of directors of MessagePro, Inc. The
Companys board members are reimbursed for customary travel
expenses and meals.
The Company currently has loans outstanding with certain
officers and employees related to past exercises of employee
stock options and purchases of the Companys common stock,
as applicable. Such amounts are reflected as subscriptions
receivable in the accompanying consolidated balance sheets. The
rate of interest on each of these loans is 5% per annum.
The total amount outstanding under such loans, including accrued
interest, was $2.0 million as of December 31, 2004. In
connection with the investment by TA Associates in February 2005
(note 20), and the concurrent redemption of a portion of
the Companys common stock, approximately $0.4 million
of the outstanding loans were repaid to the Company.
F-26
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pursuant to a restricted stock agreement dated January 20,
2003, the Company sold the president and chief executive officer
of the Company 80,000 shares of common stock in exchange
for a promissory note in the amount of $940,800. The agreement
permits the Company to repurchase a portion of such shares prior
to January 20, 2007 in certain circumstances. The agreement
also contained a provision allowing the shares to be
put to the Company in an amount sufficient to retire
the entire unpaid principal balance of the promissory note plus
accrued interest. On February 4, 2004, the Company amended
the restricted stock agreement to remove such put
right. The Company recognized approximately $0.9 million
and $1.6 million in compensation expense in the
accompanying consolidated statements of operations for the years
ended December 31, 2004 and 2003, respectively, associated
with such restricted stock grant.
|
|
(5)
|
Prepaid, Deferred Costs, and Other Current Assets
|
A summary of prepaid, deferred costs, and other current assets
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Prepaids
|
|
$
|
2,048
|
|
|
$
|
1,220
|
|
Deferred costs and other current assets
|
|
|
455
|
|
|
|
557
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,503
|
|
|
$
|
1,777
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Property and Equipment, net
|
A summary of property and equipment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
ATM equipment and related costs
|
|
$
|
52,131
|
|
|
$
|
27,237
|
|
Office furniture, fixtures, and other
|
|
|
4,840
|
|
|
|
3,129
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
56,971
|
|
|
|
30,366
|
|
Less accumulated depreciation
|
|
|
11,979
|
|
|
|
6,230
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
$
|
44,992
|
|
|
$
|
24,136
|
|
|
|
|
|
|
|
|
|
|
(7)
|
Intangible Assets, net
|
A summary of intangible assets is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Contract intangibles
|
|
$
|
51,277
|
|
|
$
|
27,670
|
|
Exclusive license agreements
|
|
|
1,432
|
|
|
|
307
|
|
Deferred financing costs
|
|
|
2,112
|
|
|
|
1,660
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
54,821
|
|
|
|
29,637
|
|
Less accumulated amortization
|
|
|
11,744
|
|
|
|
6,276
|
|
|
|
|
|
|
|
|
|
Net intangible assets
|
|
$
|
43,077
|
|
|
$
|
23,361
|
|
|
|
|
|
|
|
|
F-27
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As previously mentioned, the Company issued 17,500 shares
of its Series A preferred stock to The CapStreet Group in
multiple transactions during 2001 and 2002 for approximately
$17.5 million in gross proceeds. The carrying amount of the
Series A preferred stock, which included a 10% annual
accreting dividend provision, was $23.6 million as of
December 31, 2004. Such amount has been reflected net of
issuance costs of approximately $0.9 million.
All Series A preferred shares, including any accrued and
unpaid dividends with respect thereto, were redeemed by the
Company in February 2005, concurrent with the investment made by
TA Associates (note 20).
The Companys accrued liabilities include accrued cash
management fees, maintenance obligations, and fees owed to
merchants. Other accrued expenses include processing, sales tax,
compensation, armored fees and other miscellaneous charges. A
summary of the Companys accrued liabilities for each of
the periods presented below is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Accrued cash management fees
|
|
$
|
1,600
|
|
|
$
|
926
|
|
Accrued maintenance
|
|
|
2,498
|
|
|
|
1,820
|
|
Accrued merchant fees
|
|
|
6,259
|
|
|
|
1,171
|
|
Other accrued expenses
|
|
|
11,706
|
|
|
|
6,615
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
22,063
|
|
|
$
|
10,532
|
|
|
|
|
|
|
|
|
|
|
(10)
|
Operating Lease Obligations
|
As of December 31, 2004, the Company was a party to several
operating leases, primarily for ATMs and the rental of space at
certain merchant locations, which expire at various times during
the next nine years. Rental expense under these leases for the
periods ended December 31, 2004, 2003 and 2002 was
approximately $8.6 million, $5.9 million, and
$3.1 million, respectively. The Company did not have any
capital lease obligations as of December 31, 2004.
Future minimum lease payments under the Companys operating
leases (with initial or remaining lease terms in excess of one
year) as of December 31, 2004, were as follows (in
thousands):
|
|
|
|
|
|
2005
|
|
$
|
7,972
|
|
2006
|
|
|
7,065
|
|
2007
|
|
|
4,953
|
|
2008
|
|
|
4,472
|
|
2009
|
|
|
1,656
|
|
Thereafter
|
|
|
373
|
|
|
|
|
|
|
Total minimum lease payments
|
|
$
|
26,491
|
|
|
|
|
|
F-28
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Borrowings under the Companys term loan and revolving
credit agreement at December 31, 2003 and 2004 and
March 31, 2005, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Term loan bearing interest at LIBOR + 3.25% and 4.00% as of
December 31, 2004 and 2003, respectively (combined rate of
5.60% at December 31, 2004)
|
|
$
|
100,000
|
|
|
$
|
31,371
|
|
Revolving credit loan facility bearing interest at LIBOR + 3.25%
and 3.50% as of December 31, 2004 and 2003, respectively,
and PRIME + 2.50% for swing-line borrowings as of
December 31, 2004 (weighted-average combined rate of 5.86%
at December 31, 2004)
|
|
|
28,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
128,541
|
|
|
|
31,371
|
|
Less current portion
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total excluding current portion
|
|
$
|
113,541
|
|
|
$
|
31,371
|
|
|
|
|
|
|
|
|
On June 30, 2004, in connection with the E*TRADE
acquisition, the Company amended and restated its bank credit
facility with a syndicate of banks led by BNP Paribas and Bank
of America, N.A. The Company utilized borrowings from the new
facility to finance the E*TRADE acquisition and to repay amounts
outstanding under the Companys existing bank credit
facility. The amended bank credit facility, which matures on
June 30, 2009, provides up to $80.0 million of
revolving borrowing capacity and a $100.0 million term
loan. Additionally, up to $10.0 million of the revolving
borrowing capacity can be utilized by the Company for issuing
letters of credit. Borrowings under the term loan and revolving
credit facility bear interest at LIBOR plus 3.25%. Such spread
may be reduced to 2.75% based upon the Company achieving certain
pre-defined leverage ratios, as outlined in the amended bank
credit facility.
In connection with the amendment of the Companys previous
bank credit facility, the Company recorded a charge in the
amount of $2.5 million relating to the write-off of
previously deferred financing costs associated with such
facility, and amounts paid in connection with the new facility.
Additionally, approximately $1.5 million in current and
deferred financing costs were charged to expense in 2003 in
connection with a previous amendment to the Companys then
current bank credit facility.
Substantially all of the Companys assets, including the
stock of its subsidiaries, are pledged to secure the amended
bank credit facility. Furthermore, each of the Companys
subsidiaries has guaranteed the Companys obligations under
the amended bank credit facility. Finally, the amended bank
credit facility requires the Company to meet, among other
factors, certain financial covenants and ratios. As of
December 31, 2004, the Company was in compliance with such
covenants and ratios.
See Note 21 for details of the Companys new credit
facility.
F-29
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Maturities of long-term debt are as follows (in thousands):
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Year ending December 31:
|
|
|
|
|
2005
|
|
$
|
15,000
|
|
2006
|
|
|
20,000
|
|
2007
|
|
|
20,000
|
|
2008
|
|
|
30,000
|
|
2009
|
|
|
43,541
|
|
|
|
|
|
|
Total
|
|
$
|
128,541
|
|
|
|
|
|
At December 31, 2004, the Company had $100.0 million
outstanding under the term loan portion of the amended bank
credit facility. Principal on the term loan is payable in
quarterly installments beginning March 31, 2005, in annual
amounts that increase over the life of the loan, starting at
15.0% of the balance in 2005, 20.0% of the principal balance in
2006, 20.0% of the principal balance in 2007, 30.0% of the
principal balance in 2008 and 15.0% of the principal balance in
2009.
The Company offers a 401(k) plan to the employees but does not
make matching contributions.
|
|
(13)
|
Commitments and Contingencies
|
The following table reflects the Companys significant
contractual obligations and other commercial commitments as of
December 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
Total
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Long-term debt
|
|
$
|
128,541
|
|
|
$
|
15,000
|
|
|
$
|
20,000
|
|
|
$
|
20,000
|
|
|
$
|
30,000
|
|
|
$
|
43,541
|
|
|
$
|
|
|
Operating lease obligations
|
|
|
6,823
|
|
|
|
3,053
|
|
|
|
2,480
|
|
|
|
718
|
|
|
|
264
|
|
|
|
264
|
|
|
|
44
|
|
Merchant space lease obligations
|
|
|
19,668
|
|
|
|
4,919
|
|
|
|
4,585
|
|
|
|
4,235
|
|
|
|
4,208
|
|
|
|
1,392
|
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
155,032
|
|
|
$
|
22,972
|
|
|
$
|
27,065
|
|
|
$
|
24,953
|
|
|
$
|
34,472
|
|
|
$
|
45,197
|
|
|
$
|
373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the above commitments, the Company has guaranteed
a portion of certain merchant customers obligations to
third-party financial institutions in connection with the sale
of ATMs to those merchant customers. As of December 31,
2004, the maximum potential amount of undiscontinued future
payments that could be required under such guarantees totaled
approximately $1.0 million, with such obligations extending
through 2006. However, such amount would be somewhat offset by
the value of the underlying ATMs, which the Company would be
able to obtain and liquidate in the event of such defaults. It
is estimated that such ATMs would provide approximately
$0.3 million in net proceeds, which could be utilized to
reduce the total maximum obligation amount identified above.
F-30
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(14)
|
Asset Retirement Obligations
|
The Company changed its method of accounting for asset
retirement obligations in accordance with SFAS No. 143
effective January 1, 2003. Under SFAS No. 143,
the Company recognizes asset retirement obligations in the
period in which they are incurred if a reasonable estimate of
the fair value can be made. When the liability is initially
recorded, the Company capitalizes the cost by increasing the
carrying amount of the related long-lived asset. Over time, the
liability is accreted to its settlement value and the
capitalized cost is depreciated over the useful life of the
related asset. Upon settlement of the liability, the Company
recognizes a gain or loss for any difference between the
settlement amount and the liability recorded.
The cumulative effect of the change on prior years resulted in
an after-tax charge to income of $0.1 million (net of
income taxes of $0.08 million), or $0.06 diluted earnings
per share for the year ended December 31, 2003. The effect
of the change in 2003 was to decrease income before the
cumulative effect of the accounting changes by approximately
$0.2 million related to depreciation and accretion expense
recorded during the period. The pro forma effects of the
application of SFAS No. 143 as if the statement had
been adopted on January 1, 2002 (instead of January 1,
2003) are presented below (pro forma amounts assuming the
accounting change is applied retroactively, net of tax) (in
thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,454
|
|
|
$
|
142
|
|
Dividends on preferred stock
|
|
|
2,089
|
|
|
|
1,880
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders as reported
|
|
|
365
|
|
|
|
(1,738
|
)
|
|
(Increase) decrease in depreciation expense
|
|
|
83
|
|
|
|
(83
|
)
|
|
(Increase) decrease in accretion expense
|
|
|
51
|
|
|
|
(51
|
)
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders, as adjusted
|
|
$
|
499
|
|
|
$
|
(1,872
|
)
|
|
|
|
|
|
|
|
Asset retirement obligations consist primarily of deinstallation
costs of the ATM and the costs to restore the ATM site to its
original condition. The Company is legally required to perform
this deinstall and restoration work. In accordance with
SFAS No. 143, for each group of ATMs the Company
recognized the fair value of a liability for an asset retirement
obligation and capitalized that cost as part of the cost basis
of the related asset. The related assets are being depreciated
on a straight-line basis over 7 years.
The following table describes changes to the Companys
asset retirement obligation liability for the year ended
December 31, 2004 (in thousands):
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2004
|
|
|
|
|
|
Asset retirement obligation at the beginning of the period
|
|
$
|
3,005
|
|
Additional ATMs
|
|
|
2,483
|
|
Accretion expense
|
|
|
278
|
|
Payments
|
|
|
(461
|
)
|
|
|
|
|
Asset retirement obligation at the end of the period
|
|
$
|
5,305
|
|
|
|
|
|
F-31
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The pro forma and actual asset retirement obligation liability
balances as if SFAS No. 143 had been adopted on
January 1, 2002 (instead of January 1, 2003) were as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
Liability for asset retirement beginning
|
|
$
|
1,642
|
|
|
$
|
|
|
Liability for asset retirement ending
|
|
|
3,005
|
|
|
|
1,642
|
|
|
|
(15)
|
Derivative Financial Instruments
|
The Company is exposed to changes in interest rates
(LIBOR) as a result of its variable-rate debt and ATM cash
management activities. It is the Companys policy to limit
the variability of a portion of its expected future interest
payments as a result of changes in LIBOR by utilizing certain
types of derivative financial instruments.
To meet the above objective, the Company entered into several
LIBOR-based interest rate swaps during 2004 to fix the interest
rate paid on $200 million of the Companys current and
anticipated outstanding ATM cash balances. The effect of
such swaps was to fix the interest rate paid on the following
notional amounts for the periods identified (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
|
Weighted Average Fixed Rate
|
|
|
Term
|
|
|
|
|
|
|
|
|
|
$
|
50,000
|
|
|
|
2.86
|
%
|
|
|
Through September 30, 2006
|
|
|
50,000
|
|
|
|
3.20
|
%
|
|
|
Through September 30, 2007
|
|
|
100,000
|
|
|
|
3.36
|
%
|
|
|
Through December 31, 2007
|
|
|
|
|
|
|
|
|
|
$
|
200,000
|
|
|
|
3.19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amounts paid or received under such swaps are recorded as
adjustments to the Companys cost of ATM revenues in the
accompanying consolidated statements of operations. During the
year ended December 31, 2004, there were no gains or losses
recorded in the consolidated statements of operations as a
result of any ineffectiveness associated with the Companys
interest rate swaps.
The Companys interest rate swaps have been classified as
cash flow hedges pursuant to SFAS No. 133.
Accordingly, changes in the fair values of the Companys
interest rate swaps have been reported in accumulated other
comprehensive income in the accompanying consolidated balance
sheet. As of December 31, 2004, the accumulated gain on
such swaps totaled approximately $0.9 million, net of
income taxes of $0.6 million. During the year ending
December 31, 2005, approximately $0.2 million of the
gains included in the accumulated other comprehensive income
account are expected to be reclassified into cost of ATM
revenues as a yield adjustment to the hedged outstanding ATM
cash balances.
The Company is subject to various legal proceedings and claims
arising in the ordinary course of business, including certain
proceedings which were previously associated with the acquired
E*TRADE ATM portfolio. The Companys management does
not expect that the outcome in any of these legal proceedings,
individually or collectively, will have a material adverse
effect on the Companys financial condition, results of
operations or cash flows.
F-32
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income tax expense based on income before income taxes and
cumulative effect of accounting change consists of the following
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
22
|
|
|
$
|
28
|
|
|
$
|
|
|
|
State and local
|
|
|
47
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
$
|
69
|
|
|
$
|
82
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
2,584
|
|
|
$
|
1,313
|
|
|
$
|
82
|
|
|
State and local
|
|
|
303
|
|
|
|
116
|
|
|
|
72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
2,887
|
|
|
|
1,429
|
|
|
|
154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,956
|
|
|
$
|
1,511
|
|
|
$
|
154
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense differs from amounts computed by applying the
statutory rate to income before taxes as follows for the years
ended December 31, 2004, 2003 and 2002 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense at the statutory rate of 34%
|
|
$
|
2,572
|
|
|
$
|
1,394
|
|
|
$
|
101
|
|
State tax net of federal benefit
|
|
|
222
|
|
|
|
116
|
|
|
|
47
|
|
Provision to return adjustments
|
|
|
101
|
|
|
|
|
|
|
|
|
|
Change in effective state tax rate
|
|
|
49
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
12
|
|
|
|
1
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense on income before income taxes and cumulative
effect of accounting change
|
|
|
2,956
|
|
|
|
1,511
|
|
|
|
154
|
|
|
Income tax (benefit) allocated to cumulative effect of
accounting change
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax provision
|
|
$
|
2,956
|
|
|
$
|
1,431
|
|
|
$
|
154
|
|
|
|
|
|
|
|
|
|
|
|
F-33
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2004 and 2003, were as follows
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
2,215
|
|
|
$
|
1,028
|
|
|
Reserve for note receivable
|
|
|
61
|
|
|
|
89
|
|
|
Employment agreements
|
|
|
206
|
|
|
|
97
|
|
|
Bad debt reserve
|
|
|
33
|
|
|
|
26
|
|
|
Accrued repurchase obligation
|
|
|
23
|
|
|
|
31
|
|
|
Other
|
|
|
68
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax assets
|
|
|
2,606
|
|
|
|
1,303
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Notes receivable reserve
|
|
|
3
|
|
|
|
56
|
|
|
SFAS No. 143 deinstallation costs
|
|
|
724
|
|
|
|
196
|
|
|
Deferred revenue
|
|
|
1,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax assets
|
|
|
1,913
|
|
|
|
252
|
|
|
|
|
|
|
|
|
Current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Deferred stock compensation
|
|
|
(180
|
)
|
|
|
|
|
|
Other
|
|
|
(14
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax liabilities
|
|
|
(194
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
(6,411
|
)
|
|
|
(1,921
|
)
|
|
Deferred stock compensation
|
|
|
(94
|
)
|
|
|
|
|
|
Deployment costs
|
|
|
(1,073
|
)
|
|
|
(391
|
)
|
|
Unrealized gain on derivative instruments
|
|
|
(566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities
|
|
|
(8,144
|
)
|
|
|
(2,312
|
)
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
(3,819
|
)
|
|
$
|
(757
|
)
|
|
|
|
|
|
|
|
In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is
dependent on the generation of future taxable income during the
periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax planning
strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable
income over the periods in which the deferred tax assets are
deductible, management believes it is more likely than not that
the Company will realize the benefits of these deductible
differences.
As of December 31, 2004, the Company had approximately
$6.4 million in federal net operating loss carryforwards
that will begin expiring in 2021, and $0.7 million in state
net operating loss carryforwards that will begin expiring in
2006.
F-34
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(18)
|
Significant Suppliers
|
The Company purchased equipment from two suppliers that
accounted for 11% and 82% of total ATM purchases for the year
ended December 31, 2003. One of these suppliers accounted
for 76% of the Companys total ATM purchases for the year
ended December 31, 2004. Accounts payable to both suppliers
represented 31% of the accounts payable balance at
December 31, 2003, and less than 1% of the accounts payable
balance at December 31, 2004, for the one supplier.
|
|
(19)
|
Segment Information and Geographical Information
|
The Company considers its business activities a single reporting
segment as it derives at least 90% of its revenue and results of
operations from one business segment representing ATM Management
Services. During 2002, the Company had one merchant customer
that represented 14% of its revenue. During 2004 and 2003, the
Company had no single merchant customer that represented 10% or
more of consolidated revenues.
On February 10, 2005, the Company issued
894,568 shares of its Series B preferred stock for
$75.0 million in proceeds. The net proceeds from the
offering were utilized to redeem the Companys outstanding
Series A preferred stock and a portion of the
Companys outstanding common stock and vested options. The
Series B preferred shareholders have certain preferences to
the Companys common shareholders, including board
representation rights and preferential distributions associated
with any future liquidation event. The Series B preferred
shares are convertible into the same number of shares of the
Companys common stock, as adjusted for future stock splits
and the issuance of dilutive securities. The Series B
preferred shares have no stated dividends and are redeemable at
any time on or after February 2012, at the option of a majority
of the Series B holders.
On February 21, 2005, one of the Companys larger
merchant customers, Winn-Dixie Stores, Inc. (Winn-Dixie) filed
for Chapter 11 bankruptcy protection. The Company is still
in the process of ascertaining what impact, if any, the
bankruptcy proceedings will have on the Companys existing
ATM service contract with Winn-Dixie. However, to the extent
that the bankruptcy proceedings result in the amendment or
cancellation of the underlying contract, the Company may have to
record an impairment charge related to the carrying amounts of
the assets associated with such contract (including the related
fixed asset and intangible contract values). As of
December 31, 2004, such amounts totaled approximately
$4.3 million. Additionally, the Company has approximately
$5.3 million in future estimated operating lease payments
associated with many of the ATMs placed at the Winn-Dixie store
locations.
On March 1, 2005, the Company acquired a portfolio of ATMs
and related contracts for approximately $8.2 million in
cash. Such portfolio consisted of approximately 450 ATMs located
in independent grocery stores in and around the New York
metropolitan area. The acquisition was funded with cash on hand
and borrowings under the Companys amended bank credit
facility.
|
|
(21)
|
Events (Unaudited) Subsequent to the Date of the Report of
the Independent Auditor
|
On May 17, 2005, the Company acquired Bank Machine
Acquisitions, Ltd., an owner and operator of approximately 1,000
ATMs located throughout the United Kingdom. The acquisition
consideration totaled approximately $95.0 million and was
comprised of $92.0 million in cash and $3.0 million of
the Companys Series B preferred stock. The cash
utilized to finance the acquisition was borrowed under a new
credit facility with BNP Paribas and Bank of America, N.A. Such
facility, which replaced the Companys existing bank credit
facility, is comprised of (i) a revolving credit facility
of up to $100.0 million, (ii) a first lien term
facility of up to $125.0 million, and (iii) and a
second lien term facility of up to $75.0 million. As of the
acquisition date, the first and second lien term facilities were
fully drawn down, and approximately $33.7 million was drawn
down under the revolving credit facility.
F-35
CARDTRONICS, INC.
Condensed Consolidated Financial Statements
September 30, 2005 (unaudited)
F-36
CARDTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,517
|
|
|
$
|
1,412
|
|
|
Accounts and notes receivable, net of allowance of $714 as of
both dates
|
|
|
8,746
|
|
|
|
11,473
|
|
|
Inventory
|
|
|
4,271
|
|
|
|
2,609
|
|
|
Prepaid, deferred costs, and other current assets
|
|
|
3,181
|
|
|
|
2,503
|
|
|
Restricted cash, short-term
|
|
|
3,775
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
3,999
|
|
|
|
2,412
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
26,489
|
|
|
|
20,409
|
|
Restricted cash
|
|
|
33
|
|
|
|
32
|
|
Property and equipment, net
|
|
|
71,622
|
|
|
|
44,992
|
|
Intangible assets, net
|
|
|
74,792
|
|
|
|
43,077
|
|
Goodwill
|
|
|
160,555
|
|
|
|
84,977
|
|
Prepaid and other assets
|
|
|
7,015
|
|
|
|
1,822
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
340,506
|
|
|
$
|
195,309
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Deficit
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and notes payable
|
|
$
|
3,146
|
|
|
$
|
15,000
|
|
|
Current portion of other long-term liabilities
|
|
|
2,251
|
|
|
|
1,176
|
|
|
Accounts payable and accrued liabilities
|
|
|
41,752
|
|
|
|
24,814
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
47,149
|
|
|
|
40,990
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of current portion
|
|
|
240,421
|
|
|
|
113,541
|
|
|
Deferred tax liability
|
|
|
10,991
|
|
|
|
6,231
|
|
|
Other long-term liabilities and minority interest in subsidiary
|
|
|
14,855
|
|
|
|
13,077
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
313,416
|
|
|
|
173,839
|
|
|
|
|
|
|
|
|
Redeemable preferred stock
|
|
|
76,263
|
|
|
|
23,634
|
|
Stockholders deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 2,500,000 shares
authorized; 2,373,398 shares issued at September 30,
2005 and December 31, 2004; 1,750,238 and 2,303,257
outstanding at September 30, 2005 and December 31,
2004, respectively
|
|
|
|
|
|
|
|
|
|
Subscriptions receivable (at face value)
|
|
|
(1,476
|
)
|
|
|
(1,862
|
)
|
|
Additional paid-in capital
|
|
|
809
|
|
|
|
|
|
|
Accumulated other comprehensive income, net
|
|
|
124
|
|
|
|
886
|
|
|
Retained earnings (accumulated deficit)
|
|
|
245
|
|
|
|
(329
|
)
|
|
Treasury stock; 623,160 and 70,141 shares at cost at
September 30, 2005 and December 31, 2004, respectively
|
|
|
(48,875
|
)
|
|
|
(859
|
)
|
|
|
|
|
|
|
|
Total stockholders deficit
|
|
|
(49,173
|
)
|
|
|
(2,164
|
)
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
340,506
|
|
|
$
|
195,309
|
|
|
|
|
|
|
|
|
F-37
CARDTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
ATM operating revenues
|
|
$
|
191,731
|
|
|
$
|
125,169
|
|
|
ATM product sales and other revenues
|
|
|
7,457
|
|
|
|
5,772
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
199,188
|
|
|
|
130,941
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
Cost of ATM operating revenues
|
|
|
148,528
|
|
|
|
98,211
|
|
|
Cost of ATM product sales and other revenues
|
|
|
6,976
|
|
|
|
4,997
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
155,504
|
|
|
|
103,208
|
|
|
|
Gross profit
|
|
|
43,684
|
|
|
|
27,733
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
11,552
|
|
|
|
8,851
|
|
|
Depreciation and accretion expense
|
|
|
8,530
|
|
|
|
4,257
|
|
|
Amortization expense
|
|
|
5,689
|
|
|
|
4,092
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
25,771
|
|
|
|
17,200
|
|
Income from operations
|
|
|
17,913
|
|
|
|
10,533
|
|
Other expenses:
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
14,224
|
|
|
|
5,211
|
|
|
Minority interest in subsidiary
|
|
|
17
|
|
|
|
9
|
|
|
Other
|
|
|
865
|
|
|
|
228
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
15,106
|
|
|
|
5,448
|
|
Income (loss) before income taxes
|
|
|
2,807
|
|
|
|
5,085
|
|
Income tax provision (benefit)
|
|
|
972
|
|
|
|
1,931
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
1,835
|
|
|
|
3,154
|
|
Preferred stock dividends and accretion expense
|
|
|
1,328
|
|
|
|
1,709
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
507
|
|
|
$
|
1,445
|
|
|
|
|
|
|
|
|
F-38
CARDTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,835
|
|
|
$
|
3,154
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion expense
|
|
|
14,219
|
|
|
|
8,349
|
|
|
|
Amortization and write-off of deferred financing costs
|
|
|
4,199
|
|
|
|
2,787
|
|
|
|
Non-cash compensation expense
|
|
|
407
|
|
|
|
698
|
|
|
|
Deferred income taxes
|
|
|
(530
|
)
|
|
|
(266
|
)
|
|
|
Minority interest
|
|
|
17
|
|
|
|
9
|
|
|
|
Loss on sale of assets
|
|
|
865
|
|
|
|
228
|
|
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
(Increase) decrease in receivables, net
|
|
|
3,188
|
|
|
|
(571
|
)
|
|
|
|
(Increase) decrease in prepaid, deferred costs and other current
assets
|
|
|
1,037
|
|
|
|
(1,692
|
)
|
|
|
|
(Increase) decrease in inventory
|
|
|
240
|
|
|
|
(288
|
)
|
|
|
|
(Increase) decrease in other assets
|
|
|
41
|
|
|
|
(37
|
)
|
|
|
|
Increase in accounts payable and accrued liabilities
|
|
|
10,015
|
|
|
|
5,949
|
|
|
|
|
Increase (decrease) in other liabilities
|
|
|
(2,782
|
)
|
|
|
2,173
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
32,751
|
|
|
|
20,493
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(27,488
|
)
|
|
|
(13,289
|
)
|
|
Sales of property and equipment
|
|
|
60
|
|
|
|
285
|
|
|
Acquisitions, net of cash acquired
|
|
|
(105,916
|
)
|
|
|
(102,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(133,344
|
)
|
|
|
(115,958
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
469,410
|
|
|
|
136,041
|
|
|
Repayments of long-term debt
|
|
|
(357,541
|
)
|
|
|
(37,425
|
)
|
|
Issuance of preferred stock
|
|
|
73,142
|
|
|
|
|
|
|
Redemption of preferred stock
|
|
|
(24,795
|
)
|
|
|
|
|
|
Issuance of capital stock
|
|
|
46
|
|
|
|
148
|
|
|
Purchase of capital stock
|
|
|
(48,246
|
)
|
|
|
|
|
|
Repayment of subscription receivables
|
|
|
386
|
|
|
|
442
|
|
|
Distributions
|
|
|
(50
|
)
|
|
|
(19
|
)
|
|
Debt issuance costs
|
|
|
(10,469
|
)
|
|
|
(3,272
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
101,883
|
|
|
|
95,915
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
1,105
|
|
|
|
450
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,412
|
|
|
|
5,554
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
2,517
|
|
|
$
|
6,004
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
7,354
|
|
|
$
|
2,741
|
|
|
|
Cash paid for income taxes
|
|
|
32
|
|
|
|
327
|
|
F-39
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
NOTE 1
|
General and Basis of Financial Statements
|
Cardtronics, Inc., along with its wholly-owned subsidiaries
(collectively, the Company or
Cardtronics), owns and operates approximately 25,000
automated teller machines (ATMs) in all
50 states and approximately 1,000 ATMs located throughout
the United Kingdom. The Company provides ATM management and
equipment-related services to well known
multi-unit
retail
merchants as well as smaller retailers and operators of
facilities such as shopping malls and airports. The Company
typically enters into multi-year contractual relationships with
its merchant customers.
The unaudited interim condensed consolidated financial
statements include the accounts of Cardtronics, Inc. and its
wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated in consolidation.
Additionally, certain reclassifications have been made to the
prior year amounts to conform to the current year presentation.
The accompanying unaudited interim condensed consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States
and are presented in accordance with the rules and regulations
of the Securities and Exchange Commission applicable to interim
financial information. Accordingly, certain footnote disclosures
have been condensed or omitted. In the Companys opinion,
the unaudited interim condensed consolidated financial
statements reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of the
Companys financial position, results of operations and
cash flows for the periods presented. These financial statements
should be read in conjunction with the Companys
consolidated financial statements and notes thereto for the year
ended December 31, 2004. The results of operations for the
nine-month periods ended September 30, 2005 and 2004 are
not necessarily indicative of results that may be expected for
any other interim period or for the full fiscal year.
The condensed consolidated balance sheet at December 31,
2004 has been derived from audited consolidated financial
statements at that date but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. For further information, refer to the Companys
audited consolidated financial statements and footnotes thereto
as of and for the year ended December 31, 2004.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from those estimates, and such differences could be
material to the financial statements.
|
|
NOTE 2
|
Business Combinations
|
|
|
|
Acquisition of Bank Machine (Acquisitions) Limited
|
On May 17, 2005, the Company acquired all of the issued and
outstanding shares of Bank Machine (Acquisitions) Limited
(Bank Machine), a privately held independent owner
and operator of approximately 1,000 ATMs in the United
Kingdom. Such acquisition provides the Company with an existing
platform outside of the United States from which it can expand
its operations to other European markets.
The purchase price totaled approximately $95.0 million and
consisted of $92.0 million in cash and the issuance of
35,221 shares of the Companys Series B
Convertible Preferred Stock, which was valued by the Company at
approximately $3.0 million. Additionally, the Company
expects to incur approximately $2.5 million in transaction
costs associated with the acquisition.
Although the Bank Machine acquisition closed on May 17,
2005, the Company utilized May 1, 2005 as the effective
date of the acquisition for accounting purposes. Accordingly,
the accompanying condensed
F-40
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
consolidated financial statements of the Company include Bank
Machines results of operations for the period subsequent
to May 1, 2005. Additionally, such results have been
reduced by approximately $0.3 million, with such amount
representing the imputed interest costs associated with the
acquired Bank Machine operations for the period from May 1,
2005 through the actual closing date of May 17, 2005.
In connection with the acquisition, certain existing
shareholders of Bank Machine agreed to defer receipt of a
portion of their cash consideration proceeds in return for the
issuance of certain guaranteed notes payable from Cardtronics
Limited, the Companys wholly-owned subsidiary holding
company in the United Kingdom. As part of the guarantee
arrangement, the Company placed approximately $3.1 million
of the cash consideration paid as part of the acquisition in a
bank account to serve as collateral for the guarantee. Such cash
has been reflected in the Restricted cash,
short-term line item in the accompanying condensed
consolidated balance sheet. The notes mature in May 2008, but
may be repaid in part or in whole at any time at the option of
each individual note holder beginning in November 2005.
Accordingly, such obligations have been reflected in the
Current portion of long-term debt and notes payable
line item in the accompanying condensed consolidated balance
sheet. Interest expense on the notes accrues quarterly at the
same floating rate as that of the interest income associated
with the related restricted cash account. For the quarterly
period ended September 30, 2005, such rate was
approximately 4.50% per annum.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed as of the acquisition
date (amounts in thousands). Pursuant to Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations,
the total purchase consideration
has been allocated to the assets acquired and liabilities
assumed, including identifiable intangible assets, based on
their respective fair values at the date of acquisition. Such
preliminary allocation has resulted in the recording of
approximately $78.5 million in goodwill, which is not
expected to be deductible for income tax purposes. Such goodwill
amount has been assigned to the Companys United Kingdom
operations.
|
|
|
|
|
|
Cash
|
|
$
|
3,400
|
|
Trade accounts receivable, net
|
|
|
408
|
|
Inventory
|
|
|
82
|
|
Other current assets
|
|
|
5,224
|
|
Property and equipment
|
|
|
10,895
|
|
Intangible assets subject to amortization (7 year
weighted-average life)
|
|
|
6,812
|
|
Intangible assets not subject to amortization
|
|
|
3,682
|
|
Goodwill
|
|
|
78,470
|
|
|
|
|
|
|
Total assets acquired
|
|
|
108,973
|
|
|
|
|
|
Accounts payable
|
|
|
(2,467
|
)
|
Accrued liabilities
|
|
|
(5,836
|
)
|
Current portion of notes payable
|
|
|
(3,232
|
)
|
Deferred income taxes, non-current
|
|
|
(1,192
|
)
|
Other long-term liabilities
|
|
|
(1,225
|
)
|
|
|
|
|
|
Total liabilities assumed
|
|
|
(13,952
|
)
|
|
|
|
|
Net assets acquired
|
|
$
|
95,021
|
|
|
|
|
|
The above purchase price allocation is considered to be
preliminary pending the resolution of the Companys
independent appraisal efforts.
F-41
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As indicated in the table above, approximately $6.8 million
has been allocated to intangible assets subject to amortization,
which represents the estimated value associated with the
acquired merchant contracts/relationships associated with the
Bank Machine ATM portfolio. This amount is less than the
$16.8 million initially allocated to such assets based on
the receipt of additional information through the Companys
independent appraisal efforts. The $6.8 million is
currently being amortized on a straight-line basis over an
estimated useful life of seven years, in accordance with the
Companys existing policy. Such estimated useful life is
less than the
10-year
estimate utilized in the Companys initial purchase price
allocation. The combined effect of reducing the overall value
assigned to the intangible assets subject to amortization and
accelerating the underlying amortization period was a cumulative
reduction in amortization expense of approximately
$0.1 million. Such difference was recorded during the
nine-month period ended September 30, 2005.
The $3.7 million allocated to intangible assets not subject
to amortization represents the estimated value associated with
the acquired Bank Machine tradename. Such amount is less than
the $4.8 million value initially allocated to the acquired
tradename based on the receipt of additional information through
the Companys independent appraisal efforts.
In addition to the above, the $10.9 million allocated to
property and equipment is less than the $11.7 million value
that was initially allocated to such assets. Such difference was
due to the receipt of additional information obtained through
the Companys independent appraisal efforts, and resulted
in a cumulative reduction in depreciation expense of
approximately $34,000 during the nine months ended
September 30, 2005.
|
|
|
Acquisition of the E*TRADE Access, Inc. ATM
Portfolio
|
On June 30, 2004, the Company acquired the ATM portfolio of
E*TRADE Access, Inc. for approximately $106.9 million in
cash. The purchase price allocation associated with such
acquisition was considered to be preliminary pending the receipt
of additional information regarding a pre-existing legal dispute
associated with the acquired portfolio. During the six months
ended June 30, 2005, the Company recorded an additional
accrual associated with the anticipated outcome of such dispute,
along with certain other accruals associated with the acquired
operations, the combined effect of which was an increase to the
goodwill balance of approximately $0.1 million.
|
|
|
Pro Forma Results of Operations
|
The following table presents the unaudited pro forma combined
results of operations (in thousands) of the Company and the
acquired Bank Machine and E*TRADE Access ATM portfolios for the
nine-month periods ended September 30, 2005 and 2004, after
giving effect to certain pro forma adjustments, including the
effects of the issuance of the Companys senior
subordinated notes in August 2005 (see Note 7
Long-Term Debt). Such unaudited pro forma financial results do
not reflect the impact of the smaller acquisitions consummated
by the Company in 2005. The unaudited pro forma financial
results assume that both acquisitions and the debt issuance
occurred on January 1, 2004, and are not necessarily
indicative of the actual results that would have occurred had
those transactions been consummated on such date. Furthermore,
such pro forma results are not necessarily indicative of the
future results to be expected for the consolidated operations.
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
209,372
|
|
|
$
|
208,835
|
|
Income from continuing operations
|
|
|
19,430
|
|
|
|
18,676
|
|
Net income (loss) applicable to common shareholders
|
|
|
193
|
|
|
|
(127
|
)
|
F-42
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 3
|
Stock Based Compensation
|
The Company currently accounts for its stock-based compensation
plan in accordance with the intrinsic value based method of
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees,
and as
currently permitted by SFAS No. 123,
Accounting for
Stock-Based Compensation,
and SFAS No. 148,
Accounting for Stock-Based Compensation
Transition and Disclosure An Amendment of FASB
Statement No. 123.
Compensation cost related to stock
options issued to employees is calculated on the date of grant
only if the fair value of the underlying stock exceeds the
exercise price. Compensation expense is then recognized on a
graded basis over the vesting period, which is generally four
years.
The accompanying condensed consolidated financial statements
include compensation expense amounts relating to a restricted
stock grant that was granted in 2003 and subsequently modified
in 2004, and certain options granted in 2004. Such compensation
expense amounts totaled approximately $0.4 million and
$0.8 million for the nine months ended September 30,
2005 and 2004, respectively.
Had compensation cost for the Companys plan been
determined based on the fair value method at the grant dates, as
specified in SFAS No. 123, the Companys net
earnings would have been reduced to the following pro forma
amounts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
Net income (loss), as reported
|
|
$
|
1,835
|
|
|
$
|
3,154
|
|
Add: Stock-based employee compensation expense included in
reported net income, net of tax
|
|
|
23
|
|
|
|
|
|
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
tax
|
|
|
(164
|
)
|
|
|
(39
|
)
|
|
|
|
|
|
|
|
Net income (loss), as adjusted
|
|
|
1,694
|
|
|
|
3,115
|
|
Preferred stock dividends and accretion expense
|
|
|
1,328
|
|
|
|
1,709
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders, as adjusted
|
|
$
|
366
|
|
|
$
|
1,406
|
|
|
|
|
|
|
|
|
|
|
NOTE 4
|
Comprehensive Income
|
The Companys comprehensive income is included as a
component of stockholders deficit and is composed of
(i) net income (loss), (ii) foreign currency
translation adjustments, and (iii) unrealized gains
associated with the Companys interest rate hedging
activities. The following table presents the calculation of
comprehensive income (loss) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Ended
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,835
|
|
|
$
|
3,154
|
|
Foreign currency translation adjustments
|
|
|
(3,862
|
)
|
|
|
|
|
Unrealized gain on interest rate hedges, net of tax
|
|
|
3,100
|
|
|
|
70
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
1,073
|
|
|
$
|
3,224
|
|
|
|
|
|
|
|
|
F-43
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company currently believes that the unremitted earnings of
its United Kingdom subsidiaries will be reinvested in the United
Kingdom for an indefinite period of time. Accordingly, no
deferred taxes have been provided for on the differences between
the Companys book basis and underlying tax basis in those
subsidiaries, or on the foreign currency translation adjustment
amounts reflected in the table above.
|
|
NOTE 5
|
Intangible Assets
|
|
|
|
Intangible Assets with Indefinite Lives
|
The following table depicts the changes in the carrying amount
of the Companys intangible assets with indefinite lives
for the nine months ended September 30, 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
Tradename
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2004
|
|
$
|
84,977
|
|
|
$
|
|
|
|
$
|
84,977
|
|
Purchase price adjustments
|
|
|
145
|
|
|
|
|
|
|
|
145
|
|
Acquisitions
|
|
|
78,470
|
|
|
|
3,682
|
|
|
|
82,152
|
|
Foreign currency translation adjustments
|
|
|
(3,037
|
)
|
|
|
(150
|
)
|
|
|
(3,187
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2005
|
|
$
|
160,555
|
|
|
$
|
3,532
|
|
|
$
|
164,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets with Definite Lives
|
The following is a summary of the Companys intangible
assets that are subject to amortization as of September 30,
2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Customer contracts and relationships
|
|
$
|
77,625
|
|
|
$
|
(16,748
|
)
|
|
$
|
60,877
|
|
Exclusive license agreements
|
|
|
2,457
|
|
|
|
(329
|
)
|
|
|
2,128
|
|
Deferred financing costs
|
|
|
9,022
|
|
|
|
(767
|
)
|
|
|
8,255
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
89,104
|
|
|
$
|
(17,844
|
)
|
|
$
|
71,260
|
|
|
|
|
|
|
|
|
|
|
|
The Companys intangible assets with definite lives are
being amortized over the assets estimated useful lives
utilizing the straight-line method. Estimated useful lives range
from 3 to 12 years for customer contracts and relationships
and 4 to 8 years for exclusive license agreements. Deferred
financing costs are amortized through interest expense over the
contractual term of the underlying borrowings utilizing the
effective interest method. The Company periodically reviews the
estimated useful lives of its identifiable intangible assets,
taking into consideration any events or circumstances that might
result in a reduction in fair value or a revision of those
estimated useful lives.
Amortization of customer contracts and relationships and
exclusive license agreements totaled $5.7 million and
$4.1 million for the nine-month periods ended
September 30, 2005 and 2004, respectively.
Amortization of deferred financing costs totaled
$0.8 million and $0.3 million for the
nine-month
periods
ended September 30, 2005 and 2004, respectively. For the
nine-months ended September 30, 2005, the Company also
wrote off approximately $3.4 million in deferred financing
costs as a result of an amendment to its existing bank credit
facility in May 2005 and the repayment of its existing term
loans in August 2005. For the nine-month period ended
September 30, 2004, the Company wrote-off approximately
$2.5 million in deferred financing costs in connection with
an amendment to its bank credit facility in June 2004.
F-44
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Estimated amortization expense for the Companys customer
contracts and relationships and exclusive license agreements for
the remaining three months of 2005 and the next five years is as
follows (in thousands):
|
|
|
|
|
For the remaining period ending December 31, 2005
|
|
$
|
2,153
|
|
For the year ending December 31, 2006
|
|
$
|
9,245
|
|
For the year ending December 31, 2007
|
|
$
|
8,903
|
|
For the year ending December 31, 2008
|
|
$
|
8,847
|
|
For the year ending December 31, 2009
|
|
$
|
8,425
|
|
For the year ending December 31, 2010
|
|
$
|
6,983
|
|
|
|
NOTE 6
|
Accounts Payable and Accrued Liabilities
|
Accounts payable and accrued liabilities consist of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2005
|
|
|
December 31, 2004
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
10,861
|
|
|
$
|
2,397
|
|
Accrued merchant fees
|
|
|
7,780
|
|
|
|
6,567
|
|
Accrued armored fees
|
|
|
2,855
|
|
|
|
1,272
|
|
Accrued interest
|
|
|
2,669
|
|
|
|
447
|
|
Accrued cash management fees
|
|
|
2,487
|
|
|
|
1,600
|
|
Accrued maintenance fees
|
|
|
2,470
|
|
|
|
2,498
|
|
Accrued compensation
|
|
|
1,458
|
|
|
|
1,348
|
|
Other accrued expenses
|
|
|
11,172
|
|
|
|
8,685
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,752
|
|
|
$
|
24,814
|
|
|
|
|
|
|
|
|
On May 17, 2005, in connection with the acquisition of Bank
Machine, the Company replaced its existing bank credit facility
with new facilities provided by BNP Paribas and Bank of America,
N.A. Such facilities were comprised of (i) a revolving
credit facility of up to $100.0 million, (ii) a first
lien term facility of up to $125.0 million, and
(iii) and a second lien term facility of up to
$75.0 million. Borrowings under the facilities were
utilized to repay the Companys existing bank credit
facility and to fund the acquisition of Bank Machine. In
connection with the issuance of the Companys senior
subordinated notes in August (as discussed below), the
outstanding first and second lien term loan facilities were
repaid in full. Accordingly, as of September 30, 2005, only
$41.8 million was outstanding under the revolving credit
portion of the Companys bank credit facility.
On August 12, 2005, the Company sold $200.0 million in
senior subordinated notes (the Notes) pursuant to
Rule 144A of the Securities Act of 1933. The Notes, which
carry a
9
1
/
4
%
coupon and yield 9.375%, mature in August 2013 and pay interest
semi-annually in arrears on February 15 and August 15 of each
year. Net proceeds from the offering totaled approximately
$193.9 million initially, but are expected to total
$192.6 million after taking into consideration additional
debt issuance costs yet to be paid. The initial proceeds, along
with approximately $7.1 million in borrowings under the
Companys new revolving credit facility, were utilized to
repay all of the outstanding borrowings, including accrued but
unpaid interest, under the Companys recently executed
first and second lien term loan facilities. The Notes are
guaranteed by the
F-45
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys domestic subsidiaries and contain certain
covenants that, among other things, limit the Companys
ability to incur additional indebtedness and make certain types
of restricted payments.
On July 22, 2005, Bank Machine signed a one-year
£2.0 million unsecured overdraft and borrowing
facility. Such facility, which bears interest at 1.75% over the
banks base rate (currently 4.50%), will be utilized for
general corporate purposes for the Companys United Kingdom
operations. No borrowings were outstanding under such facility
as of September 30, 2005. However, on September 22, 2005,
Bank Machine posted a £275,000 bond under such facility,
and in return received the same amount in cash back from the
bank. Such cash amount was previously held by the bank as
collateral for one of Bank Machines existing vault cash
programs. The outstanding bond is akin to a letter of credit,
and as such, reduces the amount available for future borrowings
under the facility to £1.725 million.
|
|
NOTE 8
|
Other Long-Term Liabilities
|
Other long-term liabilities consist of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30, 2005
|
|
|
December 31, 2004
|
|
|
|
|
|
|
|
|
Asset retirement obligations
|
|
$
|
8,026
|
|
|
$
|
5,305
|
|
Deferred revenue
|
|
|
1,264
|
|
|
|
2,145
|
|
Minority interest in consolidated subsidiary
|
|
|
25
|
|
|
|
30
|
|
Other long-term liabilities
|
|
|
5,540
|
|
|
|
5,597
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
14,855
|
|
|
$
|
13,077
|
|
|
|
|
|
|
|
|
|
|
NOTE 9
|
Asset Retirement Obligations
|
The Company accounts for asset retirement obligations in
accordance with SFAS No. 143,
Asset Retirement
Obligations.
Asset retirement obligations consist primarily
of deinstallation costs of the ATM and the costs to restore the
ATM site to its original condition. The Company is legally
required to perform this deinstallation and restoration work. In
accordance with SFAS No. 143, for each group of ATMs
the Company recognizes the fair value of a liability for an
asset retirement obligation and capitalizes that cost as part of
the cost basis of the related asset. The related assets are then
depreciated on a straight-line basis over 7 years and the
related liabilities are accreted to their full value over the
same period of time.
The following table describes changes to the Companys
asset retirement obligation liability for the nine months ended
September 30, 2005 (in thousands):
|
|
|
|
|
Asset retirement obligation at December 31, 2004
|
|
$
|
5,305
|
|
Additional obligations
|
|
|
2,964
|
|
Accretion expense
|
|
|
357
|
|
Payments
|
|
|
(600
|
)
|
|
|
|
|
Asset retirement obligation at September 30, 2005
|
|
$
|
8,026
|
|
|
|
|
|
|
|
NOTE 10
|
Preferred Stock
|
On February 10, 2005, the Company issued
894,568 shares of its Series B convertible preferred
stock to investment funds controlled by TA Associates, for gross
proceeds of $75.0 million, representing a 30.6% equity
interest on a fully diluted basis as of such date. The net
proceeds from the offering were utilized to redeem all of the
Companys outstanding Series A preferred stock and to
purchase approximately 24% of the
F-46
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys outstanding common stock and vested options. The
repurchase of the Companys common stock has been reflected
as treasury stock in the accompanying condensed consolidated
balance sheet.
The Series B preferred shareholders have certain
preferences to the Companys common shareholders, including
board representation rights and preferential distributions
associated with any future liquidation event. The Series B
preferred shares are convertible into the same number of shares
of the Companys common stock, as adjusted for future stock
splits and the issuance of dilutive securities. The
Series B preferred shares have no stated dividends and are
redeemable at any time on or after February 2012, at the option
of a majority of the Series B holders.
In connection with the Bank Machine acquisition in May 2005, the
Company issued an additional 35,221 shares of its
Series B convertible preferred stock valued at
approximately $3.0 million.
|
|
NOTE 11
|
Commitments and Contingencies
|
The following table reflects the Companys significant
contractual obligations and other commercial commitments as of
September 30, 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
Total
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
Thereafter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt(a)
|
|
$
|
241,800
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
241,800
|
|
Notes payable
|
|
|
3,146
|
|
|
|
|
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
|
5,461
|
|
|
|
950
|
|
|
|
2,742
|
|
|
|
893
|
|
|
|
391
|
|
|
|
364
|
|
|
|
121
|
|
Merchant space lease obligations
|
|
|
13,518
|
|
|
|
1,126
|
|
|
|
4,376
|
|
|
|
3,453
|
|
|
|
3,242
|
|
|
|
982
|
|
|
|
339
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contractual cash obligations
|
|
$
|
263,925
|
|
|
$
|
2,076
|
|
|
$
|
10,264
|
|
|
$
|
4,346
|
|
|
$
|
3,633
|
|
|
$
|
1,346
|
|
|
$
|
242,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Includes the face value of the Companys senior
subordinated notes of $200 million, which is reflected net
of unamortized discount of approximately $1.4 million in
the accompanying condensed consolidated balance sheet.
|
As previously discussed, in May 2005 the Company issued certain
guaranteed notes payable to a number of former Bank Machine
shareholders as part of that acquisition. Such notes totaled
approximately $3.2 million as of September 30, 2005,
and are reflected in the table above as Notes
payable. Although the notes contractually mature in May
2008, they may be repaid in part or in whole at any time at the
option of each individual note holder beginning in November
2005. At this point, the Company anticipates that such notes
will be repaid in full during 2006. The Company has set aside an
amount of cash to serve as collateral for the guarantee and to
repay the notes in total, including any accrued interest related
thereto, as the amounts come due. Such restricted cash balance
is currently reflected in the Restricted cash,
short-term line item in the accompanying condensed
consolidated balance sheet.
The Company is subject to various legal proceedings and claims
arising in the ordinary course of business, including certain
proceedings which were previously associated with the acquired
E*TRADE ATM portfolio. The Companys management does not
expect that the outcome in any of these legal proceedings,
individually or collectively, will have a material adverse
effect on the Companys financial condition, results of
operations or cash flows.
F-47
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 12
|
Segment Information
|
Historically, the Company has considered its business activities
to be a single reporting segment as it derives at least 90% of
its revenues and operating results from one business segment
representing ATM Management Services. However, as a result of
the acquisition of Bank Machine in May 2005, the Company now
views its operations as being comprised of two distinct
reporting segments domestic and
international with the international segment
currently consisting entirely of the acquired Bank Machine
operations.
As part of the senior subordinated notes offering in August
2005, the Companys foreign subsidiaries were not required
to guarantee the Companys performance with respect to such
notes. As a result, the Company has presented in Note 13
certain condensed consolidating financial information reflecting
the split between the Companys domestic
(guarantor) and international (non-guarantor) operations,
thus reflecting the breakout between the Companys domestic
and international reporting segments, as applicable.
Accordingly, reference is made to Note 13 for more
information with respect to information concerning the financial
results of the Companys two segments.
|
|
NOTE 13
|
Supplemental Guarantor Financial Information
|
The Companys senior subordinated notes issued in August
2005 are guaranteed on a full and unconditional basis by the
Companys domestic subsidiaries. The following information
sets forth the condensed consolidating statements of operations
and cash flows for the nine-month periods ended
September 30, 2005 and 2004, and the condensed
consolidating balance sheets as of September 30, 2005 and
December 31, 2004, of (i) Cardtronics, Inc., the
parent company and issuer of the senior subordinated notes, and
the Companys domestic subsidiaries, all on a consolidated
basis (collectively, the Guarantors), and
(ii) the Companys international subsidiaries on a
combined basis (the
Non-Guarantors)
(in thousands):
|
|
|
Condensed Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
185,443
|
|
|
$
|
13,745
|
|
|
$
|
|
|
|
$
|
199,188
|
|
Operating costs and expenses
|
|
|
169,385
|
|
|
|
11,890
|
|
|
|
|
|
|
|
181,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
16,058
|
|
|
|
1,855
|
|
|
|
|
|
|
|
17,913
|
|
Interest expense, net
|
|
|
13,135
|
|
|
|
1,089
|
|
|
|
|
|
|
|
14,224
|
|
Equity in (earnings) losses of subsidiaries
|
|
|
(509
|
)
|
|
|
|
|
|
|
509
|
|
|
|
|
|
Other expense (income), net
|
|
|
848
|
|
|
|
34
|
|
|
|
|
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
2,584
|
|
|
|
732
|
|
|
|
(509
|
)
|
|
|
2,807
|
|
Income tax provision
|
|
|
749
|
|
|
|
223
|
|
|
|
|
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,835
|
|
|
|
509
|
|
|
|
(509
|
)
|
|
|
1,835
|
|
Preferred stock dividends and accretion expense
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
1,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
507
|
|
|
$
|
509
|
|
|
$
|
(509
|
)
|
|
$
|
507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
130,941
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
130,941
|
|
Operating costs and expenses
|
|
|
120,408
|
|
|
|
|
|
|
|
|
|
|
|
120,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
10,533
|
|
|
|
|
|
|
|
|
|
|
|
10,533
|
|
Interest expense, net
|
|
|
5,211
|
|
|
|
|
|
|
|
|
|
|
|
5,211
|
|
Equity in (earnings) losses of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income), net
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
5,085
|
|
|
|
|
|
|
|
|
|
|
|
5,085
|
|
Income tax provision
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
|
1,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,154
|
|
|
|
|
|
|
|
|
|
|
|
3,154
|
|
Preferred stock dividends and accretion expense
|
|
|
1,709
|
|
|
|
|
|
|
|
|
|
|
|
1,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
1,445
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
Condensed Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2005
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
757
|
|
|
$
|
1,760
|
|
|
$
|
|
|
|
$
|
2,517
|
|
Receivables, net
|
|
|
8,043
|
|
|
|
703
|
|
|
|
|
|
|
|
8,746
|
|
Other current assets
|
|
|
10,202
|
|
|
|
5,024
|
|
|
|
|
|
|
|
15,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
19,002
|
|
|
|
7,487
|
|
|
|
|
|
|
|
26,489
|
|
Property and equipment, net
|
|
|
57,930
|
|
|
|
13,692
|
|
|
|
|
|
|
|
71,622
|
|
Intangible assets, net
|
|
|
61,390
|
|
|
|
13,402
|
|
|
|
|
|
|
|
74,792
|
|
Goodwill
|
|
|
87,501
|
|
|
|
73,054
|
|
|
|
|
|
|
|
160,555
|
|
Investments and advances to subsidiaries
|
|
|
25,410
|
|
|
|
|
|
|
|
(25,410
|
)
|
|
|
|
|
Intercompany receivable
|
|
|
67,116
|
|
|
|
|
|
|
|
(67,116
|
)
|
|
|
|
|
Prepaid and other assets
|
|
|
7,027
|
|
|
|
21
|
|
|
|
|
|
|
|
7,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
325,735
|
|
|
$
|
107,657
|
|
|
$
|
(92,526
|
)
|
|
$
|
340,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt and notes payable
|
|
$
|
|
|
|
$
|
3,146
|
|
|
$
|
|
|
|
$
|
3,146
|
|
Current portion of other long-term liabilities
|
|
|
2,251
|
|
|
|
|
|
|
|
|
|
|
|
2,251
|
|
Accounts payable and accrued liabilities
|
|
|
32,315
|
|
|
|
9,437
|
|
|
|
|
|
|
|
41,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
34,567
|
|
|
|
12,583
|
|
|
|
|
|
|
|
47,149
|
|
Long-term debt, less current portion
|
|
|
240,421
|
|
|
|
|
|
|
|
|
|
|
|
240,421
|
|
Other non-current liabilities and minority interest
|
|
|
23,298
|
|
|
|
2,548
|
|
|
|
|
|
|
|
25,846
|
|
Intercompany payable
|
|
|
|
|
|
|
67,116
|
|
|
|
(67,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
298,285
|
|
|
|
82,247
|
|
|
|
(67,116
|
)
|
|
|
313,416
|
|
Preferred stock
|
|
|
76,263
|
|
|
|
|
|
|
|
|
|
|
|
76,263
|
|
Stockholders equity (deficit)
|
|
|
(49,173
|
)
|
|
|
25,410
|
|
|
|
(25,410
|
)
|
|
|
(49,173
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
325,375
|
|
|
$
|
107,657
|
|
|
$
|
(92,526
|
)
|
|
$
|
340,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2004
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,412
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,412
|
|
Receivables, net
|
|
|
11,473
|
|
|
|
|
|
|
|
|
|
|
|
11,473
|
|
Other current assets
|
|
|
7,524
|
|
|
|
|
|
|
|
|
|
|
|
7,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
20,409
|
|
|
|
|
|
|
|
|
|
|
|
20,409
|
|
Property and equipment, net
|
|
|
44,992
|
|
|
|
|
|
|
|
|
|
|
|
44,992
|
|
Intangible assets, net
|
|
|
43,077
|
|
|
|
|
|
|
|
|
|
|
|
43,077
|
|
Goodwill
|
|
|
84,977
|
|
|
|
|
|
|
|
|
|
|
|
84,977
|
|
Investments and advances to subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid and other assets
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
1,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
195,309
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
195,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Deficit:
|
Current portion of long-term debt and notes payable
|
|
$
|
15,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
15,000
|
|
Current portion of other long-term liabilities
|
|
|
1,176
|
|
|
|
|
|
|
|
|
|
|
|
1,176
|
|
Accounts payable and accrued liabilities
|
|
|
24,814
|
|
|
|
|
|
|
|
|
|
|
|
24,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
40,990
|
|
|
|
|
|
|
|
|
|
|
|
40,990
|
|
Long-term debt, less current portion
|
|
|
113,541
|
|
|
|
|
|
|
|
|
|
|
|
113,541
|
|
Other non-current liabilities and minority interest
|
|
|
19,308
|
|
|
|
|
|
|
|
|
|
|
|
19,308
|
|
Intercompany payable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
173,839
|
|
|
|
|
|
|
|
|
|
|
|
173,839
|
|
Preferred stock
|
|
|
23,634
|
|
|
|
|
|
|
|
|
|
|
|
23,634
|
|
Stockholders equity (deficit)
|
|
|
(2,164
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders deficit
|
|
$
|
195,309
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
195,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-51
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
Condensed Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2005
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
|
Eliminations
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities
|
|
$
|
26,759
|
|
|
$
|
5,992
|
|
|
$
|
|
|
|
$
|
32,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(19,859
|
)
|
|
|
(7,569
|
)
|
|
|
|
|
|
|
(27,428
|
)
|
Acquisitions, net of cash acquired
|
|
|
(17,249
|
)
|
|
|
(88,667
|
)
|
|
|
|
|
|
|
(105,916
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities
|
|
|
(37,108
|
)
|
|
|
(96,236
|
)
|
|
|
|
|
|
|
(133,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
403,175
|
|
|
|
66,235
|
|
|
|
|
|
|
|
469,410
|
|
Repayments of long-term debt
|
|
|
(357,541
|
)
|
|
|
|
|
|
|
|
|
|
|
(357,541
|
)
|
Proceeds from issuance of preferred stock
|
|
|
73,142
|
|
|
|
|
|
|
|
|
|
|
|
73,142
|
|
Issuance of capital stock
|
|
|
(25,908
|
)
|
|
|
25,954
|
|
|
|
|
|
|
|
46
|
|
Purchase of preferred and capital stock
|
|
|
(73,041
|
)
|
|
|
|
|
|
|
|
|
|
|
(73,041
|
)
|
Other financing activities
|
|
|
(10,133
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,133
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities
|
|
|
9,694
|
|
|
|
92,189
|
|
|
|
|
|
|
|
101,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate increases
|
|
|
|
|
|
|
(185
|
)
|
|
|
|
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(655
|
)
|
|
|
1,760
|
|
|
|
|
|
|
|
1,105
|
|
Cash and cash equivalents at beginning of period
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
1,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
757
|
|
|
$
|
1,760
|
|
|
$
|
|
|
|
$
|
2,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2004
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
Guarantors
|
|
|
Guarantors
|
|
Eliminations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by operating activities
|
|
$
|
20,493
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
20,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(13,004
|
)
|
|
|
|
|
|
|
|
|
|
|
(13,004
|
)
|
Acquisitions, net of cash acquired
|
|
|
(102,954
|
)
|
|
|
|
|
|
|
|
|
|
|
(102,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows used in investing activities
|
|
|
(115,958
|
)
|
|
|
|
|
|
|
|
|
|
|
(115,958
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
|
136,041
|
|
|
|
|
|
|
|
|
|
|
|
136,041
|
|
Repayments of long-term debt
|
|
|
(37,425
|
)
|
|
|
|
|
|
|
|
|
|
|
(37,425
|
)
|
Issuance of capital stock
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
148
|
|
Other financing activities
|
|
|
(2,849
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by financing activities
|
|
|
95,915
|
|
|
|
|
|
|
|
|
|
|
|
95,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate increases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
450
|
|
|
|
|
|
|
|
|
|
|
|
450
|
|
Cash and cash equivalents at beginning of period
|
|
|
5,554
|
|
|
|
|
|
|
|
|
|
|
|
5,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
6,004
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
6,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-52
CARDTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
NOTE 14
|
Subsequent Events
|
On December 21, 2005, the Company acquired all of the
outstanding shares of ATM National, Inc., the owner and operator
of a nationwide surcharge-free ATM alliance. The consideration
for such acquisition totaled $4.4 million, and was
comprised of $2.6 million in cash and 21,111 shares of
our common stock. Additionally, we agreed to assume
approximately $1.3 million in liabilities associated with
such acquisition. Furthermore, the merger agreement allows for
the issuance of up to 10,000 additional shares of our common
stock within 105 days of the closing date based on the
occurrence of certain events.
F-53
BANK MACHINE (ACQUISITIONS) LIMITED
Independent Auditors Report and Financial Statements
31 December 2004
F-54
Independent Auditors Report
To the Shareholders of Bank Machine (Acquisitions) Limited.
We have audited the accompanying consolidated balance sheets of
Bank Machine (Acquisitions) Limited and its subsidiary
(Company) as at 31 December 2004 and 2003, and
the related consolidated profit and loss accounts and cash flows
for each of the two years in the period ended 31 December
2004. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Bank
Machine (Acquisitions) Limited and its subsidiary as at
31 December 2004 and 2003, and the results of their
operations and their cash flows for each of the two years in the
period ended 31 December 2004, in conformity with
accounting principles generally accepted in the United Kingdom.
Accounting principles generally accepted in the United Kingdom
vary in certain significant respects from accounting principles
generally accepted in the United States of America. Information
relating to the nature and effect of such differences is
presented in Note 24 to the consolidated financial
statements.
/s/
Deloitte & Touche LLP
Chartered Accountants
London, England
21 July 2005
F-55
BANK MACHINE (ACQUISITIONS) LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
Note
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Turnover
|
|
|
2
|
(d)
|
|
|
15,614
|
|
|
|
12,431
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3
|
|
|
|
3,028
|
|
|
|
1,977
|
|
Net interest payable and similar charges
|
|
|
4
|
|
|
|
(1,481
|
)
|
|
|
(1,559
|
)
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before taxation
|
|
|
|
|
|
|
1,547
|
|
|
|
418
|
|
Tax on profit on ordinary activities
|
|
|
5
|
|
|
|
649
|
|
|
|
337
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the financial year
|
|
|
16
|
|
|
|
898
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
All turnover and operating profit for the years presented arises
from continuing operations.
There are no recognised gains or losses in either the current
year or the prior year other than as stated above. Therefore no
statement of total recognised gains and losses has been prepared.
The accompanying notes are an integral part of the consolidated
financial statements.
F-56
BANK MACHINE (ACQUISITIONS) LIMITED
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December
|
|
|
31 December
|
|
|
|
Note
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
7
|
|
|
|
14,638
|
|
|
|
15,444
|
|
Tangible assets
|
|
|
8
|
|
|
|
6,890
|
|
|
|
4,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,528
|
|
|
|
20,322
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
47
|
|
|
|
|
|
Debtors: amounts due within one year
|
|
|
9
|
|
|
|
1,446
|
|
|
|
482
|
|
Debtors: amounts due after more than one year
deferred tax
|
|
|
12
|
|
|
|
521
|
|
|
|
857
|
|
Investment
|
|
|
|
|
|
|
|
|
|
|
3,200
|
|
Cash at bank and in hand
|
|
|
|
|
|
|
3,568
|
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,582
|
|
|
|
5,620
|
|
Creditors:
amounts falling due within one year
|
|
|
10
|
|
|
|
(5,514
|
)
|
|
|
(4,406
|
)
|
|
|
|
|
|
|
|
|
|
|
Net current assets
|
|
|
|
|
|
|
68
|
|
|
|
1,214
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
|
21,596
|
|
|
|
21,536
|
|
Creditors:
amounts falling due after more than one year
|
|
|
11
|
|
|
|
(19,025
|
)
|
|
|
(19,951
|
)
|
Provisions for liabilities and charges
|
|
|
13
|
|
|
|
(642
|
)
|
|
|
(554
|
)
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
1,929
|
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
|
|
14
|
|
|
|
950
|
|
|
|
950
|
|
Profit and loss account
|
|
|
15
|
|
|
|
979
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
Total equity shareholders funds
|
|
|
16
|
|
|
|
1,929
|
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-57
BANK MACHINE (ACQUISITIONS) LIMITED
CONSOLIDATED CASH FLOW STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
Note
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Net cash inflow from operating activities
|
|
|
18
|
(a)
|
|
|
4,212
|
|
|
|
5,706
|
|
Returns on investments and servicing of finance
|
|
|
18
|
(b)
|
|
|
(522
|
)
|
|
|
(1,400
|
)
|
Taxation
|
|
|
18
|
(b)
|
|
|
(156
|
)
|
|
|
|
|
Capital expenditure and financial investment
|
|
|
18
|
(b)
|
|
|
(3,185
|
)
|
|
|
(1,138
|
)
|
Acquisitions and disposals
|
|
|
18
|
(b)
|
|
|
|
|
|
|
(15,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
349
|
|
|
|
12,346
|
|
Management of liquid resources
|
|
|
18
|
(b)
|
|
|
3,200
|
|
|
|
(3,200
|
)
|
Financing
|
|
|
18
|
(b)
|
|
|
(1,062
|
)
|
|
|
16,627
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash
|
|
|
|
|
|
|
2,487
|
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Increase in cash
|
|
|
2,487
|
|
|
|
1,081
|
|
Cash outflow/(inflow) from decrease/(increase) in debt and lease
financing
|
|
|
1,062
|
|
|
|
(20,718
|
)
|
Cash used to (decrease)/increase liquid resources
|
|
|
(3,200
|
)
|
|
|
3,200
|
|
|
|
|
|
|
|
|
Change in net debt resulting from cash flows
|
|
|
349
|
|
|
|
(16,437
|
)
|
Movement in un-amortised element of finance costs
|
|
|
(140
|
)
|
|
|
570
|
|
Interest costs capitalised into loan notes
|
|
|
(821
|
)
|
|
|
(725
|
)
|
|
|
|
|
|
|
|
Movement in net debt in the year
|
|
|
(612
|
)
|
|
|
(16,592
|
)
|
Net debt at start of year
|
|
|
(16,592
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net debt at 31 December
|
|
|
(17,204
|
)
|
|
|
(16,592
|
)
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
F-58
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1.
Nature of business
|
|
|
Bank Machine (Acquisitions) Limited (the Company)
together with its subsidiary, Bank Machine Limited (collectively
with the Company, the Group) is an independent
Automated Teller Machine (ATM) operator with approximately
1,000 ATMs located throughout the United Kingdom. On 17 January,
2003 the Company acquired its subsidiary Bank Machine Limited
from Euronet Worldwide, Inc., and commenced operations on that
date. As at the date of these financial statements the Company
was a wholly owned subsidiary of Bank Machine (Holdings) Limited.
|
2.
Accounting policies
|
|
|
The financial statements are prepared under the historical cost
convention and in accordance with applicable United Kingdom law
and accounting standards (UK GAAP). The accounting
policies applied are set out below.
|
|
|
|
b) Basis of consolidation
|
|
|
|
The consolidated financial statements comprise the financial
statements of the Company and its subsidiary undertaking. All
significant intercompany accounts and transactions have been
eliminated on consolidation.
|
|
|
The accompanying financial statements of the Company do not
comprise statutory accounts within the meaning of
Section 240 of the Companies Act 1985 (United Kingdom). The
Companys statutory accounts for the year ended
31 December 2004, prepared in accordance to UK GAAP, have
been reported on by the Companys auditors, Deloitte &
Touche LLP. The report of the Auditors was unqualified and did
not contain a statement under section 237(2) or (3) of the
Companies Act 1985 (United Kingdom).
|
c) Intangible assets
goodwill
|
|
|
Goodwill is the difference between the cost of an acquired
entity and the aggregate fair value of the entitys
identifiable assets and liabilities.
|
|
|
Positive goodwill is amortised on a straight-line basis over its
useful economic life, which the directors estimate to be
20 years, commencing at the time of acquisition. The
carrying value of goodwill is reviewed for impairment wherever
events or circumstances indicate that the carrying value may not
be recoverable. No impairment of goodwill has been recognized in
any of the periods presented.
|
d) Turnover
|
|
|
Turnover principally comprises the amounts receivable from the
deployment of ATMs in the form of transaction based fee and
services. It also includes income from ATM sales, operating
fees, fees for moving ATMs and ATM rental charges. The
transaction based fees are recognized at the time the ATM
transactions are processed and the service fees are recognized
at the time the service is performed. The Company recognizes
revenues related to the sale of ATMs when the equipment is
delivered to the merchant customer and the Company has completed
all required installation and set up procedures.
|
e) Tangible fixed assets and
depreciation
|
|
|
All tangible fixed assets are shown at historical cost less
accumulated depreciation and any provision for impairment.
|
F-59
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
Depreciation is provided on all tangible fixed assets at rates
calculated to write off the cost of each asset evenly over the
expected useful life as follows:
|
|
|
|
|
|
ATMs and related assets
|
|
|
5 to 7 years
|
|
Fixtures and fittings
|
|
|
3 to 5 years
|
|
Motor vehicles
|
|
|
4 years
|
|
Computer equipment
|
|
|
3 years
|
|
|
|
|
The Group reviews the carrying values of its tangible fixed
assets for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets
may not be recoverable or that the useful lives of these assets
are no longer appropriate. Measurement of the impairment loss is
based on the fair value of the asset. Generally, fair value will
be determined using valuation techniques such as the present
value of expected future cash flows.
|
f) Installation costs
|
|
|
Costs associated with the installation of ATMs are
capitalised and written-off over the same period as the ATM
asset.
|
g) Leases
|
|
|
Operating lease payments are charged to the profit and loss
account on a straight-line basis.
|
h) Pensions
|
|
|
Pension costs in respect of contributions to certain
employees stakeholder pension plans and Group
contributions to personal pension plans are charged to the
profit and loss account as they accrue.
|
i) Interest rate SWAP
agreement
|
|
|
Interest payable on the interest rate SWAP agreement mirrors the
repayment profile of the Facilities Agreement and interest is
charged or credited to the profit and loss account accordingly.
|
j) Corporation tax
|
|
|
All taxable profits are sourced from the UK. Corporation tax is
therefore payable on such taxable profits at the UK statutory
rate of 30% in both years.
|
k) Deferred taxation
|
|
|
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date
where transactions or events have occurred at that date that
will result in an obligation to pay more, or right to pay less
or to receive more, tax. The exception to this is that deferred
tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be
suitable taxable profits from which the underlying timing
differences can be deducted.
|
|
|
Deferred tax is measured on an undiscounted basis at the rates
that are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws
enacted or substantively enacted at the balance sheet date.
|
l) Asset retirement
obligations
|
|
|
In accordance with the provisions of Financial Reporting
Standard (FRS) 12
Provisions, Contingent
Liabilities and Contingent assets
the Group records the fair
value of its liability for asset retirement
|
F-60
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
obligations in the period in which it is incurred, and a
corresponding increase in the carrying amount of the related
long lived assets. Over time, the liability is accreted to its
present value at the end of each reporting period, and the
capitalized cost is depreciated over the useful life of the
related assets. Upon settlement of the liability, the Group will
either settle the obligation for its recorded amount or incur a
gain or loss upon settlement. The Groups asset retirement
obligations relate to the obligation for the deinstallation of
ATM machines from the customers site at the expiry of
the contracts.
|
m) Estimates
|
|
|
The preparation of financial statements in conformity with UK
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of
the financial statements, and reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
|
3.
Operating profit
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Turnover
|
|
|
15,614
|
|
|
|
12,431
|
|
Cost of sales
|
|
|
(9,991
|
)
|
|
|
(8,265
|
)
|
|
|
|
|
|
|
|
Gross profit
|
|
|
5,623
|
|
|
|
4,166
|
|
Administrative expenses
|
|
|
(2,595
|
)
|
|
|
(2,189
|
)
|
|
|
|
|
|
|
|
Operating profit
|
|
|
3,028
|
|
|
|
1,977
|
|
|
|
|
|
|
|
|
This is stated after charging:
|
|
|
|
|
|
|
|
|
Depreciation of tangible fixed assets owned assets
|
|
|
1,316
|
|
|
|
1,117
|
|
Operating lease rentals land and buildings
|
|
|
116
|
|
|
|
100
|
|
|
other
|
|
|
2
|
|
|
|
1
|
|
Auditors fees audit Group
|
|
|
26
|
|
|
|
29
|
|
other Group
|
|
|
19
|
|
|
|
19
|
|
Loss on disposal of tangible fixed assets
|
|
|
76
|
|
|
|
226
|
|
|
|
|
|
|
|
|
4.
Net interest payable and
similar charges
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Loan and overdraft interest payable
|
|
|
(1,765
|
)
|
|
|
(1,628
|
)
|
Interest receivable
|
|
|
194
|
|
|
|
88
|
|
Net receipts/(payments) under interest rate contract
|
|
|
90
|
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
Net interest payable
|
|
|
(1,481
|
)
|
|
|
(1,559
|
)
|
|
|
|
|
|
|
|
F-61
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
5.
Tax on profit on ordinary
activities
(a) Analysis of taxation charge:
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
UK Corporation tax on profits for the year
|
|
|
313
|
|
|
|
|
|
Deferred tax charge (note 12)
|
|
|
335
|
|
|
|
337
|
|
Deferred tax charge under provision in prior year
(note 12)
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge
|
|
|
649
|
|
|
|
337
|
|
|
|
|
|
|
|
|
(b) Factors affecting the tax
charge for the year:
The tax assessed for the year is higher than the standard rate
of corporation tax in the United Kingdom (30%). The differences
are explained below:
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Profit on ordinary activities before tax
|
|
|
1,547
|
|
|
|
418
|
|
|
|
|
|
|
|
|
Profit on ordinary activities multiplied by standard rate of
Corporation tax in the UK of 30%
|
|
|
464
|
|
|
|
125
|
|
Effects of:
|
|
|
|
|
|
|
|
|
Utilisation of tax losses brought forward
|
|
|
|
|
|
|
(758
|
)
|
Capital allowances in excess of depreciation
|
|
|
(319
|
)
|
|
|
410
|
|
Expenses not deductible for tax purposes
|
|
|
179
|
|
|
|
223
|
|
Short-term timing differences
|
|
|
(13
|
)
|
|
|
|
|
Adjustments to tax charge in respect of previous periods
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current tax charge
|
|
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
Staff costs
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
Staff costs including Directors emoluments
|
|
£000
|
|
|
£000
|
|
Wages and salaries
|
|
|
1,280
|
|
|
|
790
|
|
Social security costs
|
|
|
136
|
|
|
|
86
|
|
Pension costs
|
|
|
38
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
1,454
|
|
|
|
911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
Average monthly number employed including executive Directors
|
|
No.
|
|
|
No.
|
|
Sales staff
|
|
|
5
|
|
|
|
5
|
|
General administration staff
|
|
|
31
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
36
|
|
|
|
22
|
|
|
|
|
|
|
|
|
F-62
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
7.
Intangible fixed
assets
On 17 January 2003, the Company acquired Bank Machine
Limited from Euronet Worldwide, Inc. for cash consideration
totaling £16,291,000. The total consideration was allocated
based on the fair value of the assets acquired and liabilities
assumed, as follows:
|
|
|
|
|
|
|
Fair Value
|
|
|
|
£000
|
|
Tangible fixed assets
|
|
|
4,283
|
|
Stocks
|
|
|
52
|
|
Debtors
|
|
|
997
|
|
Cash
|
|
|
326
|
|
Creditors
|
|
|
(6,279
|
)
|
Provision for liabilities and charges
|
|
|
(497
|
)
|
Deferred tax
|
|
|
1,194
|
|
Goodwill
|
|
|
16,215
|
|
|
|
|
|
Total consideration
|
|
|
16,291
|
|
|
|
|
|
The goodwill established as part of the acquisition is being
amortized on a straight-line basis over an estimated useful life
of approximately 20 years. Such goodwill is not deductible
for tax purposes. The following is a rollforward of the
Companys goodwill:
|
|
|
|
|
|
|
2004
|
|
|
|
£000
|
|
Cost:
|
|
|
|
|
At 1 January 2004 and at 31 December 2004
|
|
|
16,215
|
|
|
|
|
|
Amortisation:
|
|
|
|
|
At 1 January 2004
|
|
|
(771
|
)
|
Charge for the year
|
|
|
(806
|
)
|
|
|
|
|
At 31 December 2004
|
|
|
(1,577
|
)
|
|
|
|
|
Net book value:
|
|
|
|
|
At 31 December 2004
|
|
|
14,638
|
|
|
|
|
|
At 31 December 2003
|
|
|
15,444
|
|
|
|
|
|
F-63
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8.
Tangible fixed
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixture and
|
|
|
|
|
|
|
|
|
|
fittings &
|
|
|
|
|
|
|
|
|
|
computer
|
|
|
Motor
|
|
|
|
|
|
ATMs
|
|
|
equipment
|
|
|
vehicles
|
|
|
Total
|
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2004
|
|
|
7,383
|
|
|
|
937
|
|
|
|
|
|
|
|
8,320
|
|
Additions
|
|
|
3,156
|
|
|
|
202
|
|
|
|
147
|
|
|
|
3,505
|
|
Disposals
|
|
|
(722
|
)
|
|
|
|
|
|
|
|
|
|
|
(722
|
)
|
Re-classification
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2004
|
|
|
9,902
|
|
|
|
1,139
|
|
|
|
147
|
|
|
|
11,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2004
|
|
|
(2,812
|
)
|
|
|
(630
|
)
|
|
|
|
|
|
|
(3,442
|
)
|
Depreciation on disposals
|
|
|
545
|
|
|
|
|
|
|
|
|
|
|
|
545
|
|
Charge for the year
|
|
|
(1,063
|
)
|
|
|
(235
|
)
|
|
|
(18
|
)
|
|
|
(1,316
|
)
|
Re-classification
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
(85
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2004
|
|
|
(3,415
|
)
|
|
|
(865
|
)
|
|
|
(18
|
)
|
|
|
(4,298
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2004
|
|
|
6,487
|
|
|
|
274
|
|
|
|
129
|
|
|
|
6,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2003
|
|
|
4,571
|
|
|
|
307
|
|
|
|
|
|
|
|
4,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.
Debtors
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Trade debtors
|
|
|
243
|
|
|
|
167
|
|
Prepayments
|
|
|
859
|
|
|
|
111
|
|
Other debtors
|
|
|
344
|
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
1,446
|
|
|
|
482
|
|
|
|
|
|
|
|
|
10.
Creditors: amounts
falling due within one year
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Bank overdraft and loans (Note 11)
|
|
|
1,747
|
|
|
|
922
|
|
Trade creditors
|
|
|
2,368
|
|
|
|
1,760
|
|
Other taxation and social security
|
|
|
49
|
|
|
|
57
|
|
Corporation tax
|
|
|
162
|
|
|
|
4
|
|
Other creditors
|
|
|
61
|
|
|
|
32
|
|
Accruals
|
|
|
1,127
|
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
|
|
5,514
|
|
|
|
4,406
|
|
|
|
|
|
|
|
|
F-64
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
11.
Creditors: amounts
falling due after more than one year
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Total loan facilities
|
|
|
9,163
|
|
|
|
10,928
|
|
Shareholder fixed rate subordinated unsecured Loan Notes
|
|
|
9,862
|
|
|
|
9,023
|
|
|
|
|
|
|
|
|
|
|
|
19,025
|
|
|
|
19,951
|
|
|
|
|
|
|
|
|
As set out in Note 23, subsequent to the year-end, the
ownership of the Group changed. The above debt was repaid as
part of that and replaced with funding from the new parent.
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
Total loan facilities
|
|
£000
|
|
|
£000
|
|
Amounts falling due:
|
|
|
|
|
|
|
|
|
In one year or less, or on demand
|
|
|
1,875
|
|
|
|
1,062
|
|
Between one and two years
|
|
|
2,437
|
|
|
|
1,875
|
|
Between two and five years
|
|
|
6,938
|
|
|
|
7,125
|
|
In five years or more
|
|
|
|
|
|
|
2,250
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
12,312
|
|
Less: issue costs un-amortised at 31 December
|
|
|
(322
|
)
|
|
|
(445
|
)
|
|
|
|
|
|
|
|
|
|
|
10,928
|
|
|
|
11,867
|
|
Less: included in creditors falling due within one year,
including
amortisation of issue costs
|
|
|
(1,765
|
)
|
|
|
(939
|
)
|
|
|
|
|
|
|
|
|
|
|
9,163
|
|
|
|
10,928
|
|
|
|
|
|
|
|
|
Term loan and Bank overdraft
On 17 January 2003, the Group entered into an agreement
(hereinafter referred to as the Facilities
Agreement) for a Term Loan Facility of
£13,312,500.
Borrowings under the facility are secured on assets of the Group
and bear interest at commercial rates above LIBOR. The Group
selects the duration of the interest period for the Term Loans,
which are generally of one, three or six months duration.
The Term Loan is repayable in tranches commencing on
30 September 2003 and ending on 31 December 2009.
The unused amount of the bank overdraft facility at
31 December 2004 was £937,500.
Interest rate swap agreement
On 13 March 2003 the Group entered into an interest rate swap
agreement covering the Facilities Agreement for the period to
30 December 2005. The agreement mirrors the repayment
profile of the Facilities Agreement.
Under the agreement the Group pays interest at 3.7950% and
receives floating rate at 3 month LIBOR.
F-65
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Shareholder fixed rate subordinated unsecured Loan Notes
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
Fixed rate subordinated unsecured Loan Notes
|
|
£000
|
|
|
£000
|
|
Amounts falling due:
|
|
|
|
|
|
|
|
|
In one year or less, or on demand
|
|
|
|
|
|
|
|
|
Between one and two years
|
|
|
|
|
|
|
|
|
Between two and five years
|
|
|
|
|
|
|
|
|
In five years or more
|
|
|
9,951
|
|
|
|
9,130
|
|
|
|
|
|
|
|
|
|
|
|
9,951
|
|
|
|
9,130
|
|
Less: issue costs un-amortised at 31 December
|
|
|
(107
|
)
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
9,844
|
|
|
|
9,005
|
|
Add: amortisation of issue costs within one year
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
9,862
|
|
|
|
9,023
|
|
|
|
|
|
|
|
|
On 17 January 2003, the Group issued fixed rate subordinated
unsecured Loan Notes 2010 (the Loan Notes) with
a nominal value of £8,405,000 to Bridgepoint Capital
(Nominees) Limited, a related party to Bridgepoint Capital
Limited which is one of the Groups principal shareholders.
The Loan Notes become repayable in full at par immediately prior
to a sale or flotation of the Company or earlier at the
Companys option and in any event not later than 31
December 2010.
The Loan Notes bear interest at 9% per annum.
Interest is payable on 31 December of each year until the
Loan Notes are repaid. However the interest payable in respect
of the year to 31 December 2004 has been capitalised into
the loan balance as allowed by the Loan Note agreement.
The Loan Notes are subordinated in favour of the Facilities
agreement and subject to the subordination, are freely
transferable.
12.
Deferred taxation
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Depreciation in excess of capital allowances
|
|
|
521
|
|
|
|
848
|
|
Short term timing differences
|
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
|
|
521
|
|
|
|
857
|
|
|
|
|
|
|
|
|
There is no unrecognised deferred taxation (2003: £nil).
The movement on the deferred tax asset was as follows:
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
At 1 January
|
|
|
857
|
|
|
|
|
|
Deferred tax on acquisition
|
|
|
|
|
|
|
1,194
|
|
Charge to profit and loss account (note 5)
|
|
|
(336
|
)
|
|
|
(337
|
)
|
|
|
|
|
|
|
|
At 31 December
|
|
|
521
|
|
|
|
857
|
|
|
|
|
|
|
|
|
F-66
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
13.
|
Provisions for liabilities and charges
|
The following represents the amount of the retirement obligation
at the beginning and end of the year ended 31 December:
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Beginning balance at 1 January
|
|
|
554
|
|
|
|
497
|
|
Liabilities incurred during the year
|
|
|
126
|
|
|
|
112
|
|
Liabilities settled during the year
|
|
|
(85
|
)
|
|
|
(94
|
)
|
Accretion of interest
|
|
|
47
|
|
|
|
39
|
|
|
|
|
|
|
|
|
Ending balance at 31 December
|
|
|
642
|
|
|
|
554
|
|
|
|
|
|
|
|
|
|
|
14.
|
Called up share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allotted, called
|
|
|
Allotted, called
|
|
|
|
|
|
|
|
up and fully
|
|
|
up and fully
|
|
|
|
Authorised
|
|
|
Authorised
|
|
|
paid
|
|
|
paid
|
|
|
|
No.
|
|
|
No.
|
|
|
£000
|
|
|
£000
|
|
|
|
2004
|
|
|
2003
|
|
|
2004
|
|
|
2003
|
|
Equity shares:
Ordinary shares of £1.00 each
|
|
|
950,001
|
|
|
|
950,001
|
|
|
|
950
|
|
|
|
950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
|
and loss
|
|
|
|
account
|
|
|
|
£000
|
|
Balance at 1 January 2004
|
|
|
81
|
|
Profit for the year
|
|
|
898
|
|
|
|
|
|
Balance at 31 December 2004
|
|
|
979
|
|
|
|
|
|
|
|
16.
|
Reconciliation of movement in equity shareholders
funds
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Net profit for the year
|
|
|
898
|
|
|
|
81
|
|
Issue of ordinary share capital
|
|
|
|
|
|
|
950
|
|
|
|
|
|
|
|
|
Net movement in equity shareholders funds
|
|
|
898
|
|
|
|
1,031
|
|
Opening equity shareholders funds
|
|
|
1,031
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing equity shareholders funds
|
|
|
1,929
|
|
|
|
1,031
|
|
|
|
|
|
|
|
|
F-67
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
17.
|
Operating lease commitments
|
The annual commitment under non-cancellable operating leases was
as follows:
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Leases which expire:
|
|
|
|
|
|
|
|
|
Within two to five years Other
|
|
|
2
|
|
|
|
1
|
|
Within two to five years Land and buildings
|
|
|
116
|
|
|
|
100
|
|
|
|
|
|
|
|
|
18.
Notes to the consolidated
cash flow statements
|
|
|
a) Reconciliation of operating
profit to net cash inflow from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Operating profit
|
|
|
3,028
|
|
|
|
1,977
|
|
Depreciation and amortisation
|
|
|
2,123
|
|
|
|
1,888
|
|
Loss on disposal of tangible fixed assets
|
|
|
98
|
|
|
|
266
|
|
Increase in debtors
|
|
|
(866
|
)
|
|
|
(92
|
)
|
(Increase)/decrease in stocks
|
|
|
(47
|
)
|
|
|
52
|
|
(Decrease)/increase in creditors
|
|
|
(52
|
)
|
|
|
1,607
|
|
Other non-cash movements
|
|
|
(72
|
)
|
|
|
8
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
|
|
4,212
|
|
|
|
5,706
|
|
|
|
|
|
|
|
|
|
|
|
b) Analysis of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Returns on investments and servicing of finance
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
285
|
|
|
|
89
|
|
Interest paid
|
|
|
(807
|
)
|
|
|
(766
|
)
|
Issue costs of loan financing
|
|
|
|
|
|
|
(723
|
)
|
|
|
|
|
|
|
|
|
|
|
(522
|
)
|
|
|
(1,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Taxation
|
|
|
|
|
|
|
|
|
Corporation tax paid
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
F-68
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
b) Analysis of cash
flows (Continued)
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Capital expenditure and financial investment
|
|
|
|
|
|
|
|
|
Payment to acquire tangible fixed assets
|
|
|
(3,379
|
)
|
|
|
(1,905
|
)
|
Payment of capital creditors
|
|
|
116
|
|
|
|
742
|
|
Receipts from sales of tangible fixed assets
|
|
|
78
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
(3,185
|
)
|
|
|
(1,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Acquisitions and disposals
|
|
|
|
|
|
|
|
|
Purchase of subsidiary undertaking
|
|
|
|
|
|
|
(15,836
|
)
|
Net cash held by acquired subsidiary
|
|
|
|
|
|
|
322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Management of Liquid Resources
|
|
|
|
|
|
|
|
|
Net transfers from/to money markets
|
|
|
3,200
|
|
|
|
(3,200
|
)
|
|
|
|
|
|
|
|
|
|
|
3,200
|
|
|
|
(3,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Financing
|
|
|
|
|
|
|
|
|
Issue of ordinary share capital
|
|
|
|
|
|
|
950
|
|
Repayment of secured loan
|
|
|
(1,062
|
)
|
|
|
(3,351
|
)
|
Repayment of lease and hire purchase obligations
|
|
|
|
|
|
|
(1,690
|
)
|
New secured loan
|
|
|
|
|
|
|
20,718
|
|
|
|
|
|
|
|
|
|
|
|
(1,062
|
)
|
|
|
16,627
|
|
|
|
|
|
|
|
|
F-69
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
c) Analysis of changes in net
debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
|
|
|
|
|
Other
|
|
|
At
|
|
|
|
1 January,
|
|
|
|
|
non-cash
|
|
|
31 December,
|
|
|
|
2004
|
|
|
Cash flow
|
|
|
changes
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
Cash at bank and in hand
|
|
|
1,081
|
|
|
|
2,487
|
|
|
|
|
|
|
|
3,568
|
|
Current asset investment
|
|
|
3,200
|
|
|
|
(3,200
|
)
|
|
|
|
|
|
|
|
|
Bank loans due within one year
|
|
|
(922
|
)
|
|
|
1,062
|
|
|
|
(1,887
|
)
|
|
|
(1,747
|
)
|
Bank loans due after one year
|
|
|
(19,951
|
)
|
|
|
|
|
|
|
926
|
|
|
|
(19,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt
|
|
|
(16,592
|
)
|
|
|
349
|
|
|
|
(961
|
)
|
|
|
(17,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.
Pension costs
The Group operates a stakeholder pension scheme. Group
contributions to the scheme are dependent upon the level of
employee contributions and the scheme is entirely of a defined
contribution nature. The Group also contributes to individual
pension schemes for those staff members who do not choose to
join the Group stakeholder scheme. Contributions to individual
pension schemes are also of a defined contribution nature.
There were no unpaid contributions at the year end (2003:
£nil).
Contributions paid during the year were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Group stakeholder pension scheme
|
|
|
18
|
|
|
|
17
|
|
Individual personal pension schemes
|
|
|
20
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
38
|
|
|
|
35
|
|
|
|
|
|
|
|
|
20.
Assets provided as
security
The bank loans and overdrafts of the Company are secured by a
fixed and floating charge on all the assets of Bank Machine
Limited.
21.
Parent undertaking
As of the date of the financial statements, the immediate and
ultimate parent undertaking and controlling party is Bank
Machine (Holdings) Limited, which is the parent undertaking of
the smallest and largest group to consolidate these financial
statements. It has included the Company in its group accounts,
copies of which are available from its registered office,
c/o Pinsent Mason Secretarial Limited, 1 Park Row, Leeds,
LS1 5AB.
|
|
22.
|
Related party transactions
|
Prior to the acquisition of the Company by Bridgepoint Capital
(Nominees) Limited (Bridgepoint) (through Bank
Machine (Holdings) Limited) on 17 January, 2003, the
Company conducted its operations as a wholly owned subsidiary of
Euronet Worldwide, Inc. (Euronet). Subsequent to the
aforementioned acquisition, the Company continued to rely on
Euronet to provide it with certain ATM processing services.
During 2004 and 2003, payments for such services totaled
approximately £619,000 and £521,000, respectively.
As mentioned above, the Company is a wholly owned subsidiary of
Bank Machine (Holdings) Limited, which in turn is majority owned
by Bridgepoint. During 2004 and 2003, Bank Machine (Holdings)
Limited paid
F-70
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
certain fees and expenses to Bridgepoint Capital Limited, a
related party to Bridgepoint, totaling approximately
£48,000 and £46,000, respectively.
On 17 May 2005, the Company was acquired by Cardtronics, Inc., a
U.S. based owner and operator of ATMs, for approximately
£51,464,000 in total consideration. Such consideration was
comprised of £28,319,000 in cash, £1,595,000 in
equity, and the assumption of the Companys outstanding
debt obligations as at such date totalling £21,550,000.
The Company is dependent on the continuing support of
Cardtronics Inc., to enable it to meet its liabilities as they
fall due. Cardtronics Inc. has indicated that it will continue
to provide financial support and therefore the Directors believe
that it is appropriate for the consolidated financial statements
to be prepared on the going concern basis.
|
|
24.
|
Reconciliation of differences between UK GAAP and
US GAAP
|
The Groups financial statements have been prepared in
accordance with UK GAAP, which differ in certain respects from
accounting principles generally accepted in the United States of
America (US GAAP). The differences which have a
significant effect on the consolidated net profit/(loss),
shareholders equity and the financial position of the
Group are set out below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Net profit in accordance with UK GAAP
|
|
|
|
|
|
|
898
|
|
|
|
81
|
|
US GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations:
|
|
|
(a
|
)
|
|
|
|
|
|
|
|
|
|
Reversal of goodwill amortized under UK GAAP but not US GAAP
|
|
|
|
|
|
|
806
|
|
|
|
771
|
|
|
Amortization of intangible assets recognized under US GAAP but
not UK GAAP
|
|
|
|
|
|
|
(1,456
|
)
|
|
|
(1,743
|
)
|
Vacation accrual
|
|
|
(b
|
)
|
|
|
(11
|
)
|
|
|
(4
|
)
|
Derivative financial instruments
|
|
|
(c
|
)
|
|
|
(63
|
)
|
|
|
131
|
|
Deferred tax effect of US GAAP adjustments
|
|
|
(d
|
)
|
|
|
459
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) in accordance with US GAAP
|
|
|
|
|
|
|
633
|
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
|
|
|
F-71
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
24.
Reconciliation of
differences between UK GAAP and US GAAP
(Continued)
The following is a reconciliation of total equity from UK GAAP
to US GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Total equity shareholders funds in accordance with UK GAAP
|
|
|
|
|
|
|
1,929
|
|
|
|
1,031
|
|
US GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations:
|
|
|
(a
|
)
|
|
|
|
|
|
|
|
|
|
Reversal of goodwill amortized under UK GAAP but not US GAAP
|
|
|
|
|
|
|
1,577
|
|
|
|
771
|
|
|
Amortization of intangible assets recognized under US GAAP but
not UK GAAP
|
|
|
|
|
|
|
(3,199
|
)
|
|
|
(1,743
|
)
|
Vacation accrual
|
|
|
(b
|
)
|
|
|
(15
|
)
|
|
|
(4
|
)
|
Derivative financial instruments
|
|
|
(c
|
)
|
|
|
68
|
|
|
|
131
|
|
Deferred tax effect of US GAAP adjustments
|
|
|
(d
|
)
|
|
|
943
|
|
|
|
484
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity in accordance with US GAAP
|
|
|
|
|
|
|
1,303
|
|
|
|
670
|
|
|
|
|
|
|
|
|
|
|
|
The following is a rollforward of total shareholders
equity in accordance with US GAAP:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Balance in accordance with US GAAP, beginning of year
|
|
|
670
|
|
|
|
|
|
Issuance of share equity
|
|
|
|
|
|
|
950
|
|
Net income/(loss) in accordance with US GAAP
|
|
|
633
|
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
Balance in accordance with US GAAP, end of year
|
|
|
1,303
|
|
|
|
670
|
|
|
|
|
|
|
|
|
(a) Business combinations
|
|
|
Under FRS 10, UK GAAP requires that goodwill should be
amortised over its useful economic life, which is generally
presumed not to exceed 20 years. Accordingly, under UK GAAP
goodwill is being amortized on a straight-line basis over an
estimated useful life of 20 years.
|
|
|
Under US GAAP, Statement of Financial Accounting Standards
(SFAS) No. 142,
Goodwill and Other
Intangible Assets
(SFAS 142), requires that
goodwill and intangibles with an indefinite life no longer be
amortised but instead subject to an impairment test at least
annually, and more frequently if conditions warrant.
Accordingly, under US GAAP, no goodwill amortization was
recorded during 2004 and 2003. Goodwill impairment test under
US GAAP has two steps. The first identifies potential
impairments and the second calculates the possible impairment
loss. The Group compared its estimated fair value with the
carrying value of the Groups net assets, including
goodwill, as at 31 December 2004 and 2003, and determined
that no goodwill impairment existed as at such dates.
|
|
|
|
Recognition of intangible assets other than
goodwill
|
|
|
|
UK GAAP requires intangible assets to be separately recognised
in a business combination only if (i) they can be disposed
of separately without disposing of the business of the entity,
and (ii) if their value can be measured reliably on initial
measurement.
|
F-72
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
Under US GAAP, SFAS No. 141,
Business Combinations
(SFAS 141), mandates the recognition of
intangible assets in a business combination if (i) they
arise from contractual rights or other legal rights, or
(ii) they are capable of being separated or divided from
the acquired entity and sold, transferred, licensed, rented or
otherwise exchanged. Under SFAS 141, the Group established
an additional £8,100,000 in intangible assets and a
corresponding decrease in the goodwill, as part of the purchase
price allocation process. Such amounts comprised of
£7,800,000 in acquired merchant contract relationships and
£300,000 for a covenant not to compete.
|
|
|
Under US GAAP, SFAS 142 requires that intangible assets
with finite lives be amortized over their estimated useful lives
in a manner that reflects the pattern in which the economic
benefits of such intangible assets are expected to be consumed
or otherwise used up. Accordingly, under US GAAP, the Group is
amortizing the above merchant contract relationship intangible
on an accelerated basis over an estimated useful life of
approximately 12 years, and the non-compete covenant on a
straight-line basis over a period of three years. Such
amortization expense totalled £1,456,000 and
£1,743,000 in 2004 and 2003, respectively.
|
(b) Vacation accrual
|
|
|
Under UK GAAP, there is no comprehensive requirement to accrue
for vacation pay or other compensated absences during the same
accounting period, although accrual in certain industries where
it is common for all staff to take holiday at the same time is
not prohibited.
|
|
|
Under US GAAP, in accordance with SFAS No. 43,
Accounting for Compensated Absences
(SFAS 43), an employer should accrue a
liability for employees compensation for future absences
if all of the following conditions are met: (i) the
employers obligation relating to employees rights to
receive compensation for future absences is attributable to
employees services already rendered; (ii) the
obligation relates to rights that vest or accumulate;
(iii) payment of the compensation is probable; and
(iv) the amount can be reasonably estimated. Under US GAAP,
the vacation accruals relating to compensated absences were
£15,000 and £4,000 as at 31 December 2004 and
2003, respectively.
|
(c) Derivative financial
instruments
|
|
|
Under UK GAAP, payments made or received under the Groups
interest rate swap agreement are reflected as an increase or
decrease to interest expense when incurred, and the fair market
value of the swap is not reflected in the Groups
consolidated balance sheet.
|
|
|
Under US GAAP, the Group accounts for derivative financial
instruments in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
(SFAS 133). SFAS 133 requires that all
derivative instruments be recognized as assets or liabilities in
the consolidated balance sheet and measured at fair value,
regardless of the purpose or intent in holding them. Changes in
the fair value of derivative instruments are recognized
periodically either in earnings or equity (as a component of
other comprehensive income or loss), depending on whether the
derivative is designated as a hedge of changes in fair value or
cash flows. For derivatives designated as a fair value hedges,
changes in fair value of the hedged item and the derivative are
recognized currently in earnings. For derivatives designated as
cash flow hedges, fair value changes of the effective portion of
the hedging instrument are recognized in accumulated other
comprehensive income or loss in the consolidated balance sheet
until the hedged item is recognized in earnings. The ineffective
portion of the fair value changes is recognized in earnings
immediately. Changes in the fair value of the underlying debt
instrument are not recognized in net income or equity.
|
|
|
The Group has not designated its interest rate swap transaction
as a hedge under SFAS 133. As a result, under US GAAP, such
transaction is reflected in the consolidated balance sheet at
its fair market value,
|
F-73
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
with any resulting changes in that value being recorded in
earnings in the applicable period. As at 31 December 2004
and 2003, derivative assets of £68,000 and £131,000,
respectively, were reflected in the Groups consolidated
balance sheet. In 2004, a £63,000 loss was included in the
Groups earnings reflecting the change in the fair value of
such swap during that period. In 2003, such change in value
resulted in a gain of £131,000.
|
(d) Deferred income taxes
|
|
|
Under UK GAAP, the Group provides for deferred taxes on an
undiscounted basis in respect of timing differences that have
originated but not reversed as at the balance sheet date. A net
deferred tax asset is regarded as recoverable and therefore
recognized only when, on the basis of available evidence, it is
regarded as more likely than not that there will be suitable
taxable profits against which to recover carried forward tax
losses and from which the future reversal of underlying timing
differences can be deducted.
|
|
|
Under US GAAP, deferred taxation is provided for all temporary
differences (differences between the carrying value of assets
and liabilities and their corresponding tax bases) on a full
liability basis. Deferred tax assets are also recognized (net of
a valuation allowance) to the extent that it is more likely than
not that the benefit will be realized. Under US GAAP,
discounting of deferred taxes is prohibited. Under US GAAP, the
Group has recognized additional deferred taxes for the temporary
differences resulting from the US GAAP adjustments
(a) (c) described above.
|
|
|
|
Classification differences
|
|
|
|
In addition to the differences between UK and US GAAP related to
the recognition and measurement of transactions by the Company,
there are also a number of differences in the manner in which
items are classified in the consolidated profit and loss account
and consolidated balance sheet. These classification differences
have no impact on net income or shareholders equity.
|
|
|
|
The format of a balance sheet prepared in accordance with UK
GAAP differs in certain respects from US GAAP. UK GAAP requires
assets to be presented in ascending order of liquidity in
accordance with the requirements of the Companies Act 1985,
whereas under US GAAP assets are presented in descending order
of liquidity. In addition current assets under UK GAAP include
amounts that fall due after more than one year, whereas under US
GAAP, such assets are classified as non-current assets.
|
|
|
|
Consolidated statement of cashflow
|
|
|
|
Cash flow under UK GAAP represents increases or decreases in
cash, which comprises cash in hand, deposits
repayable on demand and bank overdrafts. Under US GAAP, cash
flow represents increases or decreases in Cash and Cash
Equivalents, which includes short-term, highly liquid
investments with original maturities of less than three months,
and excludes overdrafts.
|
|
|
Under UK GAAP, cash flows are presented separately for operating
activities, returns on investment and servicing of finance,
taxation, capital expenditure and financial investment,
acquisitions and disposals, equity dividends, management of
liquid resources and financing activities. Under US GAAP, only
three categories of cash flow activity are presented, being cash
flows relating to operating activities, investing activities and
financing activities. Cash flows from taxation and returns on
investments and servicing of finance are, with the exception of
servicing of shareholder finance, included as operating.
|
F-74
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE FINANCIAL STATEMENTS (Continued)
|
|
|
The following statements summarize the statements of cash flows
as if they had been presented in accordance with US GAAP, and
include the adjustments that reconcile cash and cash equivalents
under US GAAP to cash on demand reported under UK GAAP.
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
|
|
|
Year ended
|
|
|
|
31 December,
|
|
|
31 December,
|
|
|
|
2004
|
|
|
2003
|
|
|
|
£000
|
|
|
£000
|
|
Net cash provided by operating activities
|
|
|
3,534
|
|
|
|
4,306
|
|
Net cash (used in)/provided by investing activities
|
|
|
(3,185
|
)
|
|
|
(16,652
|
)
|
Net cash (used in)/provided by financing activities
|
|
|
(1,062
|
)
|
|
|
16,627
|
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(713
|
)
|
|
|
4,281
|
|
Cash and cash equivalents under US GAAP at beginning of period
|
|
|
4,281
|
|
|
|
|
|
Cash and cash equivalents under US GAAP at end of period
|
|
|
3,568
|
|
|
|
4,281
|
|
Short-term investments with original maturities of less than
three months
|
|
|
|
|
|
|
3,200
|
|
Cash on demand under UK GAAP at end of year
|
|
|
3,568
|
|
|
|
1,081
|
|
|
|
|
New accounting pronouncements not yet adopted
|
|
|
|
|
(a)
|
Interpretation 47, Accounting for Conditional Asset
Retirement Obligations, an interpretation of FASB Statement
No. 143.
|
|
|
|
In March 2005, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No.
(FIN) 47, Accounting for Conditional
Asset Retirement Obligations an Interpretation of
FASB Statement No. 143. This Interpretation clarifies
that the term conditional asset retirement obligation as used in
SFAS 143, refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and (or) method of
settlement. Thus, the timing and (or) method of settlement
may be conditional on a future event. Accordingly, an entity is
required to recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. The fair value of a
liability for the conditional asset retirement obligation should
be recognized when incurred generally upon
acquisition, construction, or development and (or) through
the normal operation of the asset. Uncertainty about the timing
and (or) method of settlement of a conditional asset
retirement obligation should be factored into the measurement of
the liability when sufficient information exists. SFAS 143
acknowledges that in some cases, sufficient information may not
be available to reasonably estimate the fair value of an asset
retirement obligation. This Interpretation also clarifies when
an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. This
Interpretation is effective no later than the end of fiscal
years ending after December 15, 2005. The Group is
currently assessing the impact FIN 47 may have on its
financial position and results of operations.
|
|
|
|
|
(b)
|
FSP
FAS 143-1,
Accounting for Electronic Equipment Waste
Obligations.
|
|
|
|
In June 2005, the FASB issued FSP
FAS 143-1,
Accounting for Electronic Equipment Waste
Obligations, which addresses the accounting for
obligations associated with Directive 2002/96/ EC, Waste
Electrical and Electronic Equipment (the Directive),
which was adopted by the European Union. FSP
FAS 143-1
provides
guidance on how to account for the effects of the Directive with
respect to historical waste, waste associated with products
placed on the market on or before August 13, 2005. FSP
FAS 143-1
is
required to be applied to the later of the first reporting
period ending after June 8, 2005 or the date of the
adoption of the law by the applicable European Union member
country. The Group is currently evaluating the effect that the
adoption of FSP
FAS 143-1
will
have on its consolidated results of operations and financial
condition.
|
F-75
BANK MACHINE (ACQUISITIONS) LIMITED
Interim Condensed Consolidated Financial Statements
3 Months Ended 31 March 2005
F-76
BANK MACHINE (ACQUISITIONS) LIMITED
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
Note
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Turnover
|
|
|
|
|
|
|
3,989
|
|
|
|
3,485
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
|
|
|
|
390
|
|
|
|
600
|
|
Net interest payable and similar charges
|
|
|
|
|
|
|
(380
|
)
|
|
|
(400
|
)
|
|
|
|
|
|
|
|
|
|
|
Profit on ordinary activities before taxation
|
|
|
|
|
|
|
10
|
|
|
|
200
|
|
Tax on profit on ordinary activities
|
|
|
3
|
|
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
Net Profit/(loss) for the financial period
|
|
|
9
|
|
|
|
(56
|
)
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
All turnover and operating profit for the periods presented
arises from continuing operations.
There is no difference between the results as stated above and
as stated on a historical cost basis.
There are no recognised gains or losses in either the current or
prior periods other than as stated above.
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-77
BANK MACHINE (ACQUISITIONS) LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 March,
|
|
|
31 December,
|
|
|
|
Note
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Fixed assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
4
|
|
|
|
14,436
|
|
|
|
14,638
|
|
Tangible assets
|
|
|
5
|
|
|
|
7,362
|
|
|
|
6,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,798
|
|
|
|
21,528
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
|
|
|
|
48
|
|
|
|
47
|
|
Debtors: amounts due within one year
|
|
|
|
|
|
|
1,937
|
|
|
|
1,446
|
|
Debtors: amounts due after more than one year
deferred tax
|
|
|
|
|
|
|
507
|
|
|
|
521
|
|
Cash at bank and in hand
|
|
|
|
|
|
|
2,886
|
|
|
|
3,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,378
|
|
|
|
5,582
|
|
Creditors:
amounts falling due within one year
|
|
|
6
|
|
|
|
(5,584
|
)
|
|
|
(5,514
|
)
|
|
|
|
|
|
|
|
|
|
|
Net current (liabilities)/assets
|
|
|
|
|
|
|
(206
|
)
|
|
|
68
|
|
|
|
|
|
|
|
|
|
|
|
Total assets less current liabilities
|
|
|
|
|
|
|
21,592
|
|
|
|
21,596
|
|
Creditors:
amounts falling due after more than one year
|
|
|
7
|
|
|
|
(19,054
|
)
|
|
|
(19,025
|
)
|
Provisions for liabilities and charges
|
|
|
8
|
|
|
|
(665
|
)
|
|
|
(642
|
)
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
|
|
|
|
|
1,873
|
|
|
|
1,929
|
|
|
|
|
|
|
|
|
|
|
|
Capital and reserves
|
|
|
|
|
|
|
|
|
|
|
|
|
Called up share capital
|
|
|
|
|
|
|
950
|
|
|
|
950
|
|
Profit and loss account
|
|
|
|
|
|
|
923
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
Total equity shareholders funds
|
|
|
9
|
|
|
|
1,873
|
|
|
|
1,929
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-78
BANK MACHINE (ACQUISITIONS) LIMITED
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
Note
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Net cash inflow from operating activities
|
|
|
10(a)
|
|
|
|
1,055
|
|
|
|
1,248
|
|
Returns on investments and servicing of finance
|
|
|
10(b)
|
|
|
|
(122
|
)
|
|
|
39
|
|
Taxation
|
|
|
10(b)
|
|
|
|
(83
|
)
|
|
|
|
|
Capital expenditure and financial investment
|
|
|
10(b)
|
|
|
|
(1,532
|
)
|
|
|
(722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(682
|
)
|
|
|
565
|
|
Management of liquid resources
|
|
|
10(b)
|
|
|
|
|
|
|
|
(600
|
)
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash
|
|
|
|
|
|
|
(682
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Three
|
|
|
|
months
|
|
|
months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Decrease in cash
|
|
|
(682
|
)
|
|
|
(35
|
)
|
Cash outflow/(inflow) from decrease/(increase) in debt and lease
financing
|
|
|
|
|
|
|
|
|
Cash used to increase liquid resources
|
|
|
|
|
|
|
600
|
|
|
|
|
|
|
|
|
Change in net debt resulting from cash flows
|
|
|
(682
|
)
|
|
|
565
|
|
Movement in un-amortised element of finance costs
|
|
|
(33
|
)
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
Movement in net debt in the period
|
|
|
(715
|
)
|
|
|
530
|
|
Net debt at start of year
|
|
|
(17,204
|
)
|
|
|
(16,591
|
)
|
|
|
|
|
|
|
|
Net debt at 31 March
|
|
|
(17,919
|
)
|
|
|
(16,061
|
)
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the condensed
consolidated financial statements.
F-79
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (Unaudited)
|
|
|
Bank Machine (Acquisitions) Limited (the Company)
together with its subsidiary, Bank Machine Limited (collectively
with the Company, the Group) is an independent
Automated Teller Machine (ATM) operator with approximately
1,000 ATMs located throughout the United Kingdom. On
17 January, 2003 the Company acquired its subsidiary Bank
Machine Limited from Euronet Worldwide, Inc., the operations of
which are presented in these financial statements. As at the
date of these financial statements the Company was a wholly
owned subsidiary of Bank Machine (Holdings) Limited.
|
|
|
|
The accompanying condensed consolidated financial statements are
unaudited and are prepared on the basis of the accounting
policies as set forth in the Groups financial statements
for the year ended 31 December, 2004. These financial
statements reflect all adjustments, consisting of normal
recurring adjustments, which are, in the opinion of management,
necessary to present the financial results for these interim
periods fairly. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with applicable UK accounting standards (UK GAAP)
have been condensed or omitted. Accordingly, these financial
statements should be read in conjunction with the financial
statements and related notes thereto for the year ended
31 December, 2004. Interim results are not necessarily
indicative of results to be expected for the full year.
|
|
|
The 31 December, 2004 consolidated balance sheet was
derived from audited financial statements but does not include
all disclosures required by UK GAAP. However, the Company
believes that the disclosures are adequate to make the
information presented not misleading.
|
|
|
3.
|
Tax on profit on ordinary activities
|
|
|
(a)
|
Analysis of taxation charge:
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
UK Corporation tax on profits for the period
|
|
|
52
|
|
|
|
49
|
|
Deferred tax charge
|
|
|
14
|
|
|
|
17
|
|
|
|
|
|
|
|
|
Total charge
|
|
|
66
|
|
|
|
66
|
|
|
|
|
|
|
|
|
F-80
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
|
|
3.
|
Tax on profit on ordinary activities
(continued)
|
|
|
(b)
|
Factors affecting the tax charge for the period:
|
The tax assessed for the year is higher than the standard rate
of corporation tax in the United Kingdom (30%). The differences
are explained below:
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 March
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Profit on ordinary activities before tax
|
|
|
10
|
|
|
|
200
|
|
|
|
|
|
|
|
|
Profit on ordinary activities multiplied by standard rate of
Corporation tax in the UK of 30%
|
|
|
3
|
|
|
|
60
|
|
Effects of:
|
|
|
|
|
|
|
|
|
Utilisation of tax losses brought forward
|
|
|
|
|
|
|
(64
|
)
|
Depreciation in excess of capital allowances
|
|
|
14
|
|
|
|
17
|
|
Expenses not deductible for tax purposes
|
|
|
35
|
|
|
|
36
|
|
|
|
|
|
|
|
|
Total current tax charge
|
|
|
52
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
4.
|
Intangible fixed assets
|
|
|
|
|
|
|
|
£000
|
|
Cost:
|
|
|
|
|
At 1 January 2005 and at 31 March 2005
|
|
|
16,215
|
|
|
|
|
|
Amortisation:
|
|
|
|
|
At 1 January 2005
|
|
|
(1,577
|
)
|
Charge for the period
|
|
|
(202
|
)
|
|
|
|
|
At 31 March 2005
|
|
|
(1,779
|
)
|
|
|
|
|
Net book value:
|
|
|
|
|
At 31 March 2005
|
|
|
14,436
|
|
|
|
|
|
At 31 December 2004
|
|
|
14,638
|
|
|
|
|
|
Intangible fixed assets consists of goodwill arising on the
acquisition of Bank Machine Ltd on 17 January, 2003. It is
being amortised on a straight-line basis over 20 years.
F-81
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixture and
|
|
|
|
|
|
|
|
|
|
fittings &
|
|
|
|
|
|
|
|
|
|
computer
|
|
|
Motor
|
|
|
|
|
|
ATMs
|
|
|
equipment
|
|
|
vehicles
|
|
|
Total
|
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
|
£000
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2005
|
|
|
9,902
|
|
|
|
1,139
|
|
|
|
147
|
|
|
|
11,188
|
|
Additions
|
|
|
853
|
|
|
|
13
|
|
|
|
11
|
|
|
|
877
|
|
Disposals
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
(74
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2005
|
|
|
10,681
|
|
|
|
1,152
|
|
|
|
158
|
|
|
|
11,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2005
|
|
|
(3,415
|
)
|
|
|
(865
|
)
|
|
|
(18
|
)
|
|
|
(4,298
|
)
|
Depreciation on disposals
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
37
|
|
Charge for the period
|
|
|
(324
|
)
|
|
|
(35
|
)
|
|
|
(9
|
)
|
|
|
(368
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2005
|
|
|
(3,702
|
)
|
|
|
(900
|
)
|
|
|
(27
|
)
|
|
|
(4,629
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2005
|
|
|
6,979
|
|
|
|
252
|
|
|
|
131
|
|
|
|
7,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 December 2004
|
|
|
6,487
|
|
|
|
274
|
|
|
|
129
|
|
|
|
6,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Creditors: amounts falling due within one year
|
|
|
|
|
|
|
|
|
|
|
|
31 March
|
|
|
31 December
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Bank overdraft and loans
|
|
|
1,752
|
|
|
|
1,747
|
|
Trade creditors
|
|
|
1,666
|
|
|
|
2,368
|
|
Other taxation and social security
|
|
|
66
|
|
|
|
49
|
|
Corporation tax
|
|
|
174
|
|
|
|
162
|
|
Other creditors
|
|
|
304
|
|
|
|
61
|
|
Accruals
|
|
|
1,622
|
|
|
|
1,127
|
|
|
|
|
|
|
|
|
|
|
|
5,584
|
|
|
|
5,514
|
|
|
|
|
|
|
|
|
|
|
7.
|
Creditors: amounts falling due after more than one
year
|
|
|
|
|
|
|
|
|
|
|
|
31 March
|
|
|
31 December
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Total loan facilities
|
|
|
9,187
|
|
|
|
9,163
|
|
Shareholder fixed rate subordinated unsecured Loan Notes
|
|
|
9,867
|
|
|
|
9,862
|
|
|
|
|
|
|
|
|
|
|
|
19,054
|
|
|
|
19,025
|
|
|
|
|
|
|
|
|
F-82
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
|
|
|
|
|
|
|
|
|
Total loan facilities
|
|
£000
|
|
|
£000
|
|
Amounts falling due:
|
|
|
|
|
|
|
|
|
In one year or less, or on demand
|
|
|
1,875
|
|
|
|
1,875
|
|
Between one and two years
|
|
|
2,437
|
|
|
|
2,437
|
|
Between two and five years
|
|
|
6,938
|
|
|
|
6,938
|
|
In five years or more
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,250
|
|
|
|
11,250
|
|
Less: issue costs un-amortised
|
|
|
(293
|
)
|
|
|
(322
|
)
|
|
|
|
|
|
|
|
|
|
|
10,957
|
|
|
|
10,928
|
|
Less: included in creditors falling due within one year,
including amortisation of issue costs
|
|
|
(1,770
|
)
|
|
|
(1,765
|
)
|
|
|
|
|
|
|
|
|
|
|
9,187
|
|
|
|
9,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate subordinated unsecured Loan Notes
|
|
£000
|
|
|
£000
|
|
Amounts falling due:
|
|
|
|
|
|
|
|
|
In one year or less, or on demand
|
|
|
|
|
|
|
|
|
Between one and two years
|
|
|
|
|
|
|
|
|
Between two and five years
|
|
|
|
|
|
|
|
|
In five years or more
|
|
|
9,952
|
|
|
|
9,951
|
|
|
|
|
|
|
|
|
|
|
|
9,952
|
|
|
|
9,951
|
|
Less: issue costs un-amortised
|
|
|
(103
|
)
|
|
|
(107
|
)
|
|
|
|
|
|
|
|
|
|
|
9,849
|
|
|
|
9,844
|
|
Add: included in creditors falling due within one year,
including amortisation of issue costs
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
9,867
|
|
|
|
9,862
|
|
|
|
|
|
|
|
|
|
|
8.
|
Provisions for liabilities and charges
|
The following represents the amount of the retirement obligation
at the beginning and end of the period ended:
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
ended
|
|
|
|
|
|
31 March
|
|
|
31 December
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Beginning balance at 1 January
|
|
|
642
|
|
|
|
554
|
|
Liabilities incurred during the year
|
|
|
25
|
|
|
|
126
|
|
Liabilities settled during the year
|
|
|
(16
|
)
|
|
|
(85
|
)
|
Accretion of interest
|
|
|
14
|
|
|
|
47
|
|
|
|
|
|
|
|
|
Ending balance at 31 March/31 December
|
|
|
665
|
|
|
|
642
|
|
|
|
|
|
|
|
|
F-83
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
|
|
9.
|
Reconciliation of movement in equity shareholders
funds
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
|
|
|
months
|
|
|
For the year
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 December
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
(Loss)/profit for the period/year
|
|
|
(56
|
)
|
|
|
898
|
|
|
|
|
|
|
|
|
Net movement in equity shareholders funds
|
|
|
(56
|
)
|
|
|
898
|
|
Opening equity shareholders funds
|
|
|
1,929
|
|
|
|
1,031
|
|
|
|
|
|
|
|
|
Closing equity shareholders funds
|
|
|
1,873
|
|
|
|
1,929
|
|
|
|
|
|
|
|
|
|
|
10.
|
Notes to the condensed consolidated cash flow
statements
|
|
|
(a)
|
Reconciliation of operating profit to net cash inflow from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Three
|
|
|
|
months
|
|
|
months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 March
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Operating profit
|
|
|
390
|
|
|
|
600
|
|
Depreciation and amortisation
|
|
|
570
|
|
|
|
513
|
|
Loss on disposal of tangible fixed assets
|
|
|
22
|
|
|
|
30
|
|
Increase in debtors
|
|
|
(491
|
)
|
|
|
(206
|
)
|
Increase in stocks
|
|
|
(1
|
)
|
|
|
|
|
Increase in creditors
|
|
|
565
|
|
|
|
311
|
|
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
|
|
1,055
|
|
|
|
1,248
|
|
|
|
|
|
|
|
|
F-84
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
|
|
10.
|
Notes to the condensed consolidated cash flow statements
(Continued)
|
|
|
(b)
|
Analysis of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Three
|
|
|
|
months
|
|
|
months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 March
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Returns on investments and servicing of finance
|
|
|
|
|
|
|
|
|
Interest received
|
|
|
69
|
|
|
|
39
|
|
Interest paid
|
|
|
(191
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(122
|
)
|
|
|
39
|
|
|
|
|
|
|
|
|
Taxation
|
|
|
|
|
|
|
|
|
Corporation tax paid
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure and financial investment
|
|
|
|
|
|
|
|
|
Payment to acquire tangible fixed assets
|
|
|
(852
|
)
|
|
|
(70
|
)
|
Payment of capital creditors
|
|
|
(695
|
)
|
|
|
(711
|
)
|
Receipts from sales of tangible fixed assets
|
|
|
15
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
(1,532
|
)
|
|
|
(722
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
|
|
|
Three
|
|
|
|
months
|
|
|
months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 March
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Management of Liquid Resources
|
|
|
|
|
|
|
|
|
Net transfers to money markets
|
|
|
|
|
|
|
(600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(600
|
)
|
|
|
|
|
|
|
|
On 17 May 2005, the Company was acquired by Cardtronics, Inc., a
U.S. based owner and operator of ATMs, for approximately
£51,464,000 in total consideration. Such consideration was
comprised of £28,319,000 in cash, £1,595,000 in
equity, and the assumption of the Companys outstanding
debt obligations as of such date totalling £21,550,000.
The Company is dependent on the continuing support of
Cardtronics, Inc., to enable it to meet its liabilities as they
fall due. Cardtronics, Inc. has indicated that it will continue
to provide financial support and therefore the Directors believe
that it is appropriate for the consolidated financial statements
to be prepared on the going concern basis.
|
|
12.
|
Reconciliation of Differences Between UK GAAP and
US GAAP
|
The Groups unaudited condensed consolidated financial
statements have been prepared in accordance with UK GAAP, which
differ in certain significant respects from accounting
principles generally accepted in the United States of America
(US GAAP). Summaries of the significant differences
as they apply to the Group are set forth in Note 24 to the
Groups consolidated financial statements for the year ended
F-85
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
21 December, 2004. The differences which have a significant
effect on the consolidated net income (loss), shareholders
equity and the financial position of the Group are set out below.
Effect on net profit (loss) of material differences between
UK and US GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
|
|
ended
|
|
|
ended
|
|
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Net (loss)/profit in accordance with UK GAAP
|
|
|
|
|
|
|
(56
|
)
|
|
|
133
|
|
US GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of goodwill amortized under UK GAAP but not US GAAP
|
|
|
|
|
|
|
202
|
|
|
|
202
|
|
|
Amortization of intangible assets recognized under US GAAP but
not UK GAAP
|
|
|
|
|
|
|
(289
|
)
|
|
|
(364
|
)
|
Vacation accrual
|
|
|
|
|
|
|
(16
|
)
|
|
|
(13
|
)
|
Derivative financial instruments
|
|
|
|
|
|
|
(21
|
)
|
|
|
9
|
|
Deferred tax effect of US GAAP adjustments
|
|
|
|
|
|
|
97
|
|
|
|
110
|
|
|
|
|
|
|
|
|
|
|
|
Net profit in accordance with US GAAP
|
|
|
|
|
|
|
(83
|
)
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation of total equity from UK GAAP
to US GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31 March,
|
|
|
31 December,
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
£000
|
|
|
£000
|
|
Total equity shareholders funds in accordance with
UK GAAP
|
|
|
|
|
|
|
1,873
|
|
|
|
1,929
|
|
US GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business combinations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of goodwill amortized under UK GAAP but not
US GAAP
|
|
|
|
|
|
|
1,779
|
|
|
|
1,577
|
|
|
Amortization of intangible assets recognized under US GAAP
but not UK GAAP
|
|
|
|
|
|
|
(3,488
|
)
|
|
|
(3,199
|
)
|
Vacation accrual
|
|
|
|
|
|
|
(31
|
)
|
|
|
(15
|
)
|
Derivative financial instruments
|
|
|
|
|
|
|
47
|
|
|
|
68
|
|
Deferred tax effect of US GAAP adjustments
|
|
|
|
|
|
|
1,041
|
|
|
|
944
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity in accordance with US GAAP
|
|
|
|
|
|
|
1,221
|
|
|
|
1,304
|
|
|
|
|
|
|
|
|
|
|
|
The following is a rollforward of total shareholders
equity in accordance with US GAAP:
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
Three months
|
|
|
|
ended
|
|
|
ended
|
|
|
|
31 March
|
|
|
31 March
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
Balance in accordance with US GAAP, beginning of year/ period
|
|
|
1,304
|
|
|
|
670
|
|
Net profit in accordance with US GAAP
|
|
|
(83
|
)
|
|
|
77
|
|
|
|
|
|
|
|
|
Balance in accordance with US GAAP, end of year/ period
|
|
|
1,221
|
|
|
|
747
|
|
|
|
|
|
|
|
|
F-86
BANK MACHINE (ACQUISITIONS) LIMITED
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited) (Continued)
The following statements summarize the statements of cash flows
as if they had been presented in accordance with US GAAP, and
include the adjustments that reconcile cash and cash equivalents
under US GAAP to cash on demand reported under UK GAAP.
|
|
|
|
|
|
|
|
|
|
|
31 March,
|
|
|
31 March,
|
|
|
|
2005
|
|
|
2004
|
|
|
|
£000
|
|
|
£000
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
850
|
|
|
|
1,287
|
|
Net cash used in investing activities
|
|
|
(837
|
)
|
|
|
(11
|
)
|
Net cash (used in)/provided by financing activities
|
|
|
(695
|
)
|
|
|
(711
|
)
|
Net (decrease)/increase in cash and cash equivalents
|
|
|
(682
|
)
|
|
|
565
|
|
Cash and cash equivalents under US GAAP at beginning of
year/period
|
|
|
3,568
|
|
|
|
4,281
|
|
Cash and cash equivalents under US GAAP at end of period
|
|
|
2,886
|
|
|
|
4,846
|
|
Short-term investments with original maturities of less than
three months
|
|
|
|
|
|
|
3,800
|
|
Cash on demand under UK GAAP at end of period
|
|
|
2,886
|
|
|
|
1,046
|
|
New accounting pronouncements not yet adopted
(a) Interpretation 47, Accounting for
Conditional Asset Retirement Obligations, an interpretation of
FASB Statement No. 143.
In March 2005, the Financial Accounting Standards Board
(FASB) issued FASB Interpretation No.
(FIN) 47, Accounting for Conditional
Asset Retirement Obligations an Interpretation of
FASB Statement No. 143. This Interpretation clarifies
that the term conditional asset retirement obligation as used in
SFAS 143, refers to a legal obligation to perform an asset
retirement activity in which the timing and (or) method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and (or) method of
settlement. Thus, the timing and (or) method of settlement
may be conditional on a future event. Accordingly, an entity is
required to recognize a liability for the fair value of a
conditional asset retirement obligation if the fair value of the
liability can be reasonably estimated. The fair value of a
liability for the conditional asset retirement obligation should
be recognized when incurred generally upon
acquisition, construction, or development and (or) through
the normal operation of the asset. Uncertainty about the timing
and (or) method of settlement of a conditional asset
retirement obligation should be factored into the measurement of
the liability when sufficient information exists. SFAS 143
acknowledges that in some cases, sufficient information may not
be available to reasonably estimate the fair value of an asset
retirement obligation. This Interpretation also clarifies when
an entity would have sufficient information to reasonably
estimate the fair value of an asset retirement obligation. This
Interpretation is effective no later than the end of fiscal
years ending after December 15, 2005. The Group is
currently assessing the impact FIN 47 may have on its
financial position and results of operations.
(b) FSP FAS 143-1, Accounting for Electronic
Equipment Waste Obligations.
In June 2005, the FASB issued FSP FAS 143-1, Accounting
for Electronic Equipment Waste Obligations, which
addresses the accounting for obligations associated with
Directive 2002/96/ EC, Waste Electrical and Electronic Equipment
(the Directive), which was adopted by the European
Union. FSP FAS 143-1 provides guidance on how to account for the
effects of the Directive with respect to historical waste, waste
associated with products placed on the market on or before
August 13, 2005. FSP FAS 143-1 is required to be applied to
the later of the first reporting period ending after
June 8, 2005 or the date of the adoption of the law by the
applicable European Union member country. The Group is currently
evaluating the effect that the adoption of FSP FAS 143-1 will
have on its consolidated results of operations and financial
condition.
F-87
ATM COMPANY
Consolidated Financial Statements
December 31, 2002 and 2003 and June 30, 2004
(With Independent Auditors Report Thereon)
F-88
Independent Auditors Report
To the Board of Directors
Cardtronics, Inc.:
We have audited the accompanying consolidated balance sheets of
ATM Company (as defined in footnote 1) as of
December 31, 2002 and 2003, and June 30, 2004, and the
related consolidated statements of operations, in
stockholders equity (deficit), and cash flows for each of
the years in the two-year period ended December 31, 2003,
and for the six-month period ended June 30, 2004. These
consolidated financial statements are the responsibility of ATM
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purposes of expressing an opinion
on the effectiveness of ATM Companys internal control over
financial reporting. Accordingly, we express no such opinion. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of ATM Company as of December 31, 2002 and 2003,
and June 30, 2004, and the results of its operations and
its cash flows for each of the years in the two-year period
ended December 31, 2003, and for the six-month period ended
June 30, 2004, in conformity with accounting principles
generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial
statements, ATM Company adopted the provisions of Statement of
Financial Accounting Standards No. 143,
Accounting for
Asset Retirement Obligations
on January 1, 2003.
/s/
KPMG LLP
Houston, Texas
May 10, 2005
F-89
ATM COMPANY
CONSOLIDATED BALANCE SHEETS
As of December 31, 2002 and 2003 and June 30, 2004
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,391
|
|
|
$
|
11,081
|
|
|
$
|
9,991
|
|
|
Accounts receivable, net of allowance for doubtful accounts of
$614, $340, and $524, respectively
|
|
|
3,273
|
|
|
|
4,816
|
|
|
|
4,868
|
|
|
Notes receivable, current
|
|
|
70
|
|
|
|
30
|
|
|
|
32
|
|
|
Inventory
|
|
|
279
|
|
|
|
306
|
|
|
|
325
|
|
|
Prepaid, deferred costs and other current assets
|
|
|
411
|
|
|
|
90
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
8,424
|
|
|
|
16,323
|
|
|
|
15,351
|
|
Notes receivable, non-current
|
|
|
71
|
|
|
|
41
|
|
|
|
21
|
|
Property and equipment, net
|
|
|
13,901
|
|
|
|
14,481
|
|
|
|
18,279
|
|
Intangible assets, net
|
|
|
12,804
|
|
|
|
17,324
|
|
|
|
14,357
|
|
Goodwill, net
|
|
|
69,852
|
|
|
|
69,852
|
|
|
|
69,852
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
105,052
|
|
|
$
|
118,021
|
|
|
$
|
117,860
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity/(Deficit)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
6,334
|
|
|
$
|
6,630
|
|
|
$
|
5,794
|
|
|
Payable to affiliated party
|
|
|
86,482
|
|
|
|
100,794
|
|
|
|
103,320
|
|
|
Accrued liabilities
|
|
|
4,901
|
|
|
|
7,588
|
|
|
|
8,257
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
97,717
|
|
|
|
115,012
|
|
|
|
117,371
|
|
Long-term liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations under capital leases
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities
|
|
|
|
|
|
|
1,436
|
|
|
|
1,747
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
97,746
|
|
|
|
116,448
|
|
|
|
119,118
|
|
Stockholders equity/(deficit)
|
|
|
7,306
|
|
|
|
1,573
|
|
|
|
(1,258
|
)
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity/(deficit)
|
|
$
|
105,052
|
|
|
$
|
118,021
|
|
|
$
|
117,860
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-90
ATM COMPANY
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2002 and 2003 and Six
Months Ended June 30, 2004
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Six Months
|
|
|
|
December 31,
|
|
|
Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM service revenues
|
|
$
|
97,612
|
|
|
$
|
112,530
|
|
|
$
|
55,329
|
|
|
ATM product revenues
|
|
|
4,644
|
|
|
|
3,511
|
|
|
|
1,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
102,256
|
|
|
|
116,041
|
|
|
|
56,905
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of ATM service revenues
|
|
|
84,207
|
|
|
|
97,001
|
|
|
|
49,698
|
|
|
Cost of ATM product revenues
|
|
|
3,647
|
|
|
|
3,561
|
|
|
|
983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
87,854
|
|
|
|
100,562
|
|
|
|
50,681
|
|
|
|
Gross profit (exclusive of depreciation shown separately below)
|
|
|
14,402
|
|
|
|
15,479
|
|
|
|
6,224
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
8,341
|
|
|
|
7,362
|
|
|
|
3,159
|
|
|
Depreciation and accretion expense
|
|
|
3,578
|
|
|
|
4,852
|
|
|
|
2,015
|
|
|
Amortization expense
|
|
|
4,829
|
|
|
|
6,185
|
|
|
|
2,835
|
|
|
Affiliated party expense
|
|
|
711
|
|
|
|
2,109
|
|
|
|
1,260
|
|
|
Restructuring expense
|
|
|
1,691
|
|
|
|
285
|
|
|
|
250
|
|
|
Equity in (earnings)/losses of unconsolidated affiliates
|
|
|
(96
|
)
|
|
|
(62
|
)
|
|
|
(310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
19,054
|
|
|
|
20,731
|
|
|
|
9,209
|
|
Operating loss
|
|
|
(4,652
|
)
|
|
|
(5,252
|
)
|
|
|
(2,985
|
)
|
Other (income)/expense
|
|
|
(110
|
)
|
|
|
305
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and cumulative effect of change in
accounting principle
|
|
|
(4,542
|
)
|
|
|
(5,557
|
)
|
|
|
(2,831
|
)
|
|
|
|
|
|
|
|
|
|
|
Income tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before cumulative effect of change in accounting principle
|
|
|
(4,542
|
)
|
|
|
(5,557
|
)
|
|
|
(2,831
|
)
|
Cumulative effect of change in accounting principle for asset
retirement obligations, net of related income tax benefit of $0
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,542
|
)
|
|
$
|
(5,733
|
)
|
|
$
|
(2,831
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-91
ATM COMPANY
STATEMENTS OF STOCKHOLDERS EQUITY/(DEFICIT)
For the Years Ended December 31, 2002 and 2003 and Six
Months Ended June 30, 2004
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2001
|
|
$
|
33,812
|
|
|
$
|
(21,964
|
)
|
|
$
|
11,848
|
|
|
Net loss
|
|
|
|
|
|
|
(4,542
|
)
|
|
|
(4,542
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2002
|
|
|
33,812
|
|
|
|
(26,506
|
)
|
|
|
7,306
|
|
|
Net loss
|
|
|
|
|
|
|
(5,733
|
)
|
|
|
(5,733
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2003
|
|
|
33,812
|
|
|
|
(32,239
|
)
|
|
|
1,573
|
|
|
Net loss
|
|
|
|
|
|
|
(2,831
|
)
|
|
|
(2,831
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2004
|
|
$
|
33,812
|
|
|
$
|
(35,070
|
)
|
|
$
|
(1,258
|
)
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-92
ATM COMPANY
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002 and 2003 and Six
Months Ended June 30, 2004
(000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Six Months
|
|
|
|
December 31,
|
|
|
Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,542
|
)
|
|
$
|
(5,733
|
)
|
|
$
|
(2,831
|
)
|
|
Adjustments to reconcile net loss to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion expense
|
|
|
8,407
|
|
|
|
11,037
|
|
|
|
4,850
|
|
|
|
Provision for doubtful accounts
|
|
|
575
|
|
|
|
(59
|
)
|
|
|
416
|
|
|
|
(Gain) loss on sale of assets
|
|
|
27
|
|
|
|
684
|
|
|
|
74
|
|
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
176
|
|
|
|
|
|
|
|
Changes in assets and liabilities, net of acquisitions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
78
|
|
|
|
(1,484
|
)
|
|
|
(468
|
)
|
|
|
|
Prepaid, deferred costs and other current assets
|
|
|
311
|
|
|
|
320
|
|
|
|
(45
|
)
|
|
|
|
Inventory
|
|
|
456
|
|
|
|
1,014
|
|
|
|
532
|
|
|
|
|
Notes receivable, net
|
|
|
(22
|
)
|
|
|
70
|
|
|
|
17
|
|
|
|
|
Accounts payable
|
|
|
1,301
|
|
|
|
296
|
|
|
|
(837
|
)
|
|
|
|
Accrued liabilities
|
|
|
(1,452
|
)
|
|
|
2,688
|
|
|
|
669
|
|
|
|
|
Other, net
|
|
|
(18
|
)
|
|
|
(229
|
)
|
|
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
5,121
|
|
|
|
8,780
|
|
|
|
2,345
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment
|
|
|
(8,439
|
)
|
|
|
(4,762
|
)
|
|
|
(5,934
|
)
|
|
Acquisition of merchant portfolios and equipment
|
|
|
(172
|
)
|
|
|
(11,610
|
)
|
|
|
(28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(8,611
|
)
|
|
|
(16,372
|
)
|
|
|
(5,962
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt and capital leases
|
|
|
(26
|
)
|
|
|
(29
|
)
|
|
|
|
|
|
Advances from affiliated party
|
|
|
6,506
|
|
|
|
14,311
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
6,480
|
|
|
|
14,282
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,990
|
|
|
|
6,690
|
|
|
|
(1,090
|
)
|
|
Cash and cash equivalents at beginning of year
|
|
|
1,401
|
|
|
|
4,391
|
|
|
|
11,081
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
4,391
|
|
|
$
|
11,081
|
|
|
$
|
9,991
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-93
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
(1)
|
Business and Summary of Significant Accounting Policies
|
(a) Description of Business
and Basis of Presentation
ATM Company (the Company) owns and operates approximately 13,000
automated teller machines (ATMs) within the United States and
provides ATM management and equipment-related services to both
nationally known and small business merchant customers. The
Company typically enters into multi-year contractual
relationships with its merchant customers.
Prior to June 30, 2004, the Company conducted its business
as E*TRADE Access, Inc., a wholly owned subsidiary of E*TRADE
Bank. Effective June 30, 2004, substantially all of the
assets and liabilities of the Company were sold to Cardtronics,
Inc. (Cardtronics) with the exception of the payable to
affiliated party, which primarily represents the push-down
effects of the Companys prior acquisitions. The
consolidated financial statements presented herein reflect the
financial position and results of operations of the Company
immediately prior to the aforementioned sale.
(b) Principles of
Consolidation
The consolidated financial statements include the accounts of
the Company and its consolidated subsidiary, North American Cash
Systems (NACS). All significant accounts, transactions and
profits between the Company and NACS have been eliminated in
consolidation.
(c) Cash and Cash
Equivalents
For purposes of reporting financial condition and cash flows,
cash and cash equivalents include cash in bank and short-term
deposit sweep accounts. The Company had no restricted cash
balances during the periods presented in the accompanying
financial statements.
(d) ATM Vault Cash
The Company primarily relies on its agreement with Palm Desert
National Bank (PDNB) to provide it with all of the cash that it
uses in its ATMs, and for which cash is not provided by the
merchant. Such cash is provided by E*TRADE Bank to PDNB under a
separate agreement between the two parties, and is referred to
as vault cash under federal banking regulations. The
Company pays a fee for its usage of this cash based on the total
amount of the cash that it is using at any given time. At all
times during the use of this cash, it belongs to the cash
provider, and the cash provider has the right to demand the
return of all or any portion of the cash at any time upon the
occurrence of certain events beyond the Companys control.
The amount of vault cash in the Companys ATMs was
approximately $122.0 million and $92.5 million at
December 31, 2003 and June 30, 2004, respectively.
(e) Accounts
Receivable
Accounts receivable are primarily comprised of amounts due from
the Companys clearing and settlement banks for ATM
transaction revenues earned on transactions processed during the
month ending on the balance sheet date. Trade accounts
receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts is the
Companys best estimate of the amount of probable credit
losses in the Companys existing accounts receivable. The
Company reviews its allowance for doubtful accounts monthly and
determines the allowance based on an analysis of its past due
accounts. Account balances are charged off against the allowance
after all means of collection have been exhausted and the
potential for recovery is considered remote.
F-94
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(f) Note Receivable
The Companys note receivable balance relates to an ATM
financing arrangement with a term beyond one year. Such note
bears interest at approximately 13%, which is being recognized
over the life of the note. The ATMs that are financed pursuant
to this arrangement serve as collateral for the related note.
(g) Inventory
Inventory consists principally of ATMs and, to a lesser extent,
ATM spare parts and ATM supplies. Inventory items are stated at
the lower of cost or market, and cost is determined by the
specific identification method.
(h) Property and Equipment,
net
Equipment is stated at cost and depreciation is calculated using
the straight-line method over an estimated useful life of five
years. Also included in equipment are new ATMs the Company has
acquired for future installation. Such ATMs are held as
deployments in process and are not depreciated until placed in
service. Depreciation expense for equipment for the years ended
December 31, 2002 and 2003, and for the six months ended
June 30, 2004, was $3.6 million, $4.9 million,
and $2.0 million, respectively. See Note 9 regarding
asset retirement obligations associated with the Companys
ATMs.
(i) Goodwill and Other
Intangible Assets, net
Goodwill and other intangible assets, net, represent the excess
of the purchase price over the fair value of net tangible assets
acquired through the Companys previous asset and business
combinations. The goodwill balance was created in connection
with the Companys acquisition of Card Capture Services,
Inc. (CCS) in May 2000 (see Note 2). Intangible assets,
other than goodwill, are primarily comprised of merchant
contracts/relationships acquired in connection with acquisitions
of selected ATM assets (
i.e.
, the right to receive future
cash flows related to ATM transactions occurring at these
merchant locations).
For the periods prior to January 1, 2002, goodwill was
amortized using the straight-line method based on an estimated
useful life of 40 years. Upon adoption of Statement of
Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets
(SFAS 142) on
January 1, 2002, the Company ceased the amortization of
goodwill and tested the carrying amount for impairment. No
adjustment was made to the carrying value of the goodwill
balance as a result of such impairment test. The Company tests
goodwill for impairment on at least an annual basis.
Intangible assets related to acquired merchant
contracts/relationships are amortized on a straight-line basis
over estimated useful lives ranging from five to seven years.
Such estimated useful lives were determined by the Company based
on a review of the weighted average life of the expected
after-tax cash flows from the underlying merchant contracts and
the terms of the contracts themselves, as well as the
Companys expectations based on industry experience. The
Company evaluates the remaining useful lives of other intangible
assets each reporting period to determine whether events and
circumstances warrant a revision to the remaining period of
amortization.
During the years ended December 31, 2002 and 2003, and for
the six months ended June 30, 2004, the Company recorded
amortization expense related to its intangible assets of
$4.8 million, $6.2 million, and $2.8 million,
respectively. The estimated amortization expense for each of the
five succeeding years is not applicable as the Companys
intangible assets were revalued in connection with the
Cardtronics acquisition, as mentioned above.
F-95
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(j) Income Taxes
The Company accounts for income taxes pursuant to the provisions
of SFAS No. 109,
Accounting for Income Taxes
(SFAS 109). Provisions for income taxes are based on
taxes payable or refundable for the current year and deferred
taxes on temporary differences between the amount of taxable
income and income before provision for income taxes and between
the tax basis of assets and liabilities and their reported
amounts in the financial statements. Deferred tax assets and
liabilities are calculated based on current statutory federal
and state income tax rates. As changes in tax laws or rates are
enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
For the periods presented herein, the Companys predecessor
(E*TRADE Access, Inc.) was part of the consolidated tax group of
E*TRADE Financial Corporation, the parent company of E*TRADE
Bank, and shared in (and contributed to) the consolidated tax
benefits and obligations of the group. However, the income tax
amounts presented in these financial statements and related
footnotes have been computed assuming that the Company was not
part of such consolidated tax group, but rather had prepared
separate income tax returns for the periods presented. See
Note 12 for more details regarding the Companys
income tax related amounts.
|
|
|
(k) Impairment of Long-Lived
Assets
|
The Company places significant value on the installed ATMs that
it owns and manages in merchant locations and the underlying
merchant contracts/relationships. The recoverability of the
carrying value of
long-lived
assets is
reviewed whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. To
assess recoverability, the Company evaluates the carrying value
of
long-lived
assets
and compares them to the respective projected future
undiscounted cash flows. An impairment loss is recognized if the
sum of the expected net cash flows is less than the carrying
amount of the long-lived assets being evaluated. The Company
does not believe that any impairment of its intangibles or other
long-lived
assets has
occurred.
|
|
|
(l) Use of Estimates in the
Preparation of Financial Statements
|
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires the Company to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Significant items subject to such estimates include the
carrying amount of intangibles and valuation allowances for
receivables, inventories and deferred income tax assets. Actual
results could differ from those assumed in the Companys
estimates.
Substantially all of the Companys revenues are generated
from ATM
transaction-based
fees
and services, which include surcharge fees, interchange fees and
other monthly fees. Transaction-based fees are recognized at the
time the ATM transactions are processed and service fees are
recognized at the time the service is performed. The Company
offers a maintenance service agreement to certain customers
purchasing ATMs. The Company recognizes service agreement
revenue monthly as earned, and expenses relating to repairs
under service agreements as incurred. The Company recognizes
revenue related to the sale of ATMs when the equipment is
delivered to the merchant customer and the Company has completed
all required installation and set-up procedures. If the
equipment is sold directly to a third-party dealer, the Company
recognizes revenue upon the shipment of the equipment from the
manufacturer to the
third-party
dealer.
F-96
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
(n) Stock-Based
Compensation
|
The Company has not had, and does not currently have, any
stock-based compensation plans in place. However, certain
employees of the Companys predecessor participated in the
stock-based compensation plan sponsored by E*TRADE Financial
Corporation.
The Company has elected to account for its participation in the
above-mentioned stock-based compensation plan using the
intrinsic value method under Accounting Principles Board Opinion
No. 25,
Accounting for Stock Issued to Employees,
and to disclose pro forma effects on net loss as provided by
the provisions of SFAS No. 148,
Accounting for
Stock-Based Compensation Transition and Disclosure
and SFAS No. 123,
Accounting for Stock-Based
Compensation
(SFAS 123). Accordingly, no compensation
cost for stock options held by employees of the Company has been
recognized. Had compensation cost for stock options been
determined based on the fair value at the grant dates in 2002,
2003 and 2004, consistent with the provisions of SFAS 123,
the recorded net loss amounts would have been increased by
approximately $118,000, $63,000 and $8,000, respectively.
For disclosure purposes, the fair value of each stock option
granted was estimated on the date of grant using the
Black-Scholes
option-pricing
model.
The fair value of the options granted for the years ended
December 31, 2002 and 2003, and for the six months ended
June 30, 2004, were $6.09, $2.89, and $5.80, respectively.
The fair value of the Companys participation in the
above-referenced stock-based compensation plan was estimated
assuming no expected dividends and the following
weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Expected stock price volatility
|
|
|
71
|
%
|
|
|
66
|
%
|
|
|
52
|
%
|
Risk-free interest rate
|
|
|
4
|
%
|
|
|
3
|
%
|
|
|
2
|
%
|
Expected life of options following vesting (in months)
|
|
|
36
|
|
|
|
19
|
|
|
|
22
|
|
|
|
|
(o) Recent Accounting
Pronouncements
|
In June 2001, the Financial Accounting Standards Board (the
FASB) issued SFAS No. 143,
Accounting for Asset
Retirement Obligations
(SFAS 143). SFAS 143
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the related asset retirement costs. SFAS 143 requires the
Company to estimate the fair value of future retirement costs
associated with its ATMs. The fair value of a liability for an
asset retirement obligation is to be recognized in the period in
which it is incurred and can be reasonably estimated. Such asset
retirement costs are to be capitalized as part of the carrying
amount of the related long-lived asset and depreciated over the
assets estimated useful life. Fair value estimates of
liabilities for asset retirement obligations will generally
involve discounted future cash flows. Periodic accretion of such
liabilities due to the passage of time is to be recorded as an
operating expense. The provisions of SFAS 143 are effective
for fiscal years beginning after June 15, 2002, with
initial application as of the beginning of the fiscal year. The
adoption of SFAS 143 resulted in the recognition of:
(i) liabilities amounting to approximately
$1.0 million for contingent retirement obligations under
certain merchant contracts (included in other long-term
liabilities on the Companys consolidated balance sheet);
(ii) asset retirement costs amounting to approximately
$1.0 million (included in property and equipment on the
Companys consolidated balance sheet); and (iii) a
charge for the cumulative effect of the change in accounting
principle amounting to approximately $176,000. The cumulative
effect amount of $176,000 has not been reduced by a related
income tax benefit due to the uncertain future utilization of
such benefit. Accretion expense related to liabilities for
contingent retirement obligations (included in depreciation and
accretion on the Companys consolidated statements of
operations) totaled approximately $86,000 for the year ended
December 31, 2003, and approximately $54,000 for the six
months ended June 30, 2004, respectively. At
December 31, 2003 and June 30, 2004, liabilities for
contingent retirement obligations amounted to $1.4 million
and $1.7 million, respectively.
F-97
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In May 2000, E*TRADE Access, Inc. (the Companys
predecessor) was formed through the acquisition of CCS by
E*TRADE Financial Corporation. The purchase price totaled
approximately $100.8 million and was comprised of
$5.0 million in cash, approximately $87.5 million in
stock of E*TRADE Financial Corporation, the assumption of
approximately $6.8 million in debt, and the incurrence of
approximately $1.5 million in direct costs associated with
the acquisition. The following table summarizes the estimated
fair values of the major assets acquired and liabilities assumed
at the date of the acquisition (000s):
|
|
|
|
|
|
|
|
Estimated
|
|
Category
|
|
Fair Value
|
|
|
|
|
|
Net working capital
|
|
$
|
575
|
|
Property and equipment
|
|
|
3,622
|
|
Other assets
|
|
|
875
|
|
|
|
|
|
|
Total tangible assets
|
|
|
5,072
|
|
Intangible assets
|
|
|
22,860
|
|
Goodwill
|
|
|
72,889
|
|
|
|
|
|
Total net assets acquired
|
|
$
|
100,821
|
|
|
|
|
|
The $22.9 million in intangible assets primarily represents
the value assigned to the acquired merchant
contracts/relationships, as determined by an independent
appraisal specialist. Such amount is being amortized on a
straight-line
basis
over an estimated useful life of seven years. The $72.9 of
goodwill was being amortized over an estimated useful life of
40 years prior to the adoption of SFAS 142. On
January 1, 2002, the Company ceased the amortization of
such goodwill balance in accordance with the provisions of
SFAS 142.
During 2002, the Company acquired a total of 28 merchant
contracts/relationships in a series of separate transactions.
The cost of the acquisitions totaled approximately
$0.2 million and the purchase price was allocated entirely
to the acquired merchant contracts/relationships. No ATMs were
acquired in such transactions. Total consideration paid
represented the fair value of the acquired intangible assets as
of the acquisition dates.
During 2003, the Company acquired a total of over 5,000 merchant
contracts/relationships and over 240 ATMs through a series of
separate asset acquisitions. The cost of the acquisitions
totaled $11.6 million and the purchase price was allocated
$0.9 million to ATM equipment and $10.7 million to
merchant contracts/relationships. Of the $11.6 million paid
in 2003 for such acquisitions, approximately $10.1 million
related to the Companys acquisition of selected contracts
and ATMs from XtraCash ATM, Inc. Total consideration paid
represented the fair value of the acquired assets as of the
acquisition dates.
The Company made no significant acquisitions during the first
six months of 2004.
|
|
(3)
|
Affiliated Party Transactions
|
Prior to the acquisition by Cardtronics of the Company, E*TRADE
Bank provided certain services to E*TRADE Access, Inc. (the
Companys predecessor) under a service agreement, including
insurance and risk management services, tax and financial
reporting services, and payroll processing services. E*TRADE
Bank also provided use of its office space, equipment and
furniture and fixtures. The accompanying financial statements
reflect charges from E*TRADE Bank for such services in the
amounts of $0.7 million, $2.1 million, and
$1.3 million for the years ended December 31, 2002 and
2003, and for the six months ended June 30, 2004,
respectively. Amounts owed to E*TRADE Bank for such services,
including the push-
F-98
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
down effects of the Companys historical acquisitions,
totaled $86.5 million, $100.8 million, and
$103.3 million as of December 31, 2002 and 2003, and
June 30, 2004, respectively.
|
|
(4)
|
Prepaid, Deferred Costs, and Other Current Assets
|
A summary of prepaid, deferred costs, and other current assets
is as follows (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
December 31,
|
|
|
As of
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Prepaids
|
|
$
|
404
|
|
|
$
|
90
|
|
|
$
|
71
|
|
Deferred costs and other current assets
|
|
|
7
|
|
|
|
|
|
|
|
64
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
411
|
|
|
$
|
90
|
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
Property and Equipment, net
|
A summary of property and equipment is as follows (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
|
|
December 31,
|
|
|
As of
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
19,369
|
|
|
$
|
23,923
|
|
|
$
|
29,301
|
|
Software
|
|
|
1,906
|
|
|
|
2,322
|
|
|
|
2,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,275
|
|
|
|
26,245
|
|
|
|
31,636
|
|
Less accumulated depreciation
|
|
|
(7,374
|
)
|
|
|
(11,764
|
)
|
|
|
(13,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
$
|
13,901
|
|
|
$
|
14,481
|
|
|
$
|
18,279
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6)
|
Intangible Assets, net
|
A summary of intangible assets is as follows (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Merchant contracts
|
|
$
|
22,715
|
|
|
$
|
30,985
|
|
|
$
|
29,893
|
|
Less accumulated amortization
|
|
|
(9,911
|
)
|
|
|
(13,661
|
)
|
|
|
(15,536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net intangible assets
|
|
$
|
12,804
|
|
|
$
|
17,324
|
|
|
$
|
14,357
|
|
|
|
|
|
|
|
|
|
|
|
F-99
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Companys accrued liabilities include accrued armored
fees, communication fees, maintenance obligations, and other
fees associated with the Companys ongoing operations. A
summary of the Companys accrued liabilities as of the
dates below is as follows (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
As of
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring accrual
|
|
$
|
1,500
|
|
|
$
|
1,559
|
|
|
$
|
1,706
|
|
Accrued armored fees
|
|
|
843
|
|
|
|
991
|
|
|
|
920
|
|
Accrued communication fees
|
|
|
426
|
|
|
|
424
|
|
|
|
|
|
Accrued maintenance fees
|
|
|
306
|
|
|
|
343
|
|
|
|
1,352
|
|
Accrued bank and cash management fees
|
|
|
97
|
|
|
|
2,141
|
|
|
|
951
|
|
Accrued ATM purchases
|
|
|
|
|
|
|
|
|
|
|
577
|
|
Accrued sales and property taxes
|
|
|
|
|
|
|
|
|
|
|
304
|
|
Other accrued expenses
|
|
|
1,729
|
|
|
|
2,130
|
|
|
|
2,447
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,901
|
|
|
$
|
7,588
|
|
|
$
|
8,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)
|
Commitments and Contingencies
|
The following table and discussion reflect the Companys
significant contractual obligations and other commercial
commitments as of December 31, 2003 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
|
|
Total
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
$
|
2,920
|
|
|
$
|
1,188
|
|
|
$
|
1,174
|
|
|
$
|
523
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously mentioned, the Company is charged by E*TRADE Bank
for the use of its office space, and as such, has no separate
contractual lease agreement in place. Accordingly, there are no
contractual rent payment amounts included in the table above.
|
|
(9)
|
Asset Retirement Obligations
|
The Company changed its method of accounting for asset
retirement obligations in accordance with SFAS 143
effective January 1, 2003. Under SFAS 143, the Company
recognizes asset retirement obligations in the period in which
they are incurred if a reasonable estimate of the fair value can
be made. When the liability is initially recorded, the cost is
capitalized by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its
settlement value and the capitalized cost is depreciated over
the useful life of the related asset. Upon settlement of the
liability, a gain or loss is recorded for any difference between
the settlement amount and the liability recorded.
F-100
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The cumulative effect of the change on prior years resulted in
an after-tax charge to income of approximately $176,000. The
effect of the change in 2003 was to decrease income before the
cumulative effect of the accounting changes by approximately
$74,000 related to depreciation and accretion expense recorded
during the period, offset somewhat by the utilization of the
established asset retirement obligation. The pro forma effects
of the application of SFAS 143 as if the statement had been
adopted on January 1, 2002 (instead of January 1,
2003) are presented below (pro forma amounts in thousands
assuming the accounting change is applied retroactively, net of
tax):
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
|
Pro Forma
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,542
|
)
|
|
$
|
(5,733
|
)
|
|
(Increase) decrease in depreciation expense
|
|
|
(130
|
)
|
|
|
130
|
|
|
(Increase) decrease in accretion expense
|
|
|
(46
|
)
|
|
|
46
|
|
|
|
|
|
|
|
|
Net loss, as adjusted
|
|
$
|
(4,718
|
)
|
|
$
|
(5,557
|
)
|
|
|
|
|
|
|
|
Asset retirement obligations consist primarily of
de-installation costs of the ATM and the costs to restore the
ATM site to its original condition. The Company is legally
required to perform this de-install and restoration work. In
accordance with SFAS 143, for each group of ATMs the
Company recognized the fair value of a liability for an asset
retirement obligation and capitalized that cost as part of the
cost basis of the related asset. The related assets are being
depreciated on a straight-line basis over five years.
The following table describes changes to the asset retirement
obligation liability for the year ended December 31, 2003
and the six months ended June 30, 2004 (000s):
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
Asset retirement at the beginning of the year
|
|
$
|
1,016
|
|
|
$
|
1,436
|
|
Additional ATMs
|
|
|
602
|
|
|
|
257
|
|
Accretion expense
|
|
|
86
|
|
|
|
54
|
|
Payments
|
|
|
(268
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,436
|
|
|
$
|
1,747
|
|
|
|
|
|
|
|
|
The actual and pro forma asset retirement obligation liability
balances as if SFAS 143 had been adopted on January 1,
2002 (instead of January 1, 2003) were as follows
(000s):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2002
|
|
|
2003
|
|
|
|
|
|
|
|
|
Liability for asset retirement beginning
|
|
|
|
|
|
$
|
1,016
|
|
Liability for asset retirement ending
|
|
$
|
1,016
|
|
|
$
|
1,436
|
|
The Company is involved in various lawsuits and legal
proceedings which have arisen in the normal course of business.
While the ultimate results of these other matters cannot be
predicted with certainty, they are not expected to have a
material adverse effect on the financial position of the Company.
As discussed in Note 1, the Companys income taxes
have been computed assuming that the Company was not part of the
E*TRADE Financial Corporation consolidated tax group, but rather
had prepared separate
F-101
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
income tax returns for the periods presented. Accordingly, the
Company has not reflected a tax benefit for any of the periods
presented in the accompanying financial statements due to the
uncertainties surrounding the ability of the Company to utilize
such benefits.
The recorded income tax benefit differs from amounts computed by
applying the statutory rate to the Companys net loss
before taxes as follows for the years ended December 31,
2002 and 2003, and the six months ended June 30, 2004
(000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended
|
|
|
Six Months
|
|
|
|
December 31,
|
|
|
Ended
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit at the statutory rate of 35%
|
|
$
|
(1,590
|
)
|
|
$
|
(2,007
|
)
|
|
$
|
(991
|
)
|
State tax benefit, net of federal provision
|
|
|
(177
|
)
|
|
|
(224
|
)
|
|
|
(110
|
)
|
Non-deductible meals and entertainment
|
|
|
9
|
|
|
|
3
|
|
|
|
2
|
|
Change in valuation allowance
|
|
|
1,758
|
|
|
|
2,228
|
|
|
|
1,099
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit on loss before income taxes and cumulative
effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax allocated to cumulative effect of accounting change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit per financial statements
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 2002 and 2003, and
June 30, 2004, are as follows (000s):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
2002
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
630
|
|
|
$
|
83
|
|
|
$
|
84
|
|
|
Reserve for doubtful accounts
|
|
|
370
|
|
|
|
347
|
|
|
|
507
|
|
|
Other
|
|
|
17
|
|
|
|
18
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current deferred tax assets
|
|
|
1,017
|
|
|
|
448
|
|
|
|
609
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles
|
|
|
3,329
|
|
|
|
4,941
|
|
|
|
5,571
|
|
|
Net operating loss carryforwards
|
|
|
10,534
|
|
|
|
14,690
|
|
|
|
17,358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets
|
|
|
13,863
|
|
|
|
19,631
|
|
|
|
22,929
|
|
Non-current deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
1,698
|
|
|
|
2,752
|
|
|
|
4,092
|
|
|
Amortization of goodwill
|
|
|
3,859
|
|
|
|
5,750
|
|
|
|
6,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities
|
|
|
5,557
|
|
|
|
8,502
|
|
|
|
10,787
|
|
|
|
|
|
|
|
|
|
|
|
Net non-current deferred tax assets
|
|
$
|
8,306
|
|
|
$
|
11,129
|
|
|
$
|
12,142
|
|
Net current deferred tax assets
|
|
|
1,017
|
|
|
|
448
|
|
|
|
609
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
9,323
|
|
|
|
11,577
|
|
|
|
12,751
|
|
Less: Valuation allowance
|
|
|
(9,323
|
)
|
|
|
(11,577
|
)
|
|
|
(12,751
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred taxes
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
A valuation allowance has been provided to offset the deferred
tax assets for all periods presented due to the uncertainties
surrounding the future realization of such deferred tax assets.
As of June 30, 2004, the
F-102
ATM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Companys estimated net operating loss (NOL)
carryforwards for income tax purposes, assuming it had filed
separate returns for the periods presented, would have totaled
approximately $40.1 million.
Approximately $1.8 million of the valuation allowance for
deferred tax assets at June 30, 2004, relates to items
which, when recognized, would have resulted in a credit to
equity rather than a reduction in the Companys federal
income tax provision.
|
|
(12)
|
Significant Suppliers
|
The Company incurred charges from one supplier that accounted
for approximately 10% of the total cost of revenues for the
years ended December 31, 2002 and 2003, and the six months
ended June 30, 2004.
|
|
(13)
|
Segment Information and Geographical Information
|
The Company considers its business activities to be comprised of
a single reporting segment ATM Management Services.
During each of the periods presented in the accompanying
consolidated financial statements, the Company had no single
merchant customer that represented 10% or more of total
revenues. All revenues were generated in the United States of
America.
|
|
(14)
|
Acquisition by Cardtronics, Inc.
|
As disclosed in Note 1, substantially all of the assets and
liabilities of E*TRADE Access, Inc. (the Companys
predecessor), with the exception of the payable to affiliated
party, were acquired and assumed by Cardtronics, Inc. effective
June 30, 2004, for approximately $106.9 million
in cash.
F-103
ANNEX A
LETTER OF TRANSMITTAL
To Tender
Outstanding 9.250% Senior Subordinated Notes due 2013
of
CARDTRONICS, INC.
Pursuant to the Exchange Offer and Prospectus
dated
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME,
ON ,
2005 (THE EXPIRATION DATE), UNLESS THE EXCHANGE
OFFER IS EXTENDED BY THE COMPANY.
The Exchange Agent for the Exchange Offer is:
Wells Fargo Bank, National Association
Attention:
Corporate Trust Operations
Sixth and Marquette
MAC N9303-121
Minneapolis, Minnesota 55479
Telephone:
(800) 344-5128
Facsimile:
(612) 667-4927
IF YOU WISH TO EXCHANGE CURRENTLY OUTSTANDING 9.250% SENIOR
SUBORDINATED NOTES DUE 2013 (THE OUTSTANDING NOTES)
FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF NEW 9.250% SENIOR
SUBORDINATED NOTES DUE 2013 PURSUANT TO THE EXCHANGE OFFER,
YOU MUST VALIDLY TENDER (AND NOT WITHDRAW) OUTSTANDING
NOTES TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE BY CAUSING AN
AGENTS MESSAGE TO BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO SUCH TIME.
The undersigned hereby acknowledges receipt and review of the
Prospectus,
dated (the
Prospectus), of Cardtronics, Inc., a Delaware
corporation (the Company), and this Letter of
Transmittal (the Letter of Transmittal), which
together describe the Companys offer (the Exchange
Offer) to exchange its 9.250% Senior Subordinated
Notes due 2013 (the New Notes) that have been
registered under the Securities Act of 1933, as amended (the
Securities Act), for a like principal amount of its
issued and outstanding 9.250% Senior Subordinated Notes due
2013 (the Outstanding Notes). Capitalized terms used
but not defined herein have the respective meaning given to them
in the Prospectus.
The Company reserves the right, at any time or from time to
time, to extend the Exchange Offer at its discretion, in which
event the term Expiration Date shall mean the latest
date to which the Exchange Offer is extended. The Company shall
notify the Exchange Agent and each registered holder of the
Outstanding Notes of any extension by oral or written notice
prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by holders of the
Outstanding Notes. Tender of Outstanding Notes is to be made
according to the Automated Tender Offer Program
(ATOP) of the Depository Trust Company
(DTC) pursuant to the procedures set forth in the
prospectus under the caption The Exchange
A-1
Offer Procedures for Tendering. DTC
participants that are accepting the Exchange Offer must transmit
their acceptance to DTC, which will verify the acceptance and
execute a book-entry delivery to the Exchange Agents DTC
account. DTC will then send a computer generated message known
as an agents message to the exchange agent for
its acceptance. For you to validly tender your Outstanding Notes
in the Exchange Offer, the Exchange Agent must receive, prior to
the Expiration Date, an agents message under the ATOP
procedures that confirms that:
|
|
|
|
|
DTC has received your instructions to tender your Outstanding
Notes; and
|
|
|
|
You agree to be bound by the terms of this Letter of Transmittal.
|
By using the ATOP procedures to tender outstanding notes, you
will not be required to deliver this Letter of Transmittal to
the Exchange Agent. However, you will be bound by its terms, and
you will be deemed to have made the acknowledgments and the
representations and warranties it contains, just as if you had
signed it.
A-2
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
1. By tendering Outstanding Notes in the Exchange Offer,
you acknowledge receipt of the Prospectus and this Letter of
Transmittal.
2. By tendering Outstanding Notes in the Exchange Offer,
you represent and warrant that you have full authority to tender
the Outstanding Notes described above and will, upon request,
execute and deliver any additional documents deemed by the
Company to be necessary or desirable to complete the tender of
Outstanding Notes.
3. You understand that the tender of the Outstanding Notes
pursuant to all of the procedures set forth in the Prospectus
will constitute an agreement between and the Company as to the
terms and conditions set forth in the Prospectus.
4. By tendering Outstanding Notes in the Exchange Offer,
you acknowledge that the Exchange Offer is being made in
reliance upon interpretations contained in no-action letters
issued to third parties by the staff of the Securities and
Exchange Commission (the SEC), including Exxon
Capital Holdings Corp., SEC No-Action Letter (available
April 13, 1989), Morgan Stanley & Co., Inc., SEC
No-Action Letter (available June 5, 1991) and
Shearman & Sterling, SEC No-Action Letter (available
July 2, 1993), that the New Notes issued in exchange for
the Outstanding Notes pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders
thereof (other than a broker-dealer who purchased Outstanding
Notes exchanged for such New Notes directly from the Company to
resell pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933, as amended (the
Securities Act) and any such holder that is an
affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without compliance with
the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the
ordinary course of such holders business and such holders
are not participating in, and have no arrangement with any
person to participate in, the distribution of such New Notes.
5. By tendering Outstanding Notes in the Exchange Offer,
you represent and warrant that:
|
|
|
a. the New Notes acquired pursuant to the Exchange Offer
are being obtained in the ordinary course of your business,
whether or not you are the holder;
|
|
|
b. neither you nor any such other person is engaging in or
intends to engage in a distribution of such New Notes;
|
|
|
c. neither you nor any such other person has an arrangement
or understanding with any person to participate in the
distribution of such New Notes; and
|
|
|
d. neither the holder nor any such other person is an
affiliate, as such term is defined under
Rule 405 promulgated under the Securities Act, of the
Company.
|
6. You may, if you are unable to make all of the
representations and warranties contained in Item 5 above
and as otherwise permitted in the Registration Rights Agreement
(as defined below), elect to have your Outstanding Notes
registered in the shelf registration statement described in the
Registration Rights Agreement, dated as of August 12, 2005
(the Registration Rights Agreement), by and among
the Company, the Subsidiary Guarantors (as defined therein) and
the Initial Purchaser (as defined therein). Such election may be
made only by notifying the Company in writing at 3110 Hayes
Road, Suite 300, Houston, Texas 77082, Attention: Chief
Financial Officer. By making such election, you agree, as a
holder of Outstanding Notes participating in a shelf
registration, to indemnify and hold harmless the Company, each
of the directors of the Company, each of the officers of the
Company who signs such shelf registration statement, each person
who controls the Company within the meaning of either the
Securities Act or the Securities Exchange Act of 1934, as
amended (the Exchange Act), and each other holder of
Outstanding Notes, from and against any and all losses, claims,
damages or liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in any shelf
registration statement or prospectus, or in
A-3
any supplement thereto or amendment thereof, or caused by the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; but only with respect to
information relating to the undersigned furnished in writing by
or on behalf of the undersigned expressly for use in a shelf
registration statement, a prospectus or any amendments or
supplements thereto. Any such indemnification shall be governed
by the terms and subject to the conditions set forth in the
Registration Rights Agreement, including, without limitation,
the provisions regarding notice, retention of counsel,
contribution and payment of expenses set forth therein. The
above summary of the indemnification provision of the
Registration Rights Agreement is not intended to be exhaustive
and is qualified in its entirety by the Registration Rights
Agreement.
7. If you are a broker-dealer that will receive New Notes
for its own account in exchange for Outstanding Notes that were
acquired as a result of market-making activities or other
trading activities, you acknowledge, by tendering Outstanding
Notes in the Exchange Offer, that you will deliver a prospectus
in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, you will not be
deemed to admit that you are an underwriter within
the meaning of the Securities Act. If you are a broker-dealer
and Outstanding Notes held for your own account were not
acquired as a result of market-making or other trading
activities, such Outstanding Notes cannot be exchanged pursuant
to the Exchange Offer.
8. Any of your obligations hereunder shall be binding upon
your successors, assigns, executors, administrators, trustees in
bankruptcy and legal and personal representatives of the
undersigned.
A-4
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE
OFFER
1. Book-Entry Confirmations.
Any confirmation of a book-entry transfer to the Exchange
Agents account at DTC of Outstanding Notes tendered by
book-entry transfer (a Book-Entry Confirmation), as
well as an agents message, and any other documents
required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein prior to
5:00 P.M., New York City time, on the Expiration Date.
2. Partial Tenders.
Tenders of Outstanding Notes will be accepted only in integral
multiples of $1,000.
The entire principal amount of
Outstanding Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise communicated to the
Exchange Agent. If the entire principal amount of all
Outstanding Notes is not tendered, then Outstanding Notes for
the principal amount of Outstanding Notes not tendered and Notes
issued in exchange for any Outstanding Notes accepted will be
delivered to the holder via the facilities of DTC promptly after
the Outstanding Notes are accepted for exchange.
3. Validity of Tenders.
All questions as to the validity, form, eligibility (including
time of receipt), acceptance, and withdrawal of tendered
Outstanding Notes will be determined by the Company, in its sole
discretion, which determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders
not in proper form or the acceptance for exchange of which may,
in the opinion of counsel for the Company, be unlawful. The
Company also reserves the absolute right to waive any of the
conditions of the Exchange Offer or any defect or irregularity
in the tender of any Outstanding Notes. The Companys
interpretation of the terms and conditions of the Exchange Offer
(including the instructions on this Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Outstanding
Notes must be cured within such time as the Company shall
determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Outstanding
Notes, neither the Company, the Exchange Agent, nor any other
person shall be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for
failure to give such notification. Tenders of Outstanding Notes
will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes
received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the
tendering holders via the facilities of DTC, as soon as
practicable following the Expiration Date.
4. Waiver of Conditions.
The Company reserves the absolute right to waive, in whole or
part, any of the conditions to the Exchange Offer set forth in
the Prospectus or in this Letter of Transmittal.
5. No Conditional Tender.
No alternative, conditional, irregular or contingent tender of
Outstanding Notes will be accepted.
6. Request for Assistance or Additional Copies.
Requests for assistance or for additional copies of the
Prospectus or this Letter of Transmittal may be directed to the
Exchange Agent at the address or telephone number set forth on
the cover page of this Letter of Transmittal. Holders may also
contact their broker, dealer, commercial bank, trust company or
other nominee for assistance concerning the Exchange Offer.
7. Withdrawal.
Tenders may be withdrawn only pursuant to the limited withdrawal
rights set forth in the Prospectus under the caption
Exchange Offer Withdrawal of Tenders.
8. No Guarantee of Late Delivery.
There is no procedure for guarantee of late delivery in the
Exchange Offer.
IMPORTANT: By using the ATOP procedures to tender outstanding
notes, you will not be required to deliver this Letter of
Transmittal to the Exchange Agent. However, you will be bound by
its terms, and you will be deemed to have made the
acknowledgments and the representations and warranties it
contains, just as if you had signed it.
A-5
[Back Cover]
Until ,
2006, all dealers that effect transactions in the new notes,
whether or not participating in this offering, may be required
to deliver a prospectus. This is in addition to the
dealers obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
|
|
Item 20.
|
Indemnification Of Officers And Directors
|
Section 145 of the General Corporation Law of the State of
Delaware (the DGCL) authorizes a corporation, under
certain circumstances, to indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact
that the person is or was an officer or director of such
corporation, or is or was serving at the request of that
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such
action, suit or proceeding, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation. With respect to any criminal
action or proceeding, such indemnification is available if he
had no reasonable cause to believe his conduct was unlawful.
Article Eleventh of the registrants Amended and
Restated Certificate of Incorporation, as amended (the
Certificate of Incorporation), together with
Article VI of the registrants Restated Bylaws, as
amended (the Bylaws), provide for indemnification of
each person who is or was made a party to any actual or
threatened civil, criminal, administrative or investigative
action, suit or proceeding because such person is, was or has
agreed to become an officer or director of the registrant or is
a person who is or was serving or has agreed to serve at the
request of the registrant as a director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar
functionary of another corporation or of a partnership, joint
venture, sole proprietorship, trust, employee benefit plan or
other enterprise to the fullest extent permitted by the DGCL as
it existed at the time the indemnification provisions of the
Certificate of Incorporation and Bylaws were adopted or as may
be thereafter amended. Article Eleventh of the Certificate
of Incorporation and Article VI of the Bylaws expressly
provide that it is not the exclusive method of indemnification.
Section 145 of the DGCL also empowers a corporation to
purchase and maintain insurance on behalf of any person who is
or was an officer or director of such corporation against
liability asserted against or incurred by him in any such
capacity, whether or not such corporation would have the power
to indemnify such officer or director against such liability
under the provisions of Section 145.
Article Eleventh of the Certificate of Incorporation and
Article VI of the Bylaws also provide that the registrant
may maintain insurance, at the registrants expense, to
protect the registrant and any director, officer, employee or
agent of the registrant or of another entity against any
expense, liability, or loss, regardless of whether the
registrant would have the power to indemnify such person against
such expense, liability or loss under the DGCL.
Section 102(b)(7) of the DGCL provides that a certificate
of incorporation may contain a provision eliminating or limiting
the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty
as a director, provided that such provision shall not eliminate
or limit the liability of a director (a) for any breach of
the directors duty of loyalty to the corporation or its
stockholders, (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (c) under Section 174 of the DGCL (relating to
liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) or (d) for any transaction
from which the director derived improper personal benefit.
Article Twelfth of the Certificate of Incorporation
contains such a provision.
II-1
|
|
Item 21.
|
Exhibits And Financial Statement Schedules
|
(a)
Exhibits.
The following exhibits are filed
herewith pursuant to the requirements of Item 601 of
Regulation S-K:
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
*2
|
.1
|
|
Share Sale and Purchase Agreement between Bank Machine
(Holdings) Limited and Cardtronics Limited, dated effective as
of May 17, 2005.
|
|
*2
|
.2
|
|
Purchase and Sale Agreement Between E*TRADE Access, Inc.,
E*TRADE Bank, Cardtronics, LP and Cardtronics, Inc., dated
effective as of June 2, 2004.
|
|
3
|
.1
|
|
First Amended and Restated Certificate of Incorporation of
Cardtronics, Inc., dated as of March 10, 2005.
|
|
3
|
.2
|
|
Certificate of Amendment of the First Amended and Restated
Certificate of Incorporation of Cardtronics, Inc. dated as of
May 12, 2005.
|
|
3
|
.3
|
|
Certificate of Amendment of the First Amended and Restated
Certificate of Incorporation of Cardtronics, Inc. dated as of
August 9, 2005.
|
|
3
|
.4
|
|
First Amended and Restated Bylaws of Cardtronics, Inc.
|
|
4
|
.1
|
|
Indenture dated as of August 12, 2005 by and among Cardtronics,
Inc., the Subsidiary Guarantors party thereto and Wells Fargo
Bank, NA as Trustee
|
|
4
|
.2
|
|
Form of Senior Subordinated Note (incorporated by reference to
Exhibit A to Exhibit 4.1).
|
|
4
|
.3
|
|
Registration Rights Agreement dated as of August 12, 2005 by and
among Cardtronics, Inc., the Subsidiary Guarantors party thereto
and the Initial Purchasers party thereto.
|
|
5
|
.1
|
|
Opinion of Vinson & Elkins L.L.P.
|
|
*10
|
.1
|
|
ATM Cash Services Agreement between Bank of America and
Cardtronics, LP, dated effective as of August 2, 2004.
|
|
10
|
.2
|
|
Third Amended and Restated First Lien Credit Agreement, dated as
of May 17, 2005, by and among Cardtronics, Inc., the Subsidiary
Guarantors party thereto, Bank of America, N.A., BNP Paribas,
and the other Lenders parties thereto.
|
|
10
|
.3
|
|
Amendment No. 1 to Credit Agreement, dated as of July 6, 2005.
|
|
10
|
.4
|
|
Amendment No. 2 to Credit Agreement, dated as of August 5, 2005.
|
|
10
|
.5
|
|
Amendment No. 3 to Credit Agreement, dated as of November 17,
2005.
|
|
10
|
.6
|
|
Employment Agreement between Cardtronics, LP and Jack M.
Antonini, dated effective as of January 30, 2003 (incorporated
by reference to Exhibit 10.10 of the Registration Statement on
Form S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.7
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Jack M. Antonini, dated effective as of February 4, 2004
(incorporated by reference to Exhibit 10.11 of the Registration
Statement on Form S-1 filed by Cardtronics, Inc. on March 10,
2004).
|
|
10
|
.8
|
|
Second Amendment to Employment Agreement between Cardtronics, LP
and Jack M. Antonini, dated effective as of January 1, 2005.
|
|
10
|
.9
|
|
Restricted Stock Agreement, dated as of February 4, 2004 between
Cardtronics, Inc. and Jack M. Antonini.
|
|
10
|
.10
|
|
First Amendment to Restricted Stock Agreement, dated as of March
1, 2004, between Cardtronics, Inc. and Jack M. Antonini.
|
|
10
|
.11
|
|
Second Amendment to Restricted Stock Agreement, dated as of
February 10, 2005, between Cardtronics, Inc. and Jack M.
Antonini.
|
|
10
|
.12
|
|
Employment Agreement between Cardtronics, LP and Michael H.
Clinard, dated effective as of June 4, 2001 (incorporated by
reference to Exhibit 10.12 of the Registration Statement on Form
S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.13
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Michael H. Clinard, dated effective as of January 1, 2005.
|
II-2
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
10
|
.14
|
|
Employment Agreement between Cardtronics, LP and Thomas E.
Upton, dated effective as of June 1, 2001 (incorporated by
reference to Exhibit 10.13 of the Registration Statement on Form
S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.15
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Thomas E. Upton, dated effective as of January 1, 2005.
|
|
10
|
.16
|
|
Employment Agreement between Cardtronics, LP and J. Chris
Brewster, dated effective as of March 31, 2004 (incorporated by
reference to Exhibit 10.14 of the Registration Statement on Form
S-1/A filed by Cardtronics, Inc. on May 14, 2004).
|
|
10
|
.17
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and J. Chris Brewster, dated effective as of January 1, 2005.
|
|
10
|
.18
|
|
Employment Agreement between Cardtronics, LP, Cardtronics, Inc.
and Drew Soinski, dated effective as of July 12, 2005.
|
|
10
|
.19
|
|
Amended and Restated Service Agreement between Bank Machine
Limited and Ron Delnevo, dated effective as of May 17, 2005.
|
|
10
|
.20
|
|
Bonus Agreement between Bank Machine Limited and Ron Delnevo,
dated effective as of May 17, 2005.
|
|
10
|
.21
|
|
2001 Stock Incentive Plan of Cardtronics Group, Inc., dated
effective as of June 4, 2001.
|
|
10
|
.22
|
|
Amendment No. 1 to the 2001 Stock Incentive Plan of Cardtronics
Group, Inc., dated effective as of January 30, 2004.
|
|
10
|
.23
|
|
Amendment No. 2 to the 2001 Stock Incentive Plan of Cardtronics
Group, Inc., dated effective as of June 23, 2004.
|
|
10
|
.24
|
|
Form of Director Indemnification Agreement entered into by and
between Cardtronics, Inc. and each of its directors, dated as of
February 10, 2005.
|
|
12
|
.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
21
|
.1
|
|
List of Subsidiaries.
|
|
23
|
.1
|
|
Consent of KPMG LLP.
|
|
23
|
.2
|
|
Consent of Deloitte and Touche, LLP.
|
|
23
|
.3
|
|
Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1
hereto).
|
|
24
|
.1
|
|
Power of Attorney (included on the signature page to this
Registration Statement).
|
|
25
|
.1
|
|
Statement of Eligibility on Form T-1.
|
|
|
*
|
To be filed by amendment.
|
(b)
Financial Statement Schedules.
All schedules are
omitted because the required information is inapplicable or the
information is presented in the Consolidated Financial
Statements and the related notes.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of any Registrant, we have been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by any
Registrant of expenses incurred or paid by a director, officer
or controlling person of such Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, such Registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-3
Each registrant hereby undertakes
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
|
|
|
(a) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
|
|
|
(b) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate
offering price set forth in the Calculation of
Registration Fee table in the effective registration
statement;
|
|
|
(c) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement; and
|
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for purposes of determining any liability under
the Securities Act of 1933, each filing of the registrants
annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plans
annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(5) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one
business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(6) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of
Texas, on the 19th day of January, 2006.
|
|
|
|
|
Jack Antonini
|
|
President and Chief Executive Officer
|
|
|
CARDTRONICS GP, INC.
|
|
|
|
|
|
Jack Antonini
|
|
President and Chief Executive Officer
|
|
|
CARDTRONICS, LP
|
|
|
|
|
|
Jack Antonini
|
|
President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Wilmington, State of
Delaware, on the 19th day of January, 2006.
|
|
|
|
By:
|
/s/
Peter J. Winnington
|
|
|
|
|
|
Peter J. Winnington
|
|
President
|
II-5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS
, that each person
whose signature appears below constitutes and appoints Jack
Antonini and Fred R. Lummis, or either of them, his true and
lawful
attorney-in
-fact
and agent, with full power of substitution, for him and in his
name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this
Form S-4
Registration Statement, and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
SEC, granting unto said
attorney-in
-fact and
agent full power and authority to do and perform each and every
act and thing requisite and ratifying and confirming all that
said
attorney-in
-fact
and agent or his substitute or substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 19th day of January,
2006.
|
|
|
|
|
Signature
|
|
Capacity (of Cardtronics, Inc.)
|
|
|
|
|
/s/
Jack Antonini
Jack Antonini
|
|
Chief Executive Officer, President and Director (Principal
Executive Officer)
|
|
/s/
J. Chris Brewster
J. Chris Brewster
|
|
Chief Financial Officer and Treasurer (Principal Financial and
Accounting Officer)
|
|
/s/
Fred R. Lummis
Fred R. Lummis
|
|
Director and Chairman of the Board of Directors
|
|
/s/
Robert P. Barone
Robert P. Barone
|
|
Director
|
|
/s/
Frederick W.
Brazelton
Frederick W. Brazelton
|
|
Director
|
|
/s/
Ralph H. Clinard
Ralph H. Clinard
|
|
Director
|
|
/s/
Ron Coben
Ron Coben
|
|
Director
|
|
/s/
Jorge M. Diaz
Jorge M. Diaz
|
|
Director
|
|
/s/
Roger B. Kafker
Roger B. Kafker
|
|
Director
|
|
/s/
Michael A. R.
Wilson
Michael A. R. Wilson
|
|
Director
|
|
/s/
Ronald Delnevo
Ronald Delnevo
|
|
Director and Chief Executive of Bank Machine Limited
|
II-6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS,
that each person
whose signature appears below constitutes and appoints Jack
Antonini and Fred R. Lummis, or either of them, his true and
lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Form S-4 Registration
Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the SEC, granting
unto said attorney-in-fact and agent full power and authority to
do and perform each and every act and thing requisite and
ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 19th day of January,
2006.
|
|
|
|
|
Signature
|
|
Capacity (of Cardtronics GP, Inc.)
|
|
|
|
|
/s/
Jack Antonini
Jack Antonini
|
|
Chief Executive Officer, President and Director (Principal
Executive Officer)
|
|
/s/
J. Chris Brewster
J. Chris Brewster
|
|
Chief Financial Officer and Treasurer (Principal Financial and
Accounting Officer)
|
|
/s/
Fred R. Lummis
Fred R. Lummis
|
|
Director
|
|
/s/
Frederick W.
Brazelton
Frederick W. Brazelton
|
|
Director
|
II-7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS,
that each person
whose signature appears below constitutes and appoints Jack
Antonini and Fred R. Lummis, or either of them, his true and
lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments (including
post-effective amendments) to this Form S-4 Registration
Statement, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the SEC, granting
unto said attorney-in-fact and agent full power and authority to
do and perform each and every act and thing requisite and
ratifying and confirming all that said attorney-in-fact and
agent or his substitute or substitutes may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 19th day of January,
2006.
|
|
|
|
|
Signature
|
|
Capacity (of Cardtronics LP, Inc.)
|
|
|
|
|
/s/
Peter J. Winnington
Peter J. Winnington
|
|
President and Director
(Principal Executive, Financial and
Accounting Officer)
|
|
/s/
Lester E. Hendrix
Lester E. Hendrix
|
|
Director
|
|
/s/
Fred R. Lummis
Fred R. Lummis
|
|
Director
|
II-8
Index to Exhibits
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
*2
|
.1
|
|
Share Sale and Purchase Agreement between Bank Machine
(Holdings) Limited and Cardtronics Limited, dated effective as
of May 17, 2005.
|
|
*2
|
.2
|
|
Purchase and Sale Agreement Between E*TRADE Access, Inc.,
E*TRADE Bank, Cardtronics, LP and Cardtronics, Inc., dated
effective as of June 2, 2004.
|
|
3
|
.1
|
|
First Amended and Restated Certificate of Incorporation of
Cardtronics, Inc., dated as of March 10, 2005.
|
|
3
|
.2
|
|
Certificate of Amendment of the First Amended and Restated
Certificate of Incorporation of Cardtronics, Inc. dated as of
May 12, 2005.
|
|
3
|
.3
|
|
Certificate of Amendment of the First Amended and Restated
Certificate of Incorporation of Cardtronics, Inc. dated as of
August 9, 2005.
|
|
3
|
.4
|
|
First Amended and Restated Bylaws of Cardtronics, Inc.
|
|
4
|
.1
|
|
Indenture dated as of August 12, 2005 by and among Cardtronics,
Inc., the Subsidiary Guarantors party thereto and Wells Fargo
Bank, NA as Trustee
|
|
4
|
.2
|
|
Form of Senior Subordinated Note (incorporated by reference to
Exhibit A to Exhibit 4.1).
|
|
4
|
.3
|
|
Registration Rights Agreement dated as of August 12, 2005 by and
among Cardtronics, Inc., the Subsidiary Guarantors party thereto
and the Initial Purchasers party thereto.
|
|
5
|
.1
|
|
Opinion of Vinson & Elkins L.L.P.
|
|
*10
|
.1
|
|
ATM Cash Services Agreement between Bank of America and
Cardtronics, LP, dated effective as of August 2, 2004.
|
|
10
|
.2
|
|
Third Amended and Restated First Lien Credit Agreement, dated as
of May 17, 2005, by and among Cardtronics, Inc., the Subsidiary
Guarantors party thereto, Bank of America, N.A., BNP Paribas,
and the other Lenders parties thereto.
|
|
10
|
.3
|
|
Amendment No. 1 to Credit Agreement, dated as of July 6, 2005.
|
|
10
|
.4
|
|
Amendment No. 2 to Credit Agreement, dated as of August 5, 2005.
|
|
10
|
.5
|
|
Amendment No. 3 to Credit Agreement, dated as of November 17,
2005.
|
|
10
|
.6
|
|
Employment Agreement between Cardtronics, LP and Jack M.
Antonini, dated effective as of January 30, 2003 (incorporated
by reference to Exhibit 10.10 of the Registration Statement on
Form S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.7
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Jack M. Antonini, dated effective as of February 4, 2004
(incorporated by reference to Exhibit 10.11 of the Registration
Statement on Form S-1 filed by Cardtronics, Inc. on March 10,
2004).
|
|
10
|
.8
|
|
Second Amendment to Employment Agreement between Cardtronics, LP
and Jack M. Antonini, dated effective as of January 1, 2005.
|
|
10
|
.9
|
|
Restricted Stock Agreement, dated as of February 4, 2004 between
Cardtronics, Inc. and Jack M. Antonini.
|
|
10
|
.10
|
|
First Amendment to Restricted Stock Agreement, dated as of March
1, 2004, between Cardtronics, Inc. and Jack M. Antonini.
|
|
10
|
.11
|
|
Second Amendment to Restricted Stock Agreement, dated as of
February 10, 2005, between Cardtronics, Inc. and Jack M.
Antonini.
|
|
10
|
.12
|
|
Employment Agreement between Cardtronics, LP and Michael H.
Clinard, dated effective as of June 4, 2001 (incorporated by
reference to Exhibit 10.12 of the Registration Statement on Form
S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.13
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Michael H. Clinard, dated effective as of January 1, 2005.
|
|
10
|
.14
|
|
Employment Agreement between Cardtronics, LP and Thomas E.
Upton, dated effective as of June 1, 2001 (incorporated by
reference to Exhibit 10.13 of the Registration Statement on Form
S-1 filed by Cardtronics, Inc. on March 10, 2004).
|
|
10
|
.15
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and Thomas E. Upton, dated effective as of January 1, 2005.
|
|
|
|
|
|
Exhibit No.
|
|
Description
|
|
|
|
|
10
|
.16
|
|
Employment Agreement between Cardtronics, LP and J. Chris
Brewster, dated effective as of March 31, 2004 (incorporated by
reference to Exhibit 10.14 of the Registration Statement on Form
S-1/A filed by Cardtronics, Inc. on May 14, 2004).
|
|
10
|
.17
|
|
First Amendment to Employment Agreement between Cardtronics, LP
and J. Chris Brewster, dated effective as of January 1, 2005.
|
|
10
|
.18
|
|
Employment Agreement between Cardtronics, LP, Cardtronics, Inc.
and Drew Soinski, dated effective as of July 12, 2005.
|
|
10
|
.19
|
|
Amended and Restated Service Agreement between Bank Machine
Limited and Ron Delnevo, dated effective as of May 17, 2005.
|
|
10
|
.20
|
|
Bonus Agreement between Bank Machine Limited and Ron Delnevo,
dated effective as of May 17, 2005.
|
|
10
|
.21
|
|
2001 Stock Incentive Plan of Cardtronics Group, Inc., dated
effective as of June 4, 2001.
|
|
10
|
.22
|
|
Amendment No. 1 to the 2001 Stock Incentive Plan of Cardtronics
Group, Inc., dated effective as of January 30, 2004.
|
|
10
|
.23
|
|
Amendment No. 2 to the 2001 Stock Incentive Plan of Cardtronics
Group, Inc., dated effective as of June 23, 2004.
|
|
10
|
.24
|
|
Form of Director Indemnification Agreement entered into by and
between Cardtronics, Inc. and each of its directors, dated as of
February 10, 2005.
|
|
12
|
.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
21
|
.1
|
|
List of Subsidiaries.
|
|
23
|
.1
|
|
Consent of KPMG LLP.
|
|
23
|
.2
|
|
Consent of Deloitte and Touche, LLP.
|
|
23
|
.3
|
|
Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1
hereto).
|
|
24
|
.1
|
|
Power of Attorney (included on the signature page to this
Registration Statement).
|
|
25
|
.1
|
|
Statement of Eligibility on Form T-1.
|
|
|
*
|
To be filed by amendment.
|
Exhibit 4.1
EXECUTION COPY
CARDTRONICS, INC.
9 1/4% SENIOR SUBORDINATED NOTES DUE 2013
Indenture
Dated as of August 12, 2005
Wells Fargo Bank, National Association
Trustee
CROSS-REFERENCE TABLE
*
|
|
|
Trust Indenture
|
|
|
Act Section
|
|
Indenture Section
|
310 (a)(1)
|
|
7.10
|
(a)(2)
|
|
7.10
|
(a)(3)
|
|
N.A.
|
(a)(4)
|
|
N.A.
|
(a)(5)
|
|
7.10
|
(b)
|
|
7.10
|
(c)
|
|
N.A.
|
311 (a)
|
|
7.11
|
(b)
|
|
7.11
|
(c)
|
|
N.A.
|
312 (a)
|
|
2.06
|
(b)
|
|
14.03
|
(c)
|
|
14.03
|
313 (a)
|
|
7.06
|
(b)(1)
|
|
N.A.
|
(b)(2)
|
|
7.06, 7.07
|
(c)
|
|
7.06, 14.02
|
(d)
|
|
7.06
|
314 (a)
|
|
14.05
|
(b)
|
|
N.A.
|
(c)(1)
|
|
N.A.
|
(c)(2)
|
|
N.A.
|
(c)(3)
|
|
N.A.
|
(d)
|
|
N.A.
|
(e)
|
|
14.05
|
(f)
|
|
N.A.
|
315 (a)
|
|
N.A.
|
(b)
|
|
N.A.
|
(c)
|
|
N.A.
|
(d)
|
|
N.A.
|
(e)
|
|
N.A.
|
316 (a) (last sentence)
|
|
N.A.
|
(a)(1)(A)
|
|
N.A.
|
(a)(1)(B)
|
|
6.04
|
(a)(2)
|
|
N.A.
|
(b)
|
|
N.A.
|
|
|
|
*
|
N.A. means not applicable.
|
|
|
This Cross-Reference Table is not part of this Indenture
|
1
|
|
|
Trust Indenture
|
|
|
Act Section
|
|
Indenture Section
|
(c)
|
|
14.14
|
317(a)(1)
|
|
N.A.
|
(a)(2)
|
|
N.A.
|
(b)
|
|
N.A.
|
318(a)
|
|
N.A.
|
(b)
|
|
N.A.
|
(c)
|
|
14.01
|
2
TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS AND INCORPORATION
BY REFERENCE
|
|
|
|
|
Section 1.01. Definitions
|
|
|
1
|
|
Section 1.02. Other Definitions
|
|
|
27
|
|
Section 1.03. Incorporation by Reference of Trust Indenture Act
|
|
|
27
|
|
Section 1.04. Rules of Construction
|
|
|
28
|
|
ARTICLE TWO
THE NOTES
|
|
|
|
|
Section 2.01. Form and Dating
|
|
|
28
|
|
Section 2.02. Execution and Authentication
|
|
|
30
|
|
Section 2.03. Methods of Receiving Payments on the Notes
|
|
|
30
|
|
Section 2.04. Registrar and Paying Agent
|
|
|
30
|
|
Section 2.05. Paying Agent to Hold Money in Trust
|
|
|
31
|
|
Section 2.06. Holder Lists
|
|
|
31
|
|
Section 2.07. Transfer and Exchange
|
|
|
31
|
|
Section 2.08. Replacement Notes
|
|
|
44
|
|
Section 2.09. Outstanding Notes
|
|
|
44
|
|
Section 2.10. Treasury Notes
|
|
|
44
|
|
Section 2.11. Temporary Notes
|
|
|
45
|
|
Section 2.12. Cancellation
|
|
|
45
|
|
Section 2.13. Defaulted Interest
|
|
|
45
|
|
Section 2.14. CUSIP Numbers
|
|
|
45
|
|
ARTICLE THREE
REDEMPTION AND OFFERS TO
PURCHASE
|
|
|
|
|
Section 3.01. Notices to Trustee
|
|
|
46
|
|
Section 3.02. Selection of Notes to Be Redeemed
|
|
|
46
|
|
Section 3.03. Notice of Redemption
|
|
|
46
|
|
Section 3.04. Effect of Notice of Redemption
|
|
|
47
|
|
Section 3.05. Deposit of Redemption Price
|
|
|
47
|
|
Section 3.06. Notes Redeemed in Part
|
|
|
48
|
|
Section 3.07. Optional Redemption
|
|
|
48
|
|
Section 3.08. Repurchase Offers
|
|
|
48
|
|
Section 3.09. No Sinking Fund
|
|
|
50
|
|
|
|
|
|
|
i
ARTICLE FOUR
COVENANTS
|
|
|
|
|
Section 4.01. Payment of Notes
|
|
|
50
|
|
Section 4.02. Maintenance of Office or Agency
|
|
|
50
|
|
Section 4.03. Reports
|
|
|
51
|
|
Section 4.04. Compliance Certificate
|
|
|
52
|
|
Section 4.05. Taxes
|
|
|
52
|
|
Section 4.06. Stay, Extension and Usury Laws
|
|
|
52
|
|
Section 4.07. Restricted Payments
|
|
|
53
|
|
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
|
|
|
56
|
|
Section 4.09. Incurrence of Indebtedness
|
|
|
58
|
|
Section 4.10. Asset Sales
|
|
|
60
|
|
Section 4.11. Transactions with Affiliates
|
|
|
62
|
|
Section 4.12. Liens
|
|
|
64
|
|
Section 4.13. Business Activities
|
|
|
64
|
|
Section 4.14. Offer to Repurchase upon a Change of Control
|
|
|
64
|
|
Section 4.15. Limitation on Senior Subordinated Debt
|
|
|
65
|
|
Section 4.16. Designation of Restricted and Unrestricted Subsidiaries
|
|
|
66
|
|
Section 4.17. Payments for Consent
|
|
|
67
|
|
Section 4.18. Guarantees
|
|
|
67
|
|
Section 4.19. Limitation on Issuances and Sales of Preferred Stock in Restricted Subsidiaries
|
|
|
69
|
|
ARTICLE FIVE
SUCCESSORS
|
|
|
|
|
Section 5.01. Merger, Consolidation or Sale of Assets
|
|
|
69
|
|
Section 5.02. Successor Corporation Substituted
|
|
|
70
|
|
ARTICLE SIX
DEFAULTS AND REMEDIES
|
|
|
|
|
Section 6.01. Events of Default
|
|
|
71
|
|
Section 6.02. Acceleration
|
|
|
72
|
|
Section 6.03. Other Remedies
|
|
|
73
|
|
Section 6.04. Waiver of Past Defaults
|
|
|
73
|
|
Section 6.05. Control by Majority
|
|
|
74
|
|
Section 6.06. Limitation on Suits
|
|
|
74
|
|
Section 6.07. Rights of Holders of Notes to Receive Payment
|
|
|
74
|
|
Section 6.08. Collection Suit by Trustee
|
|
|
75
|
|
Section 6.09. Trustee May File Proofs of Claim
|
|
|
75
|
|
Section 6.10. Priorities
|
|
|
75
|
|
Section 6.11. Undertaking for Costs
|
|
|
76
|
|
ARTICLE SEVEN
TRUSTEE
|
|
|
|
|
Section 7.01. Duties of Trustee
|
|
|
76
|
|
ii
|
|
|
|
|
Section 7.02. Certain Rights of Trustee
|
|
|
77
|
|
Section 7.03. Individual Rights of Trustee
|
|
|
78
|
|
Section 7.04. Trustees Disclaimer
|
|
|
78
|
|
Section 7.05. Notice of Defaults
|
|
|
78
|
|
Section 7.06. Reports by Trustee to Holders of the Notes
|
|
|
78
|
|
Section 7.07. Compensation and Indemnity
|
|
|
79
|
|
Section 7.08. Replacement of Trustee
|
|
|
80
|
|
Section 7.09. Successor Trustee by Merger, Etc.
|
|
|
81
|
|
Section 7.10. Eligibility; Disqualification
|
|
|
81
|
|
Section 7.11. Preferential Collection of Claims Against Company
|
|
|
81
|
|
ARTICLE EIGHT
DEFEASANCE AND COVENANT DEFEASANCE
|
|
|
|
|
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance
|
|
|
81
|
|
Section 8.02. Legal Defeasance and Discharge
|
|
|
81
|
|
Section 8.03. Covenant Defeasance
|
|
|
82
|
|
Section 8.04. Conditions to Legal or Covenant Defeasance
|
|
|
82
|
|
Section 8.05. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions
|
|
|
84
|
|
Section 8.06. Repayment to the Company
|
|
|
84
|
|
Section 8.07. Reinstatement
|
|
|
85
|
|
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
|
|
|
|
|
Section 9.01. Without Consent of Holders of Notes
|
|
|
85
|
|
Section 9.02. With Consent of Holders of Notes
|
|
|
86
|
|
Section 9.03. Compliance with Trust Indenture Act
|
|
|
88
|
|
Section 9.04. Revocation and Effect of Consents
|
|
|
88
|
|
Section 9.05. Notation on or Exchange of Notes
|
|
|
88
|
|
Section 9.06. Trustee to Sign Amendments, Etc.
|
|
|
88
|
|
ARTICLE TEN
SATISFACTION AND DISCHARGE
|
|
|
|
|
Section 10.01. Satisfaction and Discharge
|
|
|
89
|
|
Section 10.02. Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions
|
|
|
90
|
|
Section 10.03. Repayment to the Company
|
|
|
90
|
|
Section 10.04. Survival
|
|
|
91
|
|
ARTICLE ELEVEN
SUBORDINATION OF NOTES
|
|
|
|
|
Section 11.01. Agreement to Subordinate
|
|
|
91
|
|
Section 11.02. Liquidation; Dissolution; Bankruptcy
|
|
|
91
|
|
Section 11.03. Default on Designated Senior Debt
|
|
|
91
|
|
iii
|
|
|
|
|
Section 11.04. Acceleration of Securities
|
|
|
93
|
|
Section 11.05. When Distribution Must Be Paid Over
|
|
|
93
|
|
Section 11.06. Notice by the Company
|
|
|
93
|
|
Section 11.07. Subrogation
|
|
|
93
|
|
Section 11.08. Relative Rights
|
|
|
94
|
|
Section 11.09. Subordination May Not Be Impaired by the Company
|
|
|
94
|
|
Section 11.10. Distribution or Notice to Representative
|
|
|
94
|
|
Section 11.11. Rights of Trustee and Paying Agent
|
|
|
94
|
|
Section 11.12. Authorization to Effect Subordination
|
|
|
95
|
|
ARTICLE TWELVE
NOTE GUARANTEES
|
|
|
|
|
Section 12.01. Guarantee
|
|
|
95
|
|
Section 12.02. Limitation on Guarantor Liability
|
|
|
96
|
|
Section 12.03. Note Guarantees under Indenture
|
|
|
97
|
|
Section 12.04. Guarantors May Consolidate, Etc., on Certain Terms
|
|
|
97
|
|
Section 12.05. Release of Guarantor
|
|
|
98
|
|
ARTICLE THIRTEEN
SUBORDINATION OF NOTE GUARANTEES
|
|
|
|
|
Section 13.01. Agreement To Subordinate
|
|
|
98
|
|
Section 13.02. Liquidation, Dissolution, Bankruptcy
|
|
|
98
|
|
Section 13.03. Default on Designated Senior Debt of Guarantor
|
|
|
99
|
|
Section 13.04. Demand for Payment
|
|
|
100
|
|
Section 13.05. When Distribution Must Be Paid Over
|
|
|
100
|
|
Section 13.06. Notice by the Guarantors
|
|
|
101
|
|
Section 13.07. Subrogation
|
|
|
101
|
|
Section 13.08. Relative Rights
|
|
|
101
|
|
Section 13.09. Subordination May Not Be Impaired by Guarantor
|
|
|
101
|
|
Section 13.10. Distribution or Notice to Representative
|
|
|
102
|
|
Section 13.11. Rights of Trustee and Paying Agent
|
|
|
102
|
|
Section 13.12. Authorization to Effect Subordination
|
|
|
102
|
|
Section 13.13. Reliance by Holders of Senior Debt of Guarantors on Subordination Provisions
|
|
|
103
|
|
ARTICLE FOURTEEN
MISCELLANEOUS
|
|
|
|
|
Section 14.01. Trust Indenture Act Controls
|
|
|
103
|
|
Section 14.02. Notices
|
|
|
103
|
|
Section 14.03. Communication by Holders of Notes with Other Holders of Notes
|
|
|
104
|
|
Section 14.04. Certificate and Opinion as to Conditions Precedent
|
|
|
104
|
|
Section 14.05. Statements Required in Certificate or Opinion
|
|
|
105
|
|
Section 14.06. Rules by Trustee and Agents
|
|
|
105
|
|
Section 14.07. No Personal Liability of Directors, Officers, Employees and Stockholders
|
|
|
105
|
|
Section 14.08. Governing Law
|
|
|
106
|
|
iv
|
|
|
|
|
Section 14.09. Consent to Jurisdiction
|
|
|
106
|
|
Section 14.10. No Adverse Interpretation of Other Agreements
|
|
|
106
|
|
Section 14.11. Successors
|
|
|
106
|
|
Section 14.12. Severability
|
|
|
106
|
|
Section 14.13. Counterpart Originals
|
|
|
106
|
|
Section 14.14. Acts of Holders
|
|
|
106
|
|
Section 14.15. Benefit of Indenture
|
|
|
108
|
|
Section 14.16. Table of Contents, Headings, Etc.
|
|
|
108
|
|
|
|
|
|
|
EXHIBITS
|
|
|
|
Exhibit A
|
|
FORM OF NOTE
|
|
|
|
Exhibit B
|
|
FORM OF CERTIFICATE OF TRANSFER
|
|
|
|
Exhibit C
|
|
FORM OF CERTIFICATE OF EXCHANGE
|
|
|
|
Exhibit D
|
|
FORM OF NOTATION OF GUARANTEE
|
|
|
|
Exhibit E
|
|
FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS
|
INDENTURE
dated as of August 12, 2005, among Cardtronics, Inc., a Delaware corporation,
the initial Guarantors (as defined below) listed on the signature pages hereto and Wells Fargo
National Bank, National Association, a nationally chartered banking association, as trustee.
The Company (as defined below) has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its 9 1/4% Senior Subordinated Notes due
2013 to be issued in one or more series as provided in this Indenture. Each of the initial
Guarantors has duly authorized the execution and delivery of this Indenture to provide for a
guarantee of the Notes and certain of the Companys obligations under this Indenture. All things
necessary to make this Indenture a valid agreement of the Company and the initial Guarantors, in
accordance with its terms, have been done.
The Company, the Guarantors and the Trustee (as defined below) agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders (as defined below) of
the Companys 9 1/4% Senior Subordinated Notes due 2013:
ARTICLE ONE
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01.
Definitions
.
144A Global Note
means a global note substantially in the form of
Exhibit A
bearing
the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and
registered in the name of, the Depositary or its nominee, that shall be issued in a denomination
equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
Additional
Interest
means all additional interest owing on the Notes pursuant to the
Registration Rights Agreement.
Additional
Notes
means an unlimited maximum aggregate principal amount of Notes (other than
the Notes issued on the date hereof) issued under this Indenture in accordance with Sections 2.02
and 4.09.
Applicable
Premium
means, with respect to a Note at any date of redemption, the greater of
(1) 1.0% of the principal amount of such Note and (2) the excess of (A) the present value at such
date of redemption of (i) the redemption price of such Note at August 15, 2009 (such redemption
price as described in Section 3.07)
plus
(ii) all remaining required interest payments due on such
Note through August 15, 2009 (excluding accrued but unpaid interest to the date of redemption),
computed using a discount rate equal to the Treasury Rate plus 50 basis points, over (B) the
principal amount of such Note.
Affiliate
of any specified Person means (1) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with such specified Person
or (2) any executive officer or director of such specified Person. For purposes of this definition,
control, as used with respect to any Person, will mean the possession, directly
1
or indirectly,of the power to direct or cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided
that beneficial
ownership of 10% or more of the Voting Stock of a Person will be deemed to be control. For purposes
of this definition, the terms controlling, controlled by and under common control with
will have correlative meanings.
Agent
means any Registrar or Paying Agent.
Applicable Procedures
means, with respect to any transfer or exchange of or for beneficial
interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Clearstream
that apply to such transfer or exchange.
Asset Sale
means:
(1) the sale, lease, conveyance or other disposition of any assets, other than a transaction
governed by the provisions of Section 4.14 and/or the provisions of Section 5.01; and
(2) the issuance of Equity Interests by any of the Companys Restricted Subsidiaries or the
sale by the Company or any Restricted Subsidiary thereof of Equity Interests in any of its
Subsidiaries (other than directors qualifying shares and shares issued to foreign nationals to the
extent required by applicable law).
Notwithstanding the preceding, the following items will be deemed not to be Asset Sales:
(1) any single transaction or series of related transactions that involves assets or Equity
Interests having a Fair Market Value of less than $1.0 million;
(2) a transfer of assets or Equity Interests between or among the Company and its Restricted
Subsidiaries;
(3) an issuance or sale of Equity Interests by a Restricted Subsidiary of the Company to the
Company or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or other assets in the
ordinary course of business;
(5) the sale or other disposition of Cash Equivalents;
(6) dispositions of accounts receivable in connection with the compromise, settlement or
collection thereof in the ordinary course of business or in bankruptcy or similar proceedings;
(7) a Restricted Payment that is permitted by Section 4.07 and any Permitted Investments;
(8) any sale or disposition of any property or equipment that has become damaged, worn out, or
obsolete; and
2
(9) the creation of a Lien not prohibited by the Indenture.
Bankruptcy Law
means title 11 of the United States Code or any similar federal or state law
for the relief of debtors.
Beneficial Owner
has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under
the Exchange Act, except that in calculating the beneficial ownership of any particular person
(as that term is used in Section 13(d)(3) of the Exchange Act), such person will be deemed to
have beneficial ownership of all securities that such person has the right to acquire by
conversion or exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms Beneficial Owners,
Beneficially Owns and Beneficially Owned will have a corresponding meaning.
Board of Directors
means:
(1) with respect to a corporation, the board of directors of the corporation or, except in the
context of the definitions of Change of Control and Continuing Directors, a duly authorized
committee thereof ;
(2) with respect to a partnership, the Board of Directors of the general partner of the
partnership; and
(3) with respect to any other Person, the board or committee of such Person serving a similar
function.
Board Resolution
means a resolution certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of Directors of the Company and to be in full
force and effect on the date of such certification.
Broker-Dealer
has the meaning set forth in the Registration Rights Agreement.
Business Day
means any day other than a Legal Holiday.
Capital Lease Obligation
means, at the time any determination thereof is to be made, the
amount of the liability in respect of a capital lease that would at that time be required to be
capitalized on a balance sheet in accordance with GAAP.
Capital Stock
means:
(1) in the case of a corporation, any corporate stock;
(2) in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership or membership
interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right to receive a share
of the profits and losses of, or distributions of assets of, the issuing Person.
Cash Equivalents
means:
(1) United States dollars, or in the case of a Subsidiary other than a Domestic Subsidiary,
such local currencies held by it in the ordinary course of business;
(2) securities issued or directly and fully guaranteed or insured by the United States
government, or any member state of the European Union in which the Company or any Subsidiary
operates or anticipates operating within the 12 months, or any agency or instrumentality thereof
(
provided
that the full faith and credit of the United States is pledged in support thereof)
maturing, unless such securities are deposited to defease any Indebtedness, not more than one year
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers acceptances with maturities not exceeding one year and
overnight bank deposits, in each case, with any domestic commercial bank having capital and surplus
in excess of $500.0 million and a rating at the time of acquisition thereof of P-1 or better from
Moodys Investors Service, Inc. or A-1 or better from Standard & Poors Rating Services;
(4) repurchase obligations with a term of not more than seven days for underlying securities
of the types described in clauses (2) and (3) above entered into with any financial institution
meeting the qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moodys Investors Service, Inc.
or Standard & Poors Rating Services and in each case maturing within one year after the date of
acquisition;
(6) securities issued and fully guaranteed by any state, commonwealth or territory of the
United States of America, or any member state of the European Union in which the Company or any
Subsidiary operates or anticipates operating within the next 12 months, or by any political
subdivision or taxing authority thereof, rated at least A by Moodys Investors Service, Inc. or
Standard & Poors Rating Services and having maturities of not more than six months from the date
of acquisition;
(7) in the case of any Restricted Subsidiary located in a country that is outside the United
States and the European Union (in which the Company or its Restricted Subsidiary is operating or
anticipates operating within the next 12 months), any substantially similar investment to the kinds
described in clauses (1) through (6) of this definition obtained in the ordinary course of business
and rated the lower of (i) at least P-1 by Moodys or A-1 by S&P or the equivalent thereof and (ii)
the highest ranking obtainable in the applicable jurisdiction; and
(8) money market funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (1) through (6) of this definition.
Change of Control
means the occurrence of any of the following:
4
(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of all or substantially
all of the properties or assets of the Company and its Restricted Subsidiaries, taken as a whole,
to any person (as that term is used in Section 13(d)(3) of the Exchange Act), other than to any
of the Principals or Related Parties;
(2) the adoption of a plan relating to the liquidation or dissolution of the Company;
(3) prior to the first public offering of Common Stock of the Company, the Principals or the
Related Parties cease to be the ultimate Beneficial Owners, directly or indirectly, of a majority
in the aggregate of the total voting power of the Voting Stock of the Company, on a fully diluted
basis, whether as a result of issuance of securities of the Company, any merger, consolidation,
liquidation or dissolution of the Company or a Parent, or any direct or indirect transfer of
securities by the Company, or otherwise (for the avoidance of doubt, pro rata distributions in kind
of Equity Interests of the Company by any Principal to its general and/or limited partners will be
disregarded for this clause (3));
(4) on and following the first public offering of Common Stock of the Company, any person
or group (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than
any of the Principals or Related Parties, becomes the ultimate Beneficial Owner, directly or
indirectly, of 50% or more of the voting power of the Voting Stock of the Company;
(5) the first day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors; or
(6) the Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction
in which any of the outstanding Voting Stock of the Company or such other Person is converted into
or exchanged for cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is converted into or
exchanged for Voting Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such surviving or
transferee Person (immediately after giving effect to such issuance), and any transaction where
immediately after such transaction, no person or group (as such terms are used in Section
13(d) and 14(d) of the Exchange Act), becomes, directly or indirectly, the ultimate Beneficial
Owner of 50% or more of the voting power of the Voting Stock of the surviving or transferee Person.
Clearstream
means Clearstream Banking S.A. and any successor thereto.
Company
means Cardtronics, Inc., a Delaware corporation, until a successor replaces it
pursuant to Article Five and thereafter means the successor.
Commission
means the U.S. Securities and Exchange Commission.
5
Common Stock
means, with respect to any Person, any Capital Stock (other than Preferred
Stock) of such Person, whether outstanding on the Issue Date or issued thereafter.
Consolidated Cash Flow
means, with respect to any specified Person for any period, the
Consolidated Net Income of such Person for such period
plus
:
(1) provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing
such Consolidated Net Income;
plus
(2) Fixed Charges of such Person and its Restricted Subsidiaries for such period, to the
extent that any such Fixed Charges were deducted in computing such Consolidated Net Income;
plus
(3) depreciation, amortization (including amortization of intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense that was paid in a
prior period) of such Person and its Restricted Subsidiaries for such period to the extent that
such depreciation, amortization and other noncash expenses were deducted in computing such
Consolidated Net Income;
minus
(4) non-cash items increasing such Consolidated Net Income for such period, other than the
accrual of revenue consistent with past practice;
in each case, on a consolidated basis and determined in accordance with GAAP.
Solely for the purpose of determining the amount available for Restricted Payments under
Section 4.07, notwithstanding the preceding, the provision for taxes based on the income or profits
of, the Fixed Charges of and the depreciation and amortization and other non-cash expenses of, a
Restricted Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company (A) in the same proportion that the Net Income of such
Restricted Subsidiary was added to compute such Consolidated Net Income of the Company and (B) only
to the extent that a corresponding amount would be permitted at the date of determination to be
dividended or distributed to the Company by such Restricted Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect restriction pursuant to the
terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules
and governmental regulations applicable to that Subsidiary or its stockholders.
Consolidated Net Assets
of any Person means, as of any date, the amount which in
accordance with GAAP, would be set forth under the caption Total Assets (or any like caption)
on a consolidated balance sheet of such Person and its Restricted Subsidiaries, as of the end of
the most recently ended fiscal quarter for which internal financial statements are available, less
current liabilities;
provided
that, for purposes of determining Consolidated Net Assets, the principal amount of any intercompany Indebtedness that would otherwise be included
in the definition of current liabilities under GAAP, will not be so included to the extent that
6
such intercompany Indebtedness is expressly subordinated by its terms to the Indebtedness evidenced
by the Notes and the Guarantees.
Consolidated Net Income
means, with respect to any specified Person for any period, the
aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP;
provided
that:
(1) the Net Income (or loss) of any Person that is not a Restricted Subsidiary or that is
accounted for by the equity method of accounting will be included only to the extent of the amount
of dividends or distributions or other payments that are actually paid in cash (or to the extent
converted into cash) to the specified Person or a Restricted Subsidiary thereof;
(2) Solely for the purpose of determining the amount available for Restricted Payments under
Section 4.07, the Net Income of any Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its equity holders, unless such restriction has been
waived: provided that Consolidated Net Income for such Restricted Subsidiary will be increased by
the amount of dividends or distributions or other payments that are actually paid in cash (or to
the extent converted into cash) to such Restricted Subsidiary in respect to such period, to the
extent not already included therein;
(3) the Net Income of any Person acquired during the specified period for any period prior to
the date of such acquisition will be excluded;
(4) the cumulative effect of a change in accounting principles will be excluded;
(5) the amortization or write off of fees and expenses incurred in connection with the
acquisition or integration of a Permitted Business or assets used in a Permitted Business will be
excluded;
(6) any net after tax gain (or loss) realized upon the sale or other disposition of any assets
of the Company, its Consolidated Subsidiaries or any other Person (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course
of business and any net after tax gain (or loss) realized upon the sale or other disposition of
any Capital Stock of any Person will be excluded;
(7) extraordinary gains or losses will be excluded;
(8) any non-cash compensation charge or expense realized from grants of stock, stock
appreciation or similar rights, stock option or other rights to officers, directors and employees
or the Company or any of its Restricted Subsidiaries will be excluded; and
(9) any unusual, nonoperating or nonrecurring gain, loss, charge or write-down of assets will
be excluded.
7
Continuing Directors
means, as of any date of determination, any member of the Board of
Directors of the Company who:
(1) was a member of such Board of Directors on the Issue Date; or
(2) was nominated for election or elected to such Board of Directors (i) with the approval of
a majority of the Continuing Directors who were members of such Board of Directors at the time of
such nomination or election or (ii) the nominating committee of the Board of Directors so long as
it consists of Continuing Directors appointed to serve on the nominating committee in accordance
with the First Amended and Restated Investors Agreement dated February 10, 2005.
Corporate Trust Office of the Trustee
shall
be at the address of the Trustee specified in
Section 14.02 or such other address as to which the Trustee may give notice to the Company.
Credit Agreement
means that certain Third Amended and Restated First Lien Credit
Agreement, dated as of May 17, 2005, by and among the Company and the other lenders named therein,
providing for up to $30 million in term loan borrowings and up to $150 million of revolving credit
borrowings, including any related notes, Guarantees, collateral documents, instruments and
agreements executed in connection therewith, and in each case as amended, restated, modified,
renewed, refunded, replaced, restructured, increased, supplemented or refinanced in whole or in
part from time to time, regardless of whether such amendment, restatement, modification, renewal,
refunding, replacement, restructuring, increase, supplement or refinancing is with the same
financial institutions or otherwise.
Credit Facilities
means, one or more debt facilities (including, without limitation, the
Credit Agreement), commercial paper facilities, in each case with banks or other institutional
lenders, providing for revolving credit loans, term loans, receivables financing (including through
the sale of receivables to such lenders or to special purpose entities formed to borrow from such
lenders against such receivables), letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
Custodian
means the Trustee, as custodian with respect to the Global Notes, or any successor
entity thereto.
Default
means any event that is, or with the passage of time or the giving of notice or both
would be, an Event of Default.
Definitive Note
means a certificated Note registered in the name of the Holder thereof and
issued in accordance with Section 2.07, substantially in the form of
Exhibit A
, except that
such Note shall not bear the Global Note Legend and shall not have the Schedule of Exchanges of
Interests in the Global Note attached thereto.
Depositary
means, with respect to the Notes issuable or issued in whole or in part in global
form, the Person specified in Section 2.04 as the Depositary with respect to the
8
Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
Designated Non-Cash Consideration
means the Fair Market Value of non-cash consideration
received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that
is so designated as Designated Non-Cash Consideration pursuant to an Officers Certificate, setting
forth the basis of such valuation, less the amount of Cash Equivalents received in connection with
a subsequent sale of such Designated Non-Cash Consideration.
Designated Senior Debt
means:
(1) any Indebtedness outstanding under the Credit Agreement; and
(2) to the extent permitted under the Credit Agreement, any other Senior Debt permitted under
the Indenture the amount of which is $25.0 million or more and that has been designated by the
Company as Designated Senior Debt.
Disqualified Stock
means any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible, or for which it is exchangeable, in each case at the option
of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 123 days after the date on which the
Notes mature. Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require the Company to
repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not
constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the provisions of Section 4.07. The term Disqualified Stock will also
include any options, warrants or other rights that are convertible into Disqualified Stock or that
are redeemable at the option of the holder, or required to be redeemed, prior to the date that is
one year after the date on which the Notes mature. For the avoidance of doubt, the existing
Preferred Stock is not Disqualified Stock.
Domestic Subsidiary
means any Restricted Subsidiary of the Company other than a Restricted
Subsidiary that is (1) a controlled foreign corporation under Section 957 of the Internal
Revenue Code (a) whose primary operating assets are located outside the United States and (b) that
is not subject to tax under Section 882(a) of the Internal Revenue Code of the United States
because of a trade or business within the United States or (2) a Subsidiary of an entity described
in the preceding clause (1).
Equity Offering
means any public or private placement of Capital Stock (other than
Disqualified Stock) of the Company (other than pursuant to a registration statement on Form S-8 or
otherwise relating to equity securities issuable under any employee benefit plan of the Company) to
any Person other than any Subsidiary thereof.
9
Equity Interests
means Capital Stock and all warrants, options or other rights to acquire
Capital Stock (but excluding any debt security that is convertible into, or exchangeable for,
Capital Stock).
Euroclear
means Euroclear Bank S.A./N.V., as operator of the Euroclear system, and any
successor thereto.
European Union
means the European Union or any successor thereto as constituted on the
date of determination.
Exchange Act
means the Securities Exchange Act of 1934, as amended.
Exchange Notes
means the Notes issued in the Exchange Offer in accordance with Section
2.07(f).
Exchange Offer
has the meaning set forth in the Registration Rights Agreement.
Exchange Offer Registration Statement
has the meaning set forth in the Registration Rights
Agreement.
Existing Indebtedness
means the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement or under the Notes and
the related Note Guarantees) in existence on the Issue Date after giving effect to the application
of the proceeds of (1) the Notes and (2) any borrowings made under the Credit Agreement on the
Issue Date, until such amounts are repaid.
Existing Preferred Stock
means the Companys Series B Convertible Preferred Stock.
Fair Market Value
means the price that would be paid in an arms-length transaction
between an informed and willing seller under no compulsion to sell and an informed and willing
buyer under no compulsion to buy, as determined in good faith by the Board of Directors of the
Company, whose determination, unless otherwise specified below, will be conclusive if evidenced by
a Board Resolution.
Notwithstanding the foregoing, (1) the Board of Directors determination of Fair Market Value
must be evidenced by a Board Resolution attached to an Officers Certificate delivered to the
Trustee if the Fair Market Value exceeds $5.0 million and (2) the Board of Directors determination
of Fair Market Value must be based upon an opinion or appraisal issued by an accounting, appraisal
or investment banking firm of national standing if the Fair Market Value exceeds $25.0 million.
Fixed Charges
means, with respect to any specified Person for any period, the sum, without
duplication, of:
(1) the consolidated interest expense of such Person and its Restricted Subsidiaries for such
period, whether paid or accrued, excluding amortization of debt issuance
10
costs and the expensing of any financing fees, but including original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations, and net of the effect of all
payments made or received pursuant to Hedging Obligations;
plus
(2) the consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period;
plus
(3) any interest expense on Indebtedness of another Person that is Guaranteed by such Person
or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
(4) all dividends, whether paid or accrued and whether or not in cash, on any series of
Disqualified Stock of such Person or any of its Restricted Subsidiaries, other than dividends on
Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock)
of the Company or to the Company or a Restricted Subsidiary of the Company, in each case, on a
consolidated basis and in accordance with GAAP.
Fixed Charge Coverage Ratio
means with respect to any specified Person for any period, the
ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such
Person for such period. In the event that the specified Person or any of its Restricted
Subsidiaries Incurs, repays, repurchases or redeems any Indebtedness or issues, repurchases or
redeems Preferred Stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated and on or prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the Calculation Date), then the Fixed
Charge Coverage Ratio will be calculated giving pro forma effect to such Incurrence, repayment,
repurchase or redemption of Indebtedness, or such issuance, repurchase or redemption of Preferred
Stock, and the use of the proceeds therefrom as if the same had occurred at the beginning of such
period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions and dispositions of business entities or property and assets constituting a
division or line of business of any Person that have been made by the specified Person or any of
its Restricted Subsidiaries, including through mergers or consolidations, during the four-quarter
reference period or subsequent to such reference period and on or prior to the Calculation Date
will be given pro forma effect as if they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period will be calculated on a pro
forma basis, but without giving effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, will be excluded;
(3) the Fixed Charges attributable to discontinued operations, as determined in accordance
with GAAP will be excluded, but only to the extent that the obligations giving rise to
11
such Fixed Charges will not be obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date;
(4) consolidated interest expense attributable to interest on any Indebtedness (whether
existing or being Incurred) computed on a
pro forma
basis and bearing a floating interest rate will
be computed as if the average rate in effect from the beginning of the applicable period to the
Calculation Date (taking into account any interest rate option, swap, cap or similar agreement
applicable to such Indebtedness if such agreement has a remaining term in excess of 12 months or,
if shorter, at least equal to the remaining term of such Indebtedness) had been the applicable rate
for the entire period; and
(5) if any Indebtedness is incurred under a revolving credit facility and is being given pro
forma effect in such calculation, the interest on such Indebtedness shall be calculated based on
the average daily balance of such Indebtedness for the four fiscal quarters subject to the pro
forma calculation to the extent that such Indebtedness was incurred solely for working capital
purposes.
GAAP
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants, the opinions and pronouncements of the Public Company Accounting Oversight Board and
in the statements and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
Global Note Legend
means the legend set forth in Section 2.07(g)(ii), which is required to
be placed on all Global Notes issued under this Indenture.
Global Notes
means, individually and collectively, each of the Restricted Global Notes and
the Unrestricted Global Notes, substantially in the form of
Exhibit A
, issued in accordance
with Section 2.01 or Section 2.07.
Government Securities
means securities that are direct obligations of the United States of
America for the timely payment of which its full faith and credit is pledged.
Guarantee
means, as to any Person, a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any Indebtedness of another
Person.
Guarantors
means:
(1) the Initial Guarantors; and
(2) any other subsidiary that executes a Note Guarantee in accordance with the provisions of
the Indenture;
12
and their respective successors and assigns until released from their obligations under their Note
Guarantees and the Indenture in accordance with the terms of the Indenture.
Hedging Obligations
means, with respect to any specified Person, the obligations of such
Person under:
(1) interest rate swap agreements, interest rate cap agreements, interest rate collar
agreements and other agreements or arrangements with respect to interest rates;
(2) commodity swap agreements, commodity option agreements, forward contracts and other
agreements or arrangements with respect to commodity prices; and
(3) foreign exchange contracts, currency swap agreements and other agreements or arrangements
with respect to foreign currency exchange rates.
Holder
means a Person in whose name a Note is registered.
Immaterial Subsidiary
means, as of any date of determination, any Restricted Subsidiary
whose total assets as of the most recently completed fiscal quarter were less than $1.0 million and
whose total revenues for the most recently completed 12-month fiscal period did not exceed $1.0
million;
provided
that a Restricted Subsidiary will not be deemed to be an Immaterial Subsidiary if
(1) such Restricted Subsidiary directly or indirectly guarantees any Indebtedness of the Company or
any other Subsidiary or (2) either the total assets or total revenues of such Restricted Subsidiary
exceeds the amount set forth above.
Incur
means, with respect to any Indebtedness, to incur, create, issue, assume, guarantee or
otherwise become directly or indirectly liable for or with respect to, or become responsible for,
the payment of, contingently or otherwise, such Indebtedness (and Incurrence and Incurred
will have meanings correlative to the foregoing);
provided
that (1) any Indebtedness of a Person
existing at the time such Person becomes a Restricted Subsidiary of the Company shall be deemed to
be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary of the
Company and (2) neither the accrual of interest nor the accretion of original issue discount nor
the payment of interest in the form of additional Indebtedness with the same terms and the payment
of dividends on Disqualified Stock or Preferred Stock in the form of additional shares of the same
class of Disqualified Stock or Preferred Stock (to the extent provided for when the Indebtedness or
Disqualified Stock or Preferred Stock on which such interest or dividend is paid was originally
issued) will be considered an Incurrence of Indebtedness;
provided
that, in each case, the amount
thereof is for all other purposes included in the Fixed Charges and Indebtedness of the Company or
its Restricted Subsidiary as accrued.
Indebtedness
means, with respect to any specified Person, any indebtedness of such Person,
whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof);
13
(3) in respect of bankers acceptances;
(4) in respect of Capital Lease Obligations;
(5) in respect of the balance deferred and unpaid of the purchase price of any property or
services, except any such balance that constitutes an accrued expense or trade payable;
(6) representing Hedging Obligations;
(7) representing Disqualified Stock valued at the greater of its voluntary or involuntary
maximum fixed repurchase price plus accrued dividends;
(8) in the case of a Subsidiary of such Person, representing Preferred Stock valued at greater
of its voluntary or involuntary maximum fixed repurchase price plus accrued dividends.
In addition, the term Indebtedness includes (x) all Indebtedness of others secured by a
Lien on any asset of the specified Person (whether or not such Indebtedness is assumed by the
specified Person),
provided
that the amount of such Indebtedness will be the lesser of (A) the Fair
Market Value of such asset at such date of determination and (B) the amount of such Indebtedness,
(y) to the extent not otherwise included, the Guarantee by the specified Person of any Indebtedness
of any other Person, and (z) Preferred Stock issued by any Restricted Subsidiary. For purposes
hereof, the maximum fixed repurchase price of any Disqualified Stock or Preferred Stock which
does not have a fixed repurchase price will be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock, as applicable, as if such Disqualified Stock or Preferred
Stock were repurchased on any date on which Indebtedness will be required to be determined pursuant
to the Indenture.
The amount of any Indebtedness outstanding as of any date will be the outstanding balance at
such date of all unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving rise to the
obligation, and will be:
(1) the accreted value thereof, in the case of any Indebtedness issued with original issue
discount; and
(2) the principal amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness.
Notwithstanding the foregoing, the following items of Indebtedness will be permitted:
(1) the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
arising from the honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business, provided, however,
that such Indebtedness is extinguished within five Business Days of its Incurrence;
14
(2) the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
constituting reimbursement obligations with respect to letters of credit in respect of workers
compensation claims or self-insurance obligations or bid, performance or surety bonds (in each
case, other than for an obligation for borrowed money);
(3) the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
constituting reimbursement obligations with respect to letters of credit issued in the ordinary
course of business; provided that, upon the drawing of such letters of credit or in the Incurrence
of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or
Incurrence;
(4) the Incurrence by the Company of Indebtedness to the extent that the net proceeds thereof
are promptly deposited to defease or to satisfy and discharge the Notes;
(5) any Indebtedness which has been defeased in accordance with GAAP; and
(6) the Incurrence by the Company or any of its Restricted Subsidiaries of Indebtedness
arising from agreements providing for indemnification, adjustment of purchase price or similar
obligations, or Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing
such acquisition), so long as the amount so indemnified or otherwise Incurred does not exceed the
gross proceeds actually received by the Company or any Restricted Subsidiary thereof in connection
with such disposition.
Indenture
means this Indenture, as amended or supplemented from time to time.
Indirect Participant
means a Person who holds a beneficial interest in a Global Note through
a Participant.
Initial Guarantors
means all of the Domestic Subsidiaries of the Company.
Institutional Accredited Investor
means an institution that is an accredited investor as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, who is not also a QIB.
Investment Grade Rating
means a rating equal to or higher than Baa3 (or the equivalent) by
Moodys and a rating equal to or higher than BBB- (or the equivalent) by Standard and Poors, in
each case with stable or better outlook; or, if ratings by either of Moodys or Standard and Poors
are not available, an equivalent rating with stable or better outlook by another Rating Agency.
Investments
means, with respect to any Person, all direct or indirect investments by such
Person in other Persons (including Affiliates) in the form of loans or other extensions of credit
(including Guarantees), advances, capital contributions (by means of any
15
transfer of cash or other property to others or any payment for property or services for the
account or use of others), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company that is a Guarantor
such that, after giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Company and a Guarantor, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market Value of the
Investment in such Subsidiary not sold or disposed of. The acquisition by the Company or any
Restricted Subsidiary of the Company of a Person that holds an Investment in a third Person will be
deemed to be an Investment by the Company or such Restricted Subsidiary in such third Person in an
amount equal to the Fair Market Value of the Investment held by the acquired Person in such third
Person.
Issue Date
means the date of the original issuance of the Notes under this Indenture.
Legal Holiday
means a Saturday, a Sunday or a day on which banking institutions in The City
of New York or at a place of payment are authorized by law, regulation or executive order to remain
closed.
Legended Regulation S Global Note
means a Global Note in the form of
Exhibit A
bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of
and registered in the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S.
Letter of Transmittal
means the letter of transmittal to be prepared by the Company and sent
to all Holders of the Notes for use by such Holders in connection with the Exchange Offer.
Lien
means, with respect to any asset, any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
Moodys
means Moodys Investors Service, Inc. and any successor to its rating agency
business.
Net Income
means, with respect to any specified Person, the net income (loss) of such
Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock
dividends, excluding, however:
16
(1) any gain (or loss), together with any related provision for taxes on such gain (or loss),
realized in connection with: (a) any sale of assets outside the ordinary course of business of such
Person; or (b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries; and
(2) any extraordinary gain (or loss), together with any related provision for taxes on such
extraordinary gain (or loss).
Net Proceeds
means the aggregate cash proceeds, including payments in respect of deferred
payment obligations (to the extent corresponding to the principal, but not the interest component,
thereof) received by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of
(1) the direct costs relating to such Asset Sale, including, without limitation, legal,
accounting, investment banking and brokerage fees, and sales commissions, and any relocation
expenses incurred as a result thereof,
(2) taxes paid or payable as a result thereof, in each case, after taking into account any
available tax credits or deductions and any tax sharing arrangements,
(3) amounts required to be applied to the repayment of Indebtedness or other liabilities,
secured by a Lien on the asset or assets that were the subject of such Asset Sale, or is required
to be paid as a result of such sale,
(4) any reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP,
(5) in the case of any Asset Sale by a Restricted Subsidiary of the Company, payments to
holders of Equity Interests in such Restricted Subsidiary in such capacity (other than such Equity
Interests held by the Company or any Restricted Subsidiary thereof) to the extent that such payment
is required to permit the distribution of such proceeds in respect of the Equity Interests in such
Restricted Subsidiary held by the Company or any Restricted Subsidiary thereof; and
(6) appropriate amounts to be provided by the Company or its Restricted Subsidiaries as a
reserve against liabilities associated with such Asset Sale, including, without limitation, pension
and other post employment benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset Sale, all as
determined in accordance with GAAP;
provided
that (a) excess amounts set aside for payment of taxes
pursuant to clause (2) above remaining after such taxes have been paid in full or the statute of
limitations therefor has expired and (b) amounts initially held in reserve pursuant to clause (6)
no longer so held, will, in the case of each of subclause (a) and (b), at that time become Net
Proceeds.
Non-U.S. Person
means a Person who is not a U.S. Person.
17
Note Guarantee
means a Guarantee of the Notes pursuant to this Indenture.
Notes
means the 9 1/4% Senior Subordinated Notes due 2013 of the Company issued on the date
hereof and any Additional Notes, including any Exchange Notes. The Notes and the Additional Notes
(including any Exchange Notes), if any, shall be treated as a single class for all purposes under
this Indenture.
Obligations
means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation governing any
Indebtedness.
Offering Memorandum
means the offering memorandum, dated August 3, 2005, relating to the
Companys 9 1/4% Senior Subordinated Notes due 2013.
Officer
means, with respect to any Person, the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer,
any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person.
Officers Certificate
means a certificate signed on behalf of the Company by at least two
Officers of the Company, one of whom must be the principal executive officer, the principal
financial officer, the treasurer or the principal accounting officer of the Company, that meets the
requirements of the Indenture.
Opinion of Counsel
means an opinion from legal counsel who is reasonably acceptable to the
Trustee (who may be counsel to or an employee of the Company) that meets the requirements of the
Indenture.
Participant
means, with respect to the Depositary, Euroclear or Clearstream, a Person who
has an account with the Depositary, Euroclear or Clearstream, respectively (and with respect to
DTC, shall include Euroclear and Clearstream).
Permitted Business
means any business conducted or proposed to be conducted (as described
in the offering memorandum) by the Company and its Restricted Subsidiaries on the Issue Date and
other businesses reasonably related or ancillary thereto.
Permitted Investments
means:
(1) any Investment in the Company or in a Restricted Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if
as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
18
(b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary
of the Company;
(4) any Investment made as a result of the receipt of non-cash consideration from an Asset
Sale that was made pursuant to and in compliance with the provisions of Section 4.10;
(5) Hedging Obligations that are Incurred for the purpose of fixing, hedging or swapping
interest rate, commodity price or foreign currency exchange rate risk (or to reverse or amend any
such agreements previously made for such purposes), and not for speculative purposes, and that do
not increase the Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in interest rates, commodity prices or foreign currency exchange rates or by reason of
fees, indemnifies and compensation payable thereunder;
(6) stock, obligations or securities received in satisfaction of judgments;
(7) advances to customers or suppliers in the ordinary course of business that are, in
conformity with GAAP, recorded as accounts receivable, prepaid expenses or deposits on the balance
sheet of the Company or its Restricted Subsidiaries and endorsements for collection or deposit
arising in the ordinary course of business;
(8) commission, payroll, travel and similar advances to officers and employees of the Company
or any of its Restricted Subsidiaries that are expected at the time of such advance ultimately to
be recorded as an expense in conformity with GAAP;
(9) Investments in any Person received in settlement of debts created in the ordinary course
of business and owing to the Company or any of its Subsidiaries or in satisfaction of judgments or
pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of
any debtor;
(10) Investments existing on the Issue Date;
(11) endorsements of negotiable instruments and documents in the ordinary course of business;
(12) acquisitions of assets, Equity Interests or other securities by the Company for
consideration consisting of Equity Interests (other than Disqualified Stock) of the Company;
(13) Investments in the Notes;
(14) Investments in a joint venture engaged in a Permitted Business in an amount, together
with any other amount under this clause (14), not to exceed 7.5% of the Companys Consolidated Net
Assets; and
(15) other Investments in any Person (provided that any such Person is not an Affiliate of the
Company or is an Affiliate of the Company solely because the Company, directly or indirectly, owns
Equity Interests in, or controls, such Person) having an aggregate Fair Market Value (measured on
the date each such Investment was made and without giving effect to
19
subsequent changes in value), when taken together with all other Investments made pursuant to
this clause (15) since the Issue Date, not to exceed $10.0 million.
Permitted Junior Securities
means:
(1) Equity Interests in the Company or any Guarantor or any other business entity provided for
by a plan or reorganization; and
(2) debt securities of the Company or any Guarantor or any other business entity provided for
by a plan of reorganization that are subordinated to all Senior Debt and any debt securities issued
in exchange for Senior Debt to the same extent as, or to a greater extent than, the Notes and the
Note Guarantees are subordinated to Senior Debt under the Indenture.
Permitted Liens
means:
(1) Liens on the assets of the Company, Guarantor and any Restricted Subsidiary that is not a
Domestic Subsidiary securing Senior Debt that was permitted by the terms of the Indenture to be
Incurred;
(2) Liens in favor of the Company or any Restricted Subsidiary that is a Guarantor;
(3) Liens on property of a Person existing at the time such Person is merged with or into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided
that such Liens
were in existence prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the Company or the
Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company,
provided
that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any property other than the property so
acquired by the Company or the Restricted Subsidiary;
(5) Liens securing the Notes and the Note Guarantees;
(6) Liens existing on the Issue Date;
(7) Liens securing Permitted Refinancing Indebtedness;
provided
that such Liens do not extend
to any property or assets other than the property or assets that secure the Indebtedness being
refinanced;
(8) Liens on property or assets used to defease or to satisfy and discharge Indebtedness;
provided
that (a) the Incurrence of such Indebtedness was not prohibited by the Indenture and (b)
such defeasance or satisfaction and discharge is not prohibited by the Indenture;
(9) Liens incurred or deposits made in the ordinary course of business in connection with
workers compensation, unemployment insurance or other kinds of social
20
security, or to secure the payment or performance of tenders, bids, contracts (other than
contracts for the payment of Indebtedness) or leases to which such Person is a party, statutory or
regulatory obligations, surety or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business (including lessee or operator obligations under
statutes, governmental regulations or instruments related to the ownership, exploration and
production of oil, gas and minerals on state or federal lands or waters);
(10) Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings promptly instituted
and diligently concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(11) statutory liens of landlords, mechanics, suppliers, vendors, warehousemen, carriers or
other like Liens arising in the ordinary course of business;
(12) prejudgment liens and judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceeding that may have been duly
initiated for the review of such judgment has not been finally terminated or the period within
which such proceeding may be initiated has not expired;
(13) Liens constituting survey exceptions, encumbrances, easements, and reservations of, and
rights to others for, rights-of-way, zoning and other restrictions as to the use of real
properties, and minor defects of title which, in the case of any of the foregoing, do not secure
the payment of borrowed money, and in the aggregate do not materially adversely affect the value of
the assets of the Company and its Restricted Subsidiaries, taken as a whole, or materially impair
the use of such properties for the purposes of which such properties are held by the Company or
such Subsidiaries;
(14) Liens securing Indebtedness incurred to finance the construction, purchase or lease of,
or repairs, improvements or additions to, property, plant or equipment of such Person;
provided,
however,
that the Lien may not extend to any other property owned by such Person or any of its
Restricted Subsidiaries at the time the Lien is incurred or created (other than assets and property
affixed or appurtenant thereto), and the Indebtedness (other than any interest thereon) secured by
the Lien may not be incurred or created more than 180 days after the later of the date of
acquisition, completion of construction, repair, improvement, addition or commencement of full
operation of the property subject to the Lien; and
(15) Liens incurred in the ordinary course of business of the Company or any Restricted
Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one
time outstanding.
Permitted Refinancing Indebtedness
means any Indebtedness of the Company or any of its
Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend,
refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its
Restricted Subsidiaries (other than intercompany Indebtedness);
provided
that:
21
(1) the principal amount (or accreted value or liquidation preference, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the amount (or accreted value or liquidation
preference, if applicable) the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus all accrued and unpaid interest thereon and the amount of any reasonably determined
premium necessary to accomplish such refinancing and such reasonable expenses incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date (or redemption date, if
applicable) later than the final maturity date (or redemption date, if applicable) of, and has a
Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes or the Note Guarantees, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of the Notes, and is
subordinated in right of payment to, the Notes on terms at least as favorable, taken as a whole, to
the Holders of Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(4) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is
pari passu
in right of payment with the Notes or any Note Guarantees, such Permitted Refinancing
Indebtedness is
pari passu
with, or subordinated in right of payment to, the Notes or such Note
Guarantees; and
(5) such Indebtedness is Incurred by either (a) the Restricted Subsidiary that is the obligor
on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded or (b) the
Company;
provided, however,
that a Restricted Subsidiary that is also a Guarantor may guarantee
Permitted Refinancing Indebtedness incurred by the Company, whether or not such Restricted
Subsidiary was an obligor or guarantor of the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
Person
means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or government or
other entity.
Preferred Stock
means, with respect to any Person, any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect to dividends or
redemptions upon liquidation.
Principals
means CapStreet II, L.P., CapStreet Parallel II, L.P. and TA Associates, Inc.,
TA IX L.P., TA/Atlantic and Pacific IV L.P., TA/Atlantic and Pacific V L.P., TA Strategic Partners
Fund A L.P., TA Strategic Partners Fund B L.P., TA Investors II, L.P.
Private Placement Legend
means the legend set forth in Section 2.07(g)(i) to be placed on
all Notes issued under this Indenture except where otherwise permitted by the provisions of this
Indenture.
22
QIB
means a qualified institutional buyer as defined in Rule 144A.
Rating Agency
means Standard & Poors and Moodys or if Standard & Poors or Moodys, or
both will not make a rating on any series of Notes publicly available, a nationally recognized
statistical rating agency or agencies, as the case may be, selected by the Company (as testified by
a resolution of the Board of Directors of the Company), which agency will be substituted for
Standard & Poors or Moodys or both, as the case may be.
Registration Rights Agreement
means (1) with respect to the Notes issued on the Issue
Date, the Registration Rights Agreement, to be dated the Issue Date, among the Company, the Initial
Guarantors, and Banc of America Securities LLC and (2) with respect to any Additional Notes, any
registration rights agreement between the Company and the other parties thereto relating to the
registration by the Company of such Additional Notes under the Securities Act.
Regulation S
means Regulation S promulgated under the Securities Act.
Regulation S Global Note
means a Legended Regulation S Global Note or an Unlegended
Regulation S Global Note, as appropriate.
Related Party
means (1) any Affiliate of any Principal, including any controlling
stockholder, partner, member, Subsidiary or immediate family member (in the case of an individual)
of any Principal, and including any equity fund advised by any such Person, but excluding any
portfolio company of any such Person and (2) limited partners or members of any investment fund
involved within the definition of Principal with respect to Equity Interests of the Company
received as distributions in kind from such Principal; provided that, as a result of such
distribution, no such limited partner or member will control the Company as such term is
defined under the definition of Affiliate.
Replacement Assets
means (1) non-current assets that will be used or useful in a Permitted
Business or (2) substantially all the assets of a Permitted Business or a majority of the Voting
Stock of any Person engaged in a Permitted Business that will become on the date of acquisition
thereof a Restricted Subsidiary that is a Guarantor.
Responsible Officer
, when used with respect to the Trustee, means any officer within the
Corporate Trust Office of the Trustee (or any successor group of the Trustee) or any other officer
of the Trustee customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and familiarity with the
particular subject.
Restricted Definitive Note
means a Definitive Note bearing the Private Placement Legend.
Restricted Global Note
means a Global Note bearing the Private Placement Legend.
23
Restricted
Investment
means an Investment other than a Permitted Investment.
Restricted
Period
means the 40-day distribution compliance period as defined in Regulation S.
Restricted Subsidiary
of a Person means any Subsidiary of such Person that is not an
Unrestricted Subsidiary.
Rule 144
means Rule 144 promulgated under the Securities Act.
Rule 144A
means Rule 144A promulgated under the Securities Act.
Rule 903
means Rule 903 promulgated under the Securities Act.
Rule 904
means Rule 904 promulgated under the Securities Act.
SEC
means the Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Senior Debt
of any Person means:
(1) all Indebtedness of such Person outstanding under the Credit Agreement and all Hedging
Obligations with respect thereto, whether outstanding on the Issue Date or Incurred thereafter;
(2) any other Indebtedness of such Person permitted to be Incurred under the terms of the
Indenture, unless the instrument under which such Indebtedness is Incurred expressly provides that
it is on a parity with or is subordinated in right of payment to the Notes or any Note Guarantee;
and
(3) all Obligations with respect to the items listed in the preceding clauses (1) and (2)
(including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such interest is an allowed
claim under applicable law).
Notwithstanding anything to the contrary in the preceding paragraph, Senior Debt will not
include:
(1) any liability for federal, state, local or other taxes owed or owing by the Company or any
Guarantor;
(2) any Indebtedness of the Company or any Guarantor to any of their Subsidiaries or other
Affiliates;
(3) any trade payables;
24
(4) the portion of any Indebtedness that is Incurred in violation of the Indenture, provided
that a good faith determination by the Board of Directors of the Company evidenced by a Board
Resolution, or a good faith determination by the Chief Financial Officer of the Company evidenced
by an officers certificate, that any Indebtedness being incurred under the Credit Agreement is
permitted by the Indenture will be conclusive;
(5) any Indebtedness of the Company or any Guarantor that, when Incurred, was without recourse
to the Company or such Guarantor;
(6) any repurchase, redemption or other obligation in respect of Disqualified Stock or
Preferred Stock; or
(7) any Indebtedness owed to any employee of the Company or any of its Subsidiaries.
Shelf Registration Statement
means the Shelf Registration Statement as defined in the
Registration Rights Agreement.
Significant Subsidiary
means any Subsidiary that would constitute a significant subsidiary
within the meaning of Article 1 of Regulation S-X under the Securities Act.
Standard & Poors
means Standard & Poors, a division of The McGraw-Hill Companies, Inc.,
and any successor to its rating agency business.
Stated Maturity
means, with respect to any installment of interest or principal on any
series of Indebtedness, the date on which such payment of interest or principal was scheduled to be
paid in the original documentation governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
Subsidiary
means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or the managing general partner of which is
such Person or a Subsidiary of such Person or (b) the only general partners of which are such
Person or one or more Subsidiaries of such Person (or any combination thereof).
Subsidiary Guarantors
means:
(1) each direct or indirect Domestic Subsidiary of the Company on the date of the Indenture;
and
25
(2) any other subsidiary that executes a Note Guarantee in accordance with the provisions of
the Indenture.
Treasury Rate
means the yield to maturity at the time of computation of United States
Treasury securities with a constant maturity (as compiled and published in the most recent Federal
Reserve Statistical Release H.15 (519) which has become publicly available at least two Business
Days prior to the date fixed for prepayment (or, if such Statistical Release is no longer
published, any publicly available source for similar market data)) most nearly equal to the then
remaining term of the Notes to August 15, 2009;
provided, however,
that if the then remaining term
of the Notes to August 15, 2009 is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of
United States Treasury securities for which such yields are given, except that if the then
remaining term of the Notes to August 15, 2009 is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant maturity of one year will
be used.
TIA
means the Trust Indenture Act of 1939, as in effect on the date on which this Indenture
is qualified under the TIA.
Trustee
means Wells Fargo Bank, National Association, until a successor replaces it in
accordance with the applicable provisions of this Indenture and thereafter means the successor
serving hereunder.
Unlegended Regulation S Global Note
means a permanent global Note in the form of
Exhibit
A
bearing the Global Note Legend, deposited with or on behalf of and registered in the name of
the Depositary or its nominee and issued upon expiration of the Restricted Period.
Unrestricted Definitive Note
means one or more Definitive Notes that do not bear and are not
required to bear the Private Placement Legend.
Unrestricted Global Note
means a permanent Global Note substantially in the form of
Exhibit A
that bears the Global Note Legend, that has the Schedule of Exchanges of
Interests in the Global Note attached thereto, that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Notes, and that does not bear
the Private Placement Legend.
Unrestricted Subsidiary
means any Subsidiary of the Company that is designated by the Board
of Directors of the Company as an Unrestricted Subsidiary pursuant to a Board Resolution in
compliance with the provisions of Section 4.16 and any Subsidiary of such Subsidiary.
U.S. Person
means a U.S. person as defined in Rule 902(o) under the Securities Act.
Voting Stock
of any Person as of any date means the Capital Stock of such Person that is
ordinarily entitled to vote in the election of the Board of Directors of such Person.
26
Weighted Average Life to Maturity
means, when applied to any Indebtedness at any date, the
number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
Section 1.02.
Other Definitions
.
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Defined in
|
Term
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|
Section
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Affiliate Transaction
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4.11
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Asset Sale Offer
|
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4.10
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Authentication Order
|
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2.02
|
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Change of Control Offer
|
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4.14
|
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Change of Control Payment
|
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4.14
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Change of Control Payment Date
|
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4.14
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Covenant Defeasance
|
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8.03
|
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DTC
|
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2.01
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Event of Default
|
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6.01
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Legal Defeasance
|
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8.02
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nonpayment default
|
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11.03
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Offer Amount
|
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3.08
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Offer Period
|
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3.08
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offshore transaction
|
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2.07
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Paying Agent
|
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2.04
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Payment Blockage Notice
|
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11.03
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Payment Default
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6.01
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Permitted Debt
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4.09
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Purchase Date
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3.08
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Registrar
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2.04
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Related Proceedings
|
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14.09
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Repurchase Offer
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3.08
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Restricted Payments
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4.07
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Specified Courts
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14.09
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Section 1.03.
Incorporation by Reference of Trust Indenture Act
.
Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
27
indenture securities
means the Notes and the Note Guarantees;
indenture security holder
means a Holder of a Note;
indenture to be qualified
means this Indenture;
indenture trustee
or
institutional trustee
means the Trustee; and
obligor
on the Notes means the Company, the Guarantors and any successor obligor upon
the Notes or the Note Guarantees.
All other terms used in this Indenture that are defined by the TIA, defined by TIA reference
to another statute or defined by SEC rules under the TIA have the meanings so assigned to them.
Section 1.04.
Rules of Construction
. Unless the context otherwise requires:
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(a)
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a term has the meaning assigned to it;
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(b)
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an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
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(c)
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or is not exclusive;
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(d)
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words in the singular include the plural, and in the plural
include the singular;
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(e)
|
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herein, hereof and other words of similar import refer to
this Indenture as a whole and not to any particular Section, Article or other
subdivision;
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(f)
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$, U.S. Dollars and United States Dollars each refer to
United States dollars, or such other money of the United States that at time of
payment is legal tender for payment of public and private debts;
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(g)
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all references to Sections or Articles or Exhibits refer to
Sections or Articles or Exhibits of or to this Indenture unless otherwise
indicated; and
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(h)
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references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections or
rules adopted by the SEC from time to time.
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ARTICLE TWO
THE NOTES
Section 2.01.
Form and Dating
.
(a)
General
. The Notes and the Trustees certificate of authentication shall be substantially
in the form of
Exhibit A
. The Notes may have notations, legends or endorsements required
by law, stock exchange rule or usage. Each Note shall be dated the date of its
28
authentication. The Notes shall be issued in registered form without interest coupons in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof.
The terms and provisions contained in the Notes shall constitute, and are hereby expressly
made, a part of this Indenture, and the Company, the Guarantors and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be controlling.
(b)
Global Notes
. Notes issued in global form shall be substantially in the form of
Exhibit A
(and shall include the Global Note Legend thereon and the Schedule of Exchanges
of Interests in the Global Note attached thereto). Notes issued in definitive form shall be
substantially in the form of
Exhibit A
(but without the Global Note Legend thereon and
without the Schedule of Exchanges of Interests in the Global Note attached thereto). Each Global
Note shall represent such of the outstanding Notes as shall be specified therein and each shall
provide that it represents the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby
may from time to time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in
the aggregate principal amount of outstanding Notes represented thereby shall be made by the
Trustee or, if the Custodian and the Trustee are not the same Person, by the Custodian at the
direction of the Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.07.
(c)
Regulation S Global Notes
. Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Legended Regulation S Global Note, which shall be deposited on
behalf of the purchasers of the Notes represented thereby with the Trustee, as custodian for The
Depository Trust Company (
DTC
) in New York, New York, and registered in the name of the
Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf
of Euroclear or Clearstream, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. Following the termination of the Restricted Period, beneficial interests in
the Legended Regulation S Global Note may be exchanged for beneficial interests in Unlegended
Regulation S Global Notes pursuant to Section 2.07 and the Applicable Procedures. Simultaneously
with the authentication of Unlegended Regulation S Global Notes, the Trustee shall cancel the
Legended Regulation S Global Note. The aggregate principal amount of the Regulation S Global Notes
may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee,
as the case may be, in connection with transfers of interest as hereinafter provided.
(d)
Euroclear and Clearstream Procedures Applicable
. The provisions of the Operating
Procedures of the Euroclear System and Terms and Conditions Governing Use of Euroclear and the
General Terms and Conditions of Clearstream Banking and Customer Handbook of Clearstream shall
be applicable to transfers of beneficial interests in the Regulation S Global Notes that are held
by Participants through Euroclear or Clearstream.
29
Section 2.02.
Execution and Authentication
.
At least one Officer of the Company shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office at the time a Note is
authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of the Trustee. Such
signature shall be conclusive evidence that the Note has been authenticated under this Indenture.
The aggregate principal amount of Notes which may be authenticated and delivered under this
Indenture is unlimited.
The Company may, subject to Article Four of this Indenture and applicable law, issue
Additional Notes under this Indenture, including Exchange Notes. The Notes issued on the Issue
Date and any Additional Notes subsequently issued shall be treated as a single class for all
purposes under this Indenture.
At any time and from time to time after the execution of this Indenture, the Trustee shall,
upon receipt of a written order of the Company signed by an Officer of the Company (an
Authentication Order
), authenticate Notes for original issue in an aggregate principal amount
specified in such Authentication Order. The Authentication Order shall specify the amount of Notes
to be authenticated and the date on which the Notes are to be authenticated.
The Trustee may appoint an authenticating agent acceptable to the Company to authenticate
Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes authentication by such agent.
An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of
the Company.
Section 2.03.
Methods of Receiving Payments on the Notes
.
If a Holder has given wire transfer instructions to the Company, the Company shall pay all
principal, interest and premium and Additional Interest, if any, on that Holders Notes in
accordance with those instructions. All other payments on Notes shall be made at the office or
agency of the Paying Agent and Registrar within the City and State of New York unless the Company
elects to make interest payments by check mailed to the Holders at their addresses set forth in the
register of Holders.
Section 2.04.
Registrar and Paying Agent
.
(a) The Company shall maintain a registrar with an office or agency where Notes may be
presented for registration of transfer or for exchange (
Registrar
) and a paying agent with an
office or agency where Notes may be presented for payment (
Paying Agent
). The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Company may appoint one or
more co-registrars and one or more additional paying agents. The term
30
Registrar includes any co-registrar and the term Paying Agent includes any additional
paying agent. The Company may change any Paying Agent or Registrar without prior notice to any
Holder. The Company shall promptly notify the Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries
may act as Paying Agent or Registrar.
(b) The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to
act as Custodian with respect to the Global Notes.
(c) The Company initially appoints DTC to act as Depositary with respect to the Global Notes.
Section 2.05.
Paying Agent to Hold Money in Trust
.
The Company shall require each Paying Agent other than the Trustee to agree in writing that
the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by
the Paying Agent for the payment of principal, premium or Additional Interest, if any, or interest
on the Notes, and shall notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the
Company or one of its Subsidiaries) shall have no further liability for the money. If the Company
or one of its Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the
Notes.
Section 2.06.
Holder Lists
.
The Trustee shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of all Holders and shall otherwise comply with TIA
Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other times as the Trustee
may request in writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of the Holders of Notes and the Company shall otherwise comply
with TIA Section 312(a).
Section 2.07.
Transfer and Exchange
.
(a)
Transfer and Exchange of Global Notes
. A Global Note may not be transferred as a whole
except by the Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global Notes shall be
exchanged by the Company for Definitive Notes if (i) DTC (A) notifies the Company that it is
unwilling or unable to continue as Depositary for the Global Notes and the Company fails to appoint
a successor Depositary within 90 days after receiving such notice or (B) has ceased to be a
clearing agency registered under the Exchange Act and the Company fails
31
to appoint a successor Depositary within 90 days after becoming aware of such condition; (ii)
the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of
Definitive Notes in exchange for Global Notes (in whole but not in part);
provided
that in no event
shall the Legended Regulation S Global Note be exchanged by the Company for Definitive Notes other
than in accordance with Section 2.07(c)(ii); or (iii) there shall have occurred and be continuing a
Default or Event of Default with respect to the Notes. Upon the occurrence of any of the preceding
events in (i), (ii) or (iii) above, Definitive Notes shall be issued in such names as the
Depositary shall instruct the Trustee. Global Notes also may be exchanged or replaced, in whole or
in part, as provided in Sections 2.08 and 2.11. Every Note authenticated and delivered in exchange
for, or in lieu of, a Global Note or any portion thereof, pursuant to this Section 2.07 or Section
2.08 or 2.11, shall be authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this Section 2.07(a);
however, beneficial interests in a Global Note may be transferred and exchanged as provided in
Section 2.07(b), (c) or (f).
(b)
Transfer and Exchange of Beneficial Interests in the Global Notes
. The transfer and
exchange of beneficial interests in the Global Notes shall be effected through the Depositary, in
accordance with the provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on transfer comparable to
those set forth herein to the extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either subparagraph (i) or (ii)
below, as applicable, as well as one or more of the other following subparagraphs, as applicable:
(i)
Transfer of Beneficial Interests in the Same Global Note
. Beneficial interests in
any Restricted Global Note may be transferred to Persons who take delivery thereof in the
form of a beneficial interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided
,
however
, that
prior to the expiration of the Restricted Period, transfers of beneficial interests in the
Legended Regulation S Global Note may not be made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note. No written orders or instructions
shall be required to be delivered to the Registrar to effect the transfers described in this
Section 2.07(b)(i).
(ii)
All Other Transfers and Exchanges of Beneficial Interests in Global Notes
. In
connection with all transfers and exchanges of beneficial interests that are not subject to
Section 2.07(b)(i) above, the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an Indirect Participant given
to the Depositary in accordance with the Applicable Procedures directing the Depositary to
credit or cause to be credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and (2) instructions given
in accordance with the Applicable Procedures containing information regarding the
Participant account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued a Definitive
32
Note in an amount equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing information regarding
the Person in whose name such Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above;
provided
that in no event shall Definitive Notes be
issued upon the transfer or exchange of beneficial interests in the Legended Regulation S
Global Note other than in accordance with Section 2.07(c)(ii). Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.07(f), the requirements of this
Section 2.07(b)(ii) shall be deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal delivered by the holder of such
beneficial interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global Notes contained in
this Indenture and the Notes or otherwise applicable under the Securities Act, the Trustee
shall adjust the principal amount of the relevant Global Notes pursuant to Section 2.07(i).
(iii)
Transfer of Beneficial Interests to Another Restricted Global Note
. A beneficial
interest in any Restricted Global Note may be transferred to a Person who takes delivery
thereof in the form of a beneficial interest in another Restricted Global Note if the
transfer complies with the requirements of Section 2.07(b)(ii) above and the Registrar
receives the following:
(A) if the transferee shall take delivery in the form of a beneficial interest
in the 144A Global Note, then the transferor must deliver a certificate in the form
of
Exhibit B
, including the certifications in item (1) thereof; and
(B) if the transferee shall take delivery in the form of a beneficial interest
in a Legended Regulation S Global Note, then the transferor must deliver a
certificate in the form of
Exhibit B
, including the certifications in item
(2) thereof.
(iv)
Transfer and Exchange of Beneficial Interests in a Restricted Global Note for
Beneficial Interests in an Unrestricted Global Note
. A beneficial interest in any
Restricted Global Note may be exchanged by any Holder thereof for a beneficial interest in
an Unrestricted Global Note or transferred to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note if the exchange or transfer
complies with the requirements of Section 2.07(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the Holder of the beneficial
interest to be transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal (1) it is not
an affiliate (as defined in Rule 144) of the Company, (2) it is not engaged in, and
does not intend to engage in, and has no arrangement or understanding with any
Person to participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (3) it is acquiring the Exchange Notes in its ordinary course of
business;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
33
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a beneficial interest
in an Unrestricted Global Note, a certificate from such holder in the form
of
Exhibit C
, including the certifications in item (1)(a) thereof;
or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B
, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar or the
Company so requests or if the Applicable Procedures so require, an opinion of
counsel in form reasonably acceptable to the Registrar and the Company to the effect
that such exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above at a time when an
Unrestricted Global Note has not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the aggregate principal amount
of beneficial interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged for, or transferred to
Persons who take delivery thereof in the form of, a beneficial interest in a Restricted Global
Note.
(c)
Transfer or Exchange of Beneficial Interests for Definitive Notes
.
(i)
Beneficial Interests in Restricted Global Notes to Restricted Definitive Notes
. If
any holder of a beneficial interest in a Restricted Global Note proposes to exchange such
beneficial interest for a Restricted Definitive Note or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global Note
proposes to exchange such beneficial interest for a Restricted Definitive Note, a
certificate from such holder in the form of
Exhibit C
, including the
certifications in item (2)(a) thereof;
34
(B) if such beneficial interest is being transferred to a QIB in accordance
with Rule 144A under the Securities Act, a certificate to the effect set forth in
Exhibit B
, including the certifications in item (1) thereof;
(C) [INTENTIONALLY OMITTED];
(D) [INTENTIONALLY OMITTED];
(E) if such beneficial interest is being transferred to an Institutional
Accredited Investor in reliance on an exemption from the registration requirements
of the Securities Act other than that listed in subparagraph (B) above, a
certificate to the effect set forth in
Exhibit B
hereto, including the
certifications, certificates and Opinion of Counsel required by item (3) thereof, if
applicable; or
(F) if such beneficial interest is being transferred to the Company or any of
its Subsidiaries, a certificate to the effect set forth in
Exhibit B
,
including the certifications in item (3)(a) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global Note to be
reduced accordingly pursuant to Section 2.07(i), and the Company shall execute and the
Trustee shall authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this Section 2.07(c) shall
be registered in such name or names and in such authorized denomination or denominations as
the holder of such beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.07(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii)
Beneficial Interests in Legended Regulation S Global Note to Definitive Notes
. A
beneficial interest in the Legended Regulation S Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the form of a
Definitive Note prior to the expiration of the Restricted Period, except in the case of a
transfer pursuant to an exemption from the registration requirements of the Securities Act
other than Rule 903 or Rule 904.
(iii)
Beneficial Interests in Restricted Global Notes to Unrestricted Definitive Notes
.
A holder of a beneficial interest in a Restricted Global Note may exchange such beneficial
interest for an Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the holder of such beneficial
interest, in the case of an exchange, or the transferee, in the case of a
35
transfer, certifies in the applicable Letter of Transmittal that (1) it is not
an affiliate (as defined in Rule 144) of the Company, (2) it is not engaged in, and
does not intend to engage in, and has no arrangement or understanding with any
Person to participate in, a distribution of the Exchange Notes to be issued in the
Exchange Offer and (3) it is acquiring the Exchange Notes in its ordinary course of
business;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(3) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
Holder in the form of
Exhibit C
, including the certifications in
item (1)(b) thereof; or
(4) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such Holder in the form of
Exhibit B
, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar or the
Company so requests or if the Applicable Procedures so require, an opinion of
counsel in form reasonably acceptable to the Registrar and the Company to the effect
that such exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities Act.
(iv)
Beneficial Interests in Unrestricted Global Notes to Unrestricted Definitive
Notes
. If any holder of a beneficial interest in an Unrestricted Global Note proposes to
exchange such beneficial interest for a Definitive Note or to transfer such beneficial
interest to a Person who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.07(b)(ii), the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be reduced accordingly pursuant
to Section 2.07(i), and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.07(c)(iv) shall be registered in such name or names and in such authorized
denomination or denominations as the holder of such
36
beneficial interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this Section 2.07(c)(iv) shall
not bear the Private Placement Legend.
(d)
Transfer and Exchange of Definitive Notes for Beneficial Interests
.
(i)
Restricted Definitive Notes to Beneficial Interests in Restricted Global Notes
. If
any Holder of a Restricted Definitive Note proposes to exchange such Note for a beneficial
interest in a Restricted Global Note or to transfer such Restricted Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial interest in a Restricted
Global Note, then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to exchange such
Note for a beneficial interest in a Restricted Global Note, a certificate from such
Holder in the form of
Exhibit C
, including the certifications in item (2)(b)
thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in
Exhibit
B
, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non-U.S.
Person in an
offshore transaction
in accordance with Rule 903 or Rule 904, a
certificate to the effect set forth in
Exhibit B
, including the
certifications in item (2) thereof; or
(D) if such Restricted Definitive Note is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B
,
including the certifications in item (3)(a) thereof,
the Trustee shall cancel the Restricted Definitive Note, and increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above, the
appropriate Restricted Global Note, in the case of clause (B) above, the 144A Global Note,
and in the case of clause (C) above, the Regulation S Global Note.
(ii)
Restricted Definitive Notes to Beneficial Interests in Unrestricted Global Notes
.
A Holder of a Restricted Definitive Note may exchange such Note for a beneficial interest in
an Unrestricted Global Note or transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal (1) it is not an affiliate (as defined in Rule 144) of the
37
Company, (2) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any Person to participate in, a distribution of
the Exchange Notes to be issued in the Exchange Offer and (3) it is acquiring the
Exchange Notes in its ordinary course of business;
(B) such transfer is effected pursuant to the Shelf Registration Statement in
accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the Exchange Offer
Registration Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(5) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of
Exhibit C
,
including the certifications in item (1)(c) thereof; or
(6) if the Holder of such Restricted Definitive Note proposes to
transfer such Note to a Person who shall take delivery thereof in the form
of a beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of
Exhibit B
, including the certifications
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar or the
Company so requests or if the Applicable Procedures so require, an opinion of
counsel in form reasonably acceptable to the Registrar and the Company to the effect
that such exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this Section
2.07(d)(ii), the Trustee shall cancel the Definitive Notes and increase or cause to be
increased the aggregate principal amount of the Unrestricted Global Note.
(iii)
Unrestricted Definitive Notes to Beneficial Interests in Unrestricted Global
Notes
. A Holder of an Unrestricted Definitive Note may exchange such Note for a beneficial
interest in an Unrestricted Global Note or transfer such Unrestricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note at any time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial interest is effected
pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted
38
Global Note has not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of
Definitive Notes so transferred.
(e)
Transfer and Exchange of Definitive Notes for Definitive Notes
. Upon request by a Holder
of Definitive Notes and such Holders compliance with the provisions of this Section 2.07(e), the
Registrar shall register the transfer or exchange of Definitive Notes. Prior to such registration
of transfer or exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of transfer in form
satisfactory to the Registrar duly executed by such Holder or by its attorney, duly authorized in
writing. In addition, the requesting Holder shall provide any additional certifications, documents
and information, as applicable, required pursuant to the following provisions of this Section
2.07(e).
(i)
Restricted Definitive Notes to Restricted Definitive Notes
. Any Restricted
Definitive Note may be transferred to and registered in the name of Persons who take
delivery thereof in the form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer shall be made pursuant to Rule 144A under the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit
B
, including the certifications in item (1) thereof;
(B) [INTENTIONALLY OMITTED]; and
(C) if the transfer shall be made pursuant to any other exemption from the
registration requirements of the Securities Act, then the transferor must deliver a
certificate in the form of
Exhibit B
, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if applicable.
(ii)
Restricted Definitive Notes to Unrestricted Definitive Notes
. Any Restricted
Definitive Note may be exchanged by the Holder thereof for an Unrestricted Definitive Note
or transferred to a Person or Persons who take delivery thereof in the form of an
Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer in
accordance with the Registration Rights Agreement and the Holder, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that (1) it is not an affiliate (as defined in Rule 144) of
the Company, (2) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any Person to participate in, a distribution of
the Exchange Notes to be issued in the Exchange Offer and (3) it is acquiring the
Exchange Notes in its ordinary course of business;
(B) any such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;
39
(C) any such transfer is effected by a Broker-Dealer pursuant to the Exchange
Offer Registration Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(7) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for an Unrestricted Definitive Note, a certificate from
such Holder in the form of
Exhibit C
, including the certifications
in item (1)(d) thereof; or
(8) if the Holder of such Restricted Definitive Note proposes to
transfer such Note to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of
Exhibit B
, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests, an opinion of counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the Securities Act and
that the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the Securities
Act.
(iii)
Unrestricted Definitive Notes to Unrestricted Definitive Notes
. A Holder of
Unrestricted Definitive Notes may transfer such Notes to a Person who takes delivery thereof
in the form of an Unrestricted Definitive Note. Upon receipt of a request to register such
a transfer, the Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
(f)
Exchange Offer
. Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order
in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global
Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable
Letters of Transmittal that (x) they are not affiliates (as defined in Rule 144) of the Company,
(y) they are not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any Person to participate in, a distribution of the Exchange Notes to be issued
in the Exchange Offer and (z) they are acquiring the Exchange Notes in their ordinary course of
business and (ii) Unrestricted Definitive Notes in an aggregate principal amount equal to the
principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall
execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of
Restricted Global Notes so accepted Unrestricted Global Notes in the appropriate principal amount.
40
(g)
Legends
. The following legends shall appear on the face of all Global Notes and
Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable
provisions of this Indenture.
(i)
Private Placement Legend
. Except as permitted below, each Global Note and each
Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall
bear the legend in substantially the following form:
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE SECURITIES ACT), AND THE SECURITY EVIDENCED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER, THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE ISSUER THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i)(a) TO A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS),
(ii) TO THE ISSUER, OR
(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY
41
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to
subparagraph (b)(iv), (c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.07 (and all Notes issued in exchange therefor or substitution thereof) shall not
bear the Private Placement Legend.
(ii)
Global Note Legend
. Each Global Note shall bear a legend in substantially the
following form:
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING
THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS
HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
(I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY
BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
(h)
Regulation S Global Note Legend
. The Regulation S Global Note shall bear a legend in
substantially the following form:
THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND
PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE
INDENTURE (AS DEFINED HEREIN).
(i)
Cancellation and/or Adjustment of Global Notes
. At such time as all beneficial interests
in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note
has been redeemed, repurchased or canceled in whole and not in part, each such Global Note shall be
returned to or retained and canceled by the Trustee in accordance with Section 2.12. At any time
prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or
transferred to a Person who shall take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who shall take delivery
thereof in the form of a beneficial interest in another Global Note, such other Global Note shall
be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by
the Depositary at the direction of the Trustee to reflect such increase.
42
(j)
General Provisions Relating to Transfers and Exchanges
.
(i) To permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Global Notes and Definitive Notes upon the Companys order or
at the Registrars request.
(ii) No service charge shall be made to a Holder of a beneficial interest in a Global
Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such transfer taxes or
similar governmental charges payable upon exchange or transfer pursuant to Sections 2.11,
3.06, 3.08, 4.10, 4.14 and 9.05).
(iii) The Registrar shall not be required to register the transfer of or exchange any
Note selected for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of transfer or
exchange of Global Notes or Definitive Notes shall be the valid and legally binding
obligations of the Company, evidencing the same debt, and entitled to the same benefits
under this Indenture, as the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the transfer of or to
exchange any Notes during a period beginning at the opening of business 15 days before the
day of any selection of Notes for redemption under Section 3.02 and ending at the close of
business on the day of selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion of any Note being
redeemed in part, (C) to register the transfer of or to exchange a Note between a record
date and the next succeeding interest payment date or (D) to register the transfer of or to
exchange a Note tendered and not withdrawn in connection with a Change of Control Offer or
an Asset Sale Offer.
(vi) Prior to due presentment for the registration of a transfer of any Note, the
Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is
registered as the absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Notes and for all other purposes, and none of the Trustee,
any Agent or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance
with the provisions of Section 2.02.
(viii) All certifications, certificates and Opinions of Counsel required to be
submitted to the Registrar pursuant to this Section 2.07 to effect a registration of
transfer or exchange may be submitted by facsimile.
43
Section 2.08.
Replacement Notes
.
(a) If any mutilated Note is surrendered to the Trustee or the Company or if the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company
shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Note if the Trustees requirements are met. If required by the Trustee or the Company,
an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee
and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from
any loss that any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
(b) Every replacement Note is an additional obligation of the Company and shall be entitled to
all of the benefits of this Indenture equally and proportionately with all other Notes duly issued
hereunder.
Section 2.09.
Outstanding Notes
.
(a) The Notes outstanding at any time are all the Notes authenticated by the Trustee except
for those canceled by it, those delivered to it for cancellation, those reductions in the interest
in a Global Note effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section 2.10, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however,
Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for
purposes of Section 3.07(b).
(b) If a Note is replaced pursuant to Section 2.08, it ceases to be outstanding unless the
Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser
or protected purchaser.
(c) If the principal amount of any Note is considered paid under Section 4.01, it ceases to be
outstanding and interest on it ceases to accrue.
(d) If the Paying Agent (other than the Company, a Subsidiary of the Company or an Affiliate
of any of the foregoing) holds, on a redemption date or maturity date, money sufficient to pay
Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer
outstanding and shall cease to accrue interest.
Section 2.10.
Treasury Notes
.
In determining whether the Holders of the required principal amount of Notes have concurred in
any direction, waiver or consent, Notes owned by the Company, or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
44
Section 2.11.
Temporary Notes
.
(a) Until certificates representing Notes are ready for delivery, the Company may prepare and
the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of Definitive Notes but may have variations that
the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes.
(b) Holders of temporary Notes shall be entitled to all of the benefits of this Indenture.
Section 2.12.
Cancellation
.
The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and
Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of
transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment, replacement or cancellation and shall dispose of
canceled Notes in accordance with its procedures for the disposition of canceled securities in
effect as of the date of such disposition (subject to the record retention requirement of the
Exchange Act). Certification of the disposition of all canceled Notes shall be delivered to the
Company. The Company may not issue new Notes to replace Notes that it has paid or that have been
delivered to the Trustee for cancellation.
Section 2.13.
Defaulted Interest
.
If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted
interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date, in each case at the
rate provided in the Notes and in Section 4.01. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date of the proposed
payment. The Company shall fix or cause to be fixed each such special record date and payment
date,
provided
that no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name and at the expense of
the Company) shall mail or cause to be mailed to Holders a notice that states the special record
date, the related payment date and the amount of such interest to be paid.
Section 2.14.
CUSIP Numbers
.
The Company in issuing the Notes may use CUSIP numbers (if then generally in use), and, if
so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders;
provided
that any such notice may state that no representation is made as to the correctness of
such numbers either as printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the Notes, and any such
redemption shall not be affected by any defect in or omission of such numbers. The Company shall
promptly notify the Trustee of any change in the CUSIP numbers.
45
ARTICLE THREE
REDEMPTION AND OFFERS TO
PURCHASE
Section 3.01.
Notices to Trustee
.
If the Company elects to redeem Notes pursuant to the optional redemption provisions of
Section 3.07, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a
redemption date, an Officers Certificate setting forth (i) the clause of this Indenture pursuant
to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes
to be redeemed and (iv) the redemption price.
Section 3.02.
Selection of Notes to Be Redeemed
.
(a) If less than all of the Notes are to be redeemed at any time, the Trustee shall select the
Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed or, if the Notes are
not so listed, on a
pro rata
basis, by lot or in accordance with any other method the Trustee shall
deem fair and appropriate. In the event of partial redemption by lot, the particular Notes to be
redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Notes not previously called
for redemption.
(b) The Trustee shall promptly notify the Company in writing of the Notes selected for
redemption and, in the case of any Note selected for partial redemption, the principal amount
thereof to be redeemed. No Notes in amounts of $1,000 or less shall be redeemed in part. Notes
and portions of Notes selected shall be in amounts of $1,000 or whole multiples of $1,000; except
that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes
held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03.
Notice of Redemption
.
(a) At least 30 days but not more than 60 days before a redemption date, the Company shall
mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address, except that redemption notices may be mailed more
than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of
the Notes or a satisfaction and discharge of this Indenture.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Note is being redeemed in part, the portion of the principal amount of
such Note to be redeemed and that, after the redemption date upon surrender of such
46
Note, a new Note or Notes in principal amount equal to the unredeemed portion of the
original Note shall be issued in the name of the Holder thereof upon cancellation of the
original Note;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the Paying Agent to collect
the redemption price and become due on the date fixed for redemption;
(vi) that, unless the Company defaults in making such redemption payment, interest, if
any, on Notes called for redemption ceases to accrue on and after the redemption date;
(vii) the paragraph of the Notes and/or Section of this Indenture pursuant to which the
Notes called for redemption are being redeemed; and
(viii) that no representation is made as to the correctness or accuracy of the CUSIP
number, if any, listed in such notice or printed on the Notes.
(b) At the Companys request, the Trustee shall give the notice of redemption in the Companys
name and at its expense;
provided
,
however
, that the Company shall have delivered to the Trustee,
at least 45 days prior to the redemption date, an Officers Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such notice as provided in
Section 3.03(a). The notice, if mailed in the manner provided herein shall be presumed to have
been given, whether or not the Holder receives such notice.
Section 3.04.
Effect of Notice of Redemption
.
Once notice of redemption is mailed in accordance with Section 3.03, Notes called for
redemption become irrevocably due and payable on the redemption date at the redemption price.
Interest, if any, on Notes called for redemption ceases to accrue on and after the redemption date,
unless the Company defaults in making the applicable redemption payment. A notice of redemption
may not be conditional.
Section 3.05.
Deposit of Redemption Price
.
(a) Not later than 11:00 a.m. Eastern Time on the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and
accrued and unpaid interest and Additional Interest, if any, on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited
with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued and unpaid interest on, all Notes to be redeemed.
(b) If the Company complies with the provisions of Section 3.05(a), on and after the
redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for
redemption. If a Note is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be paid to the Person in
whose
47
name such Note was registered at the close of business on such record date. If any Note
called for redemption shall not be so paid upon surrender for redemption because of the failure of
the Company to comply with Section 3.05(a), interest shall be paid on the unpaid principal from the
redemption date until such principal is paid and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01.
Section 3.06.
Notes Redeemed in Part
.
Upon surrender and cancellation of a Note that is redeemed in part, the Company shall issue
and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered. No Notes in denominations of
$1,000 or less shall be redeemed in part.
Section 3.07.
Optional Redemption
.
(a) The Company shall have the option to redeem the Notes at the redemption prices, on the
dates and in the manner provided in paragraph 5 of the Notes.
(b) Any redemption pursuant to this Section 3.07 shall be made in accordance with the
provisions of Sections 3.01 through 3.06.
Section 3.08.
Repurchase Offers
.
In the event that, pursuant to Section 4.10 or Section 4.14, the Company shall be required to
commence an offer to all Holders to purchase all or a portion of their respective Notes (a
Repurchase Offer
), it shall follow the procedures specified in such Sections and, to the extent
not inconsistent therewith, the procedures specified below.
The Repurchase Offer shall remain open for a period of no less than 30 days and no more than
60 days following its commencement, except to the extent that a longer period is required by
applicable law (the
Offer Period
). No later than five Business Days after the termination of the
Offer Period (the
Purchase Date
), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 or 4.14 (the
Offer Amount
) or, if less than the
Offer Amount has been tendered, all Notes tendered in response to the Repurchase Offer.
If the Purchase Date is on or after an interest record date and on or before the related
interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a
Note is registered at the close of business on such record date, and no additional interest shall
be payable to Holders who tender Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send, by first class mail, a
notice to the Trustee and each of the Holders, with a copy to the Trustee. The notice shall
contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to
the Repurchase Offer. The Repurchase Offer shall be made to all Holders. The notice, which shall
govern the terms of the Repurchase Offer, shall state:
48
(i) that the Repurchase Offer is being made pursuant to this Section 3.08 and Section
4.10 or Section 4.14, and the length of time the Repurchase Offer shall remain open;
(ii) the Offer Amount, the purchase price and the Purchase Date;
(iii) that any Note not tendered or accepted for payment shall continue to accrue
interest and Additional Interest, if any;
(iv) that, unless the Company defaults in making such payment, any Note (or portion
thereof) accepted for payment pursuant to the Repurchase Offer shall cease to accrue
interest and Additional Interest, if any, after the Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to a Repurchase Offer may
elect to have Notes purchased in integral multiples of $1,000 only;
(vi) that Holders electing to have a Note purchased pursuant to any Repurchase Offer
shall be required to surrender the Note, with the form entitled Option of Holder to Elect
Purchase on the reverse of the Note completed, or transfer by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(vii) that Holders shall be entitled to withdraw their election if the Company, the
Depositary or the Paying Agent, as the case may be, receives, not later than the expiration
of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing such Holders election to have such Note
purchased;
(viii) that, if the aggregate amount of Notes surrendered by Holders exceeds the Offer
Amount, the Trustee shall, subject in the case of a Repurchase Offer made pursuant to the
provisions of Section 4.10, select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations
of $1,000, or integral multiples thereof, shall be purchased); and
(ix) that Holders whose Notes were purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered (or
transferred by book-entry transfer).
On the Purchase Date, the Company shall, to the extent lawful, subject in the case of a
Repurchase Offer made pursuant to Section 4.10 to the provisions of Section 4.10, accept for
payment on a pro rata basis to the extent necessary, the Offer Amount of Notes (or portions
thereof) tendered pursuant to the Repurchase Offer, or if less than the Offer Amount has been
tendered, all Notes tendered, and shall deliver to the Trustee an Officers Certificate stating
that such Notes (or portions thereof) were accepted for payment by the Company in accordance with
the terms of this Section 3.08. The Company, the Depositary or the Paying Agent, as the case may
be, shall promptly (but in any case not later than five Business Days after the Purchase
49
Date) mail or deliver to each tendering Holder an amount equal to the purchase price of Notes
tendered by such Holder, as the case may be, and accepted by the Company for purchase, and the
Company shall promptly issue a new Note. The Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the respective Holder thereof. The Company shall publicly announce the
results of the Repurchase Offer on the Purchase Date.
The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws or regulations are
applicable in connection with the repurchase of the Notes pursuant to a Repurchase Offer. To the
extent that the provisions of any securities laws or regulations conflict with Section 3.08, 4.10
or 4.14, the Company shall comply with the applicable securities laws and regulations and shall not
be deemed to have breached its obligations under Section 3.08, 4.10 or 4.14 by virtue of such
compliance.
Section 3.09.
No Sinking Fund
.
The Company is not required to make mandatory redemption or sinking fund payments with respect
to the Notes.
ARTICLE FOUR
COVENANTS
Section 4.01.
Payment of Notes
.
(a) The Company shall pay or cause to be paid the principal of, premium, if any, and interest
on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and
interest shall be considered paid on the date due if the Paying Agent, if other than the Company or
one of its Subsidiaries, holds as of 11:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay all principal,
premium, if any, and interest then due. The Company shall pay all Additional Interest, if any, in
the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.
(b) The Company shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on
the Notes to the extent lawful; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest, and Additional Interest
(without regard to any applicable grace period) at the same rate to the extent lawful.
Section 4.02.
Maintenance of Office or Agency
.
(a) The Company shall maintain in the Borough of Manhattan, The City of New York, an office or
agency (which may be an office of the Trustee or Registrar or agent of the
50
Trustee or Registrar) where Notes may be surrendered for registration of transfer or for
exchange and where notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more other offices or agencies
where the Notes may be presented or surrendered for any or all such purposes and may from time to
time rescind such designations;
provided
,
however
, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the location of any such
other office or agency.
(c) The Company hereby designates the Corporate Trust Office of the Trustee as one such office
or agency of the Company in accordance with Section 2.04 of this Indenture.
Section 4.03.
Reports
.
(a) The Company shall furnish to the Trustee and, upon request, to the Holders a copy of all
of the information and reports referred to in clauses (i) and (ii) below, if such information and
reports are not filed electronically with the Commission, within the time periods specified in the
Commissions rules and regulations:
(i) all quarterly and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms,
including a Managements Discussion and Analysis of Financial Condition and Results of
Operations and, with respect to the annual information only, a report on the annual financial
statements by the Companys certified independent accountants; and
(ii) all current reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports.
(b) After consummation of the Exchange Offer contemplated by the Registration Rights
Agreement, whether or not required by the Commission, the Company shall comply with the periodic
reporting requirements of the Exchange Act and will file the reports specified in the preceding
paragraph with the Commission within the time periods specified above unless the Commission will
not accept such a filing. The Company shall not take any action for the purpose of causing the
Commission not to accept any such filings. If, notwithstanding the foregoing, the Commission will
not accept the Companys filings for any reason, the Company shall post the reports referred to in
the preceding clause on its website within the time periods that would apply if the Company were
required to file those reports with the Commission.
(c) If the Company has designated any of its Subsidiaries as Unrestricted Subsidiaries or if
any of the Companys Subsidiaries are not Guarantors, then the Company shall include a reasonably
detailed discussion of the financial condition and results of operations of
51
such Unrestricted Subsidiary, or if more than one, of such Unrestricted Subsidiaries, taken as
a whole and of such non-Guarantor Subsidiaries taken as a whole, separately in each case, in the
section of the Companys quarterly and annual financial information required by this clause under
the caption Managements Discussion and Analysis of Financial Condition and Results of
Operations, and further, in the case of the non-Guarantor Subsidiaries, also include a
presentation of the financial condition and results of operations of such non-Guarantor
Subsidiaries on the face of the financial statements or in the footnotes thereto, separate from the
financial condition and results of operations of the Company and its Restricted Subsidiaries.
(d) For so long as any Notes remain outstanding, the Company and the Guarantors shall furnish
to the Holders and to prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Section 4.04.
Compliance Certificate
.
(a) The Company and each Guarantor (to the extent that such Guarantor is so required under the
TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers
Certificate stating that a review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing Officers with a view to
determining whether the Company and the Guarantors have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such Officer signing such
certificate, that to his or her knowledge, the Company and the Guarantors have kept, observed,
performed and fulfilled their obligations under this Indenture and are not in default in the
performance or observance of any of the terms, provisions and conditions of this Indenture (or, if
a Default or Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company and the Guarantors are
taking or propose to take with respect thereto) and that to his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a description of the
event and what action the Company and the Guarantors are taking or propose to take with respect
thereto.
(b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee,
within five Business Days after any Officer becomes aware of any Default or Event of Default, an
Officers Certificate specifying such Default or Event of Default and what action the Company and
the Guarantors are taking or propose to take with respect thereto.
Section 4.05.
Taxes
.
The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency,
any taxes, assessments, and governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06.
Stay, Extension and Usury Laws
.
The Company and each of the Guarantors covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever claim
52
or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or
at any time hereafter in force, that may affect the covenants or the performance of this Indenture;
and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07.
Restricted Payments
.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly:
(i) declare or pay (without duplication) any dividend or make any other payment or
distribution on account of the Companys or any of its Restricted Subsidiaries Equity Interests
(including, without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders
of the Companys or any of its Restricted Subsidiaries Equity Interests in their capacity as such
(other than dividends, payments or distributions (x) payable in Equity Interests (other than
Disqualified Stock) of the Company or (y) to the Company or a Restricted Subsidiary of the
Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation,
in connection with any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) any Equity Interests of the Company, or any Restricted Subsidiary thereof held by
Persons other than the Company or any of its Restricted Subsidiaries;
(iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Indebtedness that is subordinated to the Notes or any Note
Guarantees, except (a) a payment of interest or principal at the Stated Maturity thereof or (b) the
purchase, repurchase or other acquisition of any such Indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each case due within one year
of the date of such purchase, repurchase or other acquisition; or
(iv) make any Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as Restricted Payments),
unless, at the time of and after giving effect to such Restricted Payment:
(A) no Default or Event of Default shall have occurred and be continuing or would occur as a
consequence thereof; and
(B) the Company would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09; and
53
(C) such Restricted Payment, together with the aggregate amount of all other Restricted
Payments made by the Company and its Restricted Subsidiaries after the Issue Date (excluding
Restricted Payments permitted by clauses (iii), (iv), (v), (vi) and (x) of the next succeeding
paragraph (b)), is less than the sum, without duplication, of:
(1) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter commencing
after the Issue Date to the end of the Companys most recently ended fiscal quarter
for which internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less 100%
of such deficit),
plus
(2) 100% of the aggregate net cash proceeds and the Fair Market Value of assets
other than cash received by the Company since the Issue Date as a contribution to
its common equity capital or from the issue or sale of Equity Interests (other than
Disqualified Stock) of the Company or from the Incurrence of Indebtedness of the
Company that has been converted into or exchanged for such Equity Interests (other
than Equity Interests sold to, or Indebtedness held by, a Subsidiary of the
Company),
plus
(3) with respect to Restricted Investments made by the Company and its
Restricted Subsidiaries after the Issue Date, an amount equal to the net reduction
in such Restricted Investments in any Person resulting from repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary or from the net cash proceeds from the sale of any such
Restricted Investment (except, in each case, to the extent any such payment or
proceeds are included in the calculation of Consolidated Net Income), from the
release of any Guarantee (except to the extent any amounts are paid under such
Guarantee) or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries, not to exceed, in each case, the amount of Restricted Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary after the Issue Date;
plus
(4) the amount by which Indebtedness of the Company is reduced on the Companys
most recent quarterly balance sheet upon the conversion or exchange subsequent to
the Issue Date of any Indebtedness of the Company convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of any
cash or the Fair Market Value of any other property distributed by the Company upon
such conversion or exchange) plus the amount of any cash received by the Company
upon such conversion or exchange;
provided, however,
that such amount may not exceed
the net proceeds received by the Company or any of its Restricted Subsidiaries from
the conversion or exchange of such Indebtedness (excluding Net Proceeds from
conversion or exchange by a Subsidiary of the Company or by an employee ownership
plan or by a trust established by the Company or any of its Subsidiaries for the
benefit of their employees).
54
(b) The preceding provisions will not prohibit, so long as, in the case of clauses (vii) and
(xii) below, no Default has occurred and is continuing or would be caused thereby:
(i) the payment of any dividend within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the provisions of this Indenture;
(ii) the payment of any dividend by a Restricted Subsidiary of the Company to the holders of
its Common Stock on a pro rata basis;
(iii) the redemption, repurchase, retirement, defeasance or other acquisition of any
subordinated Indebtedness or Disqualified Stock of the Company or any Guarantor or of any Equity
Interests of the Company or any Restricted Subsidiary in exchange for, or out of the net cash
proceeds of a contribution to the Equity Interests (other than Disqualified Stock) of the Company
or a substantially concurrent sale (other than to a Subsidiary of the Company) of, Equity Interests
(other than Disqualified Stock) of the Company;
provided
that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition will be excluded from Section 4.07(a)(iii)(b);
(iv) the defeasance, redemption, repurchase or other acquisition of Indebtedness subordinated
to the Notes or the Note Guarantees with the net cash proceeds from an Incurrence of Permitted
Refinancing Indebtedness;
(v) Investments acquired as a capital contribution to, or in exchange for, or out of the net
cash proceeds of a substantially concurrent offering of, Equity Interests (other than Disqualified
Stock) of the Company;
provided
that the amount of any such net cash proceeds that are utilized for
any such acquisition or exchange will be excluded from Section 4.07(a)(iii)(b);
(vi) the repurchase of Capital Stock deemed to occur upon the exercise of options or warrants
to the extent that such Capital Stock represents all or a portion of the exercise price thereof;
(vii) the repurchase, redemption or other acquisition or retirement for value of any Equity
Interests of the Company held by any current or former employee or director of the Company (or any
of its Restricted Subsidiaries) pursuant to the terms of any employee equity subscription
agreement, stock option agreement or similar agreement entered into in the ordinary course of
business; provided that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests in a calendar year does not exceed $2.0 million (with unused amounts in
any calendar year being carried over to succeeding calendar years (without giving effect to the
following proviso)) and does not exceed $6.0 million in aggregate;
provided further
that such
amount in any calendar year may be increased by an amount not to exceed (A) the net cash proceeds
received by the Company from the sale of Equity Interests (other than Disqualified Stock) of the
Company to members of management or directors of the Company and its Restricted Subsidiaries that
occurs after the Issue Date (to the extent such cash proceeds from the sale of such Equity
Interests have not otherwise been applied to the payment of Restricted Payments) plus (B) the net
cash proceeds of key man life insurance policies received by the
55
Company and its Restricted Subsidiaries after the Issue Date, less (C) the amount of any
Restricted Payments made pursuant to clauses (A) and (B) of this clause (vii);
(viii) payments in respect of management fees to any of the Principals pursuant to agreements
in effect on the Issue Date as described in this Offering Memorandum in an amount not to exceed an
aggregate amount of $500,000 in any calendar year;
(ix) payments of dividends on Disqualified Stock otherwise permitted under this Indenture;
(x) cash payments in lieu of the issuance of fractional shares in connection with the exercise
of warrants, options or other securities convertible into or exchangeable for Capital Stock of the
Company;
(xi) payments of dividends on the Companys common stock following the first bona fide
underwritten public offering of common stock of the Company after the Closing Date, of up to 6% per
annum of the net cash proceeds received by the Company from such public offering;
provided however,
that (A) at the time of payment of any such dividend, no Default will have occurred and be
continuing (or result therefrom), and (B) the aggregate amount of all dividends paid under this
clause (xi) will not exceed the aggregate amount of net proceeds received by the Company from such
public offering; and
(xii) other Restricted Payments in an aggregate amount not to exceed $10.0 million.
(c) The amount of all Restricted Payments (other than cash) will be the Fair Market Value on
the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or
issued to or by the Company or such Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company shall deliver to the
Trustee an Officers Certificate stating that such Restricted Payment is permitted and setting
forth the basis upon which the calculations required by this Section 4.07 were computed, together
with a copy of any opinion or appraisal required by this Indenture.
Section 4.08.
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(i) pay dividends or make any other distributions on its Capital Stock (or with respect to any
other interest or participation in, or measured by, its profits) to the Company or any of its
Restricted Subsidiaries or pay any liabilities owed to the Company or any of its Restricted
Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted Subsidiaries; or
56
(iii) transfer any of its properties or assets to the Company or any of its Restricted
Subsidiaries.
(b) However, Section 4.08(a) will not apply to encumbrances or restrictions:
(i) existing under, by reason of or with respect to the Credit Agreement, Existing
Indebtedness or any other agreements in effect on the Issue Date and any amendments, modifications,
restatements, renewals, extensions, supplements, refundings, replacements or refinancings thereof,
provided
that the encumbrances and restrictions in any such amendments, modifications,
restatements, renewals, extensions, supplements, refundings, replacement or refinancings are no
more restrictive, taken as a whole, than those contained in the Credit Agreement, Existing
Indebtedness or such other agreements, as the case may be, as in effect on the Issue Date;
(ii) set forth in the Indenture, the Notes and the Note Guarantees;
(iii) existing under, by reason of or with respect to applicable law;
(iv) with respect to any Person or the property or assets of a Person acquired by the Company
or any of its Restricted Subsidiaries existing at the time of such acquisition and not incurred in
connection with or in contemplation of such acquisition, which encumbrance or restriction is not
applicable to any Person or the properties or assets of any Person, other than the Person, or the
property or assets of the Person so acquired and any amendments, modifications, restatements,
renewals, extensions, supplements, refundings, replacements or refinancings thereof;
provided
that
the encumbrances and restrictions in any such amendments, modifications, restatements, renewals,
extensions, supplements, refundings, replacement or refinancings are no more restrictive, taken as
a whole, than those in effect on the date of the acquisition;
(v) in the case of Section 4.08(a)(iii):
(A) that restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or contract or similar
property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary thereof not otherwise prohibited by this Indenture;
(C) any encumbrance or restriction arising or existing by reason of
construction loans or purchase money obligations for property acquired in the
ordinary course of business and Capital Lease Obligations, in each case to the
extent permitted under this Indenture;
(D) customary restrictions imposed on the transfer of intellectual property in
connection with licenses of such intellectual property in the ordinary course of
business;
57
(E) encumbrances or restrictions existing under or by reason of provisions with
respect to the disposition or distribution of assets or property in joint venture
agreements and other similar agreements, in each case to the extent permitted under
the Indenture, so long as any such encumbrances or restrictions are not applicable
to any Person (to its property or assets) other than such joint venture or a
Subsidiary thereof; or
(F) arising or agreed to in the ordinary course of business, not relating to
any Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary thereof
in any manner material to the Company or any Restricted Subsidiary thereof;
(vi) existing under, by reason of or with respect to any agreement for the sale or other
disposition of all or substantially all of the Capital Stock of, or property and assets of, a
Restricted Subsidiary that restrict distributions by that Restricted Subsidiary pending such sale
or other disposition; and
(vii) on cash or other deposits or net worth imposed by customers or required by insurance,
surety or bonding companies, in each case, under contracts entered into in the ordinary course of
business.
Section 1.03.
Incurrence of Indebtedness
.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to,
directly or indirectly, Incur any Indebtedness;
provided, however,
that the Company or any
Guarantor may Incur Indebtedness or Disqualified Stock if the Fixed Charge Coverage Ratio for the
Companys most recently ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness or Disqualified
Stock is Incurred would have been at least 2.0 to 1, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional Indebtedness or
Disqualified Stock had been Incurred at the beginning of such four-quarter period.
(b) So long as no Default shall have occurred and be continuing or would be caused thereby.
Section 4.09(a) will not prohibit the Incurrence of the following items of Indebtedness
(collectively, Permitted Debt):
(i) the Incurrence by the Company or any Guarantor of Indebtedness under Credit Facilities
(including, without limitation, the Incurrence by the Company and the Guarantors of Guarantees
thereof) in an aggregate amount at any one time outstanding pursuant to this clause (1) not to
exceed $200.0 million,
less
the aggregate amount of all Net Proceeds of Asset Sales applied by the
Company or any Restricted Subsidiary thereof to permanently repay any such Indebtedness pursuant to
Section 4.10 ; provided that a Restricted Subsidiary that is not a Domestic Subsidiary or a
Guarantor of Indebtedness under the Credit Facilities may incur Indebtedness pursuant to this
clause (i), together with Indebtedness Incurred pursuant to clause
58
(ix) of this Section 4.09(b), in an aggregate amount, after giving effect to such Incurrence,
at any time outstanding not to exceed the greater of (a) $25.0 million or (b) 40% of the aggregate
Consolidated Net Assets of such Restricted Subsidiaries;
(ii) the Incurrence of Existing Indebtedness;
(iii) the Incurrence by the Company and the Guarantors of Indebtedness represented by the
Notes and the related Note Guarantees to be issued on the Issue Date;
(iv) the Incurrence by the Company or any Guarantor of Indebtedness represented by Capital
Lease Obligations, mortgage financings, construction loans or purchase money obligations for
property acquired in the ordinary course of business, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of construction or improvement of property,
plant or equipment used by the Company or any such Guarantor, in an aggregate amount, including all
Permitted Refinancing Indebtedness Incurred to refund, refinance or replace any Indebtedness
Incurred pursuant to this clause (iv), not to exceed 7.5% of the Companys Consolidated Net Assets
at any time outstanding;
(v) the Incurrence by the Company or any Restricted Subsidiary of the Company of Permitted
Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund,
refinance or replace Indebtedness (other than intercompany Indebtedness) that was permitted by the
Indenture to be Incurred under Section 4.09(a) or clause (ii), (iii), (iv), (v), or (x) of this
Section 4.09(b);
(vi) the Incurrence by the Company or any of its Restricted Subsidiaries of intercompany
Indebtedness owing to and held by the Company or any of its Restricted Subsidiaries;
provided,
however,
that:
(a) if the Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness must be unsecured and expressly subordinated to the prior payment in
full in cash of all Obligations;
(b) Indebtedness owed to the Company or any Guarantor must be evidenced by an
unsubordinated promissory note, unless the obligor under such Indebtedness is the
Company or a Guarantor; and
(c) (i) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a Restricted
Subsidiary thereof and (ii) any sale or other transfer of any such Indebtedness to a
Person that is not either the Company or a Restricted Subsidiary thereof, will be
deemed, in each case, to constitute an Incurrence of such Indebtedness by the
Company or such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (vi);
(vii) the Guarantee by the Company or any of the Guarantors of Indebtedness of the Company or
a Restricted Subsidiary of the Company that was permitted to be Incurred by another provision of
this Section 4.09; or
59
(viii) the Incurrence by the Company or any of its Restricted Subsidiaries of Hedging
Obligations that are Incurred for the purpose of fixing, hedging or swapping interest rate,
commodity price or foreign currency exchange rate risk (or to reverse or amend any such agreements
previously made for such purposes), and not for speculative purposes, and that do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of fluctuations in
interest rates, commodity prices or foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(ix) the Incurrence by any Restricted Subsidiary other than a Domestic Subsidiary of
Indebtedness in an aggregate amount at any time outstanding, after giving effect to such Incurrence
and together with any Indebtedness Incurred under the proviso in clause (1) of this Section
4.09(b), not to exceed the greater of (a) $25 million or (b) 40% of the Consolidated Net Assets of
any such Restricted Subsidiaries; or
(x) the Incurrence by the Company or any Guarantor of additional Indebtedness in an aggregate
amount at any time outstanding, including all Permitted Refinancing Indebtedness Incurred to
refund, refinance or replace any Indebtedness Incurred pursuant to this clause (x), not to exceed
the greater of (a) $15.0 million or (b) 5% of the Consolidated Net Assets of the Company.
For purposes of determining compliance with this covenant, in the event that any proposed
Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in
Sections 4.09(b)(i) through (x) above, or is entitled to be Incurred pursuant to Section 4.09(a),
the Company shall be permitted to classify such item of Indebtedness at the time of its Incurrence
in any manner that complies with this Section 4.09. In addition, any Indebtedness originally
classified as Incurred pursuant to Sections 4.09(b)(i) through (x) above may later be reclassified
by the Company such that it will be deemed as having been Incurred pursuant to another of such
clauses to the extent that such reclassified Indebtedness could be incurred pursuant to such new
clause at the time of such reclassification. Notwithstanding the foregoing, Indebtedness under the
Credit Agreement outstanding on the Issue Date will be deemed to have been Incurred on such date in
reliance on the exception provided by Section 4.09(b)(i).
(c) Notwithstanding any other provision of this Section 4.09, the maximum amount of
Indebtedness that may be Incurred pursuant to this covenant will not be deemed to be exceeded with
respect to any outstanding Indebtedness due solely to the result of fluctuations in the exchange
rates of currencies.
Section 1.04.
Asset Sales
.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:
(i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the Fair Market Value of the assets or Equity
Interests issued or sold or otherwise disposed of; and
60
(ii) at least 75% of the consideration therefor received by the Company or such Restricted
Subsidiary is in the form of cash, Cash Equivalents or Replacement Assets or a combination of both.
For purposes of this provision, each of the following will be deemed to be cash:
(A) any liabilities (as shown on the Companys or such Restricted Subsidiarys
most recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities, Indebtedness that is by its terms subordinated to the Notes
or any Note Guarantee and liabilities to the extent owed to the Company or any
Affiliate of the Company) that are assumed by the transferee of any such assets or
Equity Interests pursuant to a written novation agreement that releases the Company
or such Restricted Subsidiary from further liability therefor;
(B) any securities, notes or other obligations received by the Company or any
such Restricted Subsidiary from such transferee that are contemporaneously (subject
to ordinary settlement periods) converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that conversion); and
(C) any Designated Non-Cash Consideration received by the Company or any of its
Restricted Subsidiaries in such Asset Sale having an aggregated Fair Market Value,
taken together with all other Designated Non-Cash consideration received pursuant to
this clause (c) that is at that time outstanding, not to exceed the greater of (x)
5.0% of the Companys Consolidated Net Assets as of the date or receipt of such
Designated Non-Cash Consideration and (y) $15.0 million (with the Fair Market Value
of each item of Designated Non-Cash Consideration being measured at the time
received and without giving effect to subsequent changes in value).
(b) Within 540 days after the receipt of any Net Proceeds from an Asset Sale, the Company may
apply such Net Proceeds at its option:
(i) to repay Senior Debt and, if the Senior Debt repaid is revolving credit Indebtedness, to
correspondingly reduce commitments with respect thereto; or
(ii) to purchase Replacement Assets (or enter into a binding agreement to purchase such
Replacement Assets; provided that (x) such purchase is consummated within 90 days after the date of
such binding agreement and (y) if such purchase is not consummated, within the period set forth in
subclause (x), the Net Proceeds not so applied will be deemed to be Excess Proceeds (as defined
below)).
Pending the final application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture.
(c) On the 541st day after an Asset Sale or such earlier date, if any, as the Company
determines not to apply the Net Proceeds relating to such Asset Sale as set forth in
61
Section 4.10(b) (each such date being referred to as an Excess Proceeds Trigger Date),
such aggregate amount of Net Proceeds that has not been applied on or before the Excess Proceeds
Trigger Date as permitted in Section 4.10(b) (Excess Proceeds) will be applied by the Company
to make an offer (an Asset Sale Offer) to all Holders of Notes and all holders of other
Indebtedness that ranks
pari passu
in right of payment with the Notes or any Note Guarantee
containing provisions similar to those set forth in the Indenture with respect to offers to
purchase with the proceeds of sales of assets, to purchase the maximum principal amount of Notes
and such other
pari passu
Indebtedness that may be purchased using the Excess Proceeds. The offer
price in any Asset Sale Offer will be equal to 100% of the principal amount of the Notes and such
other
pari passu
Indebtedness plus accrued and unpaid interest and Additional Interest, if any, to
the date of purchase, and will be payable in cash.
(d) The Company may defer the Asset Sale Offer until there are aggregate unutilized Excess
Proceeds equal to or in excess of $10.0 million resulting from one or more Asset Sales, at which
time the entire unutilized amount of Excess Proceeds (not only the amount in excess of $10.0
million) will be applied as provided in the preceding paragraph. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such
other
pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Notes and such other
pari passu
Indebtedness will be purchased on a pro rata basis
based on the principal amount of Notes and such other
pari passu
Indebtedness tendered. Upon
completion of each Asset Sale Offer, Excess Proceeds subject to such Asset Sale and still held by
the Company shall no longer be deemed to be Excess Proceeds.
(e) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with each repurchase of Notes pursuant to an Asset Sale Offer. To the
extent that the provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company shall comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the Asset Sale provisions
of the Indenture by virtue of such compliance.
Section 4.11.
Transactions with Affiliates
.
(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into, make, amend, renew or extend any
transaction, contract, agreement, understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each, an Affiliate Transaction), unless:
(i) such Affiliate Transaction is on terms that are no less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a comparable
arms-length transaction by the Company or such Restricted Subsidiary with a Person that is not an
Affiliate of the Company or any of its Restricted Subsidiaries; and
62
(ii) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, a Board
Resolution set forth in an Officers Certificate certifying that such Affiliate
Transaction or series of related Affiliate Transactions complies with this covenant,
and that such Affiliate Transaction or series of related Affiliate Transactions has
been approved by a majority of the disinterested members of the Board of Directors
of the Company; and
(B) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $25.0 million, an
opinion as to the fairness to the Company or such Restricted Subsidiary of such
Affiliate Transaction or series of related Affiliate Transactions from a financial
point of view issued by an independent accounting, appraisal or investment banking
firm of national standing.
(b) The following items will not be deemed to be Affiliate Transactions and, therefore, will
not be subject to the provisions of Section 4.11(a):
(i) transactions between or among the Company and/or its Restricted Subsidiaries;
(ii) payment of reasonable and customary fees to, and reasonable and customary indemnification
and similar payments on behalf of, directors of the Company;
(iii) Restricted Payments that are permitted by the provisions of the Indenture under Section
4.07 including, without limitation, payments included in the definition of Permitted
Investments; and
(iv) any sale of Equity Interests (other than Disqualified Stock) of the Company;
(v) the receipt by the Company of any capital contribution from its shareholders;
(vi) transactions pursuant to agreements or arrangements in effect on the Issue Date and
described in this offering memorandum, or any amendment, modification, or supplement thereto or
replacement thereof, as long as such agreement or arrangement, as so amended, modified or
supplemented or replaced, taken as a whole, is not more disadvantageous to the Company and its
Restricted Subsidiaries than the original agreements or arrangements in existence on the Issue
Date;
(vii) payment by the Company of management or other similar fees to any of the Principals
pursuant to any agreement or arrangement in an aggregate amount not to exceed $500,000 in any
calendar year; and
63
(viii) any employment, consulting, service or termination agreement, or reasonable and
customary indemnification arrangements, entered into by the Company or any of its Restricted
Subsidiaries with officers and employees of the Company or any of its Restricted Subsidiaries and
the payment of compensation to officers and employees of the Company or any of its Restricted
Subsidiaries (including amounts paid pursuant to employee benefit plans, employee stock option or
similar plans), so long as such agreement or payment has been approved by the Board of Directors of
the Company.
Section 4.12.
Liens
.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness (other than Permitted Liens) upon any of their property or assets, now owned
or hereafter acquired, unless all payments due under the Indenture and the Notes are secured on an
equal and ratable basis with the obligations so secured (or, in the case of Indebtedness
subordinated to the Notes or the Note Guarantees, prior or senior thereto, with the same relative
priority as the Notes will have with respect to such subordinated Indebtedness) until such time as
such obligations are no longer secured by a Lien.
Section 4.13.
Business Activities
.
The Company shall not, and shall not permit any Restricted Subsidiary thereof to, engage in
any business other than Permitted Businesses, except to such extent as would not be material to the
Company and its Restricted Subsidiaries taken as a whole.
Section 4.14.
Offer to Repurchase upon a Change of Control
.
(a) If a Change of Control occurs, each Holder of Notes will have the right to require the
Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of that
Holders Notes pursuant to an offer (a Change of Control Offer) on the terms set forth in the
Indenture. In the Change of Control Offer, the Company shall offer a payment (a Change of Control
Payment) in cash equal to not less than 101% of the aggregate principal amount of Notes
repurchased plus accrued and unpaid interest and Additional Interest, if any, thereon, to the date
of repurchase (the Change of Control Payment Date, which date will be no earlier than the date
of such Change of Control). No later than 30 days following any Change of Control, the Company
shall mail a notice to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified
in such notice, which date will be no earlier than 30 days and no later than 60 days from the date
such notice is mailed, pursuant to the procedures required by Section 3.08 and described in such
notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with
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the repurchase of the Notes as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the Change of Control provisions of
the Indenture, the Company shall comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the Change of Control provisions of this
Indenture by virtue of such compliance.
(b) On the Change of Control Payment Date, the Company shall, to the extent lawful:
(i) accept for payment all Notes or portions thereof properly tendered pursuant to the Change
of Control Offer;
(ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect
of all Notes or portions thereof so tendered; and
(iii) deliver or cause to be delivered to the Trustee the Notes so accepted together with an
Officers Certificate stating the aggregate principal amount of Notes or portions thereof being
purchased by the Company.
(c) The Paying Agent will promptly mail or wire transfer to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered, if any;
provided
that each such new Note will be
in a principal amount of $1,000 or an integral multiple thereof.
(d) The Company shall publicly announce the results of the change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
(e) Prior to complying with the provisions of this covenant, but in any event no later than 30
days following a Change of Control, the Company shall either repay all outstanding Senior Debt or
obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant.
(f) The Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of
Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under
such Change of Control Offer.
Section 4.15.
Limitation on Senior Subordinated Debt
.
The Company shall not Incur any Indebtedness that is subordinate in right of payment to any
Senior Debt of the Company unless it ranks
pari passu
or subordinate in right of payment to the
Notes. No Guarantor shall Incur any Indebtedness that is subordinate or junior in right of payment
to the Senior Debt of such Guarantor unless it ranks
pari passu
or subordinate in right of payment
to such Guarantors Note Guarantee. For purposes of the foregoing, no
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Indebtedness will be deemed to be subordinated in right of payment to any other Indebtedness
of the Company or any Guarantor, as applicable, solely by reason of Liens or Guarantees arising or
created in respect of such other Indebtedness of the Company or any Guarantor or by virtue of the
fact that the holders of any secured Indebtedness have entered into intercreditor agreements giving
one or more of such holders priority over the other holders in the collateral held by them.
Section 4.16.
Designation of Restricted and Unrestricted Subsidiaries
.
(a) The Board of Directors of the Company may designate any Restricted Subsidiary of the
Company to be an Unrestricted Subsidiary;
provided
that:
(i) any Guarantee by the Company or any Restricted Subsidiary thereof of any Indebtedness of
the Subsidiary being so designated shall be deemed to be an Incurrence of Indebtedness by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of such designation, and
such Incurrence of Indebtedness would be permitted under Section 4.09 and any lien on the property
of the Restricted Subsidiary will be permitted to exist under Section 4.12;
(ii) the aggregate Fair Market Value of all outstanding Investments owned by the Company and
its Restricted Subsidiaries in the Subsidiary being so designated (including any Guarantee by the
Company or any Restricted Subsidiary of any Indebtedness of such Subsidiary) shall be deemed to be
a Restricted Investment made as of the time of such designation and that such Investment would be
permitted under Section 4.07;
(iii) the Subsidiary being so designated:
(A) except as permitted under Section 4.11, is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted Subsidiary
of the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not Affiliates of
the Company;
(B) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (i) to subscribe for
additional Equity Interests or (ii) to maintain or preserve such Persons financial
condition or to cause such Person to achieve any specified levels of operating
results; and
(C) has not Guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted Subsidiaries,
except to the extent such Guarantee or credit support would be released upon such
designation; and
(iv) no Default or Event of Default would be in existence following such designation.
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(b) Any designation of a Restricted Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee the Board Resolution giving effect to
such designation and an Officers Certificate certifying that such designation complied with the
preceding conditions and was permitted by this Indenture. If, at any time, any Unrestricted
Subsidiary would fail to meet any of the preceding requirements and such failure continues for a
period of 30 days, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness, Investments, or Liens on the property, of such Subsidiary shall be
deemed to be Incurred or made by a Restricted Subsidiary of the Company as of such date and, if
such Indebtedness, Investments or Liens are not permitted to be Incurred or made as of such date
under the Indenture, the Company shall be in default under this Indenture.
(c) The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary;
provided
that:
(i) such designation will be deemed to be an Incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation will only be permitted if such Indebtedness is permitted under Section 4.09;
(ii) all outstanding Investments owned by such Unrestricted Subsidiary shall be deemed to be
made as of the time of such designation and such designation shall only be permitted if such
Investments would be permitted under Section 4.07;
(iii) all Liens upon property or assets of such Unrestricted Subsidiary existing at the time
of such designation would be permitted under Section 4.12; and
(iv) no Default or Event of Default would be in existence following such designation.
Section 4.17.
Payments for Consent
.
The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of
the Indenture or the Notes unless such consideration is offered to be paid and is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Section 4.18.
Guarantees
.
(a) If the Company or any of its Restricted Subsidiaries acquires or creates another Domestic
Subsidiary (other than an Immaterial Subsidiary) on or after the Issue Date, then that newly
acquired or created Domestic Subsidiary must become a Guarantor of the Notes and execute a
supplemental indenture and deliver an Opinion of Counsel with respect
to such
67
Guarantee. Any Immaterial Subsidiary that no longer meets the definition of Immaterial
Subsidiary must become a Guarantor of the Notes in accordance with Section 4.18(b).
(b) The Company shall not permit any Domestic Subsidiary (including any Immaterial
Subsidiary), directly or indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of the Company or any other Restricted Subsidiary thereof unless such Restricted
Subsidiary is a Guarantor or simultaneously executes and delivers to the Trustee an Opinion of
Counsel and a supplemental indenture, in the form attached hereto as Exhibit E, providing for the
Guarantee of the payment of the Notes by such Restricted Subsidiary, which Guarantee will be senior
to, or pari passu with, such Subsidiarys Guarantee of such other Indebtedness unless such other
Indebtedness is Senior Debt, in which case the Guarantee of the Notes may be subordinated to the
Guarantee of such Senior Debt to the same extent as the Notes are subordinated to such Senior Debt.
(c) A Guarantor may not sell or otherwise dispose of all or substantially all of its assets
to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving
Person), another Person, other than the Company or another Guarantor, unless:
(i) immediately after giving effect to that transaction, no Default or Event of Default
exists; and
(ii) either:
(A) the Person acquiring the property in any such sale or disposition or the
Person formed by or surviving any such consolidation or merger (if other than the
Guarantor) is organized or existing under the laws of the United States, any state
thereof or the District of Columbia and assumes all the obligations of that
Guarantor under the Indenture, its Note Guarantee and the Registration Rights
Agreement pursuant to a supplemental indenture satisfactory to the Trustee; or
(B) such sale or other disposition or consolidation or merger complies with
Section 4.10.
(d) The Note Guarantee of a Guarantor shall be released:
(i) in connection with any sale or other disposition of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to such transaction) a
Restricted Subsidiary of the Company, if the sale of all such Capital Stock of that Guarantor
complies with Section 4.10;
(ii) if the Company properly designates any Restricted Subsidiary that is a Guarantor as an
Unrestricted Subsidiary under this Indenture; or
(iii) solely in the case of a Note Guarantee created pursuant to the second paragraph of this
covenant, upon the release or discharge of the Guarantee which resulted in the creation of such
Note Guarantee pursuant to this covenant, except a discharge or release by or as a result of
payment under such Guarantee.
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Section 4.19.
Limitation on Issuances and Sales of Preferred Stock in Restricted
Subsidiaries.
(a) The Company shall not, and shall not permit any Restricted Subsidiary to, transfer,
convey, sell, lease or otherwise dispose of any Preferred Stock in any Restricted Subsidiary of the
Company that is not a Guarantor to any Person (other than the Company or a Restricted Subsidiary of
the Company), unless:
(i) such transfer, conveyance, sale, lease or other disposition is of all the Equity Interest
in such Restricted Subsidiary owned by the Company and its Restricted Subsidiaries; and
(ii) the cash Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with Section 4.10.
(b) The Company shall not permit any Restricted Subsidiary of the Company that is not a
Guarantor to issue any of its Preferred Stock (other than, if necessary, shares of its Capital
Stock constituting directors qualifying shares or issuances of shares of Capital Stock of foreign
Restricted Subsidiaries to foreign nationals, to the extent required by applicable law) to any
Person other than to the Company or a Restricted Subsidiary of the Company.
ARTICLE FIVE
SUCCESSORS
Section 5.01.
Merger, Consolidation or Sale of Assets.
(a) The Company shall not, directly or indirectly (1) consolidate or merge with or into
another Person (whether or not the Company is the surviving Person) or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of the properties and assets of the Company
and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to another
Person, unless:
(i) either:
(1) the Company is the surviving Person; or
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment,
transfer, conveyance or other disposition will have been made (i) is
a Person organized or existing under the laws of the United States,
any state thereof or the District of Columbia and (ii) assumes all
the obligations of the Company under the Notes, the Indenture and, to
the extent applicable, the Registration Rights Agreement pursuant to
agreements reasonably satisfactory to the Trustee;
69
(ii) immediately after giving effect to such transaction no Default or Event of
Default exists;
(iii) immediately after giving effect to such transaction on a pro forma basis,
the Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer, conveyance
or other disposition will have been made, will be permitted to Incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.09(a).
(iv) each Guarantor, unless such Guarantor is the Person with which the Company
has entered into a transaction under this covenant, will have by amendment to its
Note Guarantee confirmed that its Note Guarantee will apply to the obligations of
the Company or the surviving Person in accordance with the Notes and the Indenture.
(v) the Company delivers to the Trustee an Officers Certificate (attaching the
arithmetic computation to demonstrate compliance with Section 5.01(a)(iii) above)
and Opinion of Counsel, in each case stating that such transaction and such
agreement complies with this covenant and that all conditions precedent provided for
in this covenant relating to such transaction have been complied with.
(b) The Company and its Restricted Subsidiaries may not, directly or indirectly, lease all or
substantially all the properties or assets of the Company and its Restricted Subsidiaries
considered as one enterprise, in one or more related transactions, to any other Person. Section
5.01(a)(iii) will not apply to any merger, consolidation or sale, assignment, transfer, conveyance
or other disposition of assets between or among the Company and any of its Restricted Subsidiaries.
Section 5.02.
Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, conveyance or other
disposition of all or substantially all of the assets of the Company in accordance with Section
5.01, the successor corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such consolidation, merger,
sale, assignment, conveyance or other disposition, the provisions of this Indenture referring to
the Company shall refer instead to the successor corporation and not to the Company), and may
exercise every right and power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company in this Indenture. In the event of any such
transfer (other than any transfer by way of lease), the predecessor Company shall be released and
discharged from all liabilities and obligations in respect of the Notes and this Indenture and the
predecessor Company may be dissolved, wound up or liquidated at any time thereafter.
70
ARTICLE SIX
DEFAULTS AND REMEDIES
Section 6.01.
Events of Default.
(a) Each of the following is an Event of Default:
(i) default for 30 days in the payment when due of interest on, or Additional Interest with
respect to, the Notes whether or not prohibited by Article Eleven of this Indenture;
(ii) default in payment when due (whether at maturity, upon acceleration, redemption or
otherwise) of the principal of, or premium, if any, on the Notes, whether or not prohibited by
Article Eleven of this Indenture;
(iii) failure by the Company or any of its Restricted Subsidiaries to consummate a purchase of
the Notes when required by the provisions described under Section 4.14 or Section 4.10 or failure
to comply with Section 5.01;
(iv) failure by the Company or any of its Restricted Subsidiaries for 60 days after written
notice by the Trustee or Holders representing 25% or more of the aggregate principal amount of
Notes outstanding to comply with any of the other agreements in the Indenture;
(v) default under any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries that is a Significant Subsidiary (or any Restricted Subsidiaries
that together would constitute a Significant Subsidiary) (or the payment of which is Guaranteed by
the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issue Date, if that default:
(A) is caused by a failure to make any payment when due at the final maturity
of such Indebtedness (a Payment Default); or
(B) results in the acceleration of such Indebtedness prior to its express
maturity,
and, in each case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries that is a Significant
Subsidiary (or any Restricted Subsidiaries that together would constitute a Significant Subsidiary)
to pay final judgments (to the extent such judgments are not paid or covered by insurance provided
by a reputable carrier that has the ability to perform and has acknowledged coverage in writing)
aggregating in excess of $10.0 million, which judgments are not paid, discharged or stayed for a
period of 60 days;
71
(vii) except as permitted by this Indenture, any Note Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm
its obligations under its Note Guarantee; and
(viii) the Company, any Guarantor or any Significant Subsidiary of the Company (or any
Restricted Subsidiaries that together would constitute a Significant Subsidiary) pursuant to or
within the meaning of Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an involuntary case;
(C) makes a general assignment for the benefit of its creditors; or
(D) generally is not paying its debts as they become due; and
(ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law
that:
(A) is for relief against the Company, any Guarantor or any Significant
Subsidiary of the Company (or Restricted Subsidiaries that together would constitute
a Significant Subsidiary), in an involuntary case; or
(B) appoints a custodian of the Company, any Guarantor or any Significant
Subsidiary of the Company (or Restricted Subsidiaries that together would constitute
a Significant Subsidiary) or for all or substantially all of the property of the
Company, any Guarantor or any of its Restricted Subsidiaries that is a Significant
Subsidiary (or Restricted Subsidiaries that together would constitute a Significant
Subsidiary); or
(C) orders the liquidation of the Company, any Guarantor or any Significant
Subsidiary of the Company (or Restricted Subsidiaries that together would constitute
a Significant Subsidiary);
and the order or decree remains unstayed and in effect for 60 consecutive days.
Section 6.02.
Acceleration.
(a) In the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Guarantor or any Restricted Subsidiary that is a
Significant Subsidiary of the Company (or any Restricted Subsidiaries that together would
constitute a Significant Subsidiary), all outstanding Notes shall become due and payable
immediately without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding
72
Notes may declare all the Notes to be due and payable immediately by notice in writing to the
Company specifying the event of default;
provided, however,
that so long as any Indebtedness
permitted to be Incurred pursuant to the Credit Agreement will be outstanding, that acceleration
will not be effective until the earlier of (1) an acceleration of Indebtedness under the Credit
Agreement; or (2) five Business Days after receipt by the Company, and Agent under the Credit
Agreement of written notice of the acceleration of the Notes.
(b) In the case of any Event of Default occurring by reason of any willful action or inaction
taken or not taken by or on behalf of the Company with the intention of avoiding payment of the
premium that the Company would have had to pay if the Company then had elected to redeem the Notes
pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also
become and be immediately due and payable to the extent permitted by law upon the acceleration of
the Notes. If an Event of Default occurs during any time that the Notes are outstanding, by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding the prohibition on redemption of the Notes, then the premium specified in
Section 3.07 will also become immediately due and payable to the extent permitted by law upon the
acceleration of the Notes.
Section 6.03.
Other Remedies.
(a) If an Event of Default occurs and is continuing, the Trustee may pursue any available
remedy to collect the payment of principal, premium, if any, interest and Additional Interest, if
any, with respect to the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
(b) The Trustee may maintain a proceeding even if it does not possess any of the Notes or does
not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a
Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04.
Waiver of Past Defaults.
Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to
the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of
Default and its consequences hereunder except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, interest or Additional Interest, if any, on, the
Notes,
provided
,
however
, that the Holders of a majority in principal amount of the Notes then
outstanding may rescind an acceleration and its consequences, including any related payment default
that resulted from such acceleration.
The Company shall deliver to the Trustee an Officers Certificate stating that the requisite
percentage of Holders have consented to such waiver and attaching copies of such consents. In case
of any such waiver, the Company, the Trustee and the Holders shall be restored to their former
positions and rights under this Indenture and the Notes, respectively. This Section 6.04 shall be
in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes,
73
as permitted by the TIA. Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured for every purpose of this
Indenture, but no such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05.
Control by Majority.
The Holders of a majority in principal amount of the Notes then outstanding will have the
right to direct the time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee
determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in
the giving of such direction and may take any other action it deems proper that is not inconsistent
with any such direction received from Holders of Notes.
Section 6.06.
Limitation on Suits.
(a) A Holder may not pursue any remedy with respect to this Indenture or the Notes or the Note
Guarantees unless:
(i) the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding Notes
make a written request to the Trustee to pursue the remedy;
(iii) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense;
(iv) the Trustee does not comply with the request within 60 days after receipt of the
request and the offer of indemnity; and
(v) during such 60-day period, the Holders of a majority in aggregate principal amount
of the outstanding Notes do not give the Trustee a direction that is inconsistent with the
request.
(b) A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of
a Note or to obtain a preference or priority over another Holder of a Note.
Section 6.07.
Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to
receive payment of the principal of, premium or Additional Interest, if any, or interest on, such
Note or to bring suit for the enforcement of any such payment, on or after the due date expressed
in the Notes, shall not be impaired or affected without the consent of the Holder.
74
Section 6.08.
Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a)(i) or (a)(ii) occurs and is continuing,
the Trustee is authorized to recover judgment in its own name and as trustee of an express trust
against the Company for the whole amount of principal of, premium, if any, interest and Additional
Interest, if any, remaining unpaid on, the Notes and interest on overdue principal and premium, if
any, and, to the extent lawful, interest and Additional Interest, if any, and such further amount
as shall be sufficient to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09.
Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and
counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company
or any Guarantor (or any other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect, receive and distribute any money or other securities or property
payable or deliverable on any such claims and any custodian in any such judicial proceeding is
hereby authorized by each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07. To the
extent that the payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and any other amounts due the Trustee under Section 7.07 out of the
estate in any such proceeding shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and
other properties that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting
the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
Section 6.10.
Priorities.
(a) If the Trustee collects any money pursuant to this Article Six, it shall pay out the money
in the following order:
First: to the Trustee, its agents and attorneys for amounts due under Section 7.07,
including payment of all compensation, expense and liabilities incurred, and all advances
made, by the Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for principal,
premium, if any, interest and Additional Interest, if any, ratably, without
75
preference or priority of any kind, according to the amounts due and payable on the
Notes for principal, premium, if any, interest and Additional Interest, if any,
respectively; and
Third: to the Company or to such party as a court of competent jurisdiction shall
direct.
(b) The Trustee may fix a record date and payment date for any payment to Holders of Notes
pursuant to this Section 6.10.
Section 6.11.
Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion
may require the filing by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys
fees, against any party litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder of a Note pursuant to Section 6.07, or a suit by Holders of more than
ten percent in principal amount of the then outstanding Notes.
ARTICLE SEVEN
TRUSTEE
Section 7.01.
Duties of Trustee.
Except to the extent, if any, provided otherwise in the TIA (as from time to time in effect):
(a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of care and skill in
its exercise, as a prudent person would exercise or use under the circumstances in the conduct of
such persons own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express provisions of
this Indenture and the Trustee need perform only those duties that are specifically set
forth in this Indenture and no others, and no implied covenants or obligations shall be read
into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
76
(i) this paragraph does not limit the effect of paragraph (b) of this Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes or omits to
take in good faith in accordance with a direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this Indenture that in
any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or risk its own funds
or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and
powers under this Indenture at the request of any Holders, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss, costs, liability or expense
that might be incurred by it in connection with the request or direction.
(f) Money held in trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02.
Certain Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an Officers Certificate
or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits
to take in good faith in reliance on such Officers Certificate or Opinion of Counsel. The Trustee
may consult with counsel and the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to take in good faith
that it believes to be authorized or within the rights or powers conferred upon it by this
Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand, request, direction
or notice from the Company shall be sufficient if signed by an Officer of the Company.
77
(f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request or direction of any of the Holders unless such Holders shall
have offered to the Trustee security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such request or direction.
(g) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a
Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of such
event is sent to the Trustee in accordance with Section 14.02, and such notice references the
Notes.
Section 7.03.
Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or pledgee of Notes
and may become a creditor of, or otherwise deal with, the Company or any of its Affiliates with the
same rights it would have if it were not Trustee. However, in the event that the Trustee acquires
any conflicting interest as described in the TIA, it must eliminate such conflict within 90 days,
apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11.
Section 7.04.
Trustees Disclaimer.
The Trustee shall not be responsible for and makes no representation as to the validity or
adequacy of this Indenture, it shall not be accountable for the Companys use of the proceeds from
the Notes or any money paid to the Company or upon the Companys direction under any provision of
this Indenture, it shall not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital
herein or any statement in the Notes or any other document in connection with the sale of the Notes
or pursuant to this Indenture other than its certificate of authentication.
Section 7.05.
Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to Holders of Notes a notice of the Default or Event of Default within 90
days after it occurs. Except in the case of a Default or Event of Default relating to the payment
of principal or interest or Additional Interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06.
Reports by Trustee to Holders of the Notes.
(a) Within 60 days after each May 15 beginning with the May 15 following the date hereof, and
for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief
report dated as of such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date,
no report need be transmitted). The Trustee also shall comply with
78
TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA
Section 313(c).
(b) A copy of each report at the time of its mailing to the Holders of Notes shall be mailed
to the Company and filed with the SEC and each stock exchange on which the Notes are listed in
accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes
are listed on any stock exchange or any delisting thereof.
Section 7.07.
Compensation and Indemnity.
(a) The Company shall pay to the Trustee from time to time reasonable compensation for its
acceptance of this Indenture and services hereunder in accordance with a written schedule provided
by the Trustee to the Company. The Trustees compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustees agents and counsel.
(b) The Company and the Guarantors shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and expenses of enforcing
this Indenture against the Company and the Guarantors (including this Section 7.07) and defending
itself against any claim (whether asserted by either of the Company or any Holder or any other
person) or liability in connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be attributable to its
negligence, bad faith or willful misconduct. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder unless the failure to notify the Company impairs
the Companys ability to defend such claim. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Company need not pay for any settlement made without its
consent.
(c) The obligations of the Company and the Guarantors under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture and resignation of removal of the Trustee.
(d) To secure the Companys payment obligations in this Section 7.07, the Trustee shall have a
Lien prior to the Notes on all money or property held or collected by the Trustee, except that held
in trust to pay principal and interest on particular Notes. Such Lien shall survive the
satisfaction and discharge of this Indenture and resignation or removal of the Trustee.
(e) When the Trustee incurs expenses or renders services after an Event of Default specified
in Section 6.01(a)(viii) and (ix) occurs, the expenses and the compensation for the services
(including the fees and expenses of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
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(f) The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent
applicable.
Section 7.08.
Replacement of Trustee.
(a) A resignation or removal of the Trustee and appointment of a successor Trustee shall
become effective only upon the successor Trustees acceptance of appointment as provided in this
Section 7.08.
(b) The Trustee may resign in writing at any time and be discharged from the trust hereby
created by so notifying the Company. The Holders of a majority in principal amount of the then
outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.10;
(ii) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is
entered with respect to the Trustee under any Bankruptcy Law;
(iii) a custodian or public officer takes charge of the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
(c) If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for
any reason, the Company shall promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of the then
outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
(d) If a successor Trustee does not take office within 30 days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company, or the Holders of at least 10% in
principal amount of the then outstanding Notes may petition at the expense of the Company any court
of competent jurisdiction for the appointment of a successor Trustee.
(e) If the Trustee, after written request by any Holder who has been a Holder for at least six
months, fails to comply with Section 7.10, such Holder may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(f) A successor Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall
become effective, and the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee,
provided
all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Companys obligations under Section 7.07 shall continue for the benefit of the
retiring Trustee.
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Section 7.09.
Successor Trustee by Merger, Etc.
If the Trustee consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another Person, the successor Person without any further act shall
be the successor Trustee.
Section 7.10.
Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation organized and doing
business under the laws of the United States of America or of any state thereof that is authorized
under such laws to exercise corporate trust powers, that is subject to supervision or examination
by federal or state authorities and that has a combined capital and surplus of at least $50.0
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements of TIA Section
310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b).
Section 7.11.
Preferential Collection of Claims Against Company.
The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section
311(a) to the extent indicated therein. The Trustee hereby waives any right to set off any claim
that it may have against the Company in any capacity (other than as Trustee and Paying Agent)
against any of the assets of the Company held by the Trustee;
provided
,
however
, that if the
Trustee is or becomes a lender of any other Indebtedness permitted hereunder to be
pari passu
with
the Notes, then such waiver shall not apply to the extent of such Indebtedness.
ARTICLE EIGHT
DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01.
Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of the Board of Directors evidenced by a Board Resolution set
forth in an Officers Certificate, at any time, elect to have either Section 8.02 or 8.03 be
applied to all outstanding Notes upon compliance with the conditions set forth below in this
Article Eight.
Section 8.02.
Legal Defeasance and Discharge.
Upon the Companys exercise under Section 8.01 of the option applicable to this Section 8.02,
the Company shall, subject to the satisfaction of the conditions set forth in Section 8.04, be
deemed to have been discharged from its obligations with respect to all outstanding Notes and all
obligations of the Guarantors shall be deemed to have been discharged with respect to their
obligations under the Note Guarantees on the date the conditions set forth below are satisfied
(hereinafter,
Legal Defeasance
). For this purpose, Legal Defeasance means that the Company and
the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes and Note Guarantees, respectively, which shall thereafter be deemed to be
outstanding only for the purposes of Section 8.05 and
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the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied
all their other obligations under such Notes, Note Guarantees and this Indenture (and the Trustee,
on demand of and at the expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the
trust fund described in Section 8.04, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, interest and Additional Interest, if any, on, such
Notes when such payments are due, (b) the Companys obligations with respect to such Notes under
Article Two concerning issuing temporary Notes, registration of Notes and mutilated, destroyed,
lost or stolen Notes and the Companys obligations under Section 4.02, (c) the rights, powers,
trusts, duties and immunities of the Trustee hereunder and the Companys and the Guarantors
obligations in connection therewith and (d) this Article Eight. Subject to compliance with this
Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the
prior exercise of its option under Section 8.03.
Section 8.03.
Covenant Defeasance.
Upon the Companys exercise under Section 8.01 of the option applicable to this Section 8.03,
the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in
Section 8.04, be released from their obligations under the covenants contained in Sections 3.08,
4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 5.01 and 12.04
on and after the date the conditions set forth in Section 8.04 are satisfied (hereinafter,
Covenant Defeasance
), and all obligations of the Guarantors with respect to Guarantees
discharged, and the Notes and the Note Guarantees shall thereafter be deemed not outstanding for
the purposes of any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall continue to be deemed
outstanding for all other purposes hereunder (it being understood that such Notes and Note
Guarantees shall not be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes and the Note Guarantees, the Company
and the Guarantors may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or indirectly, by reason
of any reference elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such omission to comply shall
not constitute a Default or an Event of Default under Section 6.01, but, except as specified above,
the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the
Companys exercise under Section 8.01 of the option applicable to this Section 8.03, subject to the
satisfaction of the conditions set forth in Section 8.04, Sections 6.01(a)(iii) through (vii) shall
not constitute Events of Default.
Section 8.04.
Conditions to Legal or Covenant Defeasance.
(a) The following shall be the conditions to the application of either Section 8.02 or 8.03 to
the outstanding Notes:
(i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in the opinion
82
of a nationally recognized firm of independent public accountants, to pay the principal
of, premium, interest and Additional Interest, if any, on, the outstanding Notes on the
Stated Maturity or on the applicable redemption date, as the case may be, and the Company
must specify whether the Notes are being defeased to maturity or to a particular redemption
date;
(ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee
an Opinion of Counsel reasonably acceptable to the Trustee confirming that (a) the Company
has received from, or there has been published by, the Internal Revenue Service a ruling or
(b) since the Issue Date, there has been a change in the applicable federal income tax law,
in either case to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same times as would
have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have delivered to the
Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to federal income
tax on the same amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be continuing either: (a)
on the date of such deposit; or (b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 123rd day after the
date of deposit (other than a Default resulting from the borrowing of funds to be applied to
such deposit);
(v) such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(vi) the Company must have delivered to the Trustee an Opinion of Counsel to the effect
that, (1) assuming no intervening bankruptcy of the Company or any Guarantor between the
date of deposit and the 123rd day following the deposit and assuming that no Holder or the
Trustee is deemed to be an insider of the Company under the United States Bankruptcy Code
and the New York Debtor and Creditor Law, and assuming that the deposit is not otherwise
deemed to be to or for the benefit of an insider of the Company under the United States
Bankruptcy Code and the New York Debtor and Creditor Law, and assuming that no Holder or the
Trustee is deemed to be an initial transferee or mediate transferee of a transfer
within the meaning of Section 550 of the United States Bankruptcy Code, after the 123rd day
following the deposit, the transfer of the trust funds pursuant to such deposit will not be
subject to avoidance pursuant to Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor
83
and Creditor Law and (2) the creation of the defeasance trust does not violate the
Investment Company Act of 1940;
(vii) the Company must deliver to the Trustee an Officers Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of Notes over
the other creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
(viii) the Company must deliver to the Trustee an Officers Certificate and an Opinion
of Counsel, each stating that all conditions precedent relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Section 8.05.
Deposited Money and Government Securities to Be Held in Trust; Other
Miscellaneous Provisions.
(a) Subject to Section 8.06, all money and non-callable Government Securities (including the
proceeds thereof) deposited with the Trustee pursuant to Section 8.04 in respect of the outstanding
Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such
Notes and this Indenture, to the payment, either directly or through any Paying Agent (including
the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of
all sums due and to become due thereon in respect of principal, premium and Additional Interest, if
any, and interest, but such money need not be segregated from other funds except to the extent
required by law.
(b) The Company shall pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to
Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the outstanding Notes.
(c) Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver
or pay to the Company from time to time upon the request of the Company any money or non-callable
Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section 8.04(a)), are in excess
of the amount thereof that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
Section 8.06.
Repayment to the Company.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium, if any, interest, or Additional Interest, if
any, on any Note and remaining unclaimed for two years after such principal, and premium, if any,
interest, or Additional Interest, if any, has become due and payable shall be paid to the Company
on its request or (if then held by the Company) shall be discharged from such trust; and the Holder
of such Note shall thereafter look only to the Company for payment
84
thereof, and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon cease;
provided
,
however
, that the Trustee or such Paying Agent, before being required to make any such repayment,
may at the reasonable expense of the Company cause to be published once, in the New York Times and
The Wall Street Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining shall be repaid to
the Company.
Section 8.07.
Reinstatement
.
If the Trustee or Paying Agent is unable to apply any United States dollars or non-callable
Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any
order or judgment of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Companys obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
and, in the case of a Legal Defeasance, the Guarantors obligations under their respective Note
Guarantees shall be revised and reinstated as though no deposit had occurred pursuant to Section
8.02, in each case until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be;
provided
,
however
, that, if the
Company makes any payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01.
Without Consent of Holders of Notes
.
(a) Notwithstanding Section 9.02, the Company, the Guarantors, and the Trustee may amend or
supplement this Indenture or the Notes without the consent of any Holder of a Note:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to provide for uncertificated Notes in addition to or in place of certificated
Notes;
(iii) to provide for the assumption of the Companys or any Guarantors obligations to
Holders of Notes in the case of a merger or consolidation or sale of all or substantially
all of the Companys or such Guarantors assets;
(iv) to make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not materially adversely affect the legal rights under this
Indenture of any such Holder, including the addition of any new Note Guarantee;
85
(v) to comply with requirements of the SEC in order to effect or maintain the
qualification of this Indenture under the TIA;
(vi) to comply with Section 4.18, including to reflect the release of a Guarantee of
the Notes in accordance with this Indenture;
(vii) to secure the Notes and/or Guarantees of the Notes;
(viii) to conform the text of this Indenture or the Notes to any provision of the
section of the Offering Memorandum entitled Description of Notes to the extent that such
provision in the Description of Notes was intended to be a verbatim recitation of a
provision of this Indenture or the Notes;
(ix) to evidence and provide for the acceptance of appointment by a successor Trustee;
or
(x) to provide for the issuance of Additional Notes in accordance with this Indenture.
Upon the request of the Company accompanied by a Board Resolution authorizing the execution of
any such amendment or supplement, and upon receipt by the Trustee of any documents requested under
Section 7.02(b), the Trustee shall join with the Company and the Guarantors in the execution of any
amendment or supplement authorized or permitted by the terms of this Indenture and to make any
further appropriate agreements and stipulations that may be therein contained, unless such
amendment or supplement adversely affects the Trustees own rights, duties, liabilities or
immunities under this Indenture or otherwise in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amendment or supplement.
Section 9.02.
With Consent of Holders of Notes
.
(a) Except as otherwise provided in this Section 9.02, the Company, the Guarantors and the
Trustee may amend or supplement this Indenture or the Notes with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes),
and, subject to Sections 6.04 and 6.07, any existing Default or Event of Default or compliance with
any provision of this Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer for, Notes).
(b) The Company may, but shall not be obligated to, fix a record date for the purpose of
determining the Persons entitled to consent to any amendment, supplement or waiver. If a record
date is fixed, the Holders on such record date, or their duly designated proxies, and only such
Persons, shall be entitled to consent to such amendment, supplement or waiver, whether or not such
Holders remain Holders after such record date.
86
(c) Upon the request of the Company accompanied by a Board Resolution authorizing the
execution of any amendment, supplement or waiver, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt
by the Trustee of the documents described in Section 7.02(b), the Trustee shall join with the
Company and the Guarantors in the execution of such amendment, supplement or waiver, unless such
amendment, supplement or waiver adversely affects the Trustees own rights, duties, liabilities or
immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amendment or supplement.
(d) It shall not be necessary for the consent of the Holders of Notes under this Section 9.02
to approve the particular form of any proposed amendment, supplement or waiver, but it shall be
sufficient if such consent approves the substance thereof.
(e) After an amendment, supplement or waiver under this Section becomes effective, the Company
shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment,
supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.
Subject to Sections 6.04 and 6.07, the Holders of a majority in aggregate principal amount of the
Notes then outstanding may waive compliance in a particular instance by the Company or any
Guarantor with any provision of this Indenture or the Notes. However, without the consent of each
Holder affected, an amendment, supplement or waiver under this Section 9.02 may not (with respect
to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note or alter the
provisions, or waive any payment, with respect to the redemption of the Notes other than
provisions relating to Sections 4.10, 4.14 and 5.01;
(iii) reduce the rate of or change the time for payment of interest on any Note;
(iv) waive a Default or Event of Default in the payment of principal of, premium, if
any, interest or Additional Interest, if any, on, the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate principal
amount of the Notes and a waiver of the payment default that resulted from such
acceleration);
(v) make any Note payable in money other than U.S. dollars;
(vi) make any change in the provisions of this Indenture relating to waivers of past
Defaults or the rights of Holders of Notes to receive payments of principal of, premium, if
any, interest or Additional Interest, if any, on, the Notes;
(vii) release any Guarantor from any of its obligations under its Note Guarantee as
provided for in this Indenture, except in accordance with the terms of this Indenture;
87
(viii) impair the right to institute suit for the enforcement of any payment on or with
respect to the Notes or the Note Guarantees;
(ix) except as otherwise permitted under Section 4.18, consent to the assignment or
transfer by the Company or any Guarantor of any of its rights or obligations under this
Indenture; and
(x) make any change in the preceding amendment and waiver provisions.
(f) Without the consent of the Holders of at least 75% of the principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), an amendment or waiver may not amend or modify
any of the provisions of this Indenture or the related definitions affecting the subordination or
ranking of the Notes or any Note Guarantee in any manner adverse to the holders of the Notes or any
Note Guarantee.
Section 9.03.
Compliance with Trust Indenture Act
.
Every amendment or supplement to this Indenture or the Notes shall be set forth in a document
that complies with the TIA as then in effect.
Section 9.04.
Revocation and Effect of Consents
.
Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a
Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holders Note, even if notation of
the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written notice of revocation
before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every Holder.
Section 9.05.
Notation on or Exchange of Notes
.
(a) The Trustee may place an appropriate notation about an amendment, supplement or waiver on
any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee
shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
(b) Failure to make the appropriate notation or issue a new Note shall not affect the validity
and effect of such amendment, supplement or waiver.
Section 9.06.
Trustee to Sign Amendments, Etc
.
The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article
Nine if the amendment, supplement or waiver does not adversely affect the rights, duties,
liabilities or immunities of the Trustee. The Company may not sign any amendment, supplement or
waiver until its Board of Directors approves it. In executing any amendment,
88
supplement or waiver, the Trustee shall be entitled to receive and (subject to Section 7.01)
shall be fully protected in relying upon an Officers Certificate and an Opinion of Counsel stating
that the execution of such amendment, supplement or waiver is authorized or permitted by this
Indenture.
ARTICLE TEN
SATISFACTION AND DISCHARGE
Section 10.01.
Satisfaction and Discharge
.
(a) This Indenture shall be discharged and shall cease to be of further effect as to all Notes
issued hereunder, when:
(i) either:
(A) all Notes that have been authenticated (except lost, stolen or destroyed
Notes that have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Company) have been
delivered to the Trustee for cancellation; or
(B) all Notes that have not been delivered to the Trustee for cancellation have
become due and payable by reason of the making of a notice of redemption or
otherwise or will become due and payable within one year and the Company or any
Guarantor has irrevocably deposited or caused to be deposited with the Trustee as
trust funds in trust solely for the benefit of the Holders, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient without consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the Notes not delivered to the Trustee for
cancellation for principal, premium, if any, and Additional Interest, if any, and
accrued interest to the date of maturity or redemption, as the case may be;
(ii) no Default or Event of Default shall have occurred and be continuing on the date
of such deposit or shall occur as a result of such deposit and such deposit will not result
in a breach or violation of, or constitute a default under, any other instrument to which
the Company or any Guarantor is a party or by which the Company or any Guarantor is bound;
(iii) the Company or any Guarantor has paid or caused to be paid all sums payable by it
under this Indenture; and
(iv) the Company has delivered irrevocable instructions to the Trustee under this
Indenture to apply the deposited money toward the payment of the Notes at maturity or the
redemption date, as the case may be.
In addition, the Company must deliver an Officers Certificate and an Opinion of Counsel to
the Trustee stating that all conditions precedent to satisfaction and discharge have been
satisfied.
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(b) Notwithstanding the above, the Trustee shall pay to the Company from time to time upon its
request any cash or Government Securities held by it as provided in this Section 10.01, which, in
the opinion of a nationally recognized firm of independent public accountants expressed in a
written certification delivered to the Trustee, are in excess of the amount that would then be
required to be deposited to effect a satisfaction and discharge under this Article Ten.
(c) After the conditions to satisfaction and discharge contained in this Article Ten have been
satisfied, and the Company has paid or caused to be paid all other sums payable hereunder by the
Company, and delivered to the Trustee an Officers Certificate and Opinion of Counsel, each stating
that all conditions precedent to satisfaction and discharge have been satisfied, the Trustee upon
written request shall acknowledge in writing the discharge of the obligations of the Company and
the Guarantors under this Indenture (except for those surviving obligations specified in Section
10.04).
Section 10.02.
Deposited Money and Government Securities to Be Held in Trust; Other
Miscellaneous Provisions
.
Subject to Section 10.03, all money and non-callable Government Securities (including the
proceeds thereof) deposited with the Trustee pursuant to Section 10.01 in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders
of such Notes of all sums due and to become due thereon in respect of principal, premium, if any,
interest and Additional Interest, if any, but such money need not be segregated from other funds
except to the extent required by law.
Section 10.03.
Repayment to the Company
.
Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in
trust for the payment of the principal of, premium, if any, interest or Additional Interest, if
any, on any Note and remaining unclaimed for two years after such principal, premium, if any,
interest or Additional Interest, if any, has become due and payable shall be paid to the Company
upon its request or (if then held by the Company) shall be discharged from such trust; and the
Holder of such Note shall thereafter look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money, and all liability
of the Company as trustee thereof, shall thereupon cease;
provided
,
however
, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times or The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification or publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
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Section 10.04.
Survival.
In the event that the Company makes (or causes to be made) an irrevocable deposit with the
Trustee for the benefit of the Holders pursuant to Section 10.01(a)(i)(B) hereof, prior to the date
of maturity or redemption, as the case may be, the following provisions of this Indenture shall
survive until otherwise terminated or discharged hereunder:
(1) the rights of Holders of outstanding Notes to receive payments in respect of the
principal of, premium, if any, interest and Additional Interest, if any, on such Notes when
such payments are due from the trust;
(2) the Companys obligations with respect to such Notes under Article 2 and Section
4.02 hereof;
(3) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the
Companys obligations in connection therewith; and
(4) this Article 10.
ARTICLE ELEVEN
SUBORDINATION OF NOTES
Section 11.01.
Agreement to Subordinate
.
The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness
evidenced by the Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article Eleven, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of the Company, including Senior Debt of the Company incurred after the date hereof.
Section 11.02.
Liquidation; Dissolution; Bankruptcy
.
The holders of Senior Debt of the Company shall be entitled to receive payment in full in cash
or Cash Equivalents of all Obligations due in respect of Senior Debt of the Company (including
interest after the commencement of any bankruptcy proceeding at the rate specified in the
documentation for the applicable Senior Debt of the Company) before the Holders of Notes shall be
entitled to receive any payment with respect to the Notes (except that Holders of Notes may receive
and retain Permitted Junior Securities and payments made from the trust pursuant to Article Eight),
in the event of any distribution to creditors of the Company in (a) any liquidation or dissolution
of the Company; (b) any bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property; (c) any assignment by the Company for the benefit of its
creditors; or (d) any marshaling of the Companys assets and liabilities.
Section 11.03.
Default on Designated Senior Debt
.
(a) The Company shall not make any payment in respect of the Notes (except in Permitted Junior
Securities or from the trust pursuant to Article Eight) if:
91
(i) a payment default on Designated Senior Debt of the Company occurs and is
continuing; or
(ii) any other default (a
nonpayment default
) occurs and is continuing on any series
of Designated Senior Debt of the Company that permits holders of that series of Designated
Senior Debt of the Company to accelerate its maturity and the Trustee receives a notice of
such default (a
Payment Blockage Notice
) from a representative of the holders of such
Designated Senior Debt.
(b) Payments on the Notes may and shall be resumed:
(i) in the case of a payment default on Designated Senior Debt of the Company, upon the
date on which such default is cured or waived; and
(ii) in case of a non-payment default or Designated Senior Debt of the Company, the
earliest of (x) the date on which such default is cured or waived, (y) 179 days after the
date on which the applicable Payment Blockage Notice is received and (z) the date the
Trustee receives notice from the representative for such Designated Senior Debt rescinding
the Payment Blockage Notice, unless the maturity of such Designated Senior Debt of the
Company has been accelerated.
(c) No new Payment Blockage Notice may be delivered unless and until:
(i) 360 days have elapsed since the delivery of the immediately prior Payment Blockage
Notice; and
(ii) all scheduled payments of principal of, premium, if any, interest and Additional
Interest, if any, on, the Notes that have come due have been paid in full in cash or Cash
Equivalents.
(d) No non-payment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default has been cured or waived for a period of not less than 90 days.
(e) If the Trustee or any Holder of the Notes receives a payment in respect of the Notes
(except in Permitted Junior Securities or from the trust described under Article Eight) when (i)
the payment is prohibited by this Article Eleven and (ii) the Trustee or the Holder has actual
knowledge that the payment is prohibited,
provided
that such actual knowledge shall not be required
in the case of any payment default on Designated Senior Debt, the Trustee or the Holder, as the
case may be, shall hold the payment in trust for the benefit of the holders of Senior Debt of the
Company. Upon the proper written request of the holders of Senior Debt of the Company or if there
is any payment default on any Designated Senior Debt, the Trustee or the Holder, as the case may
be, shall deliver the amounts in trust to the holders of Senior Debt of the Company or their proper
representative.
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Section 11.04.
Acceleration of Securities
.
If payment of the Notes is accelerated because of an Event of Default, the Company and the
Trustee shall promptly notify the holders of Senior Debt of the Company of the acceleration.
Section 11.05.
When Distribution Must Be Paid Over
.
In the event that the Trustee or any Holder receives any payment of any Obligations with
respect to the Notes (except in Permitted Junior Securities or from the trust pursuant to Article
Eight) at a time when the Trustee or such Holder, as applicable, has actual knowledge that such
payment is prohibited by this Article Eleven, such payment shall be held by the Trustee or such
Holder, as applicable, in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to the holders of Senior Debt of the Company as their interests may appear or
their Representative under this Indenture or other agreement (if any) pursuant to which such Senior
Debt may have been issued, as their respective interests may appear, for application to the payment
of all Obligations with respect to such Senior Debt remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt.
With respect to the holders of Senior Debt of the Company, the Trustee undertakes to perform
only such obligations on the part of the Trustee as are specifically set forth in this Article
Eleven, and no implied covenants or obligations with respect to the holders of such Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of the Company, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or
any other Person money or assets to which any holders of such Senior Debt shall be entitled by
virtue of this Article Eleven, except if such payment is made as a result of the willful misconduct
or gross negligence of the Trustee.
Section 11.06.
Notice by the Company
.
The Company shall promptly notify the Trustee and the Paying Agent in writing of any facts
known to the Company that would cause a payment of any Obligations with respect to the Notes to
violate this Article Eleven, but failure to give such notice shall not affect the subordination of
the Notes to the Senior Debt of the Company as provided in this Article Eleven.
Section 11.07.
Subrogation
.
After all Senior Debt of the Company is paid in full and until the Notes are paid in full,
Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness
pari passu
with the Notes) to the rights of holders of such Senior Debt to receive distributions applicable to
such Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have
been applied to the payment of such Senior Debt. A distribution made under this Article Eleven to
holders of Senior Debt of the Company that otherwise would have been made to Holders of Notes is
not, as between the Company and Holders, a payment by the Company on the Notes.
93
Section 11.08.
Relative Rights
.
This Article Eleven defines the relative rights of Holders of Notes and holders of Senior Debt
of the Company. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders of Notes, the obligation of the Company,
which is absolute and unconditional, to make payments on the Notes in accordance with the
terms under the Notes and this Indenture;
(b) affect the relative rights of Holders of Notes and creditors of the Company other
than their rights in relation to holders of Senior Debt of the Company; or
(c) prevent the Trustee or any Holder of Notes from exercising its available remedies
upon a Default or Event of Default, subject to the rights of holders and owners of Senior
Debt of the Company to receive distributions and payments otherwise payable to Holders of
Notes.
If the Company fails because of this Article Eleven to make a payment on the Notes in
accordance with the terms under the Notes and this Indenture, the failure is still a Default or
Event of Default.
Section 11.09.
Subordination May Not Be Impaired by the Company
.
No right of any holder of Senior Debt of the Company to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company
or any Holder or by the failure of the Company or any Holder to comply with this Indenture.
Section 11.10.
Distribution or Notice to Representative
.
Whenever a distribution is to be made or a notice is to be given to holders of Senior Debt of
the Company, the distribution may be made and the notice may be given to their Representative (if
any).
Upon any payment or distribution of assets of the Company referred to in this Article Eleven,
the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any
court of competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the Trustee or to the
Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt of the Company and other Indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertinent thereto or to this
Article Eleven.
Section 11.11.
Rights of Trustee and Paying Agent
.
Notwithstanding this Article Eleven or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would prohibit the making of
any payment or distribution by the Trustee, and the Trustee and the Paying Agent may
94
continue to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such payment written notice
of facts that would cause the payment of any Obligations with respect to the Notes to violate this
Article Eleven. Only the Company or a Representative may give the notice. Nothing in this Article
Eleven shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07.
The Trustee in its individual or any other capacity may hold Senior Debt of the Company with
the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.
Section 11.12.
Authorization to Effect Subordination
.
Each Holder of Notes, by the Holders acceptance thereof, authorizes and directs the Trustee
on such Holders behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article Eleven, and appoints the Trustee to act as such Holders
attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in Section 6.09 at least
30 days before the expiration of the time to file such claim, the lenders under the Credit
Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of
the Notes.
ARTICLE TWELVE
NOTE GUARANTEES
Section 12.01.
Guarantee
.
(a) Subject to this Article Twelve, each of the Guarantors hereby, jointly and severally, and
fully and unconditionally, guarantees to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Notes or the obligations of the Company hereunder or
thereunder, that: (i) the principal of, premium, if any, interest and Additional Interest, if any,
on, the Notes will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of, premium, if any, interest and
Additional Interest, if any, on, the Notes, if lawful (subject in all cases to any applicable grace
period provided herein), and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder will be promptly paid in full, all in accordance with the terms hereof and
thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, the same will be promptly paid in full when due in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors shall be
jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
(b) Each of the Guarantors hereby agrees that, to the maximum extent permitted under
applicable law, its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce
the same, any waiver or consent by any Holder of the Notes with respect to any
95
provisions hereof or thereof, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Subject to Section 6.06, each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first against the
Company, protest, notice and all demands whatsoever and covenants that the Note Guarantees provided
for herein shall not be discharged except by complete performance of the obligations contained in
the Notes and this Indenture.
(c) If any Holder or the Trustee is required by any court or otherwise to return to the
Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in
relation to any of the Company or the Guarantors, any amount paid by any of them to the Trustee or
such Holder, the Note Guarantees provided for herein, to the extent theretofore discharged, shall
be reinstated in full force and effect.
(d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until payment in full of
all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors,
on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for the purposes of the
Note Guarantees provided for herein, notwithstanding any stay, injunction or other prohibition
preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event
of any declaration of acceleration of such obligations as provided in Article Six, such obligations
(whether or not due and payable) shall forthwith become due and payable by the Guarantors for the
purpose of the Note Guarantees provided for herein. The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right does not impair
the rights of the Holders under the Note Guarantees provided for herein.
Section 12.02.
Limitation on Guarantor Liability
.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the
intention of all such parties that the Note Guarantee of such Guarantor not constitute (i) a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to the Note Guarantee of such Guarantor or (ii) an unlawful distribution under any
applicable state law prohibiting shareholder distributions by an insolvent subsidiary to the extent
applicable to the Note Guarantee of such Guarantor. To effectuate the foregoing intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each
Guarantor will be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this
Article Twelve, result in the obligations of such Guarantor under its Note Guarantee not
constituting a fraudulent transfer or conveyance or such an unlawful distribution.
96
Section 12.03.
Note Guarantees under Indenture
.
(a) If an Officer of a Guarantor whose signature is on this Indenture no longer holds that
office at the time the Trustee authenticates the Notes, the Note Guarantee of such Guarantor
provided for herein shall be valid nevertheless.
(b) The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of the Note Guarantees provided for herein on behalf of the Guarantors.
(c) If required by Section 4.18, the Company shall cause its Subsidiaries to execute
supplemental indentures to this Indenture providing for additional Note Guarantees in accordance
with Section 4.18 and this Article Twelve, to the extent applicable.
Section 12.04.
Guarantors May Consolidate, Etc., on Certain Terms
.
(a) A Guarantor may not sell or otherwise dispose of all or substantially all of its assets
to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving
Person), another Person, other than the Company or another Guarantor, unless:
(i) immediately after giving effect to that transaction, no Default or Event of Default
exists; and
(ii) either:
(A) the Person acquiring the property in any such sale or disposition or the
Person formed by or surviving any such consolidation or merger (if other than the
Guarantor) is organized or existing under the laws of the United States, any state
thereof or the District of Columbia and assumes all the obligations of that
Guarantor under the Indenture, its Note Guarantee and the Registration Rights
Agreement pursuant to a supplemental indenture satisfactory to the Trustee; or
(B) such sale or other disposition or consolidation or merger complies with
Section 4.10.
(b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by
the successor Person, by supplemental indenture, executed and delivered to the Trustee and
satisfactory in form to the Trustee, of the Note Guarantee and the due and punctual performance of
all of the covenants and conditions of this Indenture to be performed by a Guarantor, such
successor Person shall succeed to and be substituted for a Guarantor with the same effect as if it
had been named herein as a Guarantor. All the Note Guarantees so issued shall in all respects have
the same legal rank and benefit under this Indenture as the Note Guarantees theretofore and
thereafter issued in accordance with the terms of this Indenture as though all of such Note
Guarantees had been issued at the date of the execution hereof.
(c) Except as set forth in Article Five, and notwithstanding clauses (i) and (ii) of Section
12.04(a), nothing contained in this Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall
97
prevent any sale or other disposition of all or substantially all of the assets of a Guarantor
to the Company or another Guarantor.
Section 12.05.
Release of Guarantor
.
(a) The Note Guarantee of a Guarantor shall be released:
(i) in connection with any sale or other disposition of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to such transaction)
a Restricted Subsidiary of the Company, if the sale of all such Capital Stock of that
Guarantor complies with Section 4.10;
(ii) if the Company properly designates any Restricted Subsidiary that is a Guarantor
as an Unrestricted Subsidiary under this Indenture;
(iii) upon satisfaction and discharge of the Notes as set forth under Section 10.01 or
upon defeasance of the Notes as set forth under Article Eight; or
(iv) solely in the case of a Note Guarantee created pursuant to Section 4.18, upon the
release or discharge of the Guarantee which resulted in the creation of such Note Guarantee
pursuant to Section 4.18, except a discharge or release by or as a result of payment under
such Guarantee.
(b) Any Guarantor not released from its obligations under its Note Guarantee shall remain
liable for the full amount of principal of, premium, if any, interest and Additional Interest, if
any, on, the Notes and for the other obligations of any Guarantor under this Indenture as provided
in this Article Twelve.
ARTICLE THIRTEEN
SUBORDINATION OF NOTE GUARANTEES
Section 13.01.
Agreement To Subordinate
.
Each Guarantor agrees, and each Holder by accepting a Note agrees, that the Indebtedness
evidenced by such Guarantors Note Guarantee is subordinated in right of payment, to the extent and
in the manner provided in this Article Thirteen, to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of such Guarantor, including Senior Debt of such Guarantor incurred
after the date hereof.
Section 13.02.
Liquidation, Dissolution, Bankruptcy
.
The holders of Senior Debt of a Guarantor shall be entitled to receive payment in full in cash
or Cash Equivalents of all Obligations due in respect of Senior Debt of such Guarantor (including
interest after the commencement of any bankruptcy proceeding at the rate specified in the
documentation for the applicable Senior Debt of such Guarantor) before the Holders shall be
entitled to receive any payment with respect to such Guarantors Note Guarantee (except that
Holders may receive and retain (i) Equity Interests in such Guarantor and (ii) debt securities of
such Guarantor that are subordinated to all Senior Debt of such Guarantor
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to the same extent as, or to a greater extent than, the Notes and the Note Guarantees are
subordinated to Senior Debt under the Indenture), in the event of any distribution to creditors of
such Guarantor in (a) any liquidation or dissolution of such Guarantor; (b) any bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to such Guarantor or its
property; (c) any assignment by such Guarantor for the benefit of its creditors; or (d) any
marshaling of such Guarantors assets and liabilities.
Section 13.03.
Default on Designated Senior Debt of Guarantor
.
(a) None of the Guarantors shall make any payment in respect of its Note Guarantee (except in
(i) Equity Interests in such Guarantor and (ii) debt securities of such Guarantor that are
subordinated to all Senior Debt of such Guarantor to the same extent as, or to a greater extent
than, the Notes and the Note Guarantees are subordinated to Senior Debt under the Indenture) if:
(i) a payment default on Designated Senior Debt of such Guarantor occurs and is
continuing; or
(ii) any other default occurs and is continuing on any series of Designated Senior Debt
of such Guarantor that permits holders of that series of Designated Senior Debt of such
Guarantor to accelerate its maturity and the Trustee receives a Payment Blockage Notice from
a representative of the holders of such Designated Senior Debt.
(b) Payments by a Guarantor pursuant to its Note Guarantee may and shall be resumed:
(i) in the case of a payment default on Designated Senior Debt of such Guarantor, upon
the date on which such default is cured or waived; and
(ii) in case of a non-payment default on Designated Senior Debt of such Guarantor, the
earliest of (x) the date on which such default is cured or waived, (y) 179 days after the
date on which the applicable Payment Blockage Notice is received and (z) the date the
Trustee receives notice from the representative for such Designated Senior Debt rescinding
the Payment Blockage Notice, unless the maturity of such Designated Senior Debt of such
Guarantor has been accelerated.
(c) No new Payment Blockage Notice may be delivered unless and until:
(i) 360 days have elapsed since the delivery of the immediately prior Payment Blockage
Notice; and
(ii) all scheduled payments of principal of, premium, if any, interest and Additional
Interest, if any, on, the Notes that have come due have been paid in full in cash.
(d) No non-payment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent
99
Payment Blockage Notice unless such default has been cured or waived for a period of not less than 90 days.
(e) If the Trustee or any Holder receives a payment from any Guarantor in respect of its Note
Guarantee (except in (i) Equity Interests in such Guarantor and (ii) debt securities of such
Guarantor that are subordinated to all Senior Debt of such Guarantor to the same extent as, or to a
greater extent than, the Notes and the Note Guarantees are subordinated to Senior Debt under the
Indenture) when (i) the payment is prohibited by this Article Thirteen and (ii) the Trustee or the
Holder has actual knowledge that the payment is prohibited,
provided
that such actual knowledge
shall not be required in the case of any payment default on Designated Senior Debt of such
Guarantor, the Trustee or the Holder, as the case may be, shall hold the payment in trust for the
benefit of the holders of Senior Debt of such Guarantor. Upon the proper written request of the
holders of Senior Debt of such Guarantor or if there is any payment default on any Designated
Senior Debt of such Guarantor, the Trustee or the Holder, as the case may be, shall deliver the
amounts in trust to the holders of Senior Debt of such Guarantor or their proper representative.
Section 13.04.
Demand for Payment
.
If a demand for payment is made on a Guarantor pursuant to Article Twelve of this Indenture,
the Trustee shall promptly notify the holders of Senior Debt of such Guarantor (or their
representatives) of such demand.
Section 13.05.
When Distribution Must Be Paid Over
.
In the event that the Trustee or any Holder receives any payment of any Obligations with
respect to any Note Guarantee (except that Holders may receive and retain (i) Equity Interests in
such Guarantor and (ii) debt securities of such Guarantor that are subordinated to all Senior Debt
of such Guarantor to the same extent as, or to a greater extent than, the Notes and the Note
Guarantees are subordinated to Senior Debt under the Indenture) at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by this Article
Thirteen, such payment shall be held by the Trustee or such Holder, as applicable, in trust for the
benefit of, and shall be paid forthwith over and delivered, upon written request, to
the holders of Senior Debt of the applicable Guarantor as their interests may appear or their
Representative under this Indenture or other agreement (if any) pursuant to which such Senior Debt
may have been issued, as their respective interests may appear, for application to the payment of
all Obligations with respect to such Senior Debt remaining unpaid to the extent necessary to pay
such Obligations in full in accordance with their terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt.
With respect to the holders of Senior Debt of any Guarantor, the Trustee undertakes to perform
only such obligations on the part of the Trustee as are specifically set forth in this Article
Thirteen, and no implied covenants or obligations with respect to the holders of such Senior Debt
shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of any Guarantor, and shall not be liable to any such
holders if the Trustee shall pay over or distribute to or on behalf of Holders or such Guarantor or
any other Person money or assets to which any holders of such Senior Debt
100
shall be entitled by
virtue of this Article Thirteen, except if such payment is made as a result of the willful
misconduct or gross negligence of the Trustee.
Section 13.06.
Notice by the Guarantors
.
Each Guarantor shall promptly notify the Trustee and the Paying Agent in writing of any facts
known to such Guarantor that would cause a payment of any Obligations with respect to its Note
Guarantee to violate this Article Thirteen, but failure to give such notice shall not affect the
subordination of the Note Guarantee of such Guarantor to its Senior Debt as provided in this
Article Thirteen.
Section 13.07.
Subrogation
.
After all Senior Debt of a Guarantor is paid in full and until the Notes are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
pari passu
with the
Note Guarantees) to the rights of holders of such Senior Debt to receive distributions applicable
to such Senior Debt to the extent that distributions otherwise payable to the Holders have been
applied to the payment of such Senior Debt. A distribution made under this Article Thirteen to the
holders of Senior Debt of a Guarantor which otherwise would have been made to Holders is not, as
between the such Guarantor and Holders, a payment by such Guarantor on its Note Guarantee.
Section 13.08.
Relative Rights
.
This Article Thirteen defines the relative rights of Holders and holders of Senior Debt of a
Guarantor. Nothing in this Indenture shall:
(a) impair, as between such Guarantor and Holders, the obligation of such Guarantor,
which is absolute and unconditional, to make payments under its Note Guarantee in accordance
with the terms under this Indenture;
(b) affect the relative rights of Holders and creditors of such Guarantor other than
their rights in relation to the holders of Senior Debt of such Guarantor; or
(c) prevent the Trustee or any Holder from exercising its available remedies upon a
default by such Guarantor under its Note Guarantee, subject to the rights of holders and
owners of Senior Debt of such Guarantor to receive distributions and payments otherwise
payable to the Holders.
If a Guarantor fails because of this Article Thirteen to make a payment under its Note
Guarantee in accordance with the terms under this Indenture, the failure is still a Default or
Event of Default.
Section 13.09.
Subordination May Not Be Impaired by Guarantor
.
No right of any holder of Senior Debt of any Guarantor to enforce the subordination of the
Note Guarantee of such Guarantor shall be impaired by any act or failure to
101
act by such Guarantor
or any Holder or by the failure of such Guarantor or any Holder to comply with this Indenture.
Section 13.10.
Distribution or Notice to Representative
.
Whenever a distribution is to be made or a notice is to be given to holders of Senior Debt of
any Guarantor, the distribution may be made and the notice may be given to their Representative (if
any).
Upon any payment or distribution of assets of any Guarantor referred to in this Article
Thirteen, the Trustee and the Holders shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the Trustee or to the
Holders for the purpose of ascertaining the Persons entitled to participate in such distribution,
the holders of Senior Debt of such Guarantor and other Indebtedness of such Guarantor, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Thirteen.
Section 13.11.
Rights of Trustee and Paying Agent
.
Notwithstanding this Article Thirteen or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts that would prohibit the
making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may
continue to make payments on any Note Guarantee, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such payment written notice
of facts that would cause the payment of any Obligations with respect to such Note Guarantee to
violate this Article Thirteen. Only the Company, a Guarantor or a Representative may give the
notice. Nothing in this Article Thirteen shall impair the claims of, or payments to, the Trustee
under or pursuant to Section 7.07.
The Trustee in its individual or any other capacity may hold Senior Debt of any Guarantor with
the same rights it would have if it were not Trustee. Any Agent may do the same with like rights.
Section 13.12.
Authorization to Effect Subordination
.
Each Holder of Notes, by the Holders acceptance thereof, authorizes and directs the Trustee
on such Holders behalf to take such action as may be necessary or appropriate to effectuate the
subordination as provided in this Article Thirteen, and appoints the Trustee to act as such
Holders attorney-in-fact for any and all such purposes. If the Trustee does not file a proper
proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09
at least 30 days before the expiration of the time to file such claim, the lenders under the Credit
Agreement are hereby authorized to file an appropriate claim for and on behalf of the Holders of
the Notes.
102
Section 13.13.
Reliance by Holders of Senior Debt of Guarantors on Subordination
Provisions
.
Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination
provisions are, and are intended to be, an inducement and a consideration to each holder of any
Senior Debt of any Guarantor, whether such Senior Debt was created or acquired before or after the
issuance of the Notes, to acquire and continue to hold, such Senior Debt and such holder of Senior
Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and
continuing to hold such Senior Debt.
ARTICLE FOURTEEN
MISCELLANEOUS
Section 14.01.
Trust Indenture Act Controls
.
If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by
TIA Section 318(c), the imposed duties shall control.
Section 14.02.
Notices
.
(a) Any notice or communication by the Company or any Guarantor, on the one hand, or the
Trustee, on the other hand, to the other is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others address:
If to the Company and/or any Guarantor:
Cardtronics, Inc.
3110 Hayes Road
Suite 300
Houston, TX 77082
Facsimile: (281) 8982-0151
Attention: Chief Financial Officer
with a copy to:
Vinson & Elkins LLP
First City Tower
1001 Fannin Street, Suite 2300
Houston, TX 77002
Facsimile: (713) 615-5651
Attention: David Oelman
If to the Trustee:
Wells Fargo Bank, National Association
505 Main Street, Suite 301
Fort Worth, TX 76102
Facsimile: (817) 885-8650
Attention: Corporate Trust Administration
103
(b) The Company, the Guarantors or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
(c) All notices and communications (other than those sent to Holders) shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; three Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied;
and the next Business Day after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
(d) Any notice or communication to a Holder shall be mailed by first class mail, certified or
registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to
its address shown on the register kept by the Registrar. Any notice or communication
shall also be so mailed to any Person described in TIA Section 313(c), to the extent required
by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
(e) Where this Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity of any action taken
in reliance on such waiver.
(f) In case by reason of the suspension of regular mail service or by reason of any other
cause it shall be impracticable to give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a sufficient notification for every purpose
hereunder.
(g) If a notice or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.
(h) If the Company mails a notice or communication to Holders, it shall mail a copy to the
Trustee and each Agent at the same time.
Section 14.03.
Communication by Holders of Notes with Other Holders of Notes
.
Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to
their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and any
other Person shall have the protection of TIA Section 312(c).
Section 14.04.
Certificate and Opinion as to Conditions Precedent
.
Upon any request or application by the Company to the Trustee to take any action under this
Indenture, the Company shall furnish to the Trustee:
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(i) an Officers Certificate in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 14.05) stating that, in the
opinion of the signers, all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(ii) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee
(which shall include the statements set forth in Section 14.05) stating that, in the opinion
of such counsel (who may rely upon an Officers Certificate as to matters of fact), all such
conditions precedent and covenants have been satisfied.
Section 14.05.
Statements Required in Certificate or Opinion
.
Each certificate or opinion with respect to compliance with a condition or covenant provided
for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall
comply with the provisions of TIA Section 314(e) and shall include:
(i) a statement that the Person making such certificate or opinion has read such
covenant or condition;
(ii) a brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of such Person, such condition or
covenant has been complied with.
Section 14.06.
Rules by Trustee and Agents
.
The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar
or Paying Agent may make reasonable rules and set reasonable requirements for its functions.
Section 14.07.
No Personal Liability of Directors, Officers, Employees and
Stockholders
.
No director, officer, employee, incorporator, stockholder, member, manager or partner of the
Company or any Guarantor, as such, shall have any liability for any obligations of the Company or
the Guarantors under the Notes, this Indenture, the Note Guarantees or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. This waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to waive liabilities
under the federal securities laws.
105
Section 14.08.
Governing Law
.
THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE
NOTES.
Section 14.09.
Consent to Jurisdiction
.
Any legal suit, action or proceeding arising out of or based upon this Indenture or the
transactions contemplated hereby (
Related Proceedings
) may be instituted in the federal courts of
the United States of America located in the City of New York or the courts of the State of New York
in each case located in the City of New York (collectively, the
Specified Courts
), and each party
irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or
proceeding. Service of any process, summons, notice or document by mail (to the extent allowed
under any applicable statute or rule of court) to such partys address set forth above shall be
effective service of process for any suit, action or other proceeding brought in any such court.
The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit,
action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and
agree not to plead or claim in any such court has been brought in an inconvenient forum.
Section 14.10.
No Adverse Interpretation of Other Agreements
.
This Indenture may not be used to interpret any other indenture, loan or debt agreement of the
Company or any of its Subsidiaries or of any other Person. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
Section 14.11.
Successors
.
All agreements of the Company in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors. All agreements of each
Guarantor in this Indenture shall bind such Guarantors successors, except as otherwise provided in
Section 12.04.
Section 14.12.
Severability
.
In case any provision in this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 14.13.
Counterpart Originals
.
The parties may sign any number of copies of this Indenture. Each signed copy shall be an
original, but all of them together represent the same agreement.
Section 14.14.
Acts of Holders
.
(a) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Indenture to be given or taken by the Holders may be embodied in and
106
evidenced by
one or more instruments of substantially similar tenor signed by such Holders in person or by
agents duly appointed in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the Trustee and, where
it is hereby expressly required, to the Company. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
Act
of the
Holders signing such instrument or instruments. Proof of execution of any such instrument or of a
writing appointing any such agent shall be sufficient for any purpose of this Indenture and
conclusive in favor of the Trustee and the Company if made in the manner provided in this Section
14.14.
(b) The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to such witness, notary or officer the execution
thereof. Where such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The
fact and date of the execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee deems sufficient.
(c) Notwithstanding anything to the contrary contained in this Section 14.14, the principal
amount and serial numbers of Notes held by any Holder, and the date of holding the same, shall be
proved by the register of the Notes maintained by the Registrar as provided in Section 2.04.
(d) If the Company shall solicit from the Holders of the Notes any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by
or pursuant to a Board Resolution, fix in advance a record date for the determination of Holders
entitled to give such request, demand, authorization, direction, notice, consent, waiver or other
Act, but the Company shall have no obligation to do so. Notwithstanding TIA Section 316(c), such
record date shall be the record date specified in or pursuant to such resolution, which shall be a
date not earlier than the date 30 days prior to the first solicitation of Holders generally in
connection therewith or the date of the most recent list of Holders forwarded to the Trustee prior
to such solicitation pursuant to Section 2.06 and not later than the date such solicitation is
completed. If such a record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such record date, but only the Holders of
record at the close of business on such record date shall be deemed to be Holders for the purposes
of determining whether Holders of the requisite proportion of the then outstanding Notes have
authorized or agreed or consented to such request, demand, authorization, direction, notice,
consent, waiver or other Act, and for that purpose the then outstanding Notes shall be computed as
of such record date;
provided
that no such
authorization, agreement or consent by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this Indenture not later
than eleven months after the record date.
(e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the
Holder of any Note shall bind every future Holder of the same Note and the Holder of
107
every Note
issued upon the registration or transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Note.
(f) Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder
with regard to any particular Note may do so itself with regard to all or any part of the principal
amount of such Note or by one or more duly appointed agents each of which may do so pursuant to
such appointment with regard to all or any part of such principal amount.
Section 14.15.
Benefit of Indenture
.
Nothing in this Indenture, the Notes or the Note Guarantees, express or implied, shall give to
any Person, other than the parties hereto, any Paying Agent, any Registrar and its successors
hereunder, and the Holders, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
Section 14.16.
Table of Contents, Headings, Etc
.
The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be considered a part of
this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.
[
SIGNATURE PAGES FOLLOW
]
108
IN WITNESS WHEREOF, the parties have executed this Indenture as of August 12, 2005.
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CARDTRONICS, INC., a Delaware corporation
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By:
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/s/ JACK ANTONINI
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Name: Jack Antonini
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Title: President and Chief Executive Officer
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CARDTRONICS GP, INC., a
Delaware corporation
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By:
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/s/ JACK ANTONINI
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Name: Jack Antonini
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Title: President
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CARDTRONICS LP, INC., a
Delaware corporation
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By:
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/s/ PETER J. WINNINGTON
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Name: Peter J. Winnington
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Title: President
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CARDTRONICS, LP, a Delaware partnership
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By:
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/s/ JACK ANTONINI
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Name: Jack Antonini
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Title: President
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WELLS FARGO BANK, NATIONAL
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ASSOCIATION, as Trustee
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By:
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/s/ MELISSA SCOTT
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Name: Melissa Scott
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Title: Vice President
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2
EXHIBIT A
[Face of Note]
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS
NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE
BUT NOT IN PART PURSUANT TO SECTION 2.07(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.12 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER,
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(i)(a) TO A PERSON WHO IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE ISSUER SO REQUESTS),
(ii) TO THE ISSUER, OR
(iii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE
1
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
[
Additional language for Regulation S Note to be inserted after paragraph 1
]
THE RIGHTS ATTACHING TO THIS REGULATION S GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING
ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN).
2
CUSIP 14161HAA6
1
CARDTRONICS, INC.
9 1/4% SENIOR SUBORDINATED NOTES DUE 2013
Issue Date:
Cardtronics, Inc., a Delaware corporation (the
Company
, which term includes any successor
under the Indenture hereinafter referred to), for value received, promises to pay to CEDE & CO., or
its registered assigns, the principal sum of $200,000,000 on August 15, 2013.
Interest Payment Dates: February 15 and August 15, commencing February 15, 2006.
Record Dates: February 1 and August 15.
Reference is hereby made to the further provisions of this Note set forth on the reverse
hereof, which further provisions shall for all purposes have the same effect as if set forth at
this place.
[
SIGNATURE PAGE FOLLOWS
]
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Sold in reliance in Rule 144A
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Sold in reliance on Regulation S
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IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by
its duly authorized officer.
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CARDTRONICS, INC., a Delaware corporation
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By:
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Name:
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Title:
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4
(Trustees Certificate of Authentication)
This is one of the 9 1/4% Senior Subordinated Notes due 2013 described in the within-mentioned
Indenture.
Dated:
[], 20[]
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WELLS FARGO BANK, NATIONAL ASSOCIATION,
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as Trustee
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By:
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Authorized Signatory
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5
[Reverse Side of Note]
CARDTRONICS, INC.
9 1/4% Senior Subordinated Notes due 2013
Capitalized terms used herein shall have the meanings assigned to them in the Indenture
referred to below unless otherwise indicated.
1.
Interest
. The Company promises to pay interest on the principal amount of this Note at 9
1/4% per annum from the date hereof until maturity and shall pay the Additional Interest, if any,
payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company
shall pay interest and Additional Interest, if any, semi-annually in arrears on February 15 and
August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business
Day (each an
Interest Payment Date
). Interest on the Notes shall accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the date of original
issuance;
provided
that if there is no existing Default in the payment of interest, and if this
Note is authenticated between a record date referred to on the face hereof and the next succeeding
Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date;
provided further
that the first Interest Payment Date shall be February 15, 2006. The Company
shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal from time to time on demand at a rate that is the rate then in effect; it shall
pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Additional Interest (without regard to any applicable grace
periods) from time to time on demand at the same rate to the extent lawful. Interest shall be
computed on the basis of a 360-day year of twelve 30-day months.
2.
Method of Payment
. The Company shall pay interest on the Notes (except defaulted interest)
and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of
business on the record date immediately preceding the Interest Payment Date, even if such Notes are
canceled after such record date and on or before such Interest Payment Date, except as provided in
Section 2.13 of the Indenture with respect to defaulted interest. If a Holder has given wire
transfer instructions to the Company, the Company shall pay all principal, premium, if any,
interest and Additional Interest, if any, on that Holders Notes in accordance with those
instructions. All other payments on the Notes shall be made at the office or agency of the Paying
Agent and Registrar within the City and State of New York unless the Company elects to make
interest payments by check mailed to the Holders at their addresses set forth in the register of
Holders. Such payment shall be in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts.
3.
Paying Agent and Registrar
. Initially, the Trustee under the Indenture shall act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar without prior notice to
any Holder. The Company or any of its Subsidiaries may act in any such capacity.
6
4.
Indenture
. The Company issued the Notes under an Indenture dated as of August 12, 2005
(
Indenture
) among the Company, the Guarantors and the Trustee. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended. The Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. To the extent any provision
of this Note conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Indenture pursuant to which this Note is issued
provides that an unlimited aggregate principal amount of Additional Notes may be issued thereunder.
5.
Optional Redemption
. (a) Except as set forth in paragraphs 5(b) and(c) below, the Company
shall not have the option to redeem the Notes prior to August 15, 2009. On or after August 15,
2009, the Company may redeem all or a part of the Notes upon not less than 30 nor more than 60
days notice, at the redemption prices (expressed as percentages of principal amount) set forth
below plus accrued and unpaid interest and Additional Interest, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on August 15 of the years
indicated below:
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Year
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Percentage
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2009
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104.625
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%
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2010
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102.313
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%
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2011 and thereafter
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100.000
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%
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(b) At any time prior to August 15, 2008, the Company may redeem up to 35% of the aggregate
principal amount of Notes issued under the Indenture (including any Additional Notes) at a
redemption price of 109.250% of the principal amount thereof, plus accrued and unpaid interest and
Additional Interest, if any, thereon to the applicable redemption date, with the net cash proceeds
of one or more Equity Offerings;
provided
that (1) at least 65% of the aggregate principal amount
of Notes issued under the Indenture (including any Additional Notes) remains outstanding
immediately after the occurrence of such redemption, excluding Notes held by the Company or its
Affiliates; and (2) the redemption must occur within 45 days of the date of the closing of such
Equity Offering.
(c) At any time prior to August 15, 2009, the Company may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days prior notice at a redemption price equal to the sum of
(i) 100% of the principal amount thereof, plus (ii) the Applicable Premium as of the date of
redemption, plus (iii) accrued and unpaid interest and Additional Interest, if any, to the date of
redemption.
6.
Repurchase at Option of Holder
. (a) In connection with one or more Asset Sales that result
in an aggregate unutilized Excess Proceeds equal to or in excess of $10.0 million, the Company
shall be required to make an Asset Sale Offer on the terms set forth in the Indenture.
(b) If a Change of Control occurs, each Holder of Notes shall have the right to require the
Company to repurchase all or any part (equal to $1,000 or an integral multiple
7
thereof) of that Holders Notes pursuant to a Change of Control Offer on the terms set forth
in the Indenture.
7.
Denominations, Transfer, Exchange
. The Notes are in registered form without coupons in
minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. The transfer
of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or exchange any Note (1) for
a period of 15 days before a selection of Notes to be redeemed or (2) tendered and not withdrawn in
connection with a Change of Control Offer or an Asset Sale Offer. Transfer may be restricted as
provided in the Indenture.
8.
Persons Deemed Owners
. The registered Holder of a Note will be treated as its owner for
all purposes.
9.
Amendment, Supplement and Waiver
. Subject to certain exceptions, the Indenture or the
Notes may be amended or supplemented with the consent of the Holders of at least a majority in
principal amount of the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing
default or compliance with any provision of the Indenture or the Notes may be waived with the
consent of the Holders of a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes). Without the consent of any Holder of a Note, the Indenture or the Notes may be
amended or supplemented to, among other things, cure any ambiguity defect or inconsistency, or make
any change that does not adversely affect the legal rights under the Indenture of any such Holder.
10.
Defaults and Remedies
. The Notes will have Events of Default and related remedies
provisions set forth in Article Six of the Indenture.
11.
Trustee Dealings with Company
. The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may become a creditor of, or otherwise deal with the
Company or any of its Affiliates, with the same rights it would have if it were not Trustee.
12.
No Recourse Against Others
. No director, officer, employee, incorporator, stockholder,
member, manager or partner of the Company or any Guarantor, as such, shall have any liability for
any obligations of the Company or the Guarantors under the Notes, the Indenture, the Note
Guarantees or for any claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder of Notes by accepting a Note waives and releases all such liability. This
waiver and release are part of the consideration for issuance of the Notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
13.
Authentication
. This Note shall not be valid until authenticated by the manual signature
of the Trustee or an authenticating agent.
8
14.
Additional Rights of Holders of Restricted Global Notes and Restricted Definitive Notes
.
In addition to the rights provided to Holders under the Indenture, Holders of Restricted Global
Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration
Rights Agreement.
15.
CUSIP Numbers
. Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes
and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the other identification
numbers placed thereon.
16.
Note Guarantees
. The Companys obligations under the Notes are fully and unconditionally
guaranteed, jointly and severally, by the Guarantors.
17.
Copies of Documents
. The Company shall furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be
made to:
Cardtronics, Inc.
3110 Hayes Road
Houston TX 77802
Facsimile: (281) 892-0151
Attention: Chief Financial Officer
18.
Subordination
. The Notes and the Note Guarantees are subordinated in right of payment in
the manner and to the extent set forth in the Indenture.
9
Assignment Form
To assign this Note, fill in the form below:
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(I) or (we) assign and transfer this Note to:
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(Insert assignees legal name)
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(Insert assignees soc. sec. or tax I.D. no.)
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(Print or type assignees name, address and zip code)
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and irrevocably appoint
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to transfer this Note on the books of the Company. The agent may substitute another to act for
him.
Date:
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Your Signature:
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(Sign exactly as your name appears on the face of this Note)
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Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor
acceptable to the Trustee).
10
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or
4.14 of the Indenture, check the appropriate box below:
o
Section 4.10
o
Section 4.14
If you want to elect to have only part of the Note purchased by the Company pursuant to
Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:
$
Date:
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Your Signature:
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(Sign exactly as your name appears on the face of this Note)
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Signature Guarantee*:
*
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Participant in a recognized Signature Guarantee Medallion Program (or other signature
guarantor acceptable to the Trustee).
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11
[
To be inserted for Rule 144A Global Note
]
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest in another Global Note
or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an
interest in this Global Note, have been made:
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Principal Amount
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Signature of
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Amount of Decrease in
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Amount of Increase in
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of this Global Note
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Authorized Signatory
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Principal Amount
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Principal Amount
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Following such
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of Trustee or
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Date of Exchange
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of this Global Note
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of this Global Note
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decrease (or increase)
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Custodian
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[
To be inserted for Regulation S Global Note
]
SCHEDULE OF EXCHANGES OF REGULATION S GLOBAL NOTE
The following exchanges of a part of this Regulation S Global Note for an interest in another
Global Note or of other Restricted Global Notes for an interest in this Regulation S Global Note,
have been made:
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Principal Amount
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Signature of
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Amount of Decrease in
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Amount of Increase in
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of this Global Note
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Authorized Signatory
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Principal Amount
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Principal Amount
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Following such
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of Trustee or
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Date of Exchange
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of this Global Note
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of this Global Note
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decrease (or increase)
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Custodian
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12
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cardtronics, Inc.
3110 Hayes Road
Houston, TX 77802
Attention: Chief Financial Officer
Wells Fargo Bank, National Association
[Address]
Attention:
[]
Re: 9 1/4% Senior Subordinated Notes due 2013
Reference is hereby made to the Indenture, dated as of August 12, 2005 (the
Indenture
),
among Cardtronics, Inc. a Delaware corporation(the Company) , the Guarantors, and Wells Fargo
Bank, National Association, a nationally chartered banking association, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the Indenture.
(the
Transferor
) owns and proposes to transfer the Note[s] or interest
in such Note[s] specified in Annex A hereto, in the principal amount of $
in such
Note[s] or interests (the
Transfer
), to
(the
Transferee
), as
further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
o
1.
Check if Transferee will take delivery of a beneficial interest in the 144A Global Note
or a Definitive Note Pursuant to Rule 144A
. The Transfer is being effected pursuant to and in
accordance with Rule 144A under the Securities Act of 1933, as amended (the
Securities Act
), and,
accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believed and believes is
purchasing the beneficial interest or Definitive Note for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion, and such Person
and each such account is a qualified institutional buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
o
2.
Check if Transferee will take delivery of a beneficial interest in a Legended
Regulation S Global Note, or a Definitive Note pursuant to Regulation S
. The Transfer is being
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
1
Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer
is not being made to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and any Person acting
on its behalf reasonably believed and believes that the Transferee was outside the United States or
(y) the transaction was executed in, on or through the facilities of a designated offshore
securities market and neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act and (iv) the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer
in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Legended Regulation S Global Note and/or the Definitive Note and in the Indenture
and the Securities Act.
o
3.
Check and complete if Transferee will take delivery of a Restricted Definitive Note
pursuant to any provision of the Securities Act other than Rule 144, Rule 144A or Regulation S
.
The Transfer is being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and
in accordance with the Securities Act and any applicable blue sky securities laws of any state of
the United States, and accordingly the Transferor hereby further certifies that (check one):
o
(a) such Transfer is being effected to the Company or a subsidiary thereof; or
o
(b) such Transfer is being effected to an Institutional Accredited Investor and pursuant to an
exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies
with the transfer restrictions applicable to Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate executed by the
Transferee in the form of
Exhibit D
to the Indenture and (2) an Opinion of Counsel provided
by the Transferor or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the Indenture, the
transferred Definitive Note will be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Definitive Notes and in the Indenture and the Securities
Act.
4.
Check if Transferee will take delivery of a beneficial interest in an Unrestricted
Global Note or of an Unrestricted Definitive Note
.
o
(a) Check if Transfer is Pursuant to Rule 144. (i) The Transfer is being effected pursuant to
and in accordance with Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
2
Indenture and the Private Placement Legend are not required in order to maintain compliance
with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms
of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend printed on the
Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
o
(b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance
with the transfer restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and, in the case of a transfer from a Restricted Global Note
or a Restricted Definitive Note, the Transferor hereby further certifies that (a) the Transfer is
not being made to a person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated offshore securities
market and neither such Transferor nor any Person acting on its behalf knows that the transaction
was prearranged with a buyer in the United States, (b) no directed selling efforts have been made
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, (c) the transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (d) the transfer is not being made to a U.S. Person or for
the account or benefit of a U.S. Person, and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
o
(c) Check if Transfer is Pursuant to Other Exemption. (i) The Transfer is being effected
pursuant to and in compliance with an exemption from the registration requirements of the
Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities laws of any State of
the United States and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
3
This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.
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Dated:
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[Insert Name of Transferor]
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By:
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Name:
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Title:
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4
ANNEX A TO CERTIFICATE OF TRANSFER
1.
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The Transferor owns and proposes to transfer the following:
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[CHECK ONE OF (a) OR (b)]
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(a)
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a beneficial interest in the:
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(i)
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144A Global Note (CUSIP
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(ii)
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Regulation S Global Note (CUSIP
); or
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(b)
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a Restricted Definitive Note.
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2.
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After the Transfer the Transferee will hold:
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[CHECK ONE]
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o
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(a)
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a beneficial interest in the:
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(i)
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144A Global Note (CUSIP
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(ii)
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Regulation S Global Note (CUSIP
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(iii)
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Unrestricted Global Note (CUSIP
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(b)
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a Restricted Definitive Note; or
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(c)
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an Unrestricted Definitive Note,
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in accordance with the terms of the Indenture.
5
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cardtronics, Inc.
3110 Hayes Road
Houston, TX 77802
Attention: Chief Financial Officer
Wells Fargo Bank, National Association
[Address]
Attention:
[]
Re: 9 1/4% Senior Subordinated Notes due 2013
Reference is hereby made to the Indenture, dated as of August 12, 2005 (the
Indenture
),
among Cardtronics, Inc. a Delaware corporation (the
Company
), the Guarantors and Wells Fargo
Bank, National Association, a nationally chartered banking association, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the Indenture.
(the
Owner
) owns and proposes to exchange the Note[s] or interest
in such Note[s] specified herein, in the principal amount of $
in such Note[s] or
interests (the
Exchange
). In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a Restricted Global Note
for Unrestricted Definitive Notes or Beneficial Interests in an Unrestricted Global Note
o
(a) Check if Exchange is from beneficial interest in a Restricted Global Note to beneficial
interest in an Unrestricted Global Note. In connection with the Exchange of the Owners beneficial
interest in a Restricted Global Note for a beneficial interest in an Unrestricted Global Note in an
equal principal amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owners own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the
Securities Act
), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
o
(b) Check if Exchange is from beneficial interest in a Restricted Global Note to Unrestricted
Definitive Note. In connection with the Exchange of the Owners beneficial interest in a
Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owners own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
1
Restricted Global Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any state of the
United States.
o
(c) Check if Exchange is from Restricted Definitive Note to beneficial interest in an
Unrestricted Global Note. In connection with the Owners Exchange of a Restricted Definitive Note
for a beneficial interest in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owners own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions applicable to Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act and (iv) the beneficial interest is being acquired
in compliance with any applicable blue sky securities laws of any state of the United States.
o
(d) Check if Exchange is from Restricted Definitive Note to Unrestricted Definitive Note. In
connection with the Owners Exchange of a Restricted Definitive Note for an Unrestricted Definitive
Note, the Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owners own account without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes
for Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes
o
(a) Check if Exchange is from beneficial interest in a Restricted Global Note to Restricted
Definitive Note. In connection with the Exchange of the Owners beneficial interest in a
Restricted Global Note for a Restricted Definitive Note with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Note is being acquired for the Owners own account
without transfer. Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the Restricted Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
o
(b) Check if Exchange is from Restricted Definitive Note to beneficial interest in a
Restricted Global Note. In connection with the Exchange of the Owners Restricted Definitive Note
for a beneficial interest in the [CHECK ONE] :
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144A Global Note:
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Regulation S Global Note:
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2
with an equal principal amount, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owners own account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made for your benefit and the benefit
of the Company.
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Dated:
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[Insert Name of Transferor]
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By:
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Name:
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Title:
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3
EXHIBIT D
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any successor Person under the
Indenture) jointly and severally, unconditionally guarantees, to the extent set forth in the
Indenture and subject to the provisions in the Indenture dated as of August 12, 2005 (the
Indenture) among Cardtronics, Inc. (the Company), the Guarantors named therein and Wells Fargo
Bank, National Association, as trustee (the Trustee), (a) the due and punctual payment of the
principal of, premium and Additional Interest (as defined in the Indenture), if any, and interest
on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the
extent permitted by law, interest and Additional Interest, and the due and punctual performance of
all other obligations of the Company to the Holders or the Trustee all in accordance with the terms
of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, that the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated Maturity, by acceleration
or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee
pursuant to the Note Guarantee and the Indenture are expressly set forth in Article Twelve of the
Indenture and reference is hereby made to the Indenture for the precise terms of the Note
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action
as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and
(c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that
the Indebtedness evidenced by this Note Guarantee shall cease to be so subordinated and subject in
right of payment upon any defeasance of this Note in accordance with the provisions of the
Indenture. Capitalized terms used but not defined herein shall have the meanings ascribed to them
in the Indenture.
1
IN WITNESS HEREOF, the Guarantors have caused this Notation of Guarantee to be executed by a duly
authorized officer.
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CARDTRONICS GP, INC.
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By:
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Name:
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Title:
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CARDTRONICS LP, INC.
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By:
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Name:
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Title:
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CARDTRONICS, LP
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By:
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Name:
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Title:
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2
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
Supplemental Indenture (this
Supplemental Indenture
), dated as of
, among
(the
Guaranteeing Subsidiary
), a subsidiary of Cardtronics, Inc., a Delaware
corporation (or its permitted successor) (the
Company
), and Wells Fargo Bank, National
Assocation, a nationally chartered banking association (or its permitted successor), as trustee
under the Indenture referred to below (the
Trustee
).
W I T N E S S E T H
WHEREAS, the Company and the other Guarantors party thereto have heretofore executed and
delivered to the Trustee an indenture (the
Indenture
), dated as of August 12, 2005 providing for
the issuance of the Companys 9 1/4% Senior Subordinated Notes due 2005 (the
Notes
);
WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary
shall execute and deliver to the Trustee a supplemental indenture pursuant to which the
Guaranteeing Subsidiary shall, subject to Article Twelve of the Indenture, unconditionally
guarantee the Notes on the terms and conditions set forth therein (the
Note Guarantee
); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and
deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the Company, the Guarantors, the
Guaranteeing Subsidiary and the Trustee agree as follows for the equal and ratable benefit of the
Holders of the Notes:
1.
Capitalized Terms
. Capitalized terms used herein without definition shall have the
meanings assigned to them in the Indenture.
2.
Agreement to Guarantee
.
(a) Subject to Article Twelve of the Indenture, the Guaranteeing Subsidiary, jointly and
severally with all other Guarantors, fully and unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of
the Company hereunder or thereunder, that:
(i) the principal of, premium, if any, and accrued and unpaid interest and Additional
Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity,
by acceleration, redemption or otherwise, and interest on the overdue principal of, premium,
if any, and interest and Additional Interest, if any, on the Notes, if lawful (subject in
all cases to any applicable grace period provided herein), and all other
E-1
obligations of the Company to the Holders or the Trustee hereunder or thereunder will be
promptly paid in full, all in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Notes or any of such
other obligations, the same will be promptly paid in full when due in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors
shall be jointly and severally obligated to pay the same immediately. The Guaranteeing
Subsidiary agrees that this is a guarantee of payment and not a guarantee of collection.
(b) The Guaranteeing Subsidiary hereby agrees that, to the maximum extent permitted under
applicable law, its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce
the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable discharge or defense of a
Guarantor.
(c) The Guaranteeing Subsidiary, subject to Section 6.06 of the Indenture, hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding first against the Company, protest,
notice and all demands whatsoever and covenants that this Note Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes and the Indenture.
(d) If any Holder or the Trustee is required by any court or otherwise to return to the
Company, the Guarantors, or any custodian, trustee, liquidator or other similar official acting in
relation to any of the Company or the Guarantors, any amount paid by any of them to the Trustee or
such Holder, this Note Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
(e) The Guaranteeing Subsidiary agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(f) The Guaranteeing Subsidiary agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article Six of the Indenture for the purposes of the Note
Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration
in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article Six of the Indenture, such obligations
(whether or not due and payable) shall forthwith become due and payable by the Guarantors for the
purpose of the Note Guarantee.
E-2
(g) The Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of the Holders under the
Note Guarantee.
(h) The Guaranteeing Subsidiary confirms, pursuant to Section 12.02 of the Indenture, that it
is the intention of such Guaranteeing Subsidiary that the Note Guarantee not constitute (i) a
fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to the Note Guarantee or (ii) an unlawful distribution under any applicable state law
prohibiting shareholder distributions by an insolvent subsidiary to the extent applicable to the
Note Guarantee. To effectuate the foregoing intention, the Guaranteeing Subsidiary and the Trustee
hereby irrevocably agree that the obligations of the Guaranteeing Subsidiary will be limited to the
maximum amount as will, after giving effect to all other contingent and fixed liabilities of such
Guaranteeing Subsidiary that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under Article Twelve of the
Indenture, result in the obligations of the Guaranteeing Subsidiary under the Note Guarantee not
constituting a fraudulent transfer or conveyance or such an unlawful shareholder distribution.
3.
Execution and Delivery
. The Guaranteeing Subsidiary agrees that the Note Guarantee
shall remain in full force and effect notwithstanding any failure to endorse on each Note a
notation of the Note Guarantee.
4.
Guaranteeing Subsidiary May Consolidate, Etc., on Certain Terms
. The Guaranteeing
Subsidiary may not sell or otherwise dispose of all or substantially all of its assets to, or
consolidate with or merge with or into, any Person other than as set forth in Section 12.04 of the
Indenture.
5.
Release
. The Guaranteeing Subsidiarys Note Guarantee shall be released as set
forth in Section 12.05 of the Indenture.
6.
No Recourse Against Others
. Pursuant to Section 14.07 of the Indenture, no
director, officer, employee, incorporator or stockholder of the Guaranteeing Subsidiary shall have
any liability for any obligations of the Guaranteeing Subsidiary under the Notes, the Indenture,
this Supplemental Indenture, the Note Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. This waiver and release are part of the
consideration for the Note Guarantee.
7.
Subordination of Note Guarantee
. Payments on the Note Guarantees are subordinated
to the extent and manner provided for in Article 13 of the Indenture, to the prior payment in full
in cash or Cash Equivalents of all Senior Debt of the Guarantors, including Senior Debt of the
Guarantors incurred after the date of the Indenture.
8.
NEW YORK LAW TO GOVERN
. THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS SUPPLEMENTAL INDENTURE.
E-3
9.
Counterparts
. The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together represent the same
agreement.
10.
Effect of Headings
. The Section headings herein are for convenience only and
shall not affect the construction hereof.
11.
Trustee
. The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the
recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and
the Company.
[
SIGNATURE PAGE FOLLOWS
]
E-4
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly
executed and attested, all as of the date first above written.
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[NAME OF GUARANTEEING SUBSIDIARY]
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By:
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Name:
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Title:
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[], a
[] [corporation][limited liability
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company][partnership]
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By:
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Name:
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Title:
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[],
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as Trustee
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By:
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Name:
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E-5
Exhibit
10.2
THIRD AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT
This THIRD AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (this
Agreement
), dated
as of May 17, 2005, is by and between CARDTRONICS, INC., a Delaware corporation (the
Borrower
), CARDTRONICS, LP, a Delaware limited partnership (the
Partnership
),
CARDTRONICS GP, INC., a Delaware corporation (the
General Partner
), CARDTRONICS LP, INC.,
a Delaware corporation (the
Limited Partner
), the other Subsidiary Guarantors (as
hereinafter defined) from time to time party hereto, BANK OF AMERICA, N.A., a national banking
association (in its individual capacity,
Bank of America
), for itself, as a Lender and as
syndication agent (in such capacity, the
Syndication Agent
), BNP PARIBAS (in its
individual capacity,
BNP Paribas
), for itself, as a Lender and as agent (in such
capacity, the
Agent
), Banc of America Securities LLC and BNP Paribas Securities Corp., as
joint lead arrangers and joint bookrunning managers (in such capacity, collectively, the
Arrangers
), and the banks and other financial institutions listed on the signature pages
hereto under the caption Lenders (collectively, together with all successors and assigns and all
additional Lenders that subsequently become a party hereto, the
Lenders
).
PRELIMINARY STATEMENTS
Pursuant to (i) that certain Second Amended and Restated Credit Agreement (as amended, the
Original Credit Agreement
), dated as of June 30, 2004, among the Borrower and the
Partnership, as borrowers, various financial institutions and other Persons from time to time party
thereto (the
Existing Lenders
) and BNP Paribas, as agent and (ii) the other Loan
Documents (as defined in the Original Credit Agreement) executed in connection therewith, the
Existing Lenders provided the Borrower and the Partnership with a $180,000,000 credit facility.
The Borrower intends (a) to cause Cardtronics Limited, a company incorporated in England and
Wales and a wholly-owned Subsidiary of the Borrower (
Bidco
), to acquire (the
UK
Acquisition
) all of the issued and outstanding capital stock of Bank Machine (Acquisitions)
Limited, a company incorporated under the laws of England and Wales and the parent of Bank Machine
Limited, a company incorporated under the laws of England and Wales (the
Company
), from
Bridgepoint Capital Limited and its Affiliates and the other existing shareholders of the Company
(the
Sellers
) and (b) to refinance (the
Refinancing
and, together with the UK
Acquisition and the funding of the credit facilities hereunder, collectively, the
Transaction
) all of the indebtedness outstanding under the Original Credit Agreement and
certain indebtedness of the Company.
To finance the Transaction and related costs and expenses and to obtain ongoing working
capital, the Borrower and the Partnership have requested that the Original Credit Agreement be
amended and restated in its entirety to become effective and binding on the Borrower and the
Guarantors (as hereinafter defined) pursuant to the terms hereof to provide for, among other
things, credit facilities to the Borrower comprised of (a) a senior first lien term loan facility
in the aggregate principal amount of up to $125,000,000 and (b) a senior first lien revolving
credit facility in the aggregate principal amount of up to $100,000,000.
Third Amended and Restated Credit Agreement
Simultaneously with entering into this Agreement, the Borrower is entering into a Second Lien
Credit Agreement, dated as of the date hereof (as amended, amended and restated, supplemented or
otherwise modified from time to time in accordance with
Section 8.17
, the
Second Lien
Credit Agreement
), with the guarantors, lenders and the arranger party thereto and Banc of
America Bridge LLC, as agent.
It is a condition to the obligations of the Lenders hereunder and the effectiveness of this
Agreement that, among other conditions, (a) the UK Acquisition is consummated pursuant to the UK
Acquisition Agreement and (b) to provide a portion of the financing for the UK Acquisition, the
Borrower shall have received the proceeds of loans under the Second Lien Credit Agreement in an
aggregate principal amount of at least $75,000,000.
The provisions of this Agreement and the Second Lien Credit Agreement are (as between the
Lenders and the Lenders under the Second Lien Credit Agreement) subject to the provisions of the
Intercreditor Agreement.
In connection with the foregoing, the Lenders (including the Existing Lenders that are parties
hereto) have agreed (subject to the terms and conditions of this Agreement) to amend and restate
the Original Credit Agreement in its entirety to read as set forth herein and the Agent has agreed
to serve as Agent for the Lenders.
NOW,
THEREFORE,
in consideration of the foregoing and the mutual covenants
set forth herein, the Borrower, the other Loan Parties, the Agent and
the Lenders agree as follows:
ARTICLE I
DEFINITIONS; ACCOUNTING TERMS
SECTION 1.01
Definitions
.
As used in this Agreement, the following terms shall have
the following meanings:
Acquisition Advance
has the meaning specified in
Section 5.04
.
Acquisition Agreements
has the meaning specified in
Section 5.04(a)
.
Acquisition EBITDA
means the sum of (a) EBITDA of the Borrower and its Subsidiaries for the
period of four (4) fiscal quarters immediately preceding the measurement date for which financial
statements are available
plus
(b) the Adjusted Target EBITDA of each Prior Target and Prior Large
Program Expenditure or, as applicable, the Adjusted Target EBITDA of a Prior Target attributable to
the assets acquired from such Prior Target, for any portion of such period of four (4) fiscal
quarters occurring prior to the date of the Borrowers Acquisition of such Prior Target or the
related assets or such Prior Large Program Expenditure.
Acquisitions
shall mean (i) acquisitions of all the Equity Interests of a Person or of all
or substantially all of (a) such Persons assets or (b) the assets of a division or branch of such
Person in a single transaction or in a series of related transactions and (ii) Large Program
Expenditures.
Third Amended and Restated Credit Agreement
2
Act
has the meaning specified in
Section 12.22
.
Adjusted Target EBITDA
means, for any period, the sum of the following, each calculated
without duplication for the Target or the assets acquired for such period or the Large Program
Expenditure for such period, as the case may be: (1) Target EBITDA; plus (2) all of those expenses
which have been deducted in calculating Target EBITDA for such period and which will be eliminated
in the future upon the consummation of the proposed Acquisition by the Borrower or its Subsidiary
as approved by Agent, with such other adjustments as are also approved by the Agent; minus (3) all
income or gains which have been added in calculating Target EBITDA for such period and which will
be eliminated in the future upon the consummation of the proposed Acquisition by the Borrower as
approved by Agent.
Administrative Questionnaire
means an Administrative Questionnaire in the form of
Exhibit 1.01A
, completed by each Lender and provided to the Agent and the Borrower.
Advance
means, (a) in respect of any Revolving Credit Loans, an advance made under the
Revolving Credit Commitment pursuant to a Notice of Advance, (b) in respect of any Swing Line
Loan, an advance made by the Swing Line Lender and (c) in respect of the Term Loan, a single
advance made on the Effective Date, in each case comprised of a single Type of Loan made by all the
Lenders concurrently (except as to any Advance made under the Swing Line Loan) to the Borrower (or
resulting from a conversion or continuance of all or any portion (subject to minimums herein
specified) having, in the case of LIBOR Rate Advances, the same Interest Period (except as
otherwise provided in this Agreement).
Advance Date
means, with respect to each Advance, the Business Day upon which the proceeds
of such Advance are to be made available to the Borrower as selected by the Borrower in the
relevant Notice of Advance.
Affiliate
means any Person controlling, controlled by or under common control with any other
Person. For purposes of this definition, control (including controlled by and under common
control with) means the possession, directly or indirectly, of the power to either (a) vote 10% or
more of the securities having ordinary voting power for election of directors of such Person or (b)
direct or cause the direction of the management and policies of such Person, whether through the
ownership of voting securities or otherwise. Notwithstanding the foregoing, no individual shall be
deemed to be an Affiliate of a corporation solely by reason of his or her being an officer or
director of such corporation.
Agent
has the meaning specified in the introduction to this Agreement.
Agents Letter
means that certain fee letter dated as of May 17, 2005 from Bank of America,
Banc of America Bridge LLC, Banc of America Securities LLC, BNP Paribas and BNP Paribas Securities
Corp. to, and acknowledged by, the Borrower.
Agreement
has the meaning specified in the introduction to this Agreement.
Alternate Base Rate
means, for any day, a rate per annum (rounded upwards to the nearest
1/100 of 1%) equal to the greater of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Effective Rate in effect on such day plus
1
/
2
of 1% per annum. If, for any reason,
Third Amended and Restated Credit Agreement
3
the Agent shall have determined (which determination shall be conclusive absent manifest
error) that it is unable to ascertain the Federal Funds Effective Rate, including the inability or
failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the
Alternate Base Rate shall be determined without regard to clause (ii) of the first sentence of this
definition until the circumstances giving rise to such inability no longer exist. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective on the effective date of such change in the Prime Rate or the Federal Funds Effective
Rate, respectively.
Alternate Base Rate Advance
means any Advance bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of
Article II
.
Applicable Lending Office
means, with respect to each Lender, such Lenders Domestic Lending
Office in the case of an Alternate Base Rate Advance and such Lenders LIBOR Lending Office in the
case of a LIBOR Rate Advance.
Approved Business
has the meaning specified in
Section 8.01
.
Approved Fund
means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.
Arrangers
has the meaning specified in the introduction to the Agreement.
Assignee Group
means two or more Eligible Assignees that are Affiliates of one another or
two or more Approved Funds managed by the same investment advisor.
Assignment and Acceptance
has the meaning specified in
Section 12.10(c)
.
ATM Equipment
means automated teller machines.
Bank of America
has the meaning specified in the introduction to the Agreement.
Bankruptcy Code
has the meaning specified in
Section 9.01(f)
.
Bidco
has the meaning specified in the Preliminary Statements.
BNP Paribas
has the meaning specified in the introduction to the Agreement.
Board
means the Board of Governors of the Federal Reserve System of the United States (or
any successor) and any other banking authority to which the Lenders are subject for Eurocurrency
Liabilities or any other category of deposits or liabilities by reference to which the LIBOR Rate
is determined.
Borrower
has the meaning specified in the introduction to the Agreement.
Third Amended and Restated Credit Agreement
4
Bridge Termination Date
means the earliest of (a) the date on which the Loans (as defined in
the Second Lien Credit Agreement) are repaid in full, (b) the date on which such Loans are fully
sold or syndicated by Banc America Bridge LLC to lenders who are not affiliated with Bank of
America and (c) the date that is 270 days after the Effective Date (as defined in the Second Lien
Credit Agreement).
Business Day
means any day (other than a day which is a Saturday, Sunday or legal holiday in
the State of Texas and the State of New York) on which banks are open for business in Houston,
Texas and New York and, if the applicable Business Day relates to any LIBOR Rate Advance, on which
dealings are carried on in the London interbank market in eurodollar or Sterling.
Capital Expenditures
means all of the capital expenditures (including, but not limited to,
acquisitions of Equity Interests of a Person) of the Borrower and its Subsidiaries on a
consolidated basis which, pursuant to GAAP, are capitalized for balance sheet purposes.
Capitalized Lease Obligations
means all lease or rental obligations of the Borrower and its
Subsidiaries determined on a consolidated basis which, pursuant to GAAP, are capitalized for
balance sheet purposes.
CapStreet
means The CapStreet Group, LLC and any of its Affiliates.
CFC
means a controlled foreign corporation as defined in Section 957(a) of the Code.
Change of Control
occurs upon the occurrence of any of the following:
(A) prior to any initial public offering of the Borrowers Voting Equity Interests,
CapStreet and TA Associates cease to own on a combined basis, of record, at least a majority
of the aggregate voting power of all classes of Voting Equity Interests of the Borrower;
(B) after any initial public offering of the Borrowers Voting Equity Interests, the
acquisition by any Person or group (within the meaning of Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of greater than fifty percent
(50%) of the aggregate voting power of all classes of Voting Equity Interests of the
Borrower;
(C) the Borrower ceases to own directly or indirectly one hundred percent (100%) of the
Equity Interests of the Partnership or the Company or any other Subsidiary of the Borrower
(other than Subsidiaries as to which aggregate Investments in which are permitted under
Section 8.05(i));
(D) fifty percent (50%) or more of the members of the Board of Directors of the
Borrower on any date shall not have been approved (by recommendation, nomination, election
or otherwise) by either (i) CapStreet and/or TA Associates or (ii) Persons who constitute at
least a majority of the members of the Board of Directors of the Borrower as constituted on
the date twelve (12) months prior to such date; or
Third Amended and Restated Credit Agreement
5
(E) a change of control or any comparable term under, and as defined in, the Second
Lien Credit Agreement shall have occurred.
Code
means the Internal Revenue Code of 1986 and the regulations promulgated thereunder, in
each case as amended from time to time.
Collateral
means all of the Collateral referred to in the Security Documents and all of
the other property and assets that are or are intended under the terms of the Security Documents to
be subject to Liens in favor of the Agent for the benefit of the Lenders.
Commitment
means the obligation of each of the Lenders to make available the Loans and to
issue the Letters of Credit to the Borrower in the amounts shown on the signature page of each
Lender hereto as modified from time to time pursuant to the terms hereof (or, as to any Lender that
has entered into an Assignment and Acceptance, in the amount resulting after giving effect to each
Assignment and Acceptance entered into by such Lender) and all other duties and obligations of the
Lenders hereunder.
Commitment Letter
means that certain commitment letter dated as of May 17, 2005 from Bank of
America, Banc of America Bridge LLC, Banc of America Securities LLC, BNP Paribas and BNP Paribas
Securities Corp. to, and accepted by, the Borrower.
Company
has the meaning specified in the Preliminary Statements.
Credit Event
means the making of any Advance, the conversion of any Advance into, or
continuation of any Advance as, a LIBOR Rate Advance or the issuance of any Letter of Credit.
Default
means the occurrence of any event which with the giving of notice or the passage of
time or both would be an Event of Default.
Default Rate
means the lesser of (a) the Highest Lawful Rate and (b) the sum of (i) the
Alternate Base Rate or, as to any LIBOR Rate Advance, during any Interest Period in which an Event
of Default is continuing, the LIBOR Rate for such LIBOR Rate Advance, as the case may be,
plus
(ii)
the applicable Margin, plus (iii) two percent (2%) per annum.
Derivatives
means, with respect to any Person, foreign exchange transactions and commodity,
currency and interest rate swaps, floors, caps, collars, forward sales, options and other similar
transactions or combinations of the foregoing.
Designated Payment Date
means September 30, December 31, March 31 and June 30, in any
calendar year, and the Maturity Date,
provided
,
however
, if in any such year a
Designated Payment Date shall be a day which is not a Business Day, such Designated Payment Date
shall be the next succeeding Business Day, and such extension of time shall be included in
determining the amount to be paid on such date.
Dollars
or
$
means lawful money of the United States.
Third Amended and Restated Credit Agreement
6
Domestic Lending Office
means, with respect to any Lender, the office of such Lender
designated from time to time as its Domestic Lending Office hereunder.
Domestic Subsidiary
means, with respect to any Person, any Subsidiary of such Person that is
neither a CFC nor a Subsidiary that is held directly or indirectly by a CFC, but excluding in any
case any Foreign Subholdco.
EBITDA
means, with respect to the Borrower and its Subsidiaries determined on a consolidated
basis for the four (4) fiscal quarters immediately preceding the most recent Financial Statement
Delivery Date, without duplication, the result of net income less any non-cash income to the extent
included in determining net income and without giving effect to any non-recurring items, expenses
relating to the compensation of sellers in connection with any Permitted Acquisitions or Large
Program Expenditures and other transaction expenses and costs pursuant to any Permitted Acquisition
or Large Program Expenditure, extraordinary gains or losses from the sale of assets or write-down
in the value of assets owned by any Loan Party or any Subsidiary of any Loan Party during such
period plus depreciation, amortization, Interest Expense, book taxes and other non cash charges for
such period to the extent deducted in determining net income.
Effective Date
means the date on which all conditions to make an Advance set forth in
Section 5.01
are first met or waived in accordance with
Section 12.01
hereof.
Eligible Assignee
means (a) with respect to any Revolving Credit Loans or Revolving Credit
Commitments, (i) a Lender; (ii) an Affiliate of a Lender or an Approved Fund approved by the Agent,
such approval not to be unreasonably withheld or delayed and (iii) any other Person (other than a
natural person) approved by the Agent, the Issuing Bank and the Swing Line Lender and, unless an
Event of Default has occurred and is continuing, the Borrower, such approval not to be unreasonably
withheld or delayed, and (b) with respect to any Term Loans or Term Loan Commitments, (i) a Lender,
an Affiliate of a Lender or an Approved Fund and (ii) any other Person (other than a natural
person) approved by the Agent and, unless an Event of Default has occurred and is continuing, the
Borrower, such approval not to be unreasonably withheld or delayed;
provided
that,
notwithstanding the foregoing, Eligible Assignee shall not include the Borrower or any of the
Borrowers Affiliates or Subsidiaries.
Employee Plan
means any employee benefit plan, program or policy with respect to which the
Borrower or any ERISA Affiliate may have any liability or any obligation to contribute, other than
a Plan or a Multiemployer Plan.
Environmental Laws
means applicable federal, state or local laws, rules or regulations, and
any applicable judicial interpretations thereof, including any judicial or administrative order,
judgment, permit, approval decision or determination, in each case pertaining to conservation or
protection of the environment, in effect at the time in question, including the Clean Air Act, the
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), the Federal Water
Pollution Control Act, the Occupational Safety and Health Act, the Resource Conservation and
Recovery Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the Superfund
Amendments and Reauthorization Act of 1986, the Hazardous Materials Transportation Act and
analogous state and local laws as may be amended from time to time
Third Amended and Restated Credit Agreement
7
thereby imposing either more or less stringent requirements as relates to activity occurring
after the effective date of any such amendments.
Equity Interests
in any Person means any and all shares, interests, rights to purchase,
warrants, options, convertible debt, participations or other equivalents of or interests in
(however designated) corporate stock or other equity participations, including, membership
interests or partnership interests, whether general or limited, in such Person, together with all
other rights and interests convertible into or exchangeable for any of the foregoing.
Equivalent
in Dollars of Sterling on any date means the equivalent in Dollars of Sterling
determined by using the quoted spot rate at which the Agents principal office in New York offers
to exchange Dollars for Sterling in London prior to 3:00 p.m. (New York time) (unless otherwise
indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this
Agreement, and the Equivalent in Sterling of Dollars means the equivalent in Sterling of Dollars
determined by using the quoted spot rate at which the Agents principal office in New York offers
to exchange Sterling for Dollars in London prior to 3:00 p.m. (New York time) (unless otherwise
indicated by the terms of this Agreement) on such date as is required pursuant to the terms of this
Agreement.
ERISA
means the Employee Retirement Income Security Act of 1974 and the regulations
promulgated thereunder.
ERISA Affiliate
means (a) any Person that, together with the Borrower, is treated as a
single employer under Section 414 of the Code and the regulations thereunder, and (b) any
Subsidiary of the Borrower.
Escrow Account
means (i) a client trust or similar account of a law firm whereby cash is
held on a temporary basis for the purpose of providing security for or payments in respect of the
Seller Notes or (ii) an account maintained at a financial institution whereby cash is held for the
purpose of securing payment of, or a guaranty issued by such financial institution in respect of,
the Seller Notes.
Eurocurrency Liabilities
has the meaning specified in Regulation D as in effect from time to
time.
Events of Default
has the meaning specified in
Section 9.01
.
Excess Cash Flow
means, with respect to the Borrower and its Subsidiaries determined on a
consolidated basis, the result of the following: (a) EBITDA for such period,
minus
(b) the amount
equal to actual Capital Expenditures (exclusive of (x) Capitalized Lease Obligations and (y)
Permitted Acquisitions) incurred during such period,
minus
(c) cash taxes, cash Interest Expense
and scheduled payments or any voluntary prepayment of principal made under the Term Loan or any
voluntary prepayment of principal made under the Revolving Credit Loans resulting in a permanent
reduction in the Total Revolving Credit Commitment,
minus
(d) any dividend or payment permitted
under
Section 8.07(a)(ii)
to the extent not deducted in determining EBITDA for such period,
minus
(e) scheduled principal payments under Capitalized Lease Obligations made during such period,
and
minus
(f) scheduled principal payments under all other Indebtedness made during such period.
Third Amended and Restated Credit Agreement
8
Exchange Calculation Date
means, with respect to any LIBOR Rate Advance denominated in
Sterling, the last Business Day of each month and, if different, the last day of each Interest
Period applicable to such Advance.
Execution Date
means the date upon which this Agreement shall have been executed by the Loan
Parties, the Lenders and the Agent.
Existing Lenders
has the meaning specified in the Preliminary Statements.
Federal Funds Effective Rate
means, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of recognized standing selected
by it.
Fees
means all amounts payable pursuant to
Section 4.01
.
Financial Statement Delivery Date
means the last day on which the quarterly or annual
financial statements of the Borrower are to be delivered to the Agent and the Lenders pursuant to
Section 7.01(a)
or
Section 7.01(b)
, as the case may be.
Financials
has the meaning specified in
Section 6.07
.
Fixed Charge Coverage Ratio
means, as to the Borrower and its Subsidiaries determined on a
consolidated basis, for any period the ratio of (i) EBITDA minus Required Capital Expenditures for
such period, to (ii) the sum of (a) Interest Expense (excluding interest payable in kind) for such
period, (b) cash dividends paid by the Borrower for such period, (c) scheduled principal payments
under any Indebtedness for such period, and (d) cash taxes paid for such period.
Foreign Subholdco
means a limited liability company formed under the laws of a state of the
United States, (a) the sole assets of which are the Equity Interests in a Foreign Subsidiary
described in clause (a) of the definition thereof, and (b) all of the Equity Interests in which are
directly owned by the Borrower.
Foreign Subsidiary
means, with respect to any Person, (a) any Subsidiary of such Person that
is not a Domestic Subsidiary and is organized under the laws of, and located in, a member state of
the European Union as in existence on the Execution Date, the Federal Republic of Mexico and such
other jurisdictions as approved by the Agent (such approval not to be unreasonably withheld), and
(b) in the case of the Borrower, any Foreign Subholdco.
Fund
means any Person (other than a natural person) that is (or will be) engaged in making,
purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business.
Third Amended and Restated Credit Agreement
9
GAAP
means generally accepted accounting principles as in effect from time to time in the
United States applied on a consistent basis.
General Partner
has the meaning specified in the introduction to the Agreement.
Guaranteed Obligations
has the meaning specified in
Section 11.01
.
Guarantor
means, individually and collectively, the Partnership, the General Partner, the
Limited Partner and each Domestic Subsidiary that becomes a Loan Party pursuant to
Section
7.09
.
Guarantor Claims
has the meaning specified in
Section 11.05(a)
.
Guaranty
means
Article XI
of this Agreement.
Hazardous Materials
means (a) hazardous waste as defined in applicable regulations issued
pursuant to the Resource Conservation and Recovery Act of 1976, or in any applicable federal, state
or local law or regulation, (b) hazardous substances, as defined in CERCLA, or in applicable state
or local law or regulation, (c) gasoline or any other petroleum product, (d) toxic substances, as
defined in the Toxic Substances Control Act of 1976, or in any applicable federal, state or local
law or regulation, (e) insecticides, fungicides, or rodenticides, as defined in the Federal
Insecticide, Fungicide, and Rodenticide Act of 1975, or in any applicable federal, state or, local
law or regulation as each such act, statute or regulation may be amended from time to time, and (f)
asbestos.
Highest Lawful Rate
means, as to any Lender, the maximum nonusurious rate of interest that,
under applicable law, may be contracted for, taken, reserved, charged or received by such Lender on
the Loans or other obligations under the Loan Documents at any time or from time to time after
taking into account all amounts that constitute interest. If the maximum rate of interest which,
under applicable law, any of the Lenders is permitted to charge the Borrower on the Loans or other
obligations shall change after the date hereof, then, to the extent permitted or required by
applicable law, the Highest Lawful Rate shall be automatically increased or decreased, as the case
may be, as of the effective time of such change without notice to the Borrower or any other Person.
Indebtedness
means, with respect to any Person, (a) all indebtedness of such Person for
borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred
purchase price of property or services (other than accounts payable), (b) all indebtedness of such
Person created or arising under any conditional sale or other title retention agreement with
respect to any property, (c) Capitalized Lease Obligations of such Person, (d) all guaranties of
such Person of indebtedness of others (including the granting of a Lien on the Borrowers or any
Subsidiaries assets or security for such indebtedness) or other contingent liabilities of such
Person for indebtedness of others of any kind (including any letter of credit, any other letter of
credit reimbursement obligations, any guarantee of the financial position or covenants of any
Person or any obligation as buyer under any take or pay contract or similar arrangement), and (e)
all obligations to deliver goods or services in consideration of advance payments, excluding such
obligations incurred in the ordinary course of business as conducted by the Borrower and its
Third Amended and Restated Credit Agreement
10
Subsidiaries. Anything contained herein to the contrary notwithstanding, the Seller Notes
shall not be Indebtedness for purposes of this Agreement.
Intercreditor Agreement
means the Intercreditor Agreement, in substantially the form of
Exhibit 5.01(f)
hereto, among the Agent, the Agent referred to in the Second Lien Credit
Agreement, the Borrower and the other Loan Parties, as amended.
Interest Expense
means, with respect to the Borrower and its Subsidiaries determined on a
consolidated basis, for any period the total interest expense for such period determined in
conformity with GAAP and including any interest expense attributable to Capitalized Lease
Obligations, but excluding amortization of loan origination fees.
Interest Period
has the meaning specified in
Section 2.11(a)
.
Inventory
means inventory as defined in Article 9 of the Uniform Commercial Code.
Investment
means, as applied to any Person, any direct or indirect purchase or other
acquisition by such Person of the stock or other securities of any other Person, or any direct or
indirect loan, advance or capital contribution by such Person to any other Person, and any other
item which would be classified as an investment on a balance sheet of such Person prepared in
accordance with GAAP, including any direct or indirect contribution by such Person of property or
assets to a joint venture, partnership or other business entity in which such Person retains an
interest, or any other transfer of property or assets to such Person if such Person is a Subsidiary
that is not a wholly-owned Subsidiary of the Borrower.
Issuing Bank
means, for each Letter of Credit, the Agent (or, at the option of the Borrower,
any other Lender designated by the Borrower and approved in writing by the Agent, such approval not
to be unreasonably withheld or delayed) as the issuing bank for such Letter of Credit.
Large Program
means ATM Equipment purchased by the Borrower or a Subsidiary in a single
transaction or in a series of transactions for Total Consideration of at least $300,000, which are
located or installed under a merchant agreement with a merchant at multiple locations of the
merchant that have a record of historical transaction volumes from ATM Equipment at such locations
with another ATM service provider with respect to such ATM Equipment.
Large Program Expenditures
means all Capital Expenditures and related costs incurred
directly in connection with a Large Program.
Lender
has the meaning provided in the introduction to this Agreement.
Letter of Credit Fee
shall mean, for any Letter of Credit, (a) payable to the Issuing Bank,
(i) a 0.25% per annum fronting fee on the face amount of each Letter of Credit and (ii) with
respect to the issuance, amendment, transfer or payment of such Letter of Credit, documentary and
processing charges in accordance with the Issuing Banks standard schedule for such charges in
effect at the time of such issuance, amendment, transfer or payment, as the case may be, and (b)
payable pro rata to the Revolving Credit Lenders, a fee at a percentage per
Third Amended and Restated Credit Agreement
11
annum equal to the applicable Margin in effect from time to time on the face amount of such
Letter of Credit.
Letter of Credit Obligations
means at any time the sum of (a) the aggregate then undrawn and
unexpired amount of outstanding Letters of Credit and (b) the aggregate amount of drawings under
Letters of Credit not reimbursed pursuant to
Section 3.03(c
).
Letter of Credit Request
has the meaning specified
in Section 3.02(a)
.
Letters of Credit
has the meaning specified in
Section 3.01(a)
.
LIBOR Lending Office
means, with respect to each Lender, the branches or affiliates of such
Lender designated as its LIBOR Lending Office from time to time hereunder.
LIBOR Rate
means, for any Interest Period with respect to a LIBOR Rate Advance, the rate per
annum equal to the British Bankers Association LIBOR Rate (
BBA LIBOR
), as published by
Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by
the Agent from time to time) at approximately 11:00 a.m. (London time) two Business Days prior to
the commencement of such Interest Period, for Dollar or Sterling deposits (for delivery on the
first day of such Interest Period), as the case may be, with a term equivalent to such Interest
Period. If such rate is not available at such time for any reason, then the LIBOR Rate for such
Interest Period shall be the rate per annum determined by the Agent to be the rate at which
deposits in Dollars or Sterling, as the case may be, for delivery on the first day of such Interest
Period in same day funds in the approximate amount of the portion of the LIBOR Rate Advance being
made, continued or converted by BNP Paribas and with a term equivalent to such Interest Period
would be offered by BNP Paribas London Branch to major banks in the London interbank market for
eurodollar or Sterling, as the case may be, at their request at approximately 4:00 p.m. (London
time) two Business Days prior to the commencement of such Interest Period.
LIBOR Rate Advance
means any Advance in Dollars or Sterling bearing interest at a rate
determined by reference to the LIBOR Rate in accordance with the provisions of
Article II
.
Lien
means when used with respect to any Person, any mortgage, lien, charge, pledge,
security interest or encumbrance of any kind (whether voluntary or involuntary and whether imposed
or created by operation of law or otherwise) upon, or pledge of, any of its property or assets,
whether now owned or hereafter acquired, any lease that constitutes a security interest pursuant to
Section 1-201
of the Uniform Commercial Code of the State of New York, any capital lease in
the nature of the foregoing, any conditional sale agreement or other title retention agreement, in
each case, for the purpose, or having the effect, of protecting a creditor against loss or securing
the payment or performance of an obligation.
Limited Partner
has the meaning specified in the introduction to the Agreement.
Loan and
Loans
means the Revolving Credit Loans, the Term Loan and any Advances under
Letters of Credit.
Third Amended and Restated Credit Agreement
12
Loan Documents
means this Agreement, the Notes, the Intercreditor Agreement, any agreement
with respect to a Derivative entered into with a Lender or any Affiliate of a Lender existing from
time to time and the Security Documents.
Loan Parties
means, collectively, the Borrower and the Guarantors and, individually, any one
of the foregoing.
Margin
means, with respect to any Advance made under any Loan, any Revolving Credit
Commitment Fee or any Letter of Credit Fee payable to the Revolving Credit Lenders, the rate per
annum determined by reference to the following grid:
|
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|
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|
|
|
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Applicable
|
|
|
|
|
|
Applicable
|
Total Debt to
|
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|
Margin for
|
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Margin for
|
Acquisition
|
|
Commitment
|
|
LIBOR Rate
|
|
Letter of
|
|
Alternate Base
|
EBITDA Ratio
|
|
Fee
|
|
Advances
|
|
Credit Fee
|
|
Rate Advances
|
Less than 3.0:1.0
|
|
|
0.25
|
%
|
|
|
2.25
|
%
|
|
|
2.25
|
%
|
|
|
1.50
|
%
|
Less than 3.5:1.0 but greater than
or equal to 3.0:1.0
|
|
|
0.30
|
%
|
|
|
2.50
|
%
|
|
|
2.50
|
%
|
|
|
1.75
|
%
|
Less than 4.0:1.0 but greater than
or equal to 3.5:1.0
|
|
|
0.35
|
%
|
|
|
2.75
|
%
|
|
|
2.75
|
%
|
|
|
2.00
|
%
|
Less than 4.5:1.0 but greater than
or equal to 4.0:1.0
|
|
|
0.40
|
%
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
|
|
2.25
|
%
|
Greater than 4.5:1.0
|
|
|
0.50
|
%
|
|
|
3.25
|
%
|
|
|
3.25
|
%
|
|
|
2.50
|
%
|
From the Effective Date until the later of (a) the Bridge Termination Date and (b) the first
delivery of quarterly or annual Financials by the Borrower after the Effective Date pursuant to
Section 7.01(a) or (b)
, (i) the applicable Margin for LIBOR Rate Advances shall be 3.25%,
(ii) the applicable Margin for Alternate Base Rate Advances shall be 2.50%, (iii) the applicable
Margin for the Letter of Credit Fee shall be 3.25% and (iv) the applicable Margin for the
Commitment Fee shall be 0.50%. Commencing on the later of the dates referred to in clauses (a) and
(b) above, the applicable Margin shall be determined in accordance with the foregoing table based
on the Borrowers most recent Financials. Adjustments, if any, to the applicable Margin
Third Amended and Restated Credit Agreement
13
shall be effective five (5) Business Days after Agent has received the applicable Financials. If
the Borrower fails to deliver the Financials to the Agent at the time required pursuant to this
Agreement, then the applicable Margin shall be the highest applicable Margin set forth in the
foregoing table until five (5) days after such Financials are so delivered.
Material Adverse Effect
means, relative to any occurrence of whatever nature (including any
adverse determination in any litigation, arbitration or governmental investigation or proceeding),
(a) a material adverse effect on the financial condition, business, operations, prospects or assets
of the Borrower and its Subsidiaries taken as a whole, or (b) a material impairment of the ability
of the Borrower and its Subsidiaries taken as a whole to perform obligations under the Loan
Documents or (c) an impairment of the validity or enforceability of any Loan Document which
materially affects the benefits intended to be bestowed thereunder.
Material Contracts
means any contract to which a Loan Party or any Subsidiary of a Loan
Party is a party that produces, or could reasonably be expected to produce, annual revenues in
excess of three percent (3%) of the total consolidated revenue of the Borrower and its Subsidiaries
for the prior fiscal year.
Maturity Date
means the fifth (5
th
) anniversary of the Execution Date, unless
accelerated pursuant to
Section 9.02
.
Maximum Liability
has the meaning assigned to it in
Section 11.10
.
Multiemployer Plan
means any plan which is a multiemployer plan (as such term is defined
in Section 4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or has any
obligation or liability to make contributions, including any withdrawal liability, contingent or
otherwise.
Non-Paying Guarantor
has the meaning assigned to it in
Section 11.11
.
Notes
means the Revolving Credit Notes, the Swing Line Note and the Term Loan Notes and
Note
means any one of the same.
Notice of Advance
means, with respect to a request for a Revolving Credit Loan, a written
notice given in accordance with
Section 2.02(a)
.
Notice of Conversion
has the meaning specified in
Section 2.05
.
Notice of Default
has the meaning specified in
Section 9.02
.
Obligations
means all the obligations of the Loan Parties now or hereafter existing under
the Loan Documents, whether for principal, interest, Fees, expenses, indemnification or otherwise.
Original Credit Agreement
has the meaning specified in the Preliminary Statements.
Other Activities
has the meaning specified in
Section 10.03
.
Third Amended and Restated Credit Agreement
14
Other Financings
has the meaning specified in
Section 10.03
.
Partnership
has the meaning specified in the introduction to the Agreement.
Paying Guarantor
has the meaning assigned to it in
Section 11.11
.
Payment Office
means the office of the Agent located at 919 Third Avenue, New York, New York
10022, or such other office as the Agent may hereafter designate in writing as such to the other
parties hereto.
PBGC
means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any
of its functions under ERISA.
Permanent Securities
means senior subordinated unsecured notes or any other debt securities
of the Borrower which are issued after the Effective Date for the purpose of refinancing all or a
portion of the loans outstanding under the Second Lien Credit Agreement, in each case in form and
substance reasonably satisfactory to the Requisite Lenders.
Permitted Acquisitions
shall mean Acquisitions that satisfy all the applicable criteria set
out in
Section 5.04
which have not otherwise been waived by the Requisite Lenders,
including, without limitation, the UK Acquisition.
Permitted Investments
means, as to any Person:
(a) securities issued or directly and fully guaranteed or insured by the United States
or any agency or instrumentality thereof,
provided
that the full faith and credit of
the United States is pledged in support thereof, having maturities of not more than twelve
months from the date of acquisition by such Person.
(b) bankers acceptances or time deposits and certificates of deposit with maturities of
not more than twelve months from the date of acquisition by such Person which deposits or
certificates are either (i) insured by the Federal Deposit Insurance Corporation or (ii) in
any Lender or commercial bank incorporated in the United States or any United States branch
of any other commercial bank and, in the case of any such other commercial bank, having
capital, surplus and undivided profits aggregating $500,000,000 or more with a short-term
unsecured debt rating of at least AI from Standard & Poors Ratings Group and P1 from
Moodys Investors Service.
(c) commercial paper issued by any Person incorporated in the United States rated at
least Al or the equivalent thereof by Standard & Poors Ratings Group and at least PI or the
equivalent thereof by Moodys Investors Service and, in each case, maturing not more than
six months after the date of acquisition by such Person.
(d) investments in any security issued by an investment company registered under
Section 8 of the Investment Company Act of 1940 (15 U.S.C. 80a-8) that is a money market
fund in compliance with all applicable requirements of SEC Rule 2a-7 (17 CFR 270.2a-7); and
of not more than entered into with any bank listed in or meeting the qualifications
specified in clause (b) above.
Third Amended and Restated Credit Agreement
15
Permitted Liens
has the meaning specified in
Section 8.04
.
Person
means an individual partnership, corporation (including a business trust), limited
liability company, joint stock company, trust, unincorporated association, joint venture or other
entity, or a federal, foreign or domestic state or political subdivision thereof or any agency of
such state or subdivision.
Plan
means any employee pension benefit plan (as defined in section 3(2) of ERISA), subject
to Title IV of ERISA or section 412 of the Code, other than a Multiemployer Plan, with respect to
which the Borrower or an ERISA Affiliate contributes or has an obligation or liability to
contribute, including any such plan that may have been terminated.
Prime Rate
means the rate which Bank of America announces from time to time as its prime
rate, effective as of the date announced as the effective date of any change in such prime rate.
Without notice to the Borrower or any other Person, the Prime Rate shall change automatically from
time to time as and in the amount by which such prime rate shall fluctuate. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate actually charged to any
customer. The Agent may make commercial loans or other loans at rates of interest at, above or
below the Prime Rate.
Prior Large Program Expenditure
means as of any date of determination all Large Program
Expenditures that have been consummated by the Borrower or one of its Subsidiaries on or prior to
such date of determination.
Prior Target
means all Targets acquired or whose assets have been acquired in a Permitted
Acquisition.
Receivable
means, at any time of determination thereof the unpaid portion of the obligation,
as stated on the respective invoice, or if no invoice, other writing or an electronic medium, of an
account debtor in respect of Inventory, goods, technology or other assets purchased and shipped or
services rendered in the ordinary course of business.
Reference Banks
means Bank of America and BNP Paribas.
Refinancing
has the meaning specified in the Preliminary Statements.
Refunded Swing Line Loans
has the meaning specified in
Section 2.01(b)(ii)
.
Register
has the meaning specified in
Section 12.10(d)
.
Regulation D
means Regulation D of the Board (respecting reserve requirements), as the same
is from time to time in effect, and all official rulings and interpretations thereunder or thereof.
Regulation T
means Regulation T of the Board (respecting borrowers who obtain margin
credit), as the same is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
Third Amended and Restated Credit Agreement
16
Regulation U
means Regulation U of the Board (respecting margin credit extended by banks),
as the same is from time to time in effect, and all official rulings and interpretations thereunder
or thereof.
Regulation X
means Regulation X of the Board (respecting borrowers who obtain margin
credit), as the same is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
Release
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing into the environment (including the abandonment
or discarding of barrels, containers and other closed receptacles) other than in accordance with
Environmental Laws.
Reportable Event
means an event described in section 4043(c) of ERISA with respect to a
Plan, other than an event described in paragraphs (1) through (8) as to which the 30 day notice
requirement has been waived by the PBGC.
Required Capital Expenditures
means $6,000,000 per annum.
Requisite Lenders
means Lenders, as of any date of determination, holding at least 50.1% of
the Total Commitment (notwithstanding any reduction or termination of the Total Commitment pursuant
to
Section 4.02
,
4.03
or
9.02
).
Reserve Percentage
means, for any Interest Period and for any Lender, the reserve percentage
applicable during such Interest Period under regulations issued from time to time by the Board (or
if more than one such percentage is so applicable, the daily average for such percentages for those
days in such Interest Period during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including any marginal, supplemental or emergency
reserves) for such Lender in respect of liabilities or assets consisting of or including
Eurocurrency Liabilities.
Responsible Officer
means, with respect to any Loan Party or any Subsidiary of any Loan
Party, the general partner, the chairman of the board of directors, the president, any vice
president, chief financial officer or treasurer of such Person.
Revolving Credit Commitment
means with respect to the Revolving Credit Loans and as to each
Lender, the amount set forth opposite such Lenders name on the signature pages hereof under the
heading Revolving Credit Commitment as modified from time to time pursuant to the terms hereof.
Revolving Credit Commitment Fee
has the meaning specified in
Section 4.01(a)
.
Revolving Credit Lender
means any Lender having a Revolving Credit Commitment.
Revolving Credit Loan
s has the meaning specified in
Section 2.01(a)
.
Revolving Credit Note
has the meaning specified in
Section 2.03(a)
.
Third Amended and Restated Credit Agreement
17
Scheduled Capital Expenditures
has the meaning specified in
Section 8.13
.
Second Lien Credit Agreement
has the meaning specified in the Preliminary Statements.
Second Lien Loan Documents
means the Loan Documents as defined in the Second Lien Credit
Agreement.
Security Documents
means all those certain security agreements, pledge agreements, stock
certificates, mortgages, assignments, UCC financing statements, lien consents and waivers and all
other similar documents executed by the Loan Parties, as the case may be, in connection with
granting to the Agent for the benefit of the Lenders a Lien in substantially all of the assets of
the Loan Parties as security for the Obligations.
Seller Notes
means the floating rate unsecured loan notes 2008 issued by Bidco pursuant to
the Instrument dated the Execution Date, in favor of certain of the Sellers, in an aggregate
principal amount of approximately £1,800,000, which represent a portion of the purchase price for
the UK Acquisition.
Sellers
has the meaning specified in the Preliminary Statements.
Senior Facilities Reallocation
has the meaning specified in
Section 4.03
.
Senior Leverage Ratio
means, as of any date of determination, the ratio of (a) Total Senior
Indebtedness as of such date to (b) Acquisition EBITDA of the Borrower and its Subsidiaries on a
consolidated basis for the period of the four fiscal quarters most recently ended.
Sterling
or
£
means lawful money of the United Kingdom.
Subsidiary
means with respect to any Person (a) any corporation, partnership, association,
joint venture or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the directors (or other Persons performing similar functions)
are at the time owned by such Persons directly or indirectly and (b) any corporation, partnership,
association, joint venture or other entity in which such Person, directly or indirectly, has
greater than 50% of the equity interest. From and after the Effective Date, each of the Company
and Bidco shall be deemed to be a Subsidiary of the Borrower.
Swing Line Commitment
means the Swing Line Lenders obligation to make Swing Line Loans
pursuant to
Section 2.01(b)
.
Swing Line Lender
means BNP Paribas, in its capacity as provider of the Swing Line Loans.
Swing Line Loans
or
Swing Line Loan
has the meaning specified in
Section 2.01(b)
.
Swing Line Note
has the meaning specified in
Section 2.03(b)
.
TA Associates
means TA Associates, Inc. and any of its Affiliates.
Third Amended and Restated Credit Agreement
18
Target
means a Person whose stock or assets are to be acquired pursuant to a Permitted
Acquisition.
Target EBITDA
means with respect to any Target or any Large Program Expenditure for any
measurement period, without duplication, the result of net income less any non-cash income to the
extent included in determining net income and without giving effect to any non-recurring items,
extraordinary gains or losses from the sale of assets or write-down in the value of assets owned by
such Target or pertaining to such Large Program Expenditure, as the case may be, for such period
plus
depreciation, amortization, Interest Expense, taxes and other non-cash charges for such period
to the extent deducted in determining net income.
Term Loan
has the meaning specified in
Section 2.01(c)
.
Term Loan Commitment
means, with respect to the Term Loan and as to any Lender, the amount
set forth under such Lenders name on the signature pages hereof under the heading Term Loan
Commitment aggregating $125,000,000 on the Effective Date and as modified from time to time
pursuant to the terms hereof.
Term Loan Lender
means any Lender having a Term Loan Commitment hereunder.
Term Note
has the meaning specified in
Section 2.03(c)
.
Test Period
means a period of twelve consecutive months ending on the last day of a fiscal
quarter of the Borrower.
Total Commitment
means the Total Revolving Credit Commitment (including the Swing Line
Commitment) and the Term Loan Commitment, as same may be reduced pursuant to
Section 4.02
,
Section 4.03
and
Section 9.02
.
Total Consideration
means the present and future cash consideration to be paid by the
Borrower and/or any other Loan Party or any Subsidiary of any Loan Party in connection with a
Permitted Acquisition,
plus
all Indebtedness assumed by any Loan Party or any such
Subsidiary in connection with any Permitted Acquisition.
Total Debt
means, as to the Loan Parties and their respective Subsidiaries on a consolidated
basis at any time without duplication, all Indebtedness for borrowed money, all obligations
evidenced by bonds, debentures, notes, or other similar instruments, all Capitalized Lease
Obligations, and all guaranties of funded Indebtedness (without regard to maturity) of other
Persons.
Total Leverage Ratio
has the meaning set forth in
Section 8.12(a)
.
Total Revolving Credit Commitment
means $100,000,000 as the same may be reduced or increased
pursuant to
Section 4.02
,
Section 4.03
and
Section 9.02
.
Total Senior Indebtedness
means, as to the Loan Parties and their respective Subsidiaries on
a consolidated basis at any time without duplication, all Indebtedness outstanding under the Loan
Documents at such time.
Third Amended and Restated Credit Agreement
19
Transaction
has the meaning specified in the Preliminary Statements.
Type
has the meaning specified in
Section 1.02
.
UK Acquisition
has the meaning specified in the Preliminary Statements.
UK Acquisition Agreement
means, collectively, the Share Sale and Purchase Agreement relating
to Bank Machine (Holdings) Limited dated May 17, 2005 among Bidco and the sellers named therein,
the Share Sale and Purchase Agreement relating to the issued share capital of Bank Machine
(Acquisitions) Limited dated May 17, 2005 between Bidco and Bank Machine (Holdings) Limited dated
May 17, the share Sale and Purchase Agreement relating to shares in Bank Machine (Holdings) Limited
dated May 17 among Bidco and the sellers named therein, the Warranty Deed relating to the Sellers
dated May 17, 2005 and each other agreement relating to the foregoing and entered into in
connection with the Acquisition.
UK Acquisition Debt
means the unsecured discounted loan stock 2005 in the aggregate
principal amount of £38,346,888 issued by Bidco to the Borrower in consideration of the loan by the
Borrower to Bidco on the Execution Date in the principal amount of £38,346,888 or any indebtedness
arising from the refinancing of the principal and accrued interest of such indebtedness provided
that (a) the holder of such refinancing indebtedness is a wholly-owned Subsidiary of the Borrower,
(b) such indebtedness is unsecured, and (c) such refinancing indebtedness shall otherwise be on
terms substantially the same as the original UK Acquisition Debt, except for maturity and interest
rate (which interest rate shall be at a market rate).
Unfunded Current Liability
means, with respect to any Plan, the amount, if any, by which the
value of the benefit liabilities under the Plan as of the close of its most recent Plan year
exceeds the fair market value of the assets of the Plan, determined in accordance with Section 412
of the Code.
Unutilized Commitment
at any time means the Total Revolving Credit Commitment less the
Letter of Credit Obligations less the then outstanding Advances under the Revolving Credit Loans
and Swing Line Loans, as the same may be reduced pursuant to
Section 4.02
,
Section
4.03
and
Section 9.02
.
Voting Equity Interests
means the Equity Interests in a corporation or other Person with
voting power under ordinary circumstances for the election of directors (or persons performing
similar functions) of such Person, whether at all times or only so long as no senior class of
securities has such voting power by reason of any contingency.
SECTION 1.02
Loss of Advances
.
Advances hereunder are distinguished by Type. The
Type of an Advance refers to the determination whether such Advance is a LIBOR Rate Advance or an
Alternate Base Rate Advance.
SECTION 1.03
Accounting Terms
.
All accounting terms not defined herein shall be
construed in accordance with GAAP, as applicable, and all calculations required to be made
hereunder and all financial information required to be provided hereunder shall be done or prepared
in accordance with GAAP.
Third Amended and Restated Credit Agreement
20
ARTICLE II
THE LOANS
|
|
|
SECTION 2.01
|
|
The Revolving Credit, Swing Line and Term Loans
.
|
(a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally
agrees at any time and from time to time on and after the Effective Date and prior to the
Maturity Date, to make and maintain revolving credit loans denominated in Dollars or
Sterling (the
Revolving Credit Loans
) in an amount (based in respect of any
Revolving Credit Advances to be denominated in Sterling by reference to the Equivalent
thereof in Dollars determined on the date of delivery of the applicable Notice of Advance)
up to the amount of such Lenders Revolving Credit Commitment to the Borrower, which Loans
(1) shall, at the option of the Borrower, be made and maintained pursuant to one or more
Advances comprised of Alternate Base Rate Advances or LIBOR Rate Advances;
provided
that all Loans comprising all or a portion of the same Advance shall when made be of the
same Type, (2) in the case of any LIBOR Rate Advance denominated in Dollars, shall be made
in the minimum amount of $250,000 and integral multiples of $100,000, (3) in the case of any
LIBOR Rate Advance denominated in Sterling, shall be made in the minimum amount of £250,000
and integral multiples of £100,000, (4) in the case of any Alternate Base Rate Advance,
shall be made in the minimum amount of $200,000 (or if less, in the aggregate amount of the
Unutilized Commitment) and integral multiples of $100,000, (5) if made on the Effective
Date, shall not exceed $42,000,000 in aggregate principal amount (including the Equivalent
in Dollars at such time in the case of Revolving Credit Loans denominated in Sterling)
thereof, and (6) may be repaid and, so long as no Default or Event of Default exists
hereunder, reborrowed, at the option of the Borrower in accordance with the provisions
hereof. Notwithstanding the foregoing but subject to the provisions of
Section
2.06(a)(ii)
, the aggregate outstanding principal balance at any time (based in respect
of any Revolving Credit Advances to be denominated in Sterling by reference to the
Equivalent thereof in Dollars determined at such time) of all Revolving Credit Loans and
Swing Line Loans plus the Letter of Credit Obligations shall not exceed the Total Revolving
Credit Commitment. Anything contained herein to the contrary notwithstanding, the Revolving
Credit Lenders shall not be required to making LIBOR Advances denominated in Sterling
hereunder if such LIBOR Advances would cause the aggregate amount of LIBOR Rate Advances
denominated in Sterling outstanding hereunder to exceed the Equivalent in Dollars of
$50,000,000. There shall be no further Advances under the Revolving Credit Loans after the
Maturity Date.
(b) (i) Subject to the terms and conditions hereof, the Swing Line Lender agrees at any
time and from time to time on and after the Effective Date and prior to the Maturity Date,
to make swing line loans (each a
Swing Line Loan
and collectively, the
Swing
Line Loans
) to the Borrower in an aggregate principal amount at any one time
outstanding not to exceed $10,000,000, which Loans (1) shall be made and maintained pursuant
to one or more Advances comprised of Alternate Base Rate Advances and which shall not be
entitled to be converted into LIBOR Rate Advances, (2) shall be made in the minimum amount
of $200,000 (or if less, in the aggregate amount of the Unutilized Commitment) and integral
multiples of $100,000 and (3) may be repaid and, so long as
Third Amended and Restated Credit Agreement
21
no Default or Event of Default exists hereunder, reborrowed, at the option of the
Borrower, in accordance with the provisions hereof. Swing Line Loans shall constitute
Revolving Credit Loans for all purposes hereunder, except they shall be held by the Swing
Line Lender (subject to subclause (ii) below) and shall not be considered a utilization of
the Revolving Credit Commitment of any Revolving Credit Lender hereunder for purposes of
calculating the Revolving Credit Commitment Fee. Notwithstanding the foregoing, the
aggregate outstanding principal balance of all Revolving Credit Loans and Swing Line Loans
plus the Letter of Credit Obligations shall not exceed the Total Revolving Credit
Commitment.
(ii) At any time before or after a Default or Event of Default, the Swing Line
Lender, in its sole and absolute discretion, may give notice to the Agent to request
each Revolving Credit Lender, including the Swing Line Lender, to make a Revolving
Credit Loan as an Alternate Base Rate Loan in an amount equal to such Lenders
percentage participation in the Total Revolving Credit Commitment multiplied by the
outstanding principal balance of any Swing Line Loan (the
Refunded Swing Line
Loan
) outstanding on the date such notice is given; provided, that
notwithstanding the foregoing, the Swing Line Lender shall make such request on
Wednesday (or if any such day is not a Business Day, then the next Business Day
after such day) of each week; provided further, that the provision of this
subsection shall not affect the obligation of the Borrower to repay the Swing Line
Loans in accordance with
Section 2.06(e)
. Unless the Revolving Credit
Commitments shall have expired or terminated, each Revolving Credit Lender shall
make the proceeds of its Revolving Credit Loan available to the Agent for the
account of the Swing Line Lender on the next Business Day following such request, in
immediately available funds. The proceeds of such Revolving Credit Loans shall be
immediately applied to repay the Refunded Swing Line Loan.
(iii) At any time before or after a Default or Event of Default, if the
Revolving Credit Commitments shall have expired or be terminated while any Swing
Line Loan is outstanding, each Revolving Credit Lender, at the sole option of the
Swing Line Lender, shall either (A) notwithstanding the expiration or termination of
the Revolving Credit Commitments, make a Revolving Credit Loan as an Alternate Base
Rate Loan which such Revolving Credit Loan shall be deemed a Revolving Credit Loan
for all purposes of this Agreement and the other Loan Documents or (B) be deemed,
without further action by any Person, to have purchased from the Swing Line Lender a
participation in such Swing Line Loan in either case in an amount equal to such
Lenders percentage participation in the Total Revolving Credit Commitment
multiplied by the outstanding principal balance of such Swing Line Loan. The Agent
shall notify each such Lender of the amount of such Revolving Credit Loan or
participation and such Lender will transfer to the Agent for the account of the
Swing Line Lender on the next Business Day following such notice, in immediately
available funds, the amount of its Revolving Credit Loan or participation.
Third Amended and Restated Credit Agreement
22
(iv) If any such Lender shall not have so made its Revolving Credit Loans or
its percentage participation available to the Agent pursuant to
Section
2.01(b)(iii)
, such Lender agrees to pay interest thereon for each day from such
date until the date such amount is paid at the lesser of (1) the Federal Funds
Effective Rate on the date payment is to be made to the Agent and (2) the Highest
Lawful Rate. Whenever, at any time after the Agent has received from any Revolving
Credit Lender such Lenders Revolving Credit Loan or participating interest in a
Swing Line Loan, the Agent receives any payment on account thereof, the Agent will
pay to such Lender its participating interest in such amount (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lenders participating interest was outstanding and funded) which payment
shall be subject to repayment by such Lender if such payment received by the Agent
is required to be returned. Each Revolving Credit Lenders obligation to make the
Revolving Credit Loans or purchase such participating interests pursuant to this
Section 2.01(b)
shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (A) any setoff,
counterclaim recoupment, defense or other right which such Lender or any other
Person may have against the Swing Line Lender, the Agent or any other Person for any
reason whatsoever, (B) the occurrence or continuance of a Default or an Event of
Default or the termination of the Revolving Credit Commitments, (C) the occurrence
of any Material Adverse Effect, (D) any breach of this Agreement by the Borrower or
any other Lender or (E) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing. Each Swing Line Loan, once so
participated by any Revolving Credit Lender, shall cease to be a Swing Line Loan
with respect to that amount for purposes of this Agreement but shall continue to be
a Revolving Credit Loan and be evidenced by such Lenders Revolving Credit Note.
(c) Subject to the terms and conditions herein set forth, each Term Loan Lender agrees
to make and maintain a term loan in the amount of such Lenders Term Loan Commitment (the
Term Loan
) to the Borrower. The Term Loan shall be fully advanced on the
Effective Date, and no Term Loan Lender shall have an obligation to make any additional
Advance under the Term Loan after such date. Any amount repaid under the Term Loan may not
be reborrowed. All amounts outstanding under the Term Loan shall at the option of the
Borrower, be made and maintained as Alternate Base Rate Advances or LIBOR Rate Advances;
provided
that (i) all Loans comprising all or a portion of the same Advance shall
when made be of the same Type and (ii) on the Effective Date, all Loans shall be made as
Alternative Base Rate Advances.
|
|
|
SECTION 2.02
|
|
Notice of Advance
.
|
(a) Whenever the Borrower requires an Advance under the Revolving Credit Loans, the
Borrower shall give written notice thereof (or telephonic notice promptly confirmed in
writing) to the Agent (i) in the case of an Alternate Base Rate Advance, not later than
11:00 a.m. (New York time) on the date of such Advance, (ii) in the case of a LIBOR Rate
Advance denominated in Dollars, not later than 12:00 p.m. (New York time) three (3) Business
Days prior to the date of such Advance and (iii) in the case of a
Third Amended and Restated Credit Agreement
23
LIBOR Rate Advance denominated in Sterling, not later than 11:00 a.m. (New York time)
four (4) Business Days prior to the date of such Advance. Each Notice of Advance shall be
irrevocable and shall be in the form of
Exhibit 2.02
hereto, specifying (A) the
aggregate principal amount of the Advance to be made, (B) the date of such Advance (which
shall be a Business Day), (C) whether it is to be an Alternate Base Rate Advance or a LIBOR
Rate Advance, (D) if the proposed Advance is to be a LIBOR Rate Advance, whether it is to be
denominated in Dollars or Sterling and (E) if the proposed Advance is to be a LIBOR Rate
Advance, the initial Interest Period to be applicable thereto. The Agent shall promptly
give the Lenders written notice or telephonic notice (promptly confirmed in writing) of each
proposed Advance, of each such Lenders proportionate share thereof and of the other matters
covered by each Notice of Advance.
(b) Whenever the Borrower requires an Advance under the Swing Line Loans, it shall give
written notice thereof (or telephonic notice promptly confirmed in writing) to the Swing
Line Lender not later than 2:00 p.m. (New York time) on the date of such Advance. Each
notice shall be irrevocable and shall specify the aggregate principal amount of such Advance
and the date of such Advance (which shall be a Business Day).
(a) The Borrowers obligations to repay the Revolving Credit Loans made by each
Revolving Credit Lender shall be evidenced by a revolving credit promissory note duly
executed and delivered by the Borrower to each Revolving Credit Lender substantially in the
form of
Exhibit 2.03(a)
hereto (each a
Revolving Credit Note
and
collectively, the
Revolving Credit Notes
), and each Revolving Credit Note shall
(i) be payable to the order of such Lender, (ii) be in a stated principal amount equal to
the Revolving Credit Commitment of such Lender, (iii) be payable prior to maturity as
provided herein and mature on the Maturity Date, (iv) bear interest as provided in the
appropriate clause of
Section 2.10
and (v) be entitled to the benefits of this
Agreement and the other Loan Documents.
(b) The Borrowers obligations to repay the Swing Line Loans made by the Swing Line
Lender shall be evidenced by a swing line promissory note duly executed and delivered by the
Borrower to the Swing Line Lender substantially in the form of
Exhibit 2.03(b)
hereto (the
Swing Line Note
), and the Swing Line Note shall (i) be payable to the
order of the Swing Line Lender, (ii) be in a stated principal amount equal to the Swing Line
Commitment, (iii) be payable prior to maturity as provided herein and mature on the Maturity
Date, (iv) bear interest as provided in the appropriate clause of
Section 2.10
and
(v) be entitled to the benefits of this Agreement and the other Loan Documents.
(c) The Borrowers obligation to repay the Term Loan made by each Term Loan Lender
shall be evidenced by a term promissory note duly executed and delivered by the Borrower to
each Term Loan Lender substantially in the form of
Exhibit 2.03(c)
hereto (each a
Term Note
and collectively, the
Term Notes
), and each Term Note shall
(i) be payable to the order of such Lender, (ii) be in a stated principal amount equal to
the Term Loan Commitment of such Lender, (iii) be payable prior to maturity as
Third Amended and Restated Credit Agreement
24
provided herein and mature on the Maturity Date, (iv) bear interest as provided in the
appropriate clause of
Section 2.10
and (v) be entitled to the benefits of this
Agreement and the other Loan Documents.
|
|
|
SECTION 2.04
|
|
Disbursement of Funds
.
|
(a) (i) With respect to any Advance denominated in Dollars to be made under any Loan
other than the Swing Line Loan, no later than 2:00 p.m. (New York time on any Advance Date,
each Lender shall make available its pro rata portion of the amount of such Advance in
Dollars and in immediately available funds at the Payment Office and (ii) with respect to
any Advance denominated in Sterling, no later than 1:00 p.m. (New York time) on any Advance
Date, each Lender shall make available its pro rata portion of the amount of such Advance in
Sterling and in immediately available funds at the Payment Office. The Agent shall credit
the amounts in Dollars so received to the general deposit account of the Borrower maintained
with the Agent or as otherwise directed by the Borrower, and the amounts in Sterling so
received to the general deposit account of the Borrower maintained with Bank of America or
as otherwise directed by the Borrower.
(b) With respect to any Advance to be made under the Swing Line Loan, no later than
3:00 p.m. (New York time) on the requested Advance Date, the Swing Line Lender shall make
available to the Borrower in immediately available funds the amount of such Advance at the
Borrowers general deposit account maintained with the Agent or as otherwise directed by the
Borrower.
(c) Unless the Agent shall have been notified by any Lender prior to disbursement of an
Advance by the Agent that such Lender does not intend to make available to the Agent such
Lenders portion of the Advance to be made on such date, the Agent may assume that such
Lender has made such amount available to the Agent on such Advance Date and the Agent may,
in reliance upon such assumption, make available to the Borrower a corresponding amount. If
such corresponding amount is not in fact made available to the Agent by such Lender and the
Agent has made available same to the Borrower, the Agent shall be entitled to recover such
corresponding amount on demand from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Agents demand therefor, the Agent shall promptly
notify the Borrower, and the Borrower shall pay such corresponding amount to the Agent
within two (2) Business Days after demand therefor. The Agent shall also be entitled to
recover from such Lender or the Borrower, as the case may be, interest on such corresponding
amount from the date such corresponding amount was made available by the Agent to the
Borrower to the date such corresponding amount is recovered by the Agent, at a rate per
annum equal to, (i) as to any Lender, (A) the Federal Funds Effective Rate on the date of
such Advance in the case of Advances denominated in Dollars or (B) the cost of funds
incurred by the Agent in respect of such amount in the case of Advances denominated in
Sterling and (ii) as to the Borrower, the higher of (A) the rate per annum applicable to
such Loan plus the applicable Margin and (B) the cost of funds incurred by the Agent in
respect of such amount. Nothing herein shall be deemed to relieve any Lender from its
obligation for its Commitments hereunder or to prejudice any rights which the Borrower may
have against any Lender as a result of any default by such Lender hereunder.
Third Amended and Restated Credit Agreement
25
SECTION 2.05
Conversions and Continuances
.
(a) Subject to the provisions of
Section 2.15
hereof, the Borrower shall have
the option to convert on any Business Day all or a portion of the outstanding principal
amount of one Type of Advance into another Type of Advance (other than (i) Advances under
the Swing Line Loan which at all times must be maintained as Alternate Base Rate Advances
and (ii) LIBOR Rate Advances denominated in Sterling) or continue any LIBOR Rate Advance for
an additional Interest Period,
provided
, no Advances may be converted into or
continued as LIBOR Rate Advances if an Event of Default is in existence on the date of the
conversion or continuation. Except as provided in
Section 2.11(b)
hereof, each such
conversion or continuation shall be effected by the Borrower giving the Agent written notice
(each a
Notice of Conversion
) (a) prior to 12:00 p.m. (New York time) at least
three (3) Business Days prior to the date of such conversion in the case of conversion or
continuation into or continuance as a LIBOR Rate Advance denominated in Dollars, (b) prior
to 12:00 p.m. (New York time) at least four (4) Business Days prior to the date of such
conversion in the case of conversion or continuation into or continuance as a LIBOR Rate
Advance denominated in Sterling and (c) prior to 12:00 p.m. (New York time) on the date of
such conversion in the case of a conversion into an Alternate Base Rate Advance, specifying
each Advance (or portions thereof) to be so converted or continued and, if to be converted
into or continued as a LIBOR Rate Advance, the Interest Period to be initially applicable
thereto. The Agent shall thereafter promptly notify each affected Lender of such Notice of
Conversion.
(b) If, with respect to any LIBOR Rate Advances, the Requisite Lenders notify the Agent
that (i) they are unable to obtain matching deposits in the London interbank market at or
about 11:00 a.m. (London time) on the fourth Business Day before the making of an Advance in
sufficient amounts to fund their respective Revolving Credit Loans as a part of such Advance
during its Interest Period or (ii) the LIBOR Rate for any Interest Period for such Advances
will not adequately reflect the cost to such Requisite Lenders of making, funding or
maintaining their respective LIBOR Rate Advances for such Interest Period, the Agent shall
forthwith so notify the Borrower and the Lenders, whereupon (A) the Borrower will, on the
last day of the then existing Interest Period therefor, (1) if such LIBOR Rate Advances are
denominated in Dollars, either (x) prepay such Advances or (y) convert such Advances into
Alternate Base Rate Advances and (2) if such LIBOR Rate Advances are denominated in
Sterling, either (x) prepay such Advances or (y) exchange such Advances into an Equivalent
amount of Dollars and convert such Advances into Alternate Base Rate Advances and (B) the
obligation of the Lenders to make, or to convert Advances into, LIBOR Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist;
provided
that, if the circumstances set
forth in clause (2) above are applicable, the Borrower may elect, by notice to the Agent and
the Lenders, to continue such Advances in Sterling for Interest Periods of not longer than
one month, which Advances shall thereafter bear interest at a rate per annum equal to the
applicable Margin plus, for each Lender, the cost to such Lender (expressed as a rate per
annum) of funding its LIBOR Rate Advances by whatever means it reasonably determines to be
appropriate. Each Lender shall certify its cost of funds for each Interest Period to
the
Third Amended and Restated Credit Agreement
26
Agent and the Borrower as soon as practicable (but in any event not later than ten
Business Days after the first day of such Interest Period).
SECTION 2.06
Mandatory Repayments
.
(a) (i) All outstanding principal (and any accrued, unpaid interest) on the Revolving
Credit Notes shall be due and payable on the Maturity Date. Notwithstanding anything to the
contrary contained in this Agreement, the Original Credit Agreement or in any other Loan
Document, the aggregate outstanding principal balance (based in respect of any Revolving
Credit Advances denominated in Sterling by reference to the Equivalent thereof in Dollars
determined on the applicable Exchange Calculation Date) of the Revolving Credit Notes and
Swing Line Loans plus the Letter of Credit Obligations shall not exceed the Total Revolving
Credit Commitment. The Revolving Credit Lenders shall never be required to make any Advance
under the Revolving Credit Loans (or the Swing Line Lender to make any Swing Line Loan) or
issue any Letter of Credit that would cause the aggregate outstanding principal balance
(based in respect of any Revolving Credit Advances denominated in Sterling by reference to
the Equivalent thereof in Dollars determined on the applicable Exchange Calculation Date) of
the Revolving Credit Notes and Swing Line Loans plus the Letter of Credit Obligations to
exceed the Total Revolving Credit Commitment. Subject to the provisions of
subclause
(ii)
of this
Section 2.06(a)
, if the aggregate outstanding principal balance
(based in respect of any Revolving Credit Advances denominated in Sterling by reference to
the Equivalent thereof in Dollars determined on the applicable Exchange Calculation Date) of
the Revolving Credit Notes and Swing Line Loans plus the Letter of Credit Obligations at any
time exceeds the Total Revolving Credit Commitment, the Borrower shall immediately repay the
principal of the Revolving Credit Notes in an amount at least equal to such excess. If
after giving effect to any such principal repayment, the Letter of Credit Obligations exceed
the Total Revolving Credit Commitment, the Borrower shall pay an amount of cash equal to
such excess to the Agent to be held as security for the Letter of Credit Obligations.
(ii) If, on any date, the Agent notifies the Borrower that, on the most recent
Exchange Calculation Date, the sum of (A) the aggregate principal amount of all
Loans denominated in Dollars then outstanding plus (B) the aggregate principal
amount of all Letter of Credit Obligations then outstanding plus (C) the Equivalent
in Dollars (determined as of such Exchange Calculation Date) of the aggregate
principal amount of all Advances denominated in Sterling then outstanding exceeds
103% of the Total Revolving Credit Commitment on such date, the Borrower shall, as
soon as practicable and in any event within four (4) Business Days after receipt of
such notice, subject to the proviso to this sentence set forth below, prepay the
outstanding principal amount of any Loans owing by the Borrower in an aggregate
amount sufficient to reduce such sum to an amount not to exceed 100% of the Total
Revolving Credit Commitment on such date together with any interest accrued to the
date of such prepayment on the aggregate principal amount of Loans prepaid;
provided
that if the aggregate principal amount of Alternate Base Rate
Advances outstanding at the time of such required
prepayment is less than the amount of such required prepayment, the portion of
Third Amended and Restated Credit Agreement
27
such required prepayment in excess of the aggregate principal amount of Alternate
Base Rate Advances then outstanding shall be deferred until the earliest to occur of
the last day of the Interest Period of the outstanding LIBOR Rate Advances, in an
aggregate amount equal to the excess of such required prepayment. If, on any date,
the Agent notifies the Borrower that, on the most recent Exchange Calculation Date,
the Equivalent in Dollars (determined as of such Exchange Calculation Date) of the
aggregate principal amount of all Advances denominated in Sterling then outstanding
exceeds $50,000,000, the Borrower shall, as soon as practicable and in any event
within four (4) Business Days after receipt of such notice, prepay the outstanding
principal amount of any Loans owing by the Borrower in an aggregate amount
sufficient to reduce such sum to an amount not to exceed such amount together with
any interest accrued to the date of such prepayment on the aggregate principal
amount of Loans prepaid. The Agent shall give prompt notice of any prepayment
required under this Section
2.06(a)(ii)
to the Borrower and the Lenders, and
shall provide prompt notice to the Borrower of any such notice of required
prepayment received by it from any Lender.
(iii) Each prepayment made pursuant to this
Section 2.06(a)
shall be
made together with any interest accrued to the date of such prepayment on the
principal amounts prepaid and, in the case of any prepayment of a LIBOR Rate Advance
on a date other than the last day of an Interest Period or at its maturity, any
additional amounts which the Borrower shall be obligated to reimburse to the Lenders
in respect thereof pursuant to
Section 2.15
. The Agent shall give prompt
notice of any prepayment required under this
Section 2.06(a)(iii)
to the
Borrower and the Lenders.
(b) Outstanding principal on the Term Loan shall be due and payable on each Designated
Payment Date commencing June 30, 2006, in such aggregate amounts and for such Designated
Payment Dates as follows:
|
|
|
|
|
|
|
Percentage of Term Loan
|
|
|
Commitment Due On Each
|
Designated Payment Date
|
|
Designated Payment Date
|
June 30, 2006
|
|
|
2.50
|
%
|
September 30, 2006
|
|
|
2.50
|
%
|
December 31, 2006
|
|
|
2.50
|
%
|
March 31, 2007
|
|
|
2.50
|
%
|
June 30, 2007
|
|
|
5.00
|
%
|
September 30, 2007
|
|
|
5.00
|
%
|
December 31, 2007
|
|
|
5.00
|
%
|
March 31, 2008
|
|
|
5.00
|
%
|
June 30, 2008
|
|
|
5.00
|
%
|
September 30, 2008
|
|
|
5.00
|
%
|
December 31, 2008
|
|
|
5.00
|
%
|
Third Amended and Restated Credit Agreement
28
|
|
|
|
|
|
|
Percentage of Term Loan
|
|
|
|
Commitment Due On Each
|
|
Designated Payment Date
|
|
Designated Payment Date
|
|
March 31, 2009
|
|
|
5.00
|
%
|
June 30, 2009
|
|
|
5.00
|
%
|
September 30, 2009
|
|
|
5.00
|
%
|
December 31, 2009
|
|
|
5.00
|
%
|
March 31, 2010
|
|
|
5.00
|
%
|
Maturity Date
|
|
Remaining unpaid balance
|
The amount of the Term Loan repaid in accordance with this
Section 2.06
may not be
reborrowed.
(c) The Borrower shall prepay the Term Loan in amounts equal to:
(i) 100% of the net cash proceeds of all asset sales generating net after-tax
proceeds individually or in the aggregate in excess of $2,500,000 per annum or other
dispositions (except Inventory in the ordinary course of business and excluding net
cash proceeds of up to $2,000,000 received in any fiscal year to the extent used by
the Person selling the same to acquire similar assets within 120 days after the date
of receipt of such net cash proceeds) by the Borrower or any of its Subsidiaries
(such prepayment to be made within five (5) days after such threshold is exceeded);
(ii) 75% of Excess Cash Flow (such prepayment to be made annually within
fifteen (15) days after delivery of the annual audited financial statements pursuant
to
Section 7.01(b)
beginning with the delivery of the financial statements
dated December 31, 2006);
provided
,
however
, if the ratio of Total
Debt to Acquisition EBITDA for the Borrower and its Subsidiaries is less than
3.50:1.00 at the time such prepayment is otherwise required to be made, then the
Borrower shall not be required to prepay the Term Loan with any Excess Cash Flow;
(iii) 100% of the net cash proceeds of any debt or equity financing of the
Borrower or any of its Subsidiaries (such prepayment to be made within five (5) days
of the receipt of such proceeds), excluding (A) equity contributions relating to
Permitted Acquisitions, (B) proceeds from the exercise of rights by employees under
customary incentive compensation plans and stock options, (C) Indebtedness permitted
under
Section 8.03
(other than clause (b) thereof), (D) proceeds of up to
$10,000,000 from additional equity issued to CapStreet and/or TA, and (E) net cash
proceeds from the issuance of the Permanent Securities up to an amount sufficient to
refinance in full all loans under the Second Lien Credit Agreement and unpaid
interest thereon (
provided
that, if the Borrower has made the election
contemplated by
Section 4.03
, the Borrower shall not be required to prepay
the Term Loan Pursuant to this
clause (D)
to an amount less than the amount
of the Term Loan to remain outstanding in connection with the Senior Facilities
Reallocation); and
Third Amended and Restated Credit Agreement
29
(iv) 100% of the net cash proceeds of any casualty or condemnation related to
the Borrower or any of its Subsidiaries;
provided
, that the Borrower or such
Subsidiary may reinvest such proceeds in an amount up to $5,000,000 if such casualty
or condemnation does not have a Material Adverse Effect.
(d) All mandatory prepayments under
Section 2.06(c)
shall be applied to the
principal installments of the Term Loan in order of maturity and to the Term Loan Lenders on
a ratable basis until repayment of the Term Loan in full. The amount of the Term Loan
prepaid may not be reborrowed and each Lenders Term Loan shall proportionately and
permanently be reduced by the amount of the Term Loan prepaid pursuant to
Section
2.06(c)
.
(e) All outstanding principal (and any accrued, unpaid interest) on the Swing Line Note
shall be due and payable on the Maturity Date.
SECTION 2.07
Voluntary Prepayments
.
The Borrower shall have the right to voluntarily
prepay Advances in whole or in part upon giving two (2) Business Days prior written notice to the
Agent;
provided
,
however
, with respect to Swing Line Loans comprised of Alternate
Base Rate Advances, Borrower shall have the right to prepay such Advances in whole or in part upon
giving notice to the Agent prior to 2:00 p.m. (New York time) on the date of such prepayment. Upon
receipt of such notice, the Agent shall promptly notify each Lender of the contents thereof and of
such Lenders percentage participation of such prepayment. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein and (a) no LIBOR
Rate Advance may be prepaid prior to the last day of its Interest Period unless, simultaneously
therewith, the Borrower pays to the Agent for the benefit of the affected Lenders, all sums due
under
Section 2.15
hereof; and (b) each partial prepayment shall be made (i) in the case of
any LIBOR Rate Advance denominated in Dollars, in the minimum amount of $250,000 and integral
multiples of $100,000, (ii) in the case of any LIBOR Rate Advance denominated in Sterling, in the
minimum amount of £250,000 and integral multiples of £100,000, and (iii) in the case of a
prepayment of an Alternate Base Rate Advance, in a minimum aggregate amount of $250,000 and
integral multiples of $100,000 (or, in each case, if less, the aggregate amount of the outstanding
balance). The prepayment of the Term Loan pursuant to this
Section 2.07
shall be applied to
the remaining principal installments of the Term Loan in order of maturity in order of maturity and
to the Term Loan Lenders on a ratable basis until repayment of the Term Loan in full. The amount of
the Term Loan may not be reborrowed and each Lenders Term Loan shall proportionately and
permanently be reduced by the amount of the Term Loan prepaid pursuant to this
Section
2.07
. Prepayments of any Revolving Credit Loan under this
Section 2.07
may be
reborrowed until the Maturity Date.
SECTION 2.08
Method and Place of Payments
.
(a) Except as otherwise specifically provided herein, all payments under this Agreement
(except with respect to principal of, interest on, and other amounts relating to, Advances
denominated in Sterling) due from the Borrower shall be made to the Agent for the benefit of
the affected Lenders not later than 12:00 p.m. (New York time) on the date when due and
shall be made in lawful money of the United States in immediately available funds at the
Payment Office. Notwithstanding the foregoing, all payments
Third Amended and Restated Credit Agreement
30
under this Agreement in respect of Swing Line Loans due from the Borrower shall be made
to the Agent for the benefit of the Swing Line Lender not later than 2:00 p.m. (New York
time) on the date when due and shall be made in lawful money of the United States in
immediately available funds at the Payment Office. All payments with respect to principal
of, interest on, and other amounts relating to, Advances denominated in Sterling due from
the Borrower shall be made to the Agent for the benefit of the affected Lenders not later
than 11:00 p.m. (New York time) on the date when due and shall be made in lawful money of
the United Kingdom in immediately available funds at the Payment Office.
(b) Except as specifically provided in
Section 2.16(a)
, all payments (whether
of principal, interest, Fees, reimbursements or otherwise) by the Borrower, under this
Agreement shall be made without set-off or counterclaim and shall be made free and clear of
and without deduction for any present or future tax, levy, impost or any other charge, if
any, of any nature whatsoever now or hereafter imposed by any taxing authority. Except as
specifically provided in
Section 2.16(a)
, if the making of such payments by the
Borrower is prohibited by law unless such a tax, levy, impost or other charge is deducted or
withheld therefrom, the Borrower shall pay to the Agent, on the date of each such payment,
such additional amounts (without duplication of any amounts required to be paid by the
Borrower pursuant to
Section 2.14
or
Section 3.04)
as may be necessary in
order that the net amounts received by the Lenders after such deduction or withholding shall
equal the amounts which would have been received if such deduction or withholding were not
required. The Borrower shall confirm that all applicable taxes, if any, imposed on this
Agreement or transactions hereunder shall have been properly and legally paid by it to the
appropriate taxing authorities by sending, if available, official tax receipts or notarized
copies of such receipts, or other evidence of payments reasonably acceptable to the
applicable Lender, to the Agent within thirty (30) days after payment of any applicable tax.
Notwithstanding the foregoing, in no event shall the compensation payable under this
Section 2.08(b)
(to the extent, if any, constituting interest under applicable laws)
together with all amounts constituting interest under applicable laws and payable in
connection with this Agreement, the Notes and the other Loan Documents exceed the Highest
Lawful Rate.
(c) To the extent that the Agent receives funds for application to the amounts owing by
the Borrower under or in respect of this Agreement or any Note in currencies other than the
currency or currencies required to enable the Agent to distribute funds to the Lenders in
accordance with the terms of this
Section 2.08
, the Agent shall be entitled to
convert or exchange such funds into Dollars or into Sterling or from Sterling to Dollars, as
the case may be, to the extent necessary to enable the Agent to distribute such funds in
accordance with the terms of this
Section 2.08
;
provided
that the Borrower
and each of the Lenders hereby agree that the Agent shall not be liable or responsible for
any loss, cost or expense suffered by the Borrower or such Lender as a result of any
conversion or exchange of currencies affected pursuant to this
Section 2.08(c)
or as
a result of the failure of the Agent to effect any such conversion or exchange; and provided
further that the Borrower agrees to indemnify the Agent and each Lender, and hold the Agent
and each Lender harmless, for any and all losses, costs and expenses incurred by
Third Amended and Restated Credit Agreement
31
the Agent or any Lender for any conversion or exchange of currencies (or the failure to
convert or exchange any currencies) in accordance with this
Section 2.08(c)
.
SECTION 2.09
Pro Rata Advances/Payments
.
All Advances (other than Advances made under
the Swing Line Loans) under this Agreement shall be made by the affected Lenders pro rata
(provided, however, that nothing hereunder shall limit or impair Agents rights under
Section
2.04(b)
), and all payments in respect of any Revolving Credit Loan and Term Loan from the
Borrower to the Agent shall be applied, on the basis of the Lenders respective percentage
participations in the Total Revolving Credit Commitment or the Term Loan Commitment, as the case
may be. It is understood that no Lender shall be responsible for any default by any other Lender
in its obligation to make Advances hereunder and that each Lender shall be obligated to make the
Advances provided to be made by it hereunder, regardless of the failure of any other Lender to
fulfill its commitments hereunder.
SECTION 2.10
Interest
.
(a) Subject to
Section 12.08
, the Borrower agrees to pay interest on the total
outstanding principal balance from time to time of all Alternate Base Rate Advances from the
date of each respective Advance to maturity (whether by acceleration or otherwise) at a rate
per annum which shall at all times be equal to the lesser of (i) the Highest Lawful Rate and
(ii) the Alternate Base Rate in effect from time to time plus the applicable Margin as such
applicable Margin may change from time to time. Interest accrued under this
Section
2.10(a)
shall be computed on the basis of the actual number of days elapsed over a year
of 365 or 366 days, as the case may be.
(b) Subject to
Section 12.08
, the Borrower agrees to pay interest on the total
outstanding principal balance of all LIBOR Rate Advances from time to time from the date of
each respective Advance to maturity (whether by acceleration or otherwise) at a rate per
annum (computed on the basis of the actual number of days elapsed over a year of 360 days in
the case of LIBOR Rate Advances denominated in Dollars and 365 or 366 days, as the case may
be, in the case of LIBOR Rate Advances denominated in Sterling) which shall, during each
Interest Period applicable thereto, be equal to the lesser of (i) the Highest Lawful Rate
and (ii) the applicable LIBOR Rate for such Interest Period plus the applicable Margin.
(c) Subject to
Section 12.08
, upon the occurrence and during the continuance of
a Default under
Section 9.01(a)
,
(f)
or
(g)
, all principal and, to
the extent permitted by law, interest, in respect of any Advance and all other amounts owing
hereunder shall bear interest at a rate per annum equal to the Default Rate.
(d) Interest on each Advance shall accrue from and including the date of such Advance
to but excluding the date of any repayment thereof and shall be payable in arrears (i) in
respect of LIBOR Rate Advances (A) on the last day of the Interest Period applicable thereto
and, in the case of any Interest Period in excess of three months, on the last day of the
third month, the last day of the sixth month (if applicable) and the last day of the ninth
month (if applicable) of the Interest Period and on the last day of the Interest Period, and
(B) on the date of any voluntary or mandatory repayment or any conversion
Third Amended and Restated Credit Agreement
32
or continuance, (ii) in respect of Alternate Base Rate Advances (A) on each Designated
Payment Date and (B) on the date of any voluntary or mandatory repayment and (iii) in
respect of each Advance, at maturity (whether by acceleration or otherwise) and, after
maturity, on demand.
(e) The Agent, upon determining the LIBOR Rate for any Interest Period, shall notify
the Borrower thereof. Each such determination shall, absent manifest error, be final and
conclusive and binding on all parties hereto. In addition, prior to the due date for the
payment of interest on any Advances set forth in the immediately preceding paragraph, the
Agent shall notify the Borrower of the amount of interest due by the Borrower on all
outstanding Advances on the applicable due date, but any failure of the Agent to so notify
the Borrower shall not reduce the Borrowers liability for the amount owed.
(f) Subject to
Section 12.08
, the Borrower shall pay to the Agent for the
account of each affected Lender, so long as the Lenders shall be required under regulations
of the Board to maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal amount of
each such LIBOR Rate Advance from the date of such Advance until such principal amount is
paid in full, at an interest rate per annum equal at all times during the relevant Interest
Period for such Advance to the lesser of (i) the Highest Lawful Rate and (ii) the remainder
obtained by subtracting (A) the LIBOR Rate for such Interest Period from (B) the rate
obtained by dividing such LIBOR Rate referred to in clause (A) above by that percentage
equal to 100% minus the Reserve Percentage of such Lender for such Interest Period. Such
additional interest shall be determined by such Lender as incurred and shall be payable upon
demand therefor by the Borrower to such Lender. Each determination by such Lender of
additional interest due under this
Section 2.10(f)
shall be conclusive and binding
for all purposes in the absence of manifest error.
SECTION 2.11
Interest Periods
.
(a) At the time the Borrower gives any Notice of Advance or Notice of Conversion in
respect of the making of, or conversion into, a LIBOR Rate Advance, the Borrower shall have
the right to elect, by giving the Agent on the dates and at the times specified in
Section 2.02
or
Section 2.05
, notice of the interest period (each an
Interest Period
) applicable to such LIBOR Rate Advance, which Interest Period
shall be either a one, two, three, six, or, if deposits in the applicable currency are
available to all the Lenders in the applicable market, nine or twelve-month period;
provided
, that:
(i) the Initial Interest Period for any LIBOR Rate Advance shall commence on
the date of such LIBOR Rate Advance (including the date of any conversion thereto or
continuance thereof pursuant to
Section 2.05
); each Interest Period
occurring thereafter in respect of such LIBOR Rate Advance shall commence on the
expiration date of the immediately preceding Interest Period;
Third Amended and Restated Credit Agreement
33
(ii) if any Interest Period relating to a LIBOR Rate Advance begins on a day
for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which is not a
Business Day, such Interest Period shall expire on the next succeeding Business Day,
provided
, that if there are no more Business Days in that month, the
Interest Period shall expire on the preceding Business Day; and
(iv) no Interest Period for Advances shall extend beyond the Maturity Date.
(b) If, upon the expiration of any Interest Period applicable to a LIBOR Rate Advance,
the Borrower has failed to elect a new Interest Period to be applicable to such Advance as
provided above, (A) if such LIBOR Rate Advances are denominated in Dollars, the Borrower
shall be deemed to have elected to convert such Advance into an Alternate Base Rate Advance
effective as of the expiration date of such current Interest Period and (B) if such LIBOR
Rate Advances are denominated in Sterling, be exchanged for an Equivalent amount of Dollars
and convert into Alternate Base Rate Advances.
(c) After giving effect to any Loan, Advance, continuation or conversion of any LIBOR
Rate Advance, there may not be more than twelve (12) different Interest Periods in effect
hereunder.
SECTION 2.12
Interest Rate Not Ascertainable
.
In the event that the Agent shall
determine (which determination shall, absent manifest error, be final, conclusive and binding upon
all parties) that on any date for determining the LIBOR Rate for any Interest Period, by reason of
any changes arising after the date of this Agreement affecting the LIBOR interbank market, adequate
and fair means do not exist for ascertaining the applicable interest rate on the basis provided for
in the definition of LIBOR Rate, then, and in any such event, the Agent shall forthwith give notice
to the Borrower and to the Lenders of such determination. Until the Agent notifies the Borrower
that the circumstances giving rise to the suspension described herein no longer exist, (a) the
obligations of the Lenders to make LIBOR Rate Advances shall be suspended and (b) each LIBOR Rate
Advance will automatically, on the last day of the then existing Interest Period therefor, (i) if
such LIBOR Rate Advance is denominated in Dollars, convert into an Alternate Base Rate Advance and
(ii) if such LIBOR Rate Advance is denominated in Sterling, be prepaid by the Borrower or be
automatically exchanged for an Equivalent amount of Dollars and be converted into an Alternate Base
Rate Advance.
SECTION 2.13
Change in Legality
.
(a) Notwithstanding anything to the contrary herein contained, if any change in any law
or regulation or in the interpretation thereof by any governmental authority charged with
the administration or interpretation thereof shall make it unlawful for any Lender or its
LIBOR Lending Office to make or maintain any LIBOR Rate Advance or to
Third Amended and Restated Credit Agreement
34
give effect to its
obligations as contemplated hereby, then, by prompt written notice to the Borrower, such
Lender may:
(i) declare that LIBOR Rate Advances will not thereafter be made by such Lender
hereunder, whereupon the Borrower shall be prohibited from requesting LIBOR Rate
Advances from such Lender hereunder (and instead, any request for a LIBOR Rate
Advance in Dollars, as to such Lender, shall be deemed to be a request for an
Alternate Base Rate Advance and any request for a LIBOR Rate Advance in Sterling
shall be void and of no force and effect) unless such declaration is subsequently
withdrawn; and
(ii) require that all LIBOR Rate Advances in Sterling made by such Lender be
exchanged into an Equivalent amount of Dollars and be converted into an Alternate
Base Rate Advance and that all outstanding LIBOR Rate Advances in Dollars made by
such Lender be converted to Alternate Base Rate Advances, in which event (A) all
such LIBOR Rate Advances made by such Lender shall be automatically converted to
Alternate Base Rate Advances as of the effective date of such notice as provided in
paragraph (b) below (or if so designated by such Lender in such notice, effective as
of another date) and (B) all payments and prepayments of principal which would
otherwise have been applied to repay the converted LIBOR Rate Advances shall instead
be applied to repay the Alternate Base Rate Advances resulting from the conversion
of such LIBOR Rate Advances.
(b) For purposes of this
Section 2.13
, a notice to the Borrower by the Agent
pursuant to paragraph (a) above shall be effective on the date of receipt thereof by the
Borrower.
SECTION 2.14
Increased Costs, Taxes or Capital Adequacy Requirements
.
(a) If, after the Execution Date, the application or effectiveness of any applicable
law or regulation or compliance by any Lender with any applicable guideline or request from
any central bank or governmental authority (whether or not having the force of law) (i)
shall change the basis of taxation of payments to such Lender of the principal of or
interest on any LIBOR Rate Advance made by such Lender or any other Fees or amounts payable
hereunder (other than taxes imposed or measured on the overall net or gross income or
revenue of such Lender or its Applicable Lending Office or franchise taxes imposed upon it
by the jurisdiction in which such Lender or its Applicable Lending Office has an office),
(ii) shall impose, modify or deem applicable any reserve, special deposit or similar
requirement with respect to any LIBOR Rate Advance made by such Lender against assets of,
deposits with or for the account of, or credit extended by, such Lender (without duplication
of any amounts paid pursuant to
Section 2.10(f)
) or (iii) shall impose on such
Lender any other condition affecting this Agreement or any LIBOR Rate Advance made by such
Lender, and the result of any of the foregoing shall be to increase the cost to such Lender
of maintaining its Revolving Credit Commitment, or of making or maintaining any LIBOR Rate
Advance or to reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or
Third Amended and Restated Credit Agreement
35
otherwise) in respect thereof by an amount deemed in good
faith by such Lender to be material, then the Borrower shall pay to such Lender such
additional amount as will compensate it for such increase or reduction upon demand.
(b) If any Lender shall have determined in good faith that any change after the
Execution Date of any law, rule, regulation or guideline regarding capital adequacy, or any
change in the interpretation or administration thereof or compliance with any request or
directive regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency issued after the Execution Date has or would
have the effect of reducing the rate of return on the capital of such Lender as a
consequence of, or with reference to, such Lenders obligations hereunder to a level below
that which it could have achieved but for such change by an amount deemed by such Lender to
be material, then, from time to time, the Borrower shall pay to the Agent for the benefit of
such Lender such additional amount as will reasonably compensate it for such reduction upon
demand.
(c) Each Lender will notify the Borrower through the Agent of any event occurring after
the date of this Agreement which will entitle it to compensation pursuant to this
Section 2.14
, as promptly as practicable. A certificate (i) stating that the
compensation sought to be recovered pursuant to this
Section 2.14
is generally being
charged to other similarly situated customers and (ii) setting forth in reasonable detail
the amount necessary to compensate the Lender in question as specified in paragraph (a) or
(b) above, as the case may be, and the calculation of such amount under clause (a)(i), shall
be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower
shall pay to the Agent for the account of such Lender the amount shown as due on any such
certificate upon demand. The failure on the part of any Lender to demand increased
compensation with respect to any Interest Period shall not constitute a waiver of the right
to demand compensation thereafter,
provided
that with respect to events occurring
prior to any notice given under this
Section 2.14(c)
, such Lenders shall only be
entitled to recover compensation for such events occurring over a period of 120 days. Upon
the request of the Borrower, each Lender agrees that it will use reasonable efforts to
designate a different Applicable Lending Office for the Loans due to it affected by the
matter described in
Sections 2.14(a)
and
2.14(b)
, if such designation will
avoid or reduce the liability of the Borrower to such Lender under this
Section 2.14
so long as such designation is not disadvantageous to such Lender as determined by such
Lender in its sole discretion.
(d) Except as expressly provided in
Section 2.14(c)
failure on the part of any
Lender to demand compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any Interest Period shall not
constitute a waiver of such Lenders rights to demand compensation for any increased costs
or reduction in amounts received or receivable or reduction in return on capital with
respect to such Interest Period or any other Interest Period.
SECTION 2.15
LIBOR Advance Prepayment and Default Penalties
.
Subject to
Section
12.08
, the Borrower shall indemnify each Lender against any loss or expense (other than loss of
profit) which it may sustain or incur as a consequence of (a) an advance of, or a
Third Amended and Restated Credit Agreement
36
conversion into,or a continuance of, LIBOR Rate Advances that does not occur on the date specified therefor in a
Notice of Advance or Notice of Conversion, (b) any payment, prepayment or conversion of a LIBOR
Rate Advance required by any other provision of this Agreement or otherwise made on a date other
than the last day of the applicable Interest Period or (c) any default in the payment or prepayment of the principal amount of any LIBOR Advance or any part
thereof or interest accrued thereon, as and when due and payable (at the due date thereof, by
notice of prepayment or otherwise). Such loss or expense shall include the amount equal to the
excess determined by each Lender of (i) its cost of obtaining the funds for the Advance being paid,
prepaid or converted or not borrowed (based on the LIBOR Rate) for the period from the date of such
payment, prepayment or conversion or failure to borrow to the last day of the Interest Period for
such Advance (or, in the case of a failure to borrow, the Interest Period for the Advance which
would have commenced on the date of such failure to borrow) over (ii) the amount of interest (as
determined by each Lender) that would be realized in reemploying the funds so paid, prepaid or
converted or not borrowed for such period or Interest Period, as the case may be.
The Agent on behalf of the Lenders, will notify the Borrower of any loss or expense which will
entitle the Lenders to compensation pursuant to this
Section 2.15
, as promptly as is
practicable. A certificate of any Lender setting forth any amount which it is entitled to receive
pursuant to this
Section 2.15
shall be delivered to the Borrower and shall be conclusive
absent manifest error. The Borrower shall pay to the Agent for the account of the Lenders the
amount shown as due on any certificate upon demand. Without prejudice to the survival of any other
obligations of the Borrower hereunder, the obligations of the Borrower under this
Section
2.15
shall survive the termination of this Agreement and the assignment of any of the Notes.
The failure on the part of any Lender to demand compensation with respect to this
Section
2.15
shall not constitute a waiver of the right to demand compensation thereafter,
provided
that with respect to any loss or expense incurred prior to any notice given under
this
Section 2.15
, such Lender shall only be entitled to recover compensation for such loss
or expense incurred over a period of 120 days.
SECTION 2.16
Taxes
.
(a) With respect to each Lender (including but not limited to any Lender added by
assignment pursuant to
Section 12.10
hereof) which is organized under the laws of a
jurisdiction outside the United States, on the date of the initial Advance hereunder, and
from time to time thereafter if requested by the Borrower or the Agent, each such Lender
(including assignees of any thereof from time to time) shall provide the Agent and the
Borrower with the forms prescribed by the Internal Revenue Service of the United States
certifying as to such Lenders status for purposes of determining exemption from United
States withholding taxes with respect to all payments to be made to such Lender hereunder or
other documents satisfactory to the Borrower and the Agent indicating that all payments to
be made to such Lender hereunder are subject to such tax at a rate reduced by an applicable
tax treaty. Unless the Borrower and the Agent have received such forms or such documents
indicating that payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, the Borrower or the Agent
shall withhold taxes from such payments at the applicable statutory rate in the case of
payments to or for any Lender organized under the
Third Amended and Restated Credit Agreement
37
laws of a jurisdiction outside the United
States. For any period with respect to which a Lender has failed to provide the Borrower
with the appropriate form or other document described above (
other than
if such failure is
due to a change in law, or in the interpretation or application thereof, occurring after the
date of the initial Advance or if such form or other document otherwise is not required), such Lender shall not be
entitled to indemnification under
Section 2.08(b)
or
Section 2.16
with
respect to taxes imposed by the United States by reason of such failure.
(b) The Loan Parties shall pay any present or future stamp, documentary, excise,
property, intangible, mortgage recording or similar taxes, charges or levies that arise from
any payment made by such Loan Party hereunder or under any other Loan Documents or from the
execution, delivery or registration of, performance under, or otherwise with respect to,
this Agreement, or the other Loan Documents (
Other Taxes
).
(c) The Loan Parties shall indemnify each Lender and each Agent for and hold them
harmless against the full amount of taxes (excluding franchise taxes and taxes imposed on
overall net income of the Lender by the United States or the jurisdiction in which the
Lender is located) and Other Taxes imposed or asserted by any jurisdiction on amounts
payable under
Section 2.08(b)
or
Section 2.16
, imposed on or paid by such
Lender or such Agent (as the case may be) and any liability (including penalties, additions
to tax, interest and expenses) arising therefrom or with respect thereto. This
indemnification shall be made within 30 days from the date such Lender or such Agent (as the
case may be) makes written demand therefor.
SECTION 2.17
Replacement Lenders
.
If any Lender shall assert that any adoption or
change of the type described in
Section 2.13
hereof has occurred with respect to it or
shall assert (together with other Lenders comprising the Requisite Lenders for purposes of such
Section) that any event described in Section 2.05(b) has occurred with respect to it, or if any
Lender requests compensation under
Section 2.14
, or if the Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of any Lender
pursuant to
Section 2.05(b)
,
Section 2.08(b)
or
Section 2.16
, or if any
Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its expense
and effort, upon notice to such Lender and the Agent, require such Lender to, and such Lender
promptly shall, assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in
Section 12.10
), all its interest, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment);
provided
that (i) if such assignee is not a
Lender or an Affiliate thereof, the Borrower shall have received the prior written consent of the
Agent which consent shall not be unreasonably withheld or delayed, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans and participations in
Letters of Credit, accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (at least to the extent of such outstanding principal) and the
Borrower (in the case of all other amounts), (iii) in the case of any such assignment resulting
from a claim for compensation under
Section 2.14
or payments required to be made pursuant
to
Section 2.08(b)
or
Section 2.16
, such assignment will result in a reduction in
such compensation or payments compared to the compensation or payments payable to the assigning
Lender, and (iv) in the case of Section 2.05(b), no such assignment shall be made unless all
Lenders making such assertion are replaced.
Third Amended and Restated Credit Agreement
38
A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise,
the circumstances entitling the Borrower to require such assignment and delegation no longer exist
or cease to apply.
ARTICLE III
LETTERS OF CREDIT
SECTION 3.01
Letters of Credit
.
(a) Subject to and upon the terms and conditions herein set forth, the Issuing Bank
agrees that it will at any time and from time to time on or after the Effective Date and to
but excluding the thirtieth (30
th
) day prior to the Maturity Date, following its
receipt of a Letter of Credit Request and Application for Letter of Credit, issue for the
account of the Borrower and in support of the obligations of the Borrower or any of its
Subsidiaries, one or more standby or commercial letters of credit (the
Letters of
Credit
), up to a maximum amount outstanding at any one time for all Letters of Credit
of $10,000,000,
provided
that the Issuing Bank shall not issue any Letter of Credit
if at the time of such issuance: (i) Letter of Credit Obligations shall be greater than an
amount which, when added to all Advances under the Revolving Credit Notes and the Swing Line
Note then outstanding, would exceed the Total Revolving Credit Commitment or (ii) the expiry
date of such Letter of Credit is a date that is later than the earlier of (x) the thirtieth
(30
th
) day prior to the Maturity Date and (y) one year after its issuance;
provided
that any Letter of Credit with a one-year tenor may provide for the renewal
thereof for additional one-year periods (which shall in no event extend beyond the date
referred to in clause (x) above).
(b) The Issuing Bank shall neither renew or extend nor permit the renewal or extension
of any Letter of Credit (which renewal or extension will not be for any period ending after
the Maturity Date) if any of the conditions precedent to such renewal set forth in
Section 5.02
are not satisfied or waived or, after giving effect to such renewal,
the expiry date of such Letter of Credit would be a date that is later than the thirtieth
(30
th
) day prior to the Maturity Date.
SECTION 3.02
Letter of Credit Requests
.
(a) Whenever the Borrower desires that a Letter of Credit be issued for their account
or that the existing expiration date shall be extended, they shall give the Issuing Bank
(with copies to be sent to the Agent and each other Revolving Credit Lender) (i) in the case
of a Letter of Credit to be issued, at least five (5) Business Days prior written request
therefor and (ii) in the case of the extension of the existing expiry date of any Letter of
Credit, at least five (5) Business Days prior to the date on which the Issuing Bank must
notify the beneficiary thereof that the Issuing Bank does not intend to extend such existing
expiry date. Each such request shall be executed by the Borrower and shall be in the form
of
Exhibit 3.02
attached hereto (each a
Letter of Credit Request
) and
shall be accompanied by an Application for Letter of Credit therefor, completed to the
reasonable satisfaction of the Issuing Bank, and such other certificates, documents and
Third Amended and Restated Credit Agreement
39
other papers and information as the Issuing Bank or the Agent may reasonably request. Each
Letter of Credit shall be denominated in Dollars, shall expire no later than the date
specified in
Section 3.01
, shall not be in an amount greater than is permitted under
the clause (i) of
Section 3.01(a)
and shall be in such form as may be reasonably
approved from time to time by the Issuing Bank and the Borrower.
(b) The making of each Letter of Credit Request shall be deemed to be a representation
and warranty by the Borrower that such Letter of Credit may be issued in accordance with,
and will not violate the requirements of this Agreement. Unless the Issuing Bank has
received notice from any Revolving Credit Lender before it issues the respective Letter of
Credit or extends the existing expiry date of a Letter of Credit that one or more of the
conditions specified in
Article V
are not then satisfied, or that the issuance of
such Letter of Credit would violate this Agreement, then the Issuing Bank shall issue the
requested Letter of Credit for the account of the Borrower in accordance with the Issuing
Banks usual and customary practices. Upon its issuance of any Letter of Credit or the
extension of the existing expiry date of any Letter of Credit, as the case may be, the
Issuing Bank shall promptly notify the Borrower and the Agent and the Agent shall notify
each Revolving Credit Lender of such issuance or extension, which notices shall be
accompanied by a copy of the Letter of Credit actually issued or a copy of any amendment
extending the existing expiry date of any Letter of Credit, as the case may be.
SECTION 3.03
Letter of Credit Participations
.
(a) All Letters of Credit issued subsequent hereto shall be deemed to have been sold
and transferred by the Issuing Bank to each Revolving Credit Lender, and each Revolving
Credit Lender shall be deemed irrevocably and unconditionally to have purchased and received
from the Issuing Bank, without recourse or warranty, an undivided interest and
participation, (to the extent of such Lenders percentage participation in the Total
Revolving Credit Commitment) in each such Letter of Credit (including extensions of the
expiry date thereof), each substitute Letter of Credit, each drawing made thereunder and the
obligations of the Borrower under this Agreement and the other Loan Documents with respect
thereto, and any security therefor or guaranty pertaining thereto.
(b) In determining whether to pay under any Letter of Credit, the Issuing Bank shall
have no obligation relative to the Revolving Credit Lenders other than to confirm that any
documents required to be delivered under such Letter of Credit appear to have been delivered
and that they appear to comply on their face with the requirements of such Letter of Credit.
(c) In the event that the Issuing Bank makes any payment under any Letter of Credit,
the same shall be considered an Alternate Base Rate Advance without further action by any
Person. The Issuing Bank shall promptly notify the Agent, which shall promptly notify each
Revolving Credit Lender thereof. Each Revolving Credit Lender shall immediately pay to the
Agent for the account of the Issuing Bank the amount of such Lenders percentage
participation of such Advance. If any Revolving Credit Lender
Third Amended and Restated Credit Agreement
40
shall not have so made its
percentage participation available to the Agent, such Lender agrees to pay interest thereon,
for each day from such date until the date such amount is paid at the lesser of (i) the
Federal Funds Effective Rate and (ii) the Highest Lawful Rate.
(d) The Issuing Bank shall not be liable for, and the obligations of the Borrower and
the Lenders to make payments to the Agent for the account of the Issuing
Bank with respect to Letters of Credit shall not be subject to, any qualification or
exception whatsoever, including any of the following circumstances:
(i) any lack of validity or enforceability of the Original Credit Agreement,
this Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right which the
Borrower may have at any time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit, the Agent, any Issuing Bank, any Revolving
Credit Lender, or any other Person, whether in connection with this Agreement, any
Letter of Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transaction between the Borrower and the beneficiary named
in any such Letter of Credit);
(iii) any draft, certificate or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance or
observance of any of the terms of any of the Loan Documents; or
(v) the occurrence of any Default or Event of Default.
(e) The Issuing Bank shall not be liable for any error, omission, interruption or delay
in transmission, dispatch or delivery of any message or advice, however transmitted in
connection with any Letter of Credit, except for errors or omissions caused by such Issuing
Banks gross negligence or willful misconduct.
It is the express intention of the parties
hereto that such Issuing Bank, its officers, directors, employees and agents (other than
with respect to any claims by the Issuing Bank against any such officer, director, employee
or agent thereof) shall be indemnified and held harmless from, subject to the same type of
protections set forth in
Section 12.05(b)
, any action taken or omitted by such
Person under or in connection with any Letter of Credit or any related draft or document
arising out of or resulting from such Persons sole or contributory negligence, but not from
the gross negligence or willful misconduct of such Person.
The Borrower agrees that any
action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit
or the related drafts or documents, if done in accordance with the standards of care
specified in the Uniform Customs and Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce, Publication No. 500 (and any subsequent revisions thereof
approved by a Congress of the International Chamber of Commerce and adhered to by the
Issuing Bank) and, to the extent not inconsistent therewith, the Uniform
Third Amended and Restated Credit Agreement
41
Commercial Code of
the State of New York, shall not result in any liability of the Issuing Bank to the
Borrower.
SECTION 3.04
Increased Costs
.
(a) Notwithstanding any other provision herein, but subject to
Section 12.08
,
if any Revolving Credit Lender shall have determined in good faith that any change after
the Execution Date of any law, rule, regulation or guideline or the application or
effectiveness of any applicable law or regulation or any change after the Execution Date in
the interpretation or administration thereof, or compliance by any Revolving Credit Lender
(or any lending office of such Lender) with any applicable guideline or request from any
central bank or governmental authority (whether or not having the force of law) issued after
the Effective Date either (i) shall impose, modify or make applicable any reserve, deposit,
capital adequacy or similar requirement against Letters of Credit issued, or participated
in, by any Revolving Credit Lender or (ii) shall impose on any Revolving Credit Lender any
other conditions affecting this Agreement or any Letter of Credit; and the result of any of
the foregoing is to increase the cost to any Revolving Credit Lender of issuing, maintaining
or participating in any Letter of Credit, or reduce the amount received or receivable by any
Revolving Credit Lender hereunder with respect to Letters of Credit, by an amount deemed by
such Lender to be material, then, from time to time, the Borrower shall pay to the Agent for
the account of such Lender such additional amount or amounts as will reasonably compensate
such Lender for such increased cost or reduction by such Lender.
(b) Each Revolving Credit Lender will notify the Borrower through the Agent of any
event occurring after the date of this Agreement which will entitle such Lender to
compensation pursuant to subsection (a) above, as promptly as practicable. A certificate of
such Lender (i) stating that the compensation sought to be recovered pursuant to this
Section 3.04
is generally being charged to other similarly situated customers and
(ii) setting forth in reasonable detail such amount or amounts as shall be necessary to
compensate such Lender as specified in subsection (a) above may be delivered to the Borrower
(with a copy to the Agent) and shall be conclusive absent manifest error. The Borrower
shall pay to the Agent for the account of such Lender the amount shown as due on any such
certificate upon demand;
provided
that with respect to events occurring prior to any
notice given under this
Section 3.04(b)
, such Lender shall only be entitled to
recover compensation for such events occurring over a period of 120 days.
(c) Except as expressly provided in
Section 3.04(b)
, failure on the part of any
Revolving Credit Lender to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital with respect to any Letter
of Credit shall not constitute a waiver of such Lenders rights to demand compensation for
any increased costs or reduction in amounts received or receivable or reduction in return on
capital with respect to such Letter of Credit.
SECTION 3.05
Conflict between Applications and Agreement
.
To the extent that any
provision of any application related to any Letter of Credit is inconsistent with the provisions of
this Agreement, the provisions of this Agreement shall control.
Third Amended and Restated Credit Agreement
42
ARTICLE IV
FEES; COMMITMENTS
SECTION 4.01
Fees
.
(a) The Borrower agrees to pay to the Agent for the account of each Revolving Credit
Lender a commitment fee (the
Revolving Credit Commitment Fee
) for the period from
and including the Effective Date to the Maturity Date, computed at a rate per annum equal to
the Margin applicable to the Revolving Credit Commitment Fee set forth in the definition of
Margin on the average daily unused amount of the Revolving Credit Commitments calculated
on the basis of a 360-day year. Accrued Revolving Credit Commitment Fees shall be
calculated to the day immediately preceding each Designated Payment Date and to the date the
Revolving Credit Commitment is terminated. Revolving Credit Commitment Fees shall be due
and payable in arrears (i) on each Designated Payment Date commencing on the first such date
following the Execution Date and (ii) on the Maturity Date.
(b) The Borrower agrees to pay Letter of Credit Fees to the Issuing Bank and each
Lender in the applicable amount of the same payable thereto as set forth in the definition
of Letter of Credit Fee set forth in
Section 1.01
. Accrued Letter of Credit Fees
shall be due and payable in arrears (i) on each Designated Payment Date commencing on the
first such date following the Execution Date and (ii) on the Maturity Date, and shall be
calculated on the basis of a 360-day year.
(c) Without duplication of the other fees in this
Section 4.01
, the Borrower
agrees to pay to the Agent, for the account of Agent, in connection with its arrangement and
syndication of the credit facility; and for the account of each Lender as consideration for
such Lender making available the Loans, all of such other fees as have been agreed to
pursuant to the Agents Letter.
(d) In no event shall the Fees payable under this
Section 4.01
(to the extent,
if any, constituting interest under applicable laws) together with all amounts constituting
interest under applicable laws and payable in connection with this Agreement, the Notes and
the other Loan Documents exceed the Highest Lawful Rate.
SECTION 4.02
Reduction of Total Commitment
.
(a) Upon at least one (1) Business Days prior written notice to the Agent, the
Borrower shall have the right, without premium or penalty, to reduce or terminate the
Unutilized Commitment in part or in whole;
provided
, that (i) any such reduction
shall reduce proportionately the Revolving Credit Commitment of each of the Revolving Credit
Lenders and (ii) any partial reduction shall be in a minimum amount of $2,000,000 or an
integral multiple of $1,000,000 in excess thereof.
(b) The Revolving Credit Commitment, if not sooner terminated, shall terminate on the
Maturity Date.
Third Amended and Restated Credit Agreement
43
SECTION 4.03
Reallocation of Commitments
.
The Borrower shall have the one-time right
to elect to restructure (the
Senior Facilities Reallocation
) the Commitments and the
Loans as follows:
(a) in the event that the amount of the gross cash proceeds received by the Borrower
from the issuance and sale of the Permanent Securities is greater than or equal
to $150,000,000 and such proceeds are applied in accordance with the terms of the
Second Lien Credit Agreement and the terms set forth herein, the Borrower may elect, by
written notice to the Agent and the Lenders at least five (5) Business Days prior to the
date of receipt of such gross proceeds, to reallocate the Total Commitment remaining
hereunder after such application in an amount not to exceed $180,000,000, which shall be
comprised (at the election of the Borrower as specified in such notice) of (i) a Total
Revolving Credit Commitment of up to $150,000,000 and (ii) a Term Loan Commitment of up to
$30,000,000 (it being understood that the notice of such reallocation given by the Borrower
to the Agent and the Lenders may indicate different proposed reallocations that are
dependent on the amount of the net proceeds available from such issuance and sale); or
(b) in the event that the gross proceeds received by the Borrower from the issuance and
sale of the Permanent Securities is at least $75,000,000 but less than $150,000,000 and such
proceeds are applied in accordance with the terms of the Second Lien Credit Agreement and
the terms set forth herein, the Borrower may elect, by written notice to the Agent and the
Lenders at least five (5) Business Days prior to the date of receipt of such gross proceeds,
to reallocate the Total Commitment remaining hereunder after such application as mutually
agreed by the Borrower, the Agent and the Lenders in their sole discretion.
Any reallocation of the Commitments pursuant to this
Section 4.03
shall be made on a
pro rata basis among all of the Lenders such that (a) the percentage of the Commitments and Loans
held be each Lender before any such reallocation shall be the same after such reallocation, and
(b) each Lender shall continue to hold the same ratable portion of the Revolving Commitments and
the Term Loan.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01
Conditions Precedent to the Initial Advance
.
The obligation of each
Lender to make its initial Advance to the Borrower is subject to the condition that the Agent shall
have received the following, each in form and substance reasonably satisfactory to the Agent:
(a) this Agreement executed by the Borrower and the other Loan Parties;
(b) one Revolving Credit Note for each Revolving Credit Lender, each executed by the
Borrower and payable to the order of said Lender in the amount of its Revolving Credit
Commitment;
Third Amended and Restated Credit Agreement
44
(c) the Swing Line Note executed by the Borrower and payable to the order of the Swing
Line Lender in the amount of the Swing Line Commitment;
(d) one Term Note for each Term Loan Lender, each executed by the Borrower and payable
to the order of said Lender in the amount of its Term Loan Commitment;
(e) the Security Documents executed by each of the Loan Parties, as the case may be, to
be a party thereto, including all certificates evidencing shares of stock of the General
Partner and the Limited Partner and all partnership interests of the Partnership and
Subsidiaries pledged to the Agent for the benefit of the Lenders under the terms of any
Security Document, together with related stock powers duly executed by the applicable
pledgor;
(f) the Intercreditor Agreement, duly executed by the parties thereto;
(g) a Notice of Advance with respect to the initial Advance meeting the requirements of
Section 2.04
;
(h) a certificate (i) of the secretary or an assistant secretary or other Responsible
Officer of each of the Loan Parties certifying (A) true and complete copies of each of the
articles or certificate of incorporation, organization or partnership, as applicable, as
amended and in effect, of such Person, the bylaws, regulations, operating agreement, or
agreement of limited partnership, as applicable, as amended and in effect, of such Person
and the resolutions adopted by the Board of Directors, general partner, requisite members or
mangers, as applicable, of such Person, (1) authorizing the execution, delivery and
performance by such Person of the Loan Documents to which it is or will be a party and, as
to the Borrower, the Advances to be made hereunder, and (2) authorizing Responsible Officers
of such Person to negotiate, execute and deliver the Loan Documents to which it is or will
be a party and any related documents, including, any agreement contemplated by this
Agreement, and (B) the incumbency and specimen signatures of the Responsible Officers of
such Person executing any documents on its behalf and (ii) of a Responsible Officer of the
Borrower certifying, (A) that there has been no change in the businesses or financial
condition of such Person which would reasonably be expected to have a Material Adverse
Effect since December 31, 2004, and (B) that no Default or Event of Default shall have
occurred and be continuing or would result from the initial Advance;
(i) favorable, signed opinions addressed to the Agent and the Lenders from Vinson &
Elkins L.L.P. and Allen & Overy, counsel to the Loan Parties in form and substance
satisfactory to the Agent and its counsel;
(j) the Agent shall have received the payment for the Agent and the Lenders, as
applicable, of all Fees and expenses agreed upon by such parties and the Borrower to be
payable on or prior to the Execution Date or the Effective Date, as the case may be;
(k) certificates of appropriate public officials as to the existence, good standing
and, if material, qualification to do business as a foreign corporation, as
Third Amended and Restated Credit Agreement
45
applicable, of the Loan Parties and their respective Subsidiaries, in each jurisdiction in
which the ownership of their properties or the conduct of their business requires such
qualifications;
(l) copies of the Financials described in
Section 6.07
hereof;
(m) a Solvency Certificate, in form and substance satisfactory to Agent, executed by
the chief financial officer of the Borrower certifying as to the solvency of each Loan Party
before and after giving effect to the Transaction, the making of the initial Advance and the
application of proceeds thereof;
(n) a certificate in form and substance satisfactory to Agent executed by the chief
financial officer of the Borrower stating that, (i) for the twelve-month period ending March
31, 2005, pro forma Acquisition EBITDA of the Borrower and its Subsidiaries (taking into
account the UK Acquisition) was not less than $50,000,000, and (ii) the pro forma financial
statements and forecasts delivered pursuant to
clause (p)
below were prepared in
good faith on the basis of the assumptions stated therein, which assumptions are fair in
light of then existing conditions (it being understood that projections are necessarily
based upon opinions, estimates and projections and that the Borrower and its Subsidiaries
and representatives do not warrant that such opinions, estimates and projections will
ultimately prove to have been accurate);
(o) (i) unaudited financial statements of the Company for any interim quarterly periods
which have ended since the date of the most recent audited financial statements and at least
30 days prior to the Effective Date, which (A) shall be reasonably satisfactory in form and
substance to the Arrangers, and (B) shall not be materially inconsistent with the
information and projections provided to the Arrangers and the Lenders prior to the Effective
Date; and (ii) forecasts prepared by management of the Borrower and its Subsidiaries, each
in form reasonably satisfactory to the Arrangers, of balance sheets, income statements and
cash flow statements on a quarterly basis for the first year following the Effective Date
and on an annual basis for each year thereafter during the term of the Agreement;
(p) (i) all filings, recordations and searches necessary or desirable in connection
with the Liens and security interests in the Collateral described in the Security Documents
shall have been duly made (or otherwise provided for in a manner reasonably satisfactory to
the Agent); all filing and recording fees and taxes shall have been duly paid (or otherwise
provided for in a manner reasonably satisfactory to the Agent); and (ii) the Agent shall
have received satisfactory evidence that the Agent has (or, upon the completion of any
filings or recordings of any documents, financing statements or instruments delivered to the
Agent will have) a valid and perfected first priority Lien and security interest in the
Collateral described in the Security Documents;
(q) Certificates of Insurance evidencing the existence of all insurance required to be
maintained pursuant to
Section 6.17
, including endorsements naming the Agent on
behalf of the Lenders as an additional insured or loss payee, as the case may be;
Third Amended and Restated Credit Agreement
46
(r) evidence satisfactory to the Agent that the Borrower has received all necessary
governmental, shareholder and material third party consents and/or approvals necessary to
effect the UK Acquisition, expiration of all applicable waiting periods without any action
being taken by any authority that could restrain, prevent or impose any material adverse
conditions on any of the Borrower and its Subsidiaries, or the Transaction, or that could
seek to restrain or threaten any of the foregoing, and the absence of any applicable law or
regulation which in the reasonable judgment of the Arrangers could have such material
adverse conditions or effect;
(s) evidence that the UK Acquisition shall have been consummated simultaneously with
the initial Credit Event hereunder in accordance with the terms of the UK Acquisition
Agreement and in compliance with applicable law and regulatory approvals;
(t) evidence of receipt by the Borrower of not less than $75,000,000 gross cash
proceeds from the advance of the loans under the Second Lien Credit Agreement;
(u) an executed deed of release with respect to the Companys term loan Indebtedness
and other obligations under its existing credit facility with The Royal Bank of Scotland
(other than obligations relating to the overdraft facility permitted under Section 8.03(l)),
prior to or simultaneously with the occurrence of the Effective Date, in form and substance
satisfactory to the Agent and confirmation that all Liens or other security interests
granted by the Company in connection with such credit facility have been released;
(v) all documentation and other information requested by the Agent or any Arranger and
required by bank regulatory authorities under applicable know your customer and anti-money
laundering rules and regulations, including, without limitation, the Act; and
(w) such other consents, approvals, opinions or documents as the Agent may reasonably
request.
The acceptance of the benefits of the initial Credit Event shall constitute a representation
and warranty by the Borrower to the Agent and each of the Lenders that all of the conditions
specified in this
Section 5.01
, shall have been satisfied or waived as of that time.
SECTION 5.02
Conditions Precedent to All Credit Events
.
The obligation of the Lenders
to make any Advance is subject to the further conditions precedent that on the date of such Credit
Event:
(a) The conditions precedent set forth in
Section 5.01
shall have theretofore
been satisfied or waived;
(b) The representations and warranties set forth in
Article VI
of this
Agreement and the representations and warranties set forth in the Security Documents shall
be true and correct in all material respects as of and as if such representations and
warranties were made on, the date of the proposed Advance (unless such representation
Third Amended and Restated Credit Agreement
47
and warranty expressly relates to an earlier date or is no longer true and correct
solely as a result of transactions not prohibited by the Loan Documents), and the Borrower
shall be deemed to have certified to the Agent and the Lenders that such representations and
warranties are true and correct in all material respects by submitting a Notice of Advance;
(c) The Borrower shall have complied with the provisions of
Section 2.02
,
Section 3.02
and/or
Section 5.04
, as applicable;
(d) No Default or Event of Default shall have occurred and be continuing or would
result from such Credit Event; and
(e) No Material Adverse Effect shall have occurred since the delivery of the most
recent Financials.
The acceptance of the benefits of each such Credit Event shall constitute a representation and
warranty by the Borrower to the Agent and each of the Lenders that all of the conditions specified
in this
Section 5.02
above exist as of that time.
SECTION 5.03
Delivery of Documents
.
All of the Notes, Security Documents,
certificates and legal opinions referred to in this
Article V
unless otherwise specified,
shall be delivered to the Agent for the account of each of the Lenders and, except for the Notes,
if requested by the Agent in sufficient copies for each of the Lenders and shall be reasonably
satisfactory in form and substance to the Agent. Any Lender may request in writing to the Agent
and the Borrower a copy of any other document or paper referred to in this
Article V
and
the Borrower will thereafter provide same to such Lender.
SECTION 5.04
Permitted Acquisition Advances
.
Unless the Borrower receives prior
written approval from the Requisite Lenders, the obligation of each Lender to make any Advance to
be used by the Borrower to consummate a Permitted Acquisition other than the UK Acquisition (each,
an
Acquisition Advance
) is subject to the further conditions precedent that on the date
of such Credit Event:
(a)
Acquisition Advance Request
. The Borrower shall have provided to the Agent
and each Lender at least fifteen (15) days prior to the date that the proposed Acquisition
Advance is to be requested, the following: (i) the name of the Person (
Target
)
whose stock or assets are to be acquired or the name of the merchant associated with such
Large Program (
Large Program Merchant
) whose merchant agreements and/or ATM
Equipment are to be acquired, as applicable; (ii) a description of the nature of the
Targets or Large Program Merchants business, as applicable; (iii) copies of the
documentation (or substantially final drafts of the documentation) intended to effect the
proposed Acquisition (the
Acquisition Agreements
); (iv) a summary of the terms and
conditions of the proposed Acquisition; (v) a certificate of the chief financial officer or
chief executive officer of the Borrower certifying that no Default or Event of Default
exists or could reasonably be expected to occur as a result of the proposed Acquisition; and
(vi) any other information the Agent may reasonably request. In addition, at least fifteen
(15) days prior to the date that the Acquisition Advance is to be requested, the Borrower
must have been made available, and at the
Third Amended and Restated Credit Agreement
48
Agents request the Borrower shall use reasonable efforts to make available the officers and directors of
the Target or Large Program Merchant, as applicable, to the Agent and the Lenders to answer
questions regarding the proposed Acquisition and the documentation related thereto.
(b)
Acquisition Criteria
. The Borrower shall provide to the Agent and each
Lender evidence that:
(i) The Target is involved in or, if applicable, the merchant agreements and/or
related ATM Equipment related to the Large Program Merchant are part of, an Approved
Business;
(ii) Neither the Target nor its assets, or the merchant agreements and/or
related ATM Equipment related to the Large Program Merchant, shall be subject to any
contingent obligations (including contingent obligations arising from any
environmental liabilities), environmental liabilities, unsatisfied judgments or any
pending action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration that could reasonably be expected to result in the
proposed acquisition having a Material Adverse Effect; and
(iii) The following criteria are satisfied:
(A) The Borrower shall have provided to the Agent and each Lender (i)
copies of the pro forma financial statements of the Target for the period of
four fiscal quarters most recently ended prior to the closing of the
proposed Acquisition for which financial statements are available and (ii) a
pro forma financial projection of the Borrower and the Subsidiaries
(including the Target) for the period following the date of the consummation
of the proposed Acquisition to the Maturity Date which reflects compliance
with the financial covenants set forth in
Section 8.12
of this
Agreement;
(B) Unless the Borrower receives prior written approval from Requisite
Lenders to the contrary, the Acquisition Advance associated with any
Permitted Acquisition must not exceed $20,000,000; and
(C) The Borrower shall have provided to Agent a certificate executed by
a Responsible Officer of the Borrower which certifies compliance with the
criteria set forth in this
clause (iii)
.
Notwithstanding the foregoing and anything herein to the contrary, in connection with any
Acquisition Advance that is equal to or less than $5,000,000, the Borrower shall only be
required to provide to Agent on the date of such Credit Event a certificate executed by a
Responsible Officer of the Borrower which certifies that no Default or Event of Default
shall have occurred and be continuing or would result from such Acquisition Advance.
Third Amended and Restated Credit Agreement
49
(c)
Acquisition Agreements
. Promptly after the closing of any proposed
Acquisition funded with an Acquisition Advance greater than $5,000,000, (i) Agent and
the Lenders shall have received executed copies of the Acquisition Agreements relating
to the proposed Acquisition; (ii) the Acquisition Agreements shall be in full force and
effect and no material term or condition thereof shall have been amended, modified, or
waived after the execution thereof (other than solely to extend the date by which the
proposed acquisition is required to occur) except those for which prior written notice was
provided to Agent; (iii) none of the parties to the Acquisition Agreements shall have failed
to perform any material obligation or covenant required by the Acquisition Agreement to be
performed or complied with by it on or before the date of the closing of the proposed
acquisition unless waived with the consent of the Agent; and (iv) Agent shall have received
a certificate from a Responsible Officer of the Borrower to the effect set forth in
clauses (i)
,
(ii)
and
(iii)
above.
(d)
Proposed Acquiree Loan Documents
. If the proposed Acquisition is an
Acquisition of the stock of a Target and the Target will not be merged with an existing
Guarantor or the Borrower contemporaneously with such Acquisition, then (i) the Target shall
execute and deliver to Agent documentation required by
Section 7.09
, (ii) the
Borrower shall execute and deliver to the Agent an amendment to the relevant Security
Documents describing as collateral thereunder the stock of the Target, and (iii) the
Borrower shall deliver to the Agent the certificates representing the stock of the Target
together with undated stock powers duly executed in blank. If the proposed Acquisition is
an Acquisition of assets, the Borrower or the Subsidiary acquiring the assets shall execute
and deliver to the Agent such documentation requested by Agent to cause the property
acquired to be subject to a perfected Lien in favor of Agent for the benefit of the Lenders
and for such Lien to have priority over all other Liens other than Permitted Liens.
(e)
Consent of Requisite Lenders
. If at the time of such Acquisition the Total
Leverage Ratio is equal to or greater than 5.00:1:00, such Acquisition shall have been
approved by the Requisite Lenders.
ARTICLE VI
REPRESENTATIONS AND WARRANTEES
In order to induce the Lenders to enter into this Agreement and to make the Advances provided
for herein, the Borrower makes, on or as of the occurrence of each such Credit Event (except to the
extent such representations or warranties relate to an earlier date or are no longer true and
correct in all material respects solely as a result of transactions not prohibited by the Loan
Documents), the following representations and warranties to the Agent and the Lenders:
SECTION 6.01
Organization and Qualification
.
Each Loan Party and its respective
Subsidiaries (a) is a limited partnership or corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or organization, (b) has the
corporate or organizational power to own its property and to carry on its business as now
Third Amended and Restated Credit Agreement
50
conducted
and (c) is duly qualified as a foreign corporation or limited partnership to do business
and is in good standing, in each case in each jurisdiction in which the failure to be so
qualified or in good standing would reasonably be expected to have a Material Adverse Effect.
SECTION 6.02
Authorization and Validity
.
Each Loan Party has the corporate or
organizational power and authority to execute, deliver and perform its obligations hereunder and
under the other Loan Documents to which it is a party and all such action has been duly authorized
by all necessary corporate proceedings on its part. The Loan Documents to which each Loan Party is
a party have been duly and validly executed and delivered by such Loan Party and constitute valid
and legally binding agreements of such Loan Party enforceable in accordance with the respective
terms thereof, except, in each case, as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar laws relating to or
affecting the enforcement of creditors rights generally and general principles of equity.
SECTION 6.03
Governmental Consents
.
No authorization, consent, approval, license or
exemption (other than such exemptions that exist under applicable law, that are permitted, or that
have been obtained) of any Person or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, is necessary
for the valid execution, delivery or performance by any Loan Party of any Loan Document to which it
is a party or for the grant of a security interest in or mortgage on the collateral covered by the
Loan Documents, except such matters relating to performance as would ordinarily be done in the
ordinary course of business after the Effective Date.
SECTION 6.04
Conflicting or Adverse Agreements or Ratifications
.
No Loan Party and no
Subsidiary of any Loan Party is a party to any contract or agreement or subject to any restriction
which would reasonably be expected to have a Material Adverse Effect. As of the Execution Date,
all agreements (other than this Agreement and the other Loan Documents) of the Loan Parties and
their respective Subsidiaries relating to the lending of money or the issuance of letters of credit
to or for the account of any party are described hereto on
Schedule 6.04
. Neither the
execution nor delivery of the Loan Documents nor compliance with the terms and provisions hereof or
thereof will be contrary to the provisions of, or constitute a default under (a) the charter or
bylaws of any Loan Party or any Subsidiary of any Loan Party, (b) any applicable law or any
applicable regulation, order, writ, injunction or decree of any court or governmental
instrumentality or (c) any material agreement to which any Loan Party or any Subsidiary of any Loan
Party is a party or by which it is bound or to which it is subject.
SECTION 6.05
Title to Assets; Licenses and Permits
.
The Borrower and the Partnership
have good title to all personal property and good and indefeasible title to or a subsisting
leasehold interest in, all realty as reflected as of the Effective Date on its books and records as
being owned or leased by it subject to no Liens, except Permitted Liens. All of such assets are
being maintained by the appropriate Person in good working condition in accordance with industry
standards. The items of real and personal property owned by or leased to and used by the Borrower
and each Subsidiary of the Borrower constitute all of the material assets used in the conduct of
its business as presently conducted and neither this Agreement nor any other Loan Document, nor any
transaction contemplated under any such agreement, will affect any right, title or interest of the
Borrower or Subsidiary of the Borrower in and to any of such assets in a
Third Amended and Restated Credit Agreement
51
manner that would have or
is reasonably likely to have a Material Adverse Effect. Each of the
Loan Parties and their respective Subsidiaries is current and in good standing with respect to
all governmental approvals, permits, certificates, licenses, consents and franchises necessary to
continue to conduct its business and to own or lease and operate its properties as heretofore
conducted, owned, leased or operated except where any such failure to maintain approvals, permits,
certificates, licenses, consents and franchises would not have a Material Adverse Effect.
Notwithstanding the foregoing, except as permitted pursuant to
Section 8.16
, no Loan Party
or any Subsidiary of any Loan Party other than the Partnership and the Company owns any material
assets (other than (i) the Voting Equity Interests of the General Partner and the Limited Partner
owned by the Borrower, (ii) the Voting Equity Interests of the Partnership owned by the General
Partner and the Limited Partner, and (iii) Equity Interests in any Foreign Subsidiary owned by the
Borrower or any other Foreign Subsidiary of the Borrower) or conducts any material business
operations.
SECTION 6.06
Litigation
.
Except as shown on
Schedule 6.06
, on the Effective
Date, no proceedings before any court or governmental agency or department are pending against any
Loan Party or any Subsidiary of any Loan Party and to the knowledge of the Borrower, none of same
affect any Loan Party or any Subsidiary of any Loan Party or have been threatened. At any time
after the Effective Date, no proceedings against or affecting any Loan Party or any Subsidiary of
any Loan Party are pending or, to the knowledge of the Borrower, threatened before any court or
governmental agency or department which could reasonably be expected to have a Material Adverse
Effect.
SECTION 6.07
Financial Statements
.
Prior to the Execution Date, the Borrower has
furnished to the Lenders (i) audited consolidated financial statements of the Borrower and its
Subsidiaries for fiscal year 2003 and fiscal year 2004 certified by a firm of independent public
accountants of recognized national standing mutually agreed upon by the Borrower and Agent, (ii)
interim consolidated financial statements of the Borrower and its Subsidiaries as of Borrower March
31, 2005 (such financial statements shall include balance sheets, income statements and cash flow
statements and collectively, are referred to as
Financials
), (iii) a pro forma projected
balance sheet of the Borrower and its Subsidiaries as of June 30, 2005, after giving effect to the
UK Acquisition and the financings contemplated hereby, (iv) a pro forma calculation of trailing
twelve month Acquisition EBITDA for the Borrower and its Subsidiaries for the twelve fiscal month
period most recently ended prior to the Effective Date which gives effect, on a pro forma basis, to
the UK Acquisition, and (v) projected Financials of the Borrower and its Subsidiaries for the five
year period after the Effective Date. The Financials have been prepared in conformity with GAAP
consistently applied and present fairly, in all material respects, the financial condition of the
Borrower and its consolidated Subsidiaries as of the dates thereof. Since December 31, 2004, there
has not occurred any event which would reasonably be expected have a Material Adverse Effect.
SECTION 6.08
No Defaults
.
No Loan Party and no Subsidiary of any Loan Party is in
default (a) under any material provisions of any instrument evidencing any Indebtedness or of any
agreement relating thereto in such manner as to cause a Material Adverse Effect, (b) in any respect
under or in violation of any order, writ, injunction or decree of any court or governmental
instrumentality, in such manner as to cause a Material Adverse Effect or (c) under
Third Amended and Restated Credit Agreement
52
any provision of any Material Contract, which default would reasonably be expected to have a
Material Adverse Effect.
SECTION 6.09
Investment Company Act
.
No Loan Party and no Subsidiary of any Loan
Party is, nor is it directly or indirectly controlled by or acting on behalf of any Person which
is, an investment company, as such term is defined in the Investment Company Act of 1940, as
amended.
SECTION 6.10
Utility Regulation
.
No Loan Party and no Subsidiary of any Loan Party is
(i) a holding company, or a subsidiary company of a holding company, or an affiliate of a
holding company, or an affiliate of a subsidiary company of a holding company, or a public
utility company within the meaning of the Public Utility Holding Company Act of 1935, as amended,
(ii) an electric utility or public utility within the meaning of the Federal Power Act, as
amended, or (iii) an electric utility, public utility, or utility under any state law
regulating public utilities.
SECTION 6.11
ERISA
.
(a) The Borrower and each ERISA Affiliate have operated and administered each Plan and
Employee Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and would not reasonably be expected to have a
Material Adverse Effect. All foreign pension schemes operated by the Borrower and each of
its Subsidiaries is operated in accordance with the requirements of applicable foreign law,
except where noncompliance could not reasonably be expected to have a Material Adverse
Effect. Neither the Borrower nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA) which would individually or in the
aggregate reasonably be expected to have a Material Adverse Effect and no event, transaction
or condition has occurred or exists that would reasonably be expected to result in the
incurrence of any such liability by the Borrower or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets of the Borrower or any
ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or
excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect.
(b) No accumulated funding deficiency (as defined in section 412 of the Code or section
302 of ERISA), whether or not waived, exists or is expected to be incurred with respect to
any Plan.
(c) The Borrower and its ERISA Affiliates have not incurred withdrawal liabilities (and
are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect.
Third Amended and Restated Credit Agreement
53
(d) The expected post-retirement benefit obligation (determined as of the last day of
the Borrowers most recently ended fiscal year in accordance with Financial Accounting
Standards Board Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code) of the Borrower and its
Subsidiaries would not reasonably be expected to have a Material Adverse Effect.
SECTION 6.12
Environmental Matters
.
Except as disclosed on
Schedule 6.12
, the
Borrower and its Subsidiaries (a) possess all environmental, health and safety licenses, permits,
authorizations, registrations, approvals and similar rights necessary under Environmental Laws for
them to conduct their operations as now being conducted, except where failure to have such
licenses, permits, authorizations, registrations, approvals, and similar rights would not
reasonably be expected to have a Material Adverse Effect, and (b) each of such licenses, permits,
authorizations, registrations, approvals and similar rights is valid and subsisting, in full force
and effect and enforceable by the Borrower and its Subsidiaries, and the Borrower and its
Subsidiaries are in compliance with all terms, conditions or other provisions of such permits,
authorizations, regulations, approvals and similar rights except for such failure or noncompliance
that, individually or in the aggregate for the Borrower and its Subsidiaries, would not reasonably
be expected to have a Material Adverse Effect. Except as disclosed on
Schedule 6.12
,
neither the Borrower nor any Subsidiary has received any written notices of any violation or
noncompliance with, or remedial obligation under, any Environmental Laws (other than any violation,
non-compliance, or remedial obligation that has been cured or would not reasonably be expected to
have a Material Adverse Effect) and there are no writs, injunctions, decrees, orders or judgments
outstanding under the Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of
the Borrower and its Subsidiaries, investigations or inquiries pending or threatened under
Environmental Laws, relating to the ownership, use, condition, maintenance or operation of, or
conduct of business related to, any property owned, leased or operated by the Borrower and its
Subsidiaries or other assets of the Borrower and its Subsidiaries other than those violations,
instances of noncompliance, obligations, writs, injunctions, decrees, orders, judgments, lawsuits,
claims, proceedings, investigations or inquiries that individually or in the aggregate for the
Borrower and its Subsidiaries, would not reasonably be expected to have a Material Adverse Effect.
Except as disclosed on
Schedule 6.12
, there are no obligations, undertakings or liabilities
arising out of or relating to Environmental Laws which the Borrower and its Subsidiaries have
agreed to, assumed or retained, or by which the Borrower and its Subsidiaries are adversely
affected, by contract or otherwise, except such obligations, undertakings or liabilities as would
not reasonably be expected to have a Material Adverse Effect. Except as disclosed on
Schedule
6.12
, the Borrower and its Subsidiaries have not received a written notice or claim to the
effect that any of them are or may be liable to any other Person as the result of a Release or
threatened Release of a Hazardous Material except such notice or claim that would not reasonably be
expected to have a Material Adverse Effect.
SECTION 6.13
Purpose of Loans
.
(a) The proceeds of the Term Loan and the Revolving Credit Loans made on the Effective
Date will be used by the Borrower to finance in part the UK Acquisition and the Refinancing
and to pay fees and expenses incurred in connection with the Transaction. The proceeds of
other Revolving Credit Loans shall be used by the
Third Amended and Restated Credit Agreement
54
Borrower for working capital, to finance Permitted Acquisitions, to finance Capital
Expenditures and for general corporate purposes.
(b) None of the proceeds of any Advance will be used directly or indirectly for the
purpose of purchasing or carrying any margin stock within the meaning of Regulation U
(herein called
margin stock
) or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin stock, or for any
other purpose which might constitute this transaction as a purpose credit within the
meaning of Regulation U. Neither the Borrower nor any agent acting on its behalf has taken
or will take any action which might cause this Agreement or any other Loan Document to
violate, or involve the Lenders in a violation of, Regulation T, Regulation U, Regulation X
or any other regulation of the Board of Governors or to violate the Securities and Exchange
Act of 1934, as amended and the rules and regulations promulgated thereunder.
SECTION 6.14
Subsidiaries
.
Except as disclosed on
Schedule 6.14
or as
disclosed in writing to the Agent after the Execution Date, the Borrower does not have any
Subsidiaries, and neither the Borrower nor any Subsidiary of the Borrower is a party to any joint
venture, partnership or similar organization or arrangement.
SECTION 6.15
Solvency
.
After giving effect to the initial Advance hereunder and all
other Indebtedness of the Borrower at the time of such Advance, (i) the fair value and present fair
saleable value of the Borrowers assets exceeds the Borrowers stated liabilities and identified
contingent liabilities, on a consolidated basis; (ii) the Borrower is able to pay its debts as they
become due; (iii) the Borrower has sufficient capital to engage in its business as management has
indicated it is now conducted; and (iv) no insolvency proceedings or creditors process of a nature
described in
Section 9.01(f)
or
(g)
has been taken or, to the knowledge of the
Borrower, threatened in relation to the Borrower or any of its Subsidiaries.
SECTION 6.16
Accuracy of Information
.
Neither this Agreement nor any other document,
certificate, statement or other further information (excluding projections), taken as a whole,
furnished in writing to the Agent or any Lender by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any transaction contemplated hereby, taken as a
whole, contains any untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein and therein not misleading. The financial
information with respect to the Borrowers projections, copies of which have been furnished to each
Lender prior to the Execution Date, were prepared in good faith on the basis of the assumptions
stated therein, which assumptions were believed by the Borrower to be reasonable in all material
respects at the time made.
SECTION 6.17
Insurance
.
The Borrower and its Subsidiaries maintain insurance of such
types as is usually carried by corporations of established reputation engaged in the same or
similar businesses and similarly situated with financially sound, responsible and reputable
insurance companies or associations (or, as to workers compensation or similar insurance, with an
insurance fund or by self-insurance authorized by the jurisdiction in which its operations are
carried on) and in such amounts (and with co-insurance and deductibles) as such insurance is
usually carried by corporations of established reputation and engaged in the same or similar
Third Amended and Restated Credit Agreement
55
businesses and similarly situated. Neither the Borrower nor its Subsidiaries maintains any
formalized self-insurance program with respect to its assets or operations or material risks with
respect thereto.
SECTION 6.18
Indebtedness and Contingent Liabilities
.
As of the Effective Date, the
Loan Parties and their respective Subsidiaries do not have any outstanding Indebtedness (excluding
the Loans and the amounts set forth on
Schedule 6.18
hereto) or material contractually
assumed contingent liabilities.
SECTION 6.19
Compliance with Laws
.
The Loan Parties and their respective Subsidiaries
are in compliance with all of the following, (except as to ERISA and Environmental Laws, only to
the extent required under
Sections 6.11
and
6.12
, respectively) as applicable in
respect of the conduct of their respective businesses and the ownership of their respective
properties: all statutes, material regulations and material orders of, and all restrictions imposed
by all governmental bodies, except any failure to comply that would not reasonably be expected to
have a Material Adverse Effect.
SECTION 6.20
Security Interests
.
The Security Documents create valid Liens in all of
the collateral described therein in favor of the Agent for the benefit of the Lenders securing the
Obligations and constitute (subject to (i) the filing after the Effective Date of financing
statements and assignments of patents and trademarks delivered to the Agent on the Execution Date
and thereafter from time to time and (ii) delivery of any collateral after the Effective Date as
provided herein or any other Loan Document) perfected first priority Liens in substantially all of
such collateral described therein subject to no Liens other than Permitted Liens (other than titled
equipment and patents, trademarks, copyrights and similar items existing or issued outside of the
United States).
SECTION 6.21
Material Contracts
.
(a) As of the Execution Date, the Material Contracts (i) have been duly executed and
delivered by, and constitute the legal, valid and binding obligation of the Loan Parties
(and, where applicable, their respective Subsidiaries) and to the Borrowers knowledge all
other parties thereto, enforceable against such parties in accordance with its terms, (ii)
are in full force and effect and (iii) except as disclosed to the Agent, have not been
amended or modified in a manner which would reasonably be expected to have a Material
Adverse Effect.
(b) All consents required under the Material Contracts in connection with the Security
Documents have been obtained by the Borrower.
SECTION 6.22
Taxes
. The Borrower and its Subsidiaries have filed all material
Federal, state and other material tax returns and reports required to be filed, and have paid all
material Federal, state, foreign and other material taxes, assessments and governmental charges or
levies imposed upon them or upon their respective incomes or profits, or upon any properties
belonging to any of them, prior to the date on which penalties attach thereto, except for such
amounts that are being contested in good faith and by appropriate actions and for which appropriate
reserves have been made on the books of such entity in accordance with GAAP.
Third Amended and Restated Credit Agreement
56
There is no proposed tax assessment against the Borrower or any Subsidiary that would, if
made, have a Material Adverse Effect. No Loan Party nor any of its Subsidiaries is party to any
tax sharing agreement with any Person other than tax sharing agreements between Loan Parties. The
Merger will not be taxable to the Company or any of its Subsidiaries or Affiliates.
SECTION 6.23
Intellectual Property; Licenses, Etc
. Each Loan Party and each of its
Subsidiaries owns, or possesses the right to use, all of the trademarks, service marks, trade
names, copyrights, patents, patent rights, franchises, licenses and other intellectual property
rights (collectively,
IP Rights
) that are reasonably necessary for the operation of their
respective businesses, without conflict with the rights of any other Person, and set forth on
Schedule 6.23
is a complete and accurate list of all such IP Rights owned or used by each
Loan Party and each of its Subsidiaries. To the best knowledge of the Borrower, no slogan or other
advertising device, product, process, method, substance, part or other material employed, or
contemplated to be employed, by any Loan Party or any Subsidiary of any Loan Party infringes upon
any rights held by any other Person.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that on and after the date hereof and until the Notes are
paid in full and the Total Commitment has terminated:
SECTION 7.01
Information Covenants
.
Except for those items described below in
Sections 7.01(e)
,
(f)
and
(h)
which will be furnished by the Borrower to
the Agent, the Borrower will furnish or cause to be furnished to each Lender:
(a) As soon as available, and in any event within thirty (30) days after each month-end
and within forty-five (45) days after the close of each fiscal quarter in each fiscal year
of the Borrower, the consolidated monthly and consolidated quarterly unaudited balance
sheets of the Borrower and its Subsidiaries as of the end of such periods and the related
consolidated (and consolidating for quarter-end periods) unaudited statements of income and
cash flows for such periods (
provided
, that such cash flows shall only be provided
quarterly), setting forth, in each case, comparative figures for the related periods in the
prior fiscal year and, with respect to such statements of income, for the budget delivered
pursuant to subsection (f) below, all of which shall be certified by any Responsible Officer
of the Borrower as fairly presenting in all material respects, the consolidated financial
position of the Borrower as of the end of such period and the results of its operations for
the period then ended in accordance with GAAP, subject to changes resulting from normal
year-end audit adjustments, and a narrative report describing the operations of the Borrower
and its Subsidiaries with respect to each period covered by the related financial statements
(and addressing the comparisons to prior periods contained therein), in the form agreed upon
by the Borrower and Agent prior to Closing or otherwise in a form acceptable to the Agent;
and
(b) As soon as available, and in any event within ninety (90) days after the close of
each fiscal year of the Borrower, the audited consolidated balance sheet of the
Third Amended and Restated Credit Agreement
57
Borrower and its Subsidiaries as at the end of such fiscal year and the related audited
statements of income and audited cash flows for such fiscal year, setting forth, in each
case, comparative figures for the preceding fiscal year and certified by independent
certified public accountants of recognized national standing, whose report shall be without
limitation as to the scope of the audit, unqualified and otherwise reasonably satisfactory
in substance to the Agent.
(c) Promptly after any Responsible Officer of the Borrower or any Subsidiary of the
Borrower obtains knowledge thereof, notice of:
(i) any material violation of, noncompliance with, or remedial obligations
under, Environmental Laws by the Borrower or any Subsidiary of the Borrower,
(ii) any material Release or threatened material Release of Hazardous Materials
affecting any property owned, leased or operated by the Borrower or its
Subsidiaries,
(iii) the existence of any event or condition which constitutes a Default or an
Event of Default,
(iv) any material violation of public health or welfare laws or regulations by
the Borrower or any Subsidiary of the Borrower,
(v) the filing of any tax or other governmental Liens against the Borrower or
any Subsidiary of the Borrower covering amounts owing in excess of $150,000 in the
aggregate for all such Liens,
(vi) the creation of any Subsidiary,
(vii) any Person having given any written notice to the Borrower or its
Subsidiaries or taken any other action with respect to a claimed default or event of
default under (A) the Second Lien Loan Documents, (B) any Material Contract, or (C)
any other instrument or agreement which would reasonably be expected to have a
Material Adverse Effect,
(viii) the institution of any litigation in which the damages claimed are in
excess of $1,000,000 that are not fully covered by insurance (except for any
applicable deductibles), and
(ix) any other condition or event which, in the opinion of management of the
Borrower, would reasonably be expected to have a Material Adverse Effect, which
notice shall specify the nature and period of existence thereof and specifying the
notice given or action taken by such Person and the nature of any such claimed
default, event or condition and, in the case of an Event of Default or Default, what
action has been taken, is being taken or is proposed to be taken with respect
thereto.
Third Amended and Restated Credit Agreement
58
(d) On any Financial Statement Delivery Date, a certificate of a Responsible Officer of
the Borrower to the effect that no Default or Event of Default exists or, if any Default or
Event of Default does exist, specifying the nature and extent thereof and the action that is
being taken or that is proposed to be taken with respect thereto, which certificate shall
set forth the calculations required to establish whether the Borrower was in compliance with
the provisions of
Section 8.12
as at the end of such fiscal period or year, as the
case may be.
(e) Promptly upon receipt thereof a copy of any report or management letter submitted
to the Borrower or its Subsidiaries by its independent accountants in connection with any
regular or special audit of the Borrowers or its Subsidiaries records.
(f) Within sixty (60) days after the start of each fiscal year of the Borrower
beginning with fiscal year 2006, a financial plan and budget of the Borrower and its
Subsidiaries for such fiscal year prepared by the Borrower in its ordinary course of
business, which financial plan and budget shall include a balance sheet and related
statements of income and cash flow for such forthcoming fiscal year.
(g) Promptly upon filing or distribution, copies of all periodic and other reports,
proxy statements and other materials filed by the Borrower or any of its Subsidiaries with
the Securities and Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission), or with any national securities
exchange, or distributed by the Borrower to its shareholders generally.
(h) As soon as available and in any event within forty-five (45) days of the close of
(i) each fiscal quarter of the Borrower through the first anniversary of the Effective Date
and (ii) thereafter, each fiscal year, a report setting forth all owned or leased ATM
Equipment locations.
(i) Within fifteen (15) days following the consummation of any Permitted Acquisition
pursuant to an Acquisition Advance equal to or less than $5,000,000, the Borrower shall
provide to the Agent (i) the name of the Person whose stock or assets were acquired; (ii) a
description of the nature of such Persons business; (iii) copies of the documentation that
effectuated the Acquisition; (iv) any documentation required by
Section 7.09
, if
applicable; (v) evidence that such Person or Large Program, as the case may be, is involved
in an Approved Business; (vi) a pro forma financial projection of the Borrower and its
Subsidiaries for a period of four (4) fiscal quarters following the date of the consummation
of the Acquisition which reflects compliance with the financial covenants set forth in
Section 8.12
of this Agreement; and (vii) any other information the Agent may
reasonably request (including any supplements or amendments to any applicable Security
Documents).
(j) From time to time and with reasonable promptness, such other information or
documents as the Agent or any Lender through the Agent may reasonably request.
Third Amended and Restated Credit Agreement
59
SECTION 7.02
Books, Records and Inspections
.
The Loan Parties will maintain and cause
their respective Subsidiaries to maintain corporate books and financial records, and will permit,
or cause to be permitted any Person designated by the Agent, and after the occurrence and during
the continuance of an Event of Default, any Person designated by any Lender, to visit and inspect
any of the properties of the Borrower and its Subsidiaries, to examine such corporate books and
financial records of the Borrower and its Subsidiaries and to make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any such corporations with the
officers, employees and agents of the Borrower and its Subsidiaries, with their independent public
accountants, all at such reasonable times and upon reasonable notice and as often as the Agent may
reasonably request. Upon the occurrence and during the continuance of an Event of Default, any
Person designated by the Agent may request that such independent public accountants obtain
Receivable confirmation reports from account receivable debtors of the Borrower and its
Subsidiaries.
SECTION 7.03
Insurance and Maintenance of Properties
.
(a) The Loan Parties will, and will cause their respective Subsidiaries to, keep
reasonably adequately insured by financially sound and reputable insurers all of its
material property, which is of a character, and in amounts and against such risks, usually
and reasonably insured by similar Persons engaged in the same or similar businesses,
including, without limitation, insurance against fire, casualty, and any other hazards
normally insured against. The Borrower will at all times maintain and will cause its
Subsidiaries to maintain insurance against its liability for injury to Persons or property,
which insurance shall be by financially sound and reputable insurers and in such amounts and
form as are customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties, and upon the prior written
request of the Agent shall provide the Agent a listing of all such insurance and such other
certificates and other evidence thereof, as the Agent shall reasonably request. A listing
of all policies existing on the Execution Date (including policy limits) of the Borrower and
its Subsidiaries is attached hereto as
Schedule 7.03
. The Borrower shall obtain and
cause its Subsidiaries to obtain all such endorsements as are available to such policies
showing the Agent as an additional insured, and, at the Agents option, co-loss payee,
thereunder. All policies of insurance required by the terms of this Agreement or any
Security Document shall provide that at least fifteen (15) days prior written notice be
given to the Agent of any termination, cancellation, reduction or other material
modification of such insurance.
(b) The Loan Parties will cause, and will cause their respective Subsidiaries to cause,
all of their properties used or useful in the conduct of their respective businesses to be
maintained and kept in good condition, repair and working order and supplied with all
necessary equipment and will cause to be made all reasonably necessary repairs, renewals and
replacements thereof, all as in the reasonable judgment of the Borrower may be reasonably
necessary so that the business carried on in connection therewith may be properly conducted
at all times.
SECTION 7.04
Payment of Taxes
.
The Loan Parties will pay and discharge, and cause
their respective Subsidiaries to pay and discharge, all material taxes, assessments and
Third Amended and Restated Credit Agreement
60
governmental charges or levies imposed upon them or upon their respective incomes or profits,
or upon any properties belonging to any of them, prior to the date on which penalties attach
thereto, except for such amounts that are being contested in good faith and by appropriate actions
and for which appropriate reserves have been made on the books of such entity in accordance with
GAAP.
SECTION 7.05
Corporate Existence
.
The Loan Parties will do, and cause their
respective Subsidiaries to do, all things necessary to (i) except as permitted under
Section
8.02
, preserve and keep in full force and effect their respective corporate existences and (ii)
maintain all rights, franchise agreements, business contracts, patents, trademarks, licenses and
Material Contacts as may be required so that the business carried on in connection therewith may be
properly conducted at all times, except for any failure to so maintain that would not reasonably be
expected to have a Material Adverse Effect.
SECTION 7.06
Compliance with Statutes
.
The Loan Parties will comply, and cause their
respective Subsidiaries to comply, with all applicable statutes (except as to ERISA and
Environmental Laws, only to the extent required under
Sections 6.11
and
6.12
,
respectively), regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, except for any failure to so comply that would not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.07
ERISA
.
Immediately after any Responsible Officer of the Borrower knows
or has reason to know any of the following items are true, the Borrower will deliver or cause to be
delivered to the Agent a certificate of a Responsible Officer of the Borrower setting forth details
as to such occurrence and such action, if any, the Borrower or any ERISA Affiliate is required or
proposes to take, together with any notices required or proposed to be given to or filed with or by
the Borrower or its ERISA Affiliate with respect thereto: that a Reportable Event has occurred or
that an application may be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard; that a Multiemployer Plan has been or may be
terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that any
required contribution which is material to a Plan, Multiemployer Plan or Employee Plan has not been
or may not be timely made; that proceedings may be or have been instituted under Section 4069(a) of
ERISA to impose liability on the Borrower or an ERISA Affiliate or under Section 4042 of ERISA to
terminate a Plan or appoint a trustee to administer a Plan; that the Borrower or any ERISA
Affiliate has incurred or may incur any material liability (including any contingent or secondary
liability) on account of the termination of or withdrawal from a Plan or a Multiemployer Plan; and
that the Borrower or any ERISA Affiliate may be required to provide security to a Plan under
section 401(a)(29) of the Code; or any other condition(s) exist(s) or may occur with respect to one
or more Plans, Employee Plans and/or Multiemployer Plans which would reasonably be expected to
result, individually or in the aggregate, in a Material Adverse Effect.
SECTION 7.08
Utility Regulation
.
The Borrower will cause the representations and
warranties set forth in
Section 6.10
hereof to be and remain at all times true and correct.
SECTION 7.09
Subsidiaries
.
The Borrower will (a) cause any Person becoming a Domestic
Subsidiary of the Borrower to become a Loan Party under this Agreement and to
Third Amended and Restated Credit Agreement
61
become a Grantor under and as defined in the Intercreditor Agreement, and to execute in form
and substance satisfactory to the Agent a guaranty, security agreement, deed of trust and/or other
security instruments and documents sufficient to (x) obligate such Domestic Subsidiary for
repayment of all or (at Agents election) a portion of the Loans and (y) pledge all or
substantially all of such Domestic Subsidiaries assets (excluding Equity Interests in Foreign
Subsidiaries) as collateral for the Loans, and to become a party to this Agreement and the
Intercreditor Agreement, and (b) execute, and cause any such Domestic Subsidiary to execute, as
applicable, a pledge agreement in form and substance satisfactory to the Agent pledging all of the
Equity Interests in any Subsidiary that is either a direct Subsidiary of the Borrower or a direct
Subsidiary of such Domestic Subsidiary (which shall be limited, in the case of the pledge of shares
of any Equity Interests of any Foreign Subsidiary, to 66% of the Voting Equity Interests and 100%
of the non-voting Equity Interests of such Subsidiary).
SECTION 7.10
Material Contracts
.
The Borrower will notify the Agent of any material
default under any Material Contract promptly after a Responsible Officer obtains knowledge thereof.
SECTION 7.11
Interest Rate Protection
.
The Borrower shall obtain (or maintain
existing) interest rate protection pursuant to interest rate swaps, interest rate caps, Interest
Periods of nine (9) months or more in duration or similar arrangements, in a manner satisfactory to
Agent, for at least the two (2) year period following the Effective Date, with respect to a
notional amount of debt equal to not less than $75,000,000;
provided
,
however
, that
the Borrower shall not be required to maintain such interest rate protection in the event that
Permanent Securities are issued within 270 days after the Execution Date.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees as to itself and each of its Subsidiaries that on and after
the date hereof and until the Notes are paid in full and the Total Commitment has terminated:
SECTION 8.01
Change in Business
.
The Loan Parties will not engage, and will not
permit their respective Subsidiaries to engage, in any businesses not of the same general type as,
or reasonably related to, those conducted by the Loan Parties on the Effective Date (
Approved
Business
).
SECTION 8.02
Consolidation, Merger or Sale of Assets
.
None of the Loan Parties will,
or will permit any of their respective Subsidiaries to, wind up, liquidate or dissolve its affairs,
or enter into any transaction of merger, amalgamation or consolidation, or sell, transfer or
otherwise dispose of all or any part of its property or assets (other than sales of Inventory and
surplus or obsolete assets in the ordinary course of business),
except
that
(a) any Subsidiary of the Borrower may merge, consolidate, wind up, liquidate or
dissolve into and with the Borrower or any other wholly-owned Subsidiary of the Borrower;
provided
that (i) when any Guarantor is merging or consolidating with
Third Amended and Restated Credit Agreement
62
another Subsidiary that is not a Guarantor, the Guarantor shall be the continuing or
surviving Person, and (ii) when any Domestic Subsidiary is merging or consolidating with a
Subsidiary that is not a Domestic Subsidiary, the Domestic Subsidiary shall be the
continuing or surviving Person;
(b) the Borrower and its Subsidiaries may make Permitted Investments;
(c) any Subsidiary of the Borrower may sell its assets to the Borrower or another
wholly-owned Subsidiary of the Borrower;
provided
that no Guarantor shall be
permitted to sell its assets under this clause (c) to any Person that is not a Loan Party;
(d) sales of assets by the Loan Parties and their Subsidiaries (other than capital
stock or other equity interests in any Loan Party or any Subsidiary of any Loan Party) not
to exceed $4,000,000 in the aggregate in any fiscal year;
(e) Permitted Acquisitions;
(f) the Borrower and its Subsidiaries may enter into new contracts with third parties
to lease or otherwise finance such third parties purchase of ATM Equipment having an
aggregate fair market value not in excess of the sum of $1,000,000 in each fiscal year
(which amount shall not include any renewals of existing lease or financing contracts);
(g) sale or disposition of assets occurring as the result of a casualty event,
condemnation or expropriation;
(h) sale or disposition of chattel paper to third parties pursuant to arms-length
transactions for fair value in the ordinary course of business;
(i) the Borrower may contribute all or any part of the capital stock of Bidco to any
Foreign Subholdco, and the Borrower or any Foreign Subholdco may contribute all or any part
of the capital stock of Bidco to one or more wholly-owned Foreign Subsidiaries of the
Borrower, and any such Foreign Subsidiary may contribute all or any part of such capital
stock to any other wholly-owned Foreign Subsidiary,
provided
that, in each case, (i)
the Borrower shall have pledged to the Agent, for the ratable benefit of the Lenders, 66% of
the Voting Equity Interests and 100% of the non-voting Equity Interests of one or more (but
not more than two) Foreign Subsidiaries (the
Pledged Foreign Subsidiaries
) that
directly or indirectly own 100% of the Equity Interests of all other Foreign Subsidiaries of
the Borrower, in each case pursuant to documentation in form and substance reasonably
satisfactory to the Arrangers, (ii) the organizational documents for each Foreign Pledged
Subsidiary shall be in form and substance reasonably satisfactory to the Arrangers, (iii)
the Arrangers shall have received evidence reasonably satisfactory to them that such pledge
constitutes a first priority perfected pledge and security interest, and (iv) the Arrangers
shall have received such other instruments, documents, agreements, approvals, consents,
certificates and opinions, and evidence of such other actions, as the Arrangers may
reasonably request in connection with the formation of such Persons, the transfer of such
Equity Interests, such pledge and all matters related thereto as the Arrangers shall have
reasonably requested;
Third Amended and Restated Credit Agreement
63
(j) the Borrower or any Foreign Subholdco may contribute all or any part of the UK
Acquisition Debt to one or more wholly-owned Foreign Subsidiaries of the Borrower, and any
such Foreign Subsidiary may contribute all or any part of the UK Acquisition Debt to any
other Foreign Subsidiary, in each case free and clear of any Lien under the Security
Documents,
provided
that in each case the Foreign Subsidiary to which such
contribution is made shall at all times be a direct or indirect wholly-owned Subsidiary of
the Borrower; and
(k) any Subsidiary of the Borrower or the Borrower may merge or consolidate with
another Person other than the Borrower or another Subsidiary of the Borrower if (i) the
Borrower or such Subsidiary involved in the merger or consolidation is the surviving Person
or the Person who is the survivor becomes a wholly-owned Subsidiary of the Borrower as a
result thereof (which shall be a Domestic Subsidiary if such Person merged or consolidated
with a Domestic Subsidiary), (ii) such wholly-owned Subsidiary of the Borrower has been
acquired or created in compliance with
Section 7.09
and (iii) the Total
Consideration associated with such transaction would result in such transaction being
considered a Permitted Acquisition pursuant to the terms of
Section 5.04(b)(iii)(B)
if such Total Consideration were funded with an Acquisition Advance.
Upon the request and at the expense of the Borrower in connection with any sale, transfer or
other disposition of property or assets permitted hereunder or under any other Loan Document, and
so long as no Default or Event of Default has occurred and is continuing, the Agent shall upon
request execute and deliver, or shall cause the secured party, mortgage, trustee or other
appropriate Person to execute and deliver, to the Borrower duly executed releases or partial
releases, as applicable, of any Lien pursuant to any Loan Document which it may have in such
property or assets, in form and substance reasonably satisfactory to the Agent
,
the secured party,
mortgage, trustee or other appropriate Person, as the case may be, and the Borrower. Anything
contained herein to the contrary notwithstanding, (1) the UK Acquisition Debt shall not be
transferred to or held by any Person other than the Borrower or as specified in Section 8.02(j)
above, and (2) except as otherwise expressly permitted by Section 8.02(i), the Borrower shall not,
and shall not permit any of its Subsidiaries to, sell, transfer, encumber or otherwise dispose of
any capital stock or other equity interests in Bidco, the Company or any other Foreign Subsidiary.
SECTION 8.03
Indebtedness
.
None of the Loan Parties will create, incur, assume or
permit to exist any Indebtedness, or permit any of their respective Subsidiaries to do so, except:
(a) the Obligations existing hereunder;
(b) Indebtedness of the Borrower or any of its Subsidiaries to a Person other than the
Borrower of a Subsidiary of the Borrower which is expressly and validly subordinated to the
Obligations pursuant to terms and conditions, and in amounts, which are satisfactory to the
Requisite Lenders;
(c) Capitalized Lease Obligations and purchase money financing not to exceed
$10,000,000 in the aggregate outstanding at any time;
Third Amended and Restated Credit Agreement
64
(d) Indebtedness relating to loans or advances permitted under
Section 8.05
;
(e) Indebtedness that constitutes a renewal, refinancing or extension of any
Indebtedness referred to in this
Section 8.03(a)
,
(c)
,
(f)
,
(g)
,
(h)
and
(i)
;
provided
that (i) no Lien existing at the
time of such renewal reflecting an extension shall be extended to cover any property not
already subject to such Lien and (ii) the principal amount of any Indebtedness renewed,
refinanced or extended shall not exceed the amount of such Indebtedness outstanding
immediately prior to such renewal, refinancing or extension;
(f) Indebtedness associated with guarantees or other agreements to assist third parties
in their purchase of new ATM Equipment, in an aggregate principal amount not to exceed the
sum of (i) $1,000,000 in each fiscal year, plus (ii) obligations in an aggregate amount not
to exceed $1,000,000 at any one time outstanding in respect of the Popular Leasing
Preferred Vendor Agreement between Popular Leasing, USA, Inc. and the Partnership dated
April 30, 1999, as the same is amended, modified or supplemented from time to time,
provided
that the security for such obligations shall be limited to the equipment
financed under such agreement;
(g) Indebtedness of any future Subsidiary of the Borrower (which Subsidiary of the
Borrower is acquired by the Borrower or a Subsidiary of the Borrower in an Acquisition)
which Indebtedness is in existence (but not incurred or created in connection with, or in
anticipation of, such Acquisition) on the date which such Subsidiary is acquired by the
Borrower or a Subsidiary,
provided
that, (i) neither the Borrower nor any other
Subsidiary (other than the acquired Subsidiary) has any obligation with respect to such
Indebtedness, (ii) none of the properties of the Borrower or any of its other Subsidiaries
(other than the acquired Subsidiary) is bound with respect to such Indebtedness and (iii)
the aggregate amount of all such Subsidiary Indebtedness does not exceed $1,000,000 in the
aggregate outstanding at any time;
(h) Indebtedness secured by Liens upon any property hereafter acquired by the Borrower
or any Subsidiary in an Acquisition to secure Indebtedness in existence on the date of such
Acquisition (but not incurred or created in connection with, or in anticipation of, such
Acquisition), which Indebtedness is assumed by such acquiring Person simultaneously with
such Acquisition, which Liens extend only to such property so acquired and with respect to
which Indebtedness neither the Borrower nor any of its Subsidiaries (other than the
acquiring Person) has any obligation, and the aggregate amount of all such Indebtedness does
not exceed $500,000 in the aggregate outstanding at any time;
(i) Indebtedness under the Second Lien Credit Agreement in an aggregate principal
amount not to exceed $75,000,000 (plus any additional indebtedness thereunder incurred in
connection with the syndication thereof) or in respect of the Permanent Securities in an
aggregate principal amount not to exceed $150,000,000, in either case less principal amounts
paid thereunder from time to time (other than principal of the Second Lien Credit Agreement
prepaid with the proceeds of the Permanent Securities);
Third Amended and Restated Credit Agreement
65
(j) the UK Acquisition Debt as in existence on the Execution Date and as amended from
time to time thereafter as provided in the definition of UK Acquisition Debt or otherwise
with the consent of the Requisite Lenders,
provided
that (i) Bidco is the sole
obligor on such UK Acquisition Debt, and (ii) such UK Acquisition Debt is unsecured;
(k) Indebtedness owed to the Borrower or any Subsidiary of the Borrower and arising
from an Investment permitted by
Section 8.05(c)
(subject to the proviso to
Section 8.05
);
(l) Indebtedness of the Company in the form of a customary overdraft facility in an
aggregate amount outstanding not to exceed £2,000,000 at any time; and
(m) other Indebtedness not to exceed $2,000,000 in the aggregate outstanding at any
time.
SECTION 8.04
Liens
.
The Loan Parties will not, and will not permit any Subsidiary to,
create, incur, assume or suffer to exist any Lien upon or with respect to any of its property or
assets of any kind whether now owned or hereafter acquired (nor will it covenant with any other
Person not to grant such a lien to the Agent),
except
in connection with the following
which are permitted liens (
Permitted Liens
):
(a) Liens existing on the Execution Date and listed on
Schedule 8.04(a);
(b) Liens for taxes or assessments or other governmental charges or levies, either not
yet due and payable or being contested in good faith and by appropriate actions for which
adequate reserves have been established;
(c) Liens imposed by operation of law or in the ordinary course of business including,
without limitation, landlord Liens for rent not yet due and payable, and Liens for
materialmen, mechanics, warehousemen, carriers, employees, workmen, repairmen, current wages
or accounts payable not yet delinquent and arising in the ordinary course of business or
being contested in good faith by appropriate proceedings and subject to maintenance of
adequate reserves;
(d) easements, rights-of-way, restrictions and other similar Liens or imperfections to
title which do not materially interfere with the occupation, use, and enjoyment by a Loan
Party of the property or asset encumbered thereby or materially impair the value of the
property or asset subject thereto and none of which are violated by existing or proposed
improvements or land use of such property or asset;
(e) Liens arising under workers compensation laws, unemployment insurance laws or
similar legislation;
(f) Liens securing the Obligations in favor of the Agent for the benefit of the Lenders
and the other holders of the Obligations pursuant to the Loan Documents;
Third Amended and Restated Credit Agreement
66
(g) Liens securing Indebtedness permitted by
Section 8.03(c), (e)
,
(f)(ii)
,
(g)
,
(h)
,
(l)
or
(m)
;
(h) Liens of any judgments or orders not constituting an Event of Default;
(i) any right of set off relating to any Indebtedness or Investment that is not
prohibited by this Agreement;
(j) Liens on the Escrow Account and on amounts on deposit therein as security for the
payment of the Seller Notes;
(k) any renewal, extension or replacement of any Lien referred to in subparagraph (a)
above;
provided
,
that no Lien arising or existing as a result of such extension,
renewal or replacement shall be extended to cover any property not theretofore subject to
the Lien being extended, renewed or replaced and
provided
that the principal amount
of the Indebtedness secured thereby shall not exceed the principal amount of the
Indebtedness so secured at the time of such extension, renewal or replacement;
(l) Liens created under the Second Lien Loan Documents securing obligations under the
Second Lien Loan Documents, in all cases subject to the provisions of the Intercreditor
Agreement; and
(m) Liens on cash securing obligations of the Company to providers of vault services
with respect to such cash.
SECTION 8.05
Investments
.
None of the Loan Parties or their Subsidiaries will,
directly or indirectly, make or own any Investment in any Person, or permit any of its Subsidiaries
to do so, except:
(a) any Loan Party and any Subsidiary of any Loan Party may make and own Permitted
Investments;
(b) any Loan Party and any Subsidiary of any Loan Party may continue to own Investments
owned by such Person on the Execution Date as set forth on
Schedule 8.05(b)
;
(c) Investments consisting of loans by any Loan Party or any Subsidiary of any Loan
Party to the Borrower or any wholly-owned Subsidiary of the Borrower, in each case in the
ordinary course of business;
(d) Investments arising out of loans and advances for expenses, travel per diem and
similar items in the ordinary course of business to officers, directors, and employees not
to exceed $200,000 in the aggregate outstanding at any time;
(e) Permitted Acquisitions;
Third Amended and Restated Credit Agreement
67
(f) Investments consisting of equity contributions by the Borrower and its Subsidiaries
to their respective Subsidiaries,
provided
that such Subsidiaries are wholly-owned
Subsidiaries of the Borrower;
(g) any non-cash loans by the Borrower, in an aggregate amount which does not exceed
$4,500,000 outstanding at any time, to officers and directors of any Loan Party,
provided
that all of the proceeds of such loans are used solely to purchase common
stock of Borrower pursuant to the exercise by such Person of stock options or restricted
stock granted by Borrower to such Person;
(h) shares of stock, obligations or other securities received in settlement of claims
arising in the ordinary course of business;
(i) Investments in Persons that are not wholly-owned Subsidiaries of the Borrower which
comprise contributions or loans to joint ventures or partnerships between the Borrower and
third Persons in an aggregate amount not to exceed $5,000,000;
(j) other Investments which, in the aggregate, do not exceed $2,000,000;
provided
that, anything contained herein to the contrary notwithstanding, the aggregate
amount of Investments made on or after the Execution Date by the Loan Parties in or to Subsidiaries
of the Borrower that are not Loan Parties shall not exceed $25,000,000 outstanding at any time,
other than any Investment made by the Borrower in Bidco on the Effective Date in an aggregate
amount equal to £51,613,585, any Investment made by any Foreign Subsidiary of the Borrower in any
other Foreign Subsidiary of the Borrower on the Effective Date and Investments made pursuant to
Section 8.05(i).
SECTION 8.06
Guaranties
.
None of the Loan Parties will, directly or indirectly,
guarantee the Indebtedness of any Person, or permit any of its Subsidiaries to do so, except:
(a) endorsements of instruments for deposit or collection in the ordinary course of
business;
(b) guaranties of the Obligations in favor of the Agent, the Lenders or the other
holders of the Obligations evidenced by a Loan Document;
(c) guaranties by the Partnership of any obligations of the Borrower or any other
Subsidiary of Indebtedness permitted hereby incurred in the ordinary course of business and
not otherwise prohibited hereby; and
(d) guaranties of obligations of the Borrower under the Second Lien Credit Loan
Documents.
SECTION 8.07
Restricted Payments
.
The Borrower will not (a) pay any dividends or make
any other distributions, direct or indirect, on account of any shares of any class of stock of the
Borrower now or hereafter outstanding, except as follows,
provided
that there is not then
in existence any Default or Event of Default and neither would result therefrom, the Borrower may
pay dividends payable solely in shares of stock or warrants, rights or options
Third Amended and Restated Credit Agreement
68
to acquire shares of stock of the Borrower; or (b) redeem, retire, purchase or make any other
acquisition, direct or indirect, of any shares of any class of stock of the Borrower and/or of any
warrants, rights or options to acquire any such shares, now or hereafter outstanding, except as
follows,
provided
that there is not then in existence any Default or Event of Default and
neither would result therefrom (i) the Borrower may do any of the foregoing to the extent that the
consideration therefor consists solely of shares of stock (including warrants, rights or options
relating thereto) of the Borrower and (ii) payments by any Loan Party to be used to repurchase,
redeem, acquire or retire for value any capital stock of the Borrower pursuant to any stockholders
agreement, management equity subscription plan or agreement, stock option plan or agreement or
other employee benefit plan or agreement or of any officer, director or employee upon his death,
termination or resignation;
provided
that the aggregate price paid, and not reimbursed, for
all such repurchased, redeemed, acquired or retired capital stock pursuant to this clause (ii)
shall not exceed during any one fiscal year of the Borrower $2,000,000.
SECTION 8.08
Change in Accounting
.
The Borrower will not change its method of
accounting except for (a) immaterial changes permitted by GAAP in which the Borrowers auditors
concur or (b) changes required by GAAP;
provided
that the Borrower and the Agent shall
negotiate in good faith, to renegotiate any affected provision of this Agreement to reflect any
such change. The Borrower shall notify the Agent and the Lenders in writing promptly upon any
material change to the extent same is not disclosed in the financial statements required under
Section 7.01
hereof.
SECTION 8.09
Prepayment of Other Indebtedness and Seller Notes
.
The Borrower (a) will
not make any voluntary prepayments or defeasements of principal or interest on any other
Indebtedness of the Borrower (including any redemptions prior to scheduled maturity whether
voluntary or obligatory), except for (i) permanent reduction of Indebtedness (other than
Indebtedness under the Second Lien Loan Documents and Permanent Securities) and (ii) prepayments of
the loans under the Second Lien Credit Agreement in full with the proceeds of the Permanent
Securities, (b) will not amend any term (including interest, payment or subordination terms) of the
Permanent Securities without the prior written consent of the Requisite Lenders, (c) will not amend
any material term (including interest, payment or subordination terms) of any other Indebtedness in
excess of $5,000,000 (other than Indebtedness under the Second Lien Loan Documents) without the
prior written consent of the Requisite Lenders except (A) such amendments which do not make any
material term less favorable to the Borrower or the Lenders and (B) amendments to Indebtedness
permitted pursuant to
Section 8.03
hereof so long as such Indebtedness would continue to be
permitted pursuant to
Section 8.03
hereof after giving effect to such amendment, and (d)
will not make, or permit any of its Subsidiaries to make, any payments under any Seller Note except
with the amounts that have been deposited on the Execution Date in the Escrow Account.
SECTION 8.10
Transactions with Affiliates
.
Other than (a) those arrangements
disclosed to and approved by the Agent in writing which are to be created on or before the
Effective Date or (b) payment of reasonable and customary salaries and benefits in the ordinary
course of business, the Loan Parties will not directly or indirectly, engage in any transaction
with any Affiliate or permit any of their respective Subsidiaries to do so, including the purchase,
sale or exchange of assets or the rendering of any service, except transactions in the ordinary
course of business or pursuant to the reasonable requirements of its business and, in each case,
upon
Third Amended and Restated Credit Agreement
69
terms that are no less favorable than those which might be obtained in an arms-length
transaction at the time from non-Affiliates.
SECTION 8.11
Material Contracts and Seller Notes
.
The Borrower will not, and will not
permit any of its Subsidiaries to, will amend, cancel or breach any of the Material Contracts
except such amendments, cancellations or breaches as would not reasonably be expected to cause a
Material Adverse Effect. The Borrower shall not, and shall not permit any of its Subsidiaries to,
amend or modify any of the Seller Notes.
SECTION 8.12
Financial Ratios
.
(a)
Total Leverage Ratio
. The Borrower will not permit at any time the ratio
of (i) Total Debt of the Borrower and its Subsidiaries on a consolidated basis at such time
to (ii) Acquisition EBITDA of the Borrower and its Subsidiaries on a consolidated basis
(such ratio being the
Total Leverage Ratio
), to be greater than the ratio set
forth below for each corresponding period set forth below:
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
June 30, 2005
|
|
|
5.00:1.00
|
|
September 30, 2005
|
|
|
5.00:1.00
|
|
December 31, 2005
|
|
|
5.00:1.00
|
|
March 31, 2006
|
|
|
4.75:1.00
|
|
June 30, 2006
|
|
|
4.75:1.00
|
|
September 30, 2006
|
|
|
4.75:1.00
|
|
December 31, 2006
|
|
|
4.50:1.00
|
|
March 31, 2007
|
|
|
4.50:1.00
|
|
June 30, 2007
|
|
|
4.25:1.00
|
|
September 30, 2007
|
|
|
4.25:1.00
|
|
December 31, 2007
|
|
|
3.75:1.00
|
|
March 31, 2008
|
|
|
3.75:1.00
|
|
June 30, 2008
|
|
|
3.75:1.00
|
|
September 30, 2008
|
|
|
3.75:1.00
|
|
December 31, 2008 and each fiscal quarter-end thereafter
|
|
|
3.75:1.00
|
|
(b)
Senior Leverage Ratio
. The Borrower will not permit at any time the Senior
Leverage Ratio to be greater than the ratio set forth below for each corresponding period
set forth below:
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
|
June 30, 2005
|
|
|
3.50:1.00
|
|
September 30, 2005
|
|
|
3.50:1.00
|
|
December 31, 2005
|
|
|
3.50:1.00
|
|
March 31, 2006
|
|
|
3.50:1.00
|
|
June 30, 2006
|
|
|
3.50:1.00
|
|
Third Amended and Restated Credit Agreement
70
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
|
September 30, 2006
|
|
|
3.50:1.00
|
|
December 31, 2006
|
|
|
3.25:1.00
|
|
March 31, 2007
|
|
|
3.25:1.00
|
|
June 30, 2007
|
|
|
3.00:1.00
|
|
September 30, 2007
|
|
|
3.00:1.00
|
|
December 31, 2007
|
|
|
2.75:1.00
|
|
March 31, 2008
|
|
|
2.75:1.00
|
|
June 30, 2008 and each fiscal quarter -end thereafter
|
|
2.75:1.00
|
provided
,
however
, that upon the issuance of Permanent Securities consisting
of senior subordinated unsecured debt securities, the table set forth above shall be
replaced, to the extent applicable, by the following table:
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
June 30, 2005
|
|
|
2.75:1.00
|
|
September 30, 2005
|
|
|
2.75:1.00
|
|
December 31, 2005
|
|
|
2.75:1.00
|
|
March 31, 2006
|
|
|
2.75:1.00
|
|
June 30, 2006
|
|
|
2.50:1.00
|
|
September 30, 2006
|
|
|
2.50:1.00
|
|
December 31, 2006
|
|
|
2.50:1.00
|
|
March 31, 2007
|
|
|
2.50:1.00
|
|
June 30, 2007 and each fiscal quarter-end thereafter
|
|
|
2.25:1.00
|
|
(c)
Fixed Charge Coverage Ratio
. The Borrower will not permit at any time the
Fixed Charge Coverage Ratio to be less than the ratio set forth below for each corresponding
period set forth below:
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
June 30, 2005
|
|
|
1.25:1.00
|
|
September 30, 2005
|
|
|
1.25:1.00
|
|
December 31, 2005
|
|
|
1.25:1.00
|
|
March 31, 2006
|
|
|
1.25:1.00
|
|
June 30, 2006
|
|
|
1.25:1.00
|
|
September 30, 2006
|
|
|
1.25:1.00
|
|
December 31, 2006
|
|
|
1.25:1.00
|
|
March 31, 2007
|
|
|
1.25:1.00
|
|
June 30, 2007
|
|
|
1.25:1.00
|
|
September 30, 2007
|
|
|
1.25:1.00
|
|
December 31, 2007
|
|
|
1.20:1.00
|
|
March 31, 2008
|
|
|
1.20:1.00
|
|
June 30, 2008
|
|
|
1.20:1.00
|
|
September 30, 2008
|
|
|
1.20:1.00
|
|
December 31, 2008
|
|
|
1.20:1.00
|
|
Third Amended and Restated Credit Agreement
71
|
|
|
|
|
Four (4) Quarter Period Ending:
|
|
Ratio:
|
March 31, 2009
|
|
|
1.20:1.00
|
|
June 30, 2009
|
|
|
1.20:1.00
|
|
September 30, 2009
|
|
|
1.20:1.00
|
|
December 31, 2009
|
|
|
1.20:1.00
|
|
March 31, 2010
|
|
|
1.15:1.00
|
|
June 30, 2010
|
|
|
1.10:1.00
|
|
SECTION 8.13
Capital Expenditures
.
(a) Except as permitted in subclause (b) below,
the Loan Parties will not permit any Capital Expenditures (other than Permitted Acquisitions) to
be, in the aggregate, in excess of the amounts set forth below during any Test Period ending on any
date set forth below (
Scheduled Capital Expenditures
):
|
|
|
|
|
Test Period Ending:
|
|
Amounts:
|
June 30, 2005
|
|
$
|
31,776,000
|
|
September 30, 2005
|
|
$
|
34,689,854
|
|
December 31, 2005
|
|
$
|
36,083,512
|
|
March 31, 2006
|
|
$
|
38,327,441
|
|
June 30, 2006
|
|
$
|
41,231,079
|
|
September 30, 2006
|
|
$
|
38,204,379
|
|
December 31, 2006
|
|
$
|
37,908,347
|
|
March 31, 2007
|
|
$
|
37,908,347
|
|
June 30, 2007
|
|
$
|
37,908,347
|
|
September 30, 2007
|
|
$
|
37,908,347
|
|
December 31, 2007
|
|
$
|
25,485,475
|
|
March 31, 2008
|
|
$
|
25,485,475
|
|
June 30, 2008
|
|
$
|
25,485,475
|
|
September 30, 2008
|
|
$
|
25,485,475
|
|
December 31, 2008
|
|
$
|
25,485,475
|
|
March 31, 2009
|
|
$
|
25,485,475
|
|
June 30, 2009
|
|
$
|
25,485,475
|
|
September 30, 2009
|
|
$
|
25,485,475
|
|
December 31, 2009
|
|
$
|
25,485,475
|
|
March 31, 2010
|
|
$
|
25,485,475
|
|
June 30, 2010
|
|
$
|
25,485,475
|
|
(b) Beginning with the Test Period ending September 30, 2005, to the extent any amount
of Scheduled Capital Expenditures is not used during any prior Test Period, fifty percent
(50%) of such unexpended amount may be carried forward and expended during the next Test
Period (but not any other Test Period);
provided
,
however
, that in each such
circumstance where an unexpended amount has been carried forward to the next Test Period,
for the purpose of determining what amount of Scheduled Capital Expenditures are not used
during such new Test Period (and therefore are available for the 50% carry forward to the
subsequent Test Period) the Capital Expenditures (other than Permitted Acquisitions)
actually made during such new twelve month period shall
Third Amended and Restated Credit Agreement
72
be deemed to first apply to the amount of Scheduled Capital Expenditures for such Test
Period and then to the carry forward amount.
SECTION 8.14
Fiscal Year
.
The Loan Parties will not change, or permit any of their
respective Subsidiaries to change, their respective fiscal year ends.
SECTION 8.15
Sale/Leaseback Transactions
.
The Loan Parties will not enter, and will
not permit any Subsidiary to enter, into any arrangement with any Person or to which such Person is
a party providing for the leasing by the Loan Parties of real or personal property which has been
or is to be sold or transferred by the Loan Parties to such Person or to any other Person to whom
funds have been or are to be advanced by such Person on the security of such property or rental
obligations of the Loan Parties.
SECTION 8.16
Assets and Business Operations
. Other than the Company and the
Partnership and any Subsidiary of the Partnership acquired or created after the Effective Date in
compliance with
Section 7.09
(including, without limitation, pursuant to a Permitted
Acquisition), no Loan Party shall own any material assets (other than (a) the Voting Equity
Interests of the General Partner, the Limited Partner and Bidco owned by the Borrower, (b) the
Voting Equity Interests of the Partnership owned by the General Partner and the Limited Partner,
and (c) the Voting Equity Interests in any Foreign Subsidiary owned by the Borrower or any other
Foreign Subsidiary) or conduct any material business operations. Bidco shall not carry on any
business, own any assets or incur any liabilities, except for (i) the provision of administrative
services (except treasury services) to its Subsidiaries of a type customarily provided by a holding
company to its Subsidiaries, (ii) ownership of shares in the Company, and (iii) liabilities for
professional fees and administration costs in the ordinary course of business as a holding company.
The Borrower shall not permit any Foreign Subholdco to carry on any business, own any assets or
incur any liabilities, except for the ownership of all of the Equity Interests in any of its
Foreign Subsidiaries.
SECTION 8.17
Modification of Second Lien Loan Documents
. The Loan Parties shall not
amend, supplement or otherwise modify in any manner any of the terms or provisions contained in, or
applicable to, any Second Lien Loan Documents, unless (a) a fee of no more than 50 basis points is
payable to the lenders under the Second Lien Loan Documents, (b) such amendment, supplement or
modification is permitted by the Intercreditor Agreement, and (c) the sole purpose of any such
amendment, supplement or other modification is one or more of the following: (i) to extend the
date or reduce the amount of any required repayment, prepayment or redemption of the principal of
the loans under the Second Lien Loan Documents, (ii) to reduce the rate or extend the date for
payment of the interest, premium (if any) or fees payable on the Second Lien Loan Documents or
(iii) to make the covenants, events of default or remedies in the Second Lien Loan Documents less
restrictive on the Borrower, provided that this Section 8.17 shall not apply to any amendments,
supplements or modifications that are required by the terms of the Second Lien Loan Documents.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES
Third Amended and Restated Credit Agreement
73
SECTION 9.01
Events of Default
.
The following events shall constitute Events of
Default (
Events of Default
) hereunder:
(a) any installment of principal due hereunder or on any Note shall not be paid on the
date on which such payment is due, or any payment of interest due hereunder or on any Note
or any payment of any Fee or any other amount due hereunder shall not be paid within three
(3) days after the date such payment is due; or
(b) any representation or warranty made or, for purposes of
Article VI
, deemed
made by the Borrower or any Loan Party herein or in any of the Loan Documents or other
document, certificate or financial statement delivered in connection with this Agreement or
any other Loan Document shall prove to have been incorrect in any material respect when made
or deemed made or reaffirmed, as the case may be; or
(c) the Borrower shall fail to perform or observe any duty or covenant contained in
Article VIII
(other than those described in, but not permitted by
Section
8.04(b
),
(c)
or
(e)
) or in
Section 7.01(e)
or
Section
7.03(a)
or
Section 7.09
hereof; or
(d) the Borrower or any Loan Party shall fail to perform or observe any duty or
covenant contained in this Agreement or any Loan Document other than those referenced in
Section
9.01(a)
,
(b)
, or
(c)
and such failure is not remedied within
the earlier of (i) forty-five (45) days or (ii) twenty (20) days after the earlier of (x)
notice of such failure by the Agent to the Borrower or (xx) after a Responsible Officer of
the Borrower or any Subsidiary has actual knowledge thereof; or
(e) the Borrower or any Subsidiary of the Borrower shall (i) fail to make (whether as
primary obligor or as guarantor or other surety) any principal payment of or interest or
premium, if any, on (A) Indebtedness under the Second Lien Loan Documents or (B) any other
Indebtedness in the aggregate in excess of $5,000,000 allowed hereunder (other than the
Notes) and in each case such failure remains outstanding beyond any period of grace provided
with respect thereto or (ii) fail to duly observe, perform or comply with any agreement with
any Person, or any term or condition of (A) Indebtedness under the Second Lien Credit
Agreement or (B) any other Indebtedness in excess of $5,000,000 beyond any period of grace
provided with respect thereto, in each case if such failure causes (unless such failure has
been waived by the holder(s) of such Indebtedness), or permits the holder(s) to cause, such
obligations to become due prior to any stated maturity; or
(f) an involuntary proceeding shall be commenced or an involuntary petition shall be
filed in (or, with respect to any UK Subsidiary of the Borrower, the presentation of an
application shall be made with) a court of competent jurisdiction seeking (i) relief in
respect of the Borrower or any Subsidiary of the Borrower or of a substantial part of the
property or assets of the Borrower or any Loan Party, under Title 11 of the United States
Code, as now or hereafter in effect, or any successor thereto (the
Bankruptcy
Code
), or any other federal or state bankruptcy, insolvency, receivership or similar
law (foreign or domestic), (ii) the appointment of a receiver, trustee, custodian,
sequestrator,
Third Amended and Restated Credit Agreement
74
conservator or similar official (or, with respect to any UK Subsidiary of the Borrower,
an administration order) for the Borrower or any or any Subsidiary of the Borrower or for a
substantial part of the property or assets of the Borrower or any Subsidiary of the Borrower
or (iii) a petition or application for the winding-up or liquidation of the Borrower or any
Subsidiary of the Borrower; and such proceeding or petition shall continue undismissed for
sixty (60) days (or 14 days in the case of a winding up petition in respect of a company
incorporated in England and Wales or Scotland) or an order or decree approving or ordering
any of the foregoing shall be entered; or
(g) the Borrower or any Subsidiary of the Borrower shall (i) voluntarily commence any
proceeding or file any petition seeking relief under the Bankruptcy Code or any other
federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of or fail to contest in a timely and appropriate manner, any proceeding
or the filing of any petition described in clause (f) above, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian sequestrator, conservator or similar
official for the Borrower or any Subsidiary of the Borrower or for a substantial part of the
property or assets of the Borrower or any Subsidiary of the Borrower, (iv) file an answer
admitting the material allegations of a petition filed against it in any such proceeding,
(v) make a general assignment for the benefit of creditors, (vi) admit in writing its
inability or fail generally to pay its debts as they become due or (vii) take any action for
the purpose of effecting any of the foregoing; or
(h) a judgment or order, which with other outstanding judgments and orders against the
Borrower and its Subsidiaries, equals or exceeds $2,000,000 in the aggregate (to the extent
not covered by insurance as to which the respective insurer has acknowledged coverage),
shall be entered against the Borrower or any Subsidiary of the Borrower and (i) within
thirty (30) days after entry thereof such judgment shall not have been paid or discharged or
execution thereof stayed pending appeal or, prior to the expiration of any such stay, such
judgment shall not have been paid or discharged or (ii) any enforcement proceeding shall
have been commenced (and not stayed) by any creditor or upon such judgment; or
(i) if (A) (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or
the Code for any plan year or part thereof or a waiver of such standards or extension of any
amortization period is sought or granted under section 412 of the Code, (ii) a notice of
intent to terminate any Plan shall have been or is reasonably expected to be filed with the
PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have notified the Borrower or any
Subsidiary or any ERISA Affiliate that a Plan may become subject to any such proceedings,
(iii) any Plan shall have any Unfunded Current Liability, (iv) the Borrower or any
Subsidiary or any ERISA Affiliate shall have incurred or is reasonably expected to incur any
liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the
Code relating to employee benefit plans, (v) the Borrower or any Subsidiary or any ERISA
Affiliate withdraws from any Multiemployer Plan, (vi) the Borrower or any Subsidiary or any
ERISA Affiliate fails to make any contribution due, or payment to or with respect to, any
employee benefit plan, or (vii) the Borrower or any Subsidiary or any ERISA Affiliate
establishes or amends any employee
Third Amended and Restated Credit Agreement
75
welfare benefit plan that provides post-employment welfare benefits in a manner that
would increase the liability of the Borrower or any Subsidiary or any ERISA Affiliate
thereunder, and (B) any such event or events described in clauses (i) through (vii) above,
either individually or together with any other such event or events, would reasonably be
expected to have a Material Adverse Effect; or
(j) after the Effective Date, the occurrence of any Change of Control; or
(k) after the Effective Date, the occurrence of any event of default under any Security
Document; or
(l) the Obligations shall cease, except as permitted hereby, being secured by
substantially all of the assets of the Loan Parties; or
(m) any Guarantor shall revoke or attempt to revoke its Guaranty under
Article
XI
, or shall be in default of or repudiate its obligations thereunder; or
(n) the occurrence of any Event of Default (as defined in the Second Lien Credit
Agreement) under the Second Lien Credit Agreement.
SECTION 9.02
Primary Remedies
.
In the event of any Event of Default, and at any time
after the occurrence of any Event of Default, the Agent shall, if requested by the Requisite
Lenders, by written notice to the Borrower (a
Notice of Default
) take any or all of the
following actions (without prejudice to the rights of any Lender to enforce any other rights it may
have against the Borrower,
provided
that, if an Event of Default specified in
Section
9.01(f)
or
Section 9.01(g)
shall occur, the following shall occur automatically without
the giving of any Notice of Default): (a) declare the Total Revolving Credit Commitment terminated
whereupon the Total Revolving Credit Commitment shall forthwith terminate immediately and any
Revolving Credit Commitment Fee shall forthwith become due and payable without any other notice of
any kind; (b) declare the principal of and any accrued and unpaid interest in respect of all
Advances, and all obligations owing hereunder, to be, whereupon the same shall become, forthwith
due and payable without presentment, demand, notice of demand or of dishonor and non-payment,
protest, notice of protest, notice of intent to accelerate, declaration or notice of acceleration
or any other notice of any kind, all of which are hereby waived by the Borrower; and (c) exercise
any rights or remedies under any of the Loan Documents.
SECTION 9.03
Other Remedies
.
Upon the occurrence and during the continuance of any
Event of Default, the Agent may proceed to protect and enforce its and the Lenders rights, either
by suit in equity or by action at law or both, whether for the specific performance of any covenant
or agreement contained in this Agreement or in any other Loan Document or in aid of the exercise of
any power granted in this Agreement or in any other Loan Document; or may proceed to enforce the
payment of all amounts owing to the Lenders under the Loan Documents and any accrued and unpaid
interest thereon in the manner set forth herein or therein; it being intended that no remedy
conferred herein or in any of the other Loan Documents is to be exclusive of any other remedy, and
each and every remedy contained herein or in any other Loan Document shall be cumulative and shall
be in addition to every other
Third Amended and Restated Credit Agreement
76
remedy given hereunder and under the other Loan Documents or now or hereafter existing at law
or in equity or by statute or otherwise.
SECTION 9.04
Application of Proceeds
.
After the occurrence and during the continuance
of any Default or Event of Default, all proceeds of the Collateral received by Agent shall be
forthwith paid over, in the funds and currency received, and applied in such order as follows:
first
, to Fees and Agents expenses reimbursable hereunder;
second
, to interest on
the Loans, ratably in proportion to the interest accrued as to each Loan;
third
, to
principal payments on the Loans, to provide cash collateral for Letter of Credit Obligations, and
to other Obligations not described in the foregoing clauses of this sentence, ratably to the
aggregate, combined principal balance of the Loans, outstanding Letter of Credit Obligations and
outstanding amount of such other Obligations; and
fourth
, to the payment of any surplus
then remaining to the Borrower, unless otherwise provided by law or directed by a court of
competent jurisdiction.
ARTICLE X
THE AGENT
SECTION 10.01
Authorization and Action
.
Each Lender hereby irrevocably appoints and
authorizes the Agent to act on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are specifically delegated to or required of the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. The Agent may perform any of its
duties hereunder by or through its agents and employees. The duties of the Agent shall be
mechanical and administrative in nature; the Agent shall not have by reason of this Agreement or
any other Loan Document a fiduciary relationship in respect of any Lender; and nothing in this
Agreement or any other Loan Document, expressed or implied, is intended to, or shall be so
construed as to, impose upon the Agent any obligations in respect of this Agreement or any other
Loan Document except as expressly set forth herein or therein. As to any matters not expressly
provided for by this Agreement, the Notes or the other Loan Documents (including enforcement or
collection of the Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Requisite Lenders, and such
instructions shall be binding upon the Lenders and all holders of Notes and the Obligations;
provided
, that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to this Agreement or applicable law.
SECTION 10.02
Agents Reliance
.
(a) Neither the Agent nor any of its directors, officers, agents or employees shall be
liable to the Lenders for any action taken or omitted to be taken by it or them under or in
connection with this Agreement, the Notes or any of the other Loan Documents (i) with the
consent or at the request of the Requisite Lenders or (ii) in the absence of its or their
own gross negligence or willful misconduct
(it being the express intention of the parties
hereto that the Agent and its directors, officers, agents and
Third Amended and Restated Credit Agreement
77
employees shall have no liability for actions and omissions under this
Section
10.02
resulting from their sole ordinary or contributory negligence).
(b) Without limitation of the generality of the foregoing, the Agent: (i) may treat the
payee of each Note and the Obligations as the holder thereof until the Agent receives
written notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any statements,
warranties or representations made in or in connection with this Agreement, any Note or any
other Loan Document; (iv) except as otherwise expressly provided herein, shall not have any
duty to ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement, any Note or any other Loan Document or to inspect
the property (including the books and records) of the Borrower; (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability, collectibility,
genuineness, sufficiency or value of this Agreement any Note, any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (vi) shall not be
responsible to any Lender for the perfection or priority of any Lien securing the
Obligations; and (vii) shall incur no liability under or in respect of this Agreement, any
Note or any other Loan Document by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier, cable or telex) reasonably
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 10.03
Agent and Affiliates
.
Without limiting the right of any other Lender to
engage in any business transactions with the Borrower or any of its Affiliates, with respect to
their commitments, the Loans made by them and the Notes issued by them, the Agent and each other
Lender who may become the Agent shall have the same rights and powers under this Agreement and its
Notes as any other Lender and may exercise the same as though it was not the Agent; and the term
Lender or Lenders shall, unless otherwise expressly indicated, include BNP Paribas and any such
other Lender, in their individual capacities. BNP Paribas, each other Person who becomes the Agent
and their respective Affiliates may be engaged in, or may hereafter engage in, one or more loans,
letters of credit, leasings or other financing activity not the subject of this Agreement
(collectively, the
Other Financings
) with the Borrower or any of its Affiliates, or may
act as trustee on behalf of or depository for, or otherwise engage in business transactions with
the Borrower or any of its Affiliates (all Other Financings and other such business transactions
being collectively, the
Other Activities
) with no responsibility to account therefor to
the Lenders. Without limiting the rights and remedies of the Lenders specifically set forth
herein, no other Lender by virtue of being a Lender hereunder shall have any interest in (a) any
Other Activities, (b) any present or future guaranty by or for the account of the Borrower not
contemplated or included herein, (c) any present or future offset exercised by the Agent in respect
of any such Other Activities, (d) any present or future property taken as security for any such
Other Activities or (e) any property now or hereafter in the possession or control of the Agent
which may be or become security for the obligations of the Borrower hereunder and under the Notes
by reason of the general description of indebtedness secured, or
Third Amended and Restated Credit Agreement
78
of property contained in any other agreements, documents or documents related to such Other
Activities;
provided
,
however
, that if any payment in respect of such guaranties or
such property or the proceeds thereof shall be applied to reduction of the Obligations evidenced
hereunder and by the Note, then each Lender shall be entitled to share in such application
according to its pro rata portion of such Obligations.
SECTION 10.04
Lender Credit Decision
.
Each Lender acknowledges and agrees that it
has, independently and without reliance upon the Agent or any other Lender and based on the
financial statements referred to in
Section 7.01
and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges and agrees that it will, and without reliance upon the
Agent or any other Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
SECTION 10.05
Agents Indemnity
.
(a) The Agent shall not be required, insofar as the Lenders are concerned, to take any
action hereunder or to prosecute or defend any suit in respect of this Agreement, the Notes
or any other Loan Document unless indemnified to the Agents satisfaction by the Lenders
against loss, cost, liability and expense. If any indemnity furnished to the Agent shall
become impaired, it may call for additional indemnity and cease to do the acts indemnified
against until such additional indemnity is given. In addition, the Lenders agree to
indemnify the Agent (to the extent not reimbursed by the Borrower), ratably according to the
respective aggregate principal amounts of the Notes then held by each of them (or if no
Notes are at the time outstanding, ratably according to the respective amounts of the Total
Commitment), from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whosoever which may be imposed on, incurred by, or asserted against the Agent in any way
relating to or arising out of this Agreement or any action taken or omitted by the Agent (in
such capacity) under this Agreement, the Notes and the other Loan Documents. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand
for its ratable share of any out-of-pocket expenses (including reasonable counsel fees)
incurred by the Agent in connection with the preparation, execution, administration, or
enforcement of, or legal advice in respect of rights or responsibilities under, this
Agreement, the Notes and the other Loan Documents to the extent that the Agent is not
reimbursed for such expenses by the Borrower. The provisions of this
Section
10.05(a)
shall survive the termination of this Agreement, the payment of the Obligations
and/or the assignment of any of the Notes.
(b) Notwithstanding the foregoing, no Lender shall be liable under this
Section
10.05(b)
to the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements due to the Agent
resulting from the Agents gross negligence or willful misconduct as determined by a final
non-appealable judgment made by a court of competent jurisdiction.
Each Lender agrees,
however, that it expressly intends, under this
Section 10.05(b)
to indemnify the
Agent ratably as aforesaid for all such liabilities, obligations, losses,
Third Amended and Restated Credit Agreement
79
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
arising out of or resulting from the Agents sole ordinary or contributory negligence.
SECTION 10.06
Successor Agent
.
The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower and may be removed as Agent under this Agreement,
the Notes and the other Loan Documents at any time with or without cause by the Requisite Lenders.
Upon any such resignation or removal the Requisite Lenders shall have the right to appoint a
successor Agent, subject to the approval of the Borrower, if no Event of Default has occurred and
is continuing, (which approval will not be unreasonably withheld). If no successor Agent shall
have been so appointed by the Requisite Lenders, and shall have accepted such appointment, within
30 calendar days after the resigning Agents giving of notice of resignation or the Requisite
Lenders removal of the resigning Agent, then the resigning Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a commercial bank organized under the laws of the United
States of America or of any state thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of any appointment as Agent hereunder and under the Notes and
the other Loan Documents by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights, power, privileges and duties of the resigning Agent, and the
resigning Agent shall be discharged from its duties and obligations under this Agreement, the Notes
and the other Loan Documents. After any resigning Agents resignation or removal as Agent
hereunder and under the Notes and the other Loan Documents, the provisions of this
Article
X
shall inure to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement, the Notes and the other Loan Documents. If for any reason there shall
not be any duly appointed Agent, the Lenders shall act collectively by taking actions on the
direction of the Requisite Lenders until an agent is duly appointed as Agent hereunder.
SECTION 10.07
Notice of Default
.
The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder unless the Agent shall have
received notice from a Lender or the Borrower referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a notice of default. If the Agent receives
such notice, the Agent shall give notice thereof to the Lenders;
provided
,
however
,
if such notice is received from a Lender, the Agent also shall give notice thereof to the Borrower.
The Agent shall be entitled to take action or refrain from taking action with respect to such
Default or Event of Default as provided in
Sections 10.01
and
10.02
.
SECTION 10.08
Release of Collateral and Guarantors
.
The Agent shall have the
authority, without further approval from the Lenders or the Requisite Lenders, to release any
collateral pledged to secure the Obligations or release any Guarantor in connection with any
transaction permitted by this Agreement or any other Loan Document. To effect any such release,
the Agent shall, in its name or on behalf of the Lenders, as appropriate, at the expense of the
Borrower return any such collateral in its possession and execute and deliver to the Borrower any
releases, termination statements or other instruments reasonably desirable to evidence the
foregoing.
SECTION 10.09
Intercreditor Agreement
. Each of the Lenders hereby acknowledges that
it has received and reviewed the Intercreditor Agreement and agrees to be
Third Amended and Restated Credit Agreement
80
bound by the terms thereof. Each Lender (and each Person that becomes a Lender hereunder
pursuant to
Section 12.10
) hereby (i) acknowledges that BNP Paribas is acting under the
Intercreditor Agreement in multiple capacities as the Agent and the collateral agent under the
Intercreditor Agreement and (ii) waives any conflict of interest, now contemplated or arising
hereafter, in connection therewith and agrees not to assert against BNP Paribas any claims, causes
of action, damages or liabilities of whatever kind or nature relating thereto. Each Lender (and
each Person that becomes a Lender hereunder pursuant to
Section 12.10
) hereby authorizes
and directs BNP Paribas to enter into the Intercreditor Agreement on behalf of such Lender and
agrees that BNP Paribas, in its various capacities thereunder, may take such actions on its behalf
as is contemplated by the terms of the Intercreditor Agreement.
ARTICLE XI
GUARANTY
SECTION 11.01
Guaranty
.
Each Guarantor hereby agrees that it is jointly and severally
liable for, and, as primary obligor and not merely as surety, absolutely and unconditionally
guarantees to the Lenders the prompt payment when due, whether at stated maturity, upon
acceleration or otherwise, and at all times thereafter, of the Obligations of the Borrower and all
costs and expenses including, without limitation, all court costs and attorneys and paralegals
fees and expenses paid or incurred by the Agent, the Issuing Bank and the Lenders in endeavoring to
collect all or any part of the Obligations from, or in prosecuting any action against, the
Borrower, any Guarantor or any other guarantor of all or any part of such Obligations (such costs
and expenses, together with the Obligations of the Borrower, collectively the
Guaranteed
Obligations
). Each Guarantor further agrees that the Guaranteed Obligations may be extended
or renewed in whole or in part without notice to or further assent from it, and that it remains
bound upon its guarantee notwithstanding any such extension or renewal.
SECTION 11.02
Guaranty of Payment
.
This Guaranty is a guaranty of payment and not of
collection. Each Guarantor waives any right to require the Agent, the Issuing Bank or any Lender
to sue the Borrower, any Guarantor, any other guarantor, or any other person obligated for all or
any part of the Guaranteed Obligations, or otherwise to enforce its payment against any collateral
securing all or any part of the Guaranteed Obligations.
SECTION 11.03
No Discharge or Diminishment of Guaranty
.
(a) Except as otherwise provided for herein and to the extent provided for herein, the
obligations of each Guarantor hereunder are unconditional and absolute and not subject to
any reduction, limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Guaranteed Obligations), including:
(i) any claim of waiver, release, extension, renewal, settlement, surrender,
alteration, or compromise of any of the Guaranteed Obligations or any other
Obligations, by operation of law or otherwise;
Third Amended and Restated Credit Agreement
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(ii) any change in the corporate existence, structure or ownership of the
Borrower or any other Guarantor of or other Person liable for any of the Guaranteed
Obligations or any other Obligations;
(iii) any insolvency, bankruptcy, reorganization or other similar proceeding
affecting the Borrower, any Guarantor, or any other guarantor of or other person
liable for any of the Guaranteed Obligations or any other Obligations, or their
assets or any resulting release or discharge of any obligation of the Borrower, any
Guarantor, or any other guarantor of or other Person liable for any of the
Guaranteed Obligations or any other Obligations; or
(iv) the existence of any claim, setoff or other rights which any Guarantor may
have at any time against the Borrower, any Guarantor, any other guarantor of the
Guaranteed Obligations or any other Obligations, the Agent, the Issuing Bank, any
Lender, or any other person, whether in connection herewith or in any unrelated
transactions.
(b) The obligations of each Guarantor hereunder are not subject to any defense or
setoff, counterclaim, recoupment, or termination whatsoever by reason of the invalidity,
illegality, or unenforceability of any of the Guaranteed Obligations or otherwise, or any
provision of applicable law or regulation purporting to prohibit payment by the Borrower,
any Guarantor or any other guarantor of or other person liable for any of the Guaranteed
Obligations, of the Guaranteed Obligations or any part thereof.
(c) Further, the obligations of any Guarantor hereunder are not discharged or impaired
or otherwise affected by:
(i) the failure of the Agent, the Issuing Bank or any Lender to assert any
claim or demand or to enforce any remedy with respect to all or any part of the
Guaranteed Obligations or any other Obligations;
(ii) any waiver or modification of or supplement to any provision of any
agreement relating to the Guaranteed Obligations or any other Obligations;
(iii) any release, non-perfection, or invalidity of any indirect or direct
security for the obligations of the Borrower for all or any part of the Guaranteed
Obligations or any other Obligations or any obligations of any other guarantor of or
other person liable for any of the Guaranteed Obligations or any other Obligations;
(iv) any action or failure to act by the Agent, the Issuing Bank or any Lender
with respect to any collateral securing any part of the Guaranteed Obligations or
any other Obligations; and
(v) any default, failure or delay, willful or otherwise, in the payment or
performance of any of the Guaranteed Obligations or any other Obligations, or any
other circumstance, act, omission or delay that might in any manner or to any extent
vary the risk of such Guarantor or that would otherwise operate as a
Third Amended and Restated Credit Agreement
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discharge of any Guarantor as a matter of law or equity (other than the
indefeasible payment in full in cash of the Guaranteed Obligations).
SECTION 11.04
Defenses Waived
.
To the fullest extent permitted by applicable law,
each Guarantor hereby waives any defense based on or arising out of any defense of the Borrower or
any Guarantor or the unenforceability of all or any part of the Guaranteed Obligations or any other
Obligations from any cause, or the cessation from any cause of the liability of the Borrower or any
Guarantor, other than the indefeasible payment in full in cash of the Guaranteed Obligations.
Without limiting the generality of the foregoing, each Guarantor irrevocably waives acceptance
hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not
provided for herein, as well as any requirement that at any time any action be taken by any person
against the Borrower, any Guarantor, any other guarantor of any of the Guaranteed Obligations, or
any other person. The Agent may, at its election, foreclose on any Collateral held by it by one or
more judicial or nonjudicial sales, accept an assignment of any such Collateral in lieu of
foreclosure or otherwise act or fail to act with respect to any collateral securing all or a part
of the Guaranteed Obligations or any other Obligations, compromise or adjust any part of the
Guaranteed Obligations or any other Obligations, make any other accommodation with the Borrower,
any Guarantor, any other guarantor or any other person liable on any part of the Guaranteed
Obligations or any other Obligations or exercise any other right or remedy available to it against
the Borrower, any Guarantor, any other guarantor or any other Person liable on any of the
Guaranteed Obligations or any other Obligations, without affecting or impairing in any way the
liability of such Guarantor under this Guaranty except to the extent the Guaranteed Obligations
have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law,
each Guarantor waives any defense arising out of any such election even though that election may
operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of any Guarantor against the Borrower, any other guarantor or
any other Person liable on any of the Guaranteed Obligations or any other Obligations, as the case
may be, or any security.
SECTION 11.05
Subordination; Subrogation
.
(a) All rights and claims of each Guarantor (collectively the
Guarantor
Claims
) against the Borrower or any of the Borrowers property now or hereafter
existing shall be subordinate and subject in right of payment to the prior payment in full
in cash, and the performance, of all of the Guaranteed Obligations pursuant to this
Guaranty.
(b) Upon the occurrence of a Default or an Event of Default and until the Guaranteed
Obligations have been paid and performed in full and each Guarantor shall have performed all
of Guarantors obligations hereunder, no Guarantor shall receive or collect, directly or
indirectly, from the Borrower or any other party any payment upon Guarantor Claims, nor seek
to realize upon any collateral securing such Guarantor Claims. Notwithstanding the
foregoing, if any Guarantor should receive any such payment, such Guarantor agrees to hold
same in trust for the Agent and Lenders and agrees that such Guarantor shall have absolutely
no rights in or to or dominion over such payments except to pay them promptly to the Agent
for the benefit of Lenders, and such Guarantor hereby covenants to do so.
Third Amended and Restated Credit Agreement
83
(c) Notwithstanding anything to the contrary contained herein, no Guarantor shall have
any right of subrogation in or under this Agreement, any of the Security Documents or any of
the Loan Documents or to participate in any way therein, or in any right, title or interest
in and to any security or right of recourse for the Guaranteed Obligations or any right to
reimbursement, exoneration, contribution, indemnification or any similar rights, until the
Guaranteed Obligations have been fully and finally paid in full in cash. This waiver is
given to induce Lenders to make the Loans to the Borrower.
SECTION 11.06
Reinstatement; Stay of Acceleration
.
If at any time any payment of any
portion of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy, or reorganization of the Borrower or otherwise, each Guarantors
obligations under this Guaranty with respect to that payment shall be reinstated at such time as
though the payment had not been made and whether or not the Agent, the Issuing Bank and the Lenders
are in possession of this Guaranty. If acceleration of the time for payment of any of the
Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower,
all such amounts otherwise subject to acceleration under the terms of any agreement relating to the
Guaranteed Obligations shall nonetheless be payable by the Guarantors forthwith on demand by the
Lenders.
SECTION 11.07
Information
.
Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrowers financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature,
scope and extent of the risks that each Guarantor assumes and incurs under this Guaranty, and
agrees that neither the Agent, the Issuing Bank nor any Lender shall have any duty to advise any
Guarantor of information known to it regarding those circumstances or risks.
SECTION 11.08
Termination
.
This Guaranty may not be terminated by any Guarantor
without the consent of the Lenders. Notwithstanding the foregoing, if this Guaranty shall be
terminated as to any Guarantor for any reason, such Guarantor will continue to be liable to the
Lenders for any Guaranteed Obligations created, assumed or committed to prior to such termination,
and all subsequent renewals, extensions, modifications and amendments with respect to, or
substitutions for, all or any part of that Guaranteed Obligations.
SECTION 11.09
Taxes
.
All payments of the Guaranteed Obligations will be made by each
Guarantor free and clear of and without deduction for or on account of any and all present or
future taxes of whatever nature imposed by any governmental authority with respect to such
payments, and any and all liabilities with respect to the foregoing, but excluding franchise taxes
and taxes imposed on overall net income of the Lender by the United States or the jurisdiction in
which the Lender is located. If any Guarantor is required by law to deduct any taxes from or in
respect of any sum payable to the Lenders under this Guaranty, (a) the sum payable must be
increased as necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this provision) the Lenders receive an amount equal to
the sum it would have received had no such deductions been made, (b) the Guarantors must then make
such deductions, and must pay the full amount deducted to the relevant authority in accordance with
applicable law, and (c) the Guarantors must furnish to the Lender within forty-five days after
their due date certified copies of all official receipts
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evidencing payment thereof, or other evidence of payments reasonably acceptable to the
applicable Lender.
SECTION 11.10
Severability and Limitation on Liability
.
The provisions of this
Guaranty are severable, and in any action or proceeding involving any state corporate law, or any
state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of any Guarantor under this Guaranty would otherwise be
held or determined to be avoidable, invalid or unenforceable on account of the amount of such
Guarantors liability under this Guaranty, then, notwithstanding any other provision of this
Guaranty to the contrary, the amount of such liability shall, without any further action by the
Guarantors or the Lenders, be automatically limited and reduced to the highest amount that is valid
and enforceable as determined in such action or proceeding (such highest amount determined
hereunder being the relevant Guarantors
Maximum Liability
.) This
Section 11.10
with respect to the Maximum Liability of each Guarantor is intended solely to preserve the rights
of the Lenders to the maximum extent not subject to avoidance under applicable law, and no
Guarantor nor any other person or entity shall have any right or claim under this
Section
11.10
with respect to such Maximum Liability, except to the extent necessary so that the
obligations of any Guarantor hereunder shall not be rendered voidable under applicable law. Each
Guarantor agrees that the Guaranteed Obligations may at any time and from time to time exceed the
Maximum Liability of each Guarantor without impairing this Guaranty or affecting the rights and
remedies of the Lenders hereunder,
provided
that nothing in this sentence shall be
construed to increase any Guarantors obligations hereunder beyond its Maximum Liability.
SECTION 11.11
Contribution
.
In the event any Guarantor (a
Paying Guarantor
)
shall make any payment or payments under this Guaranty or shall suffer any loss as a result of any
realization upon any collateral granted by it to secure its obligations under this Guaranty, each
other Guarantor (each a
Non-Paying Guarantor
) shall contribute to such Paying Guarantor
an amount equal to such Non-Paying Guarantors Pro Rata Share of such payment or payments made,
or losses suffered, by such Paying Guarantor. For purposes of this
Article XI
, each
Non-Paying Guarantors Pro Rata Share with respect to any such payment or loss by a Paying
Guarantor shall be determined as of the date on which such payment or loss was made by reference to
the ratio of (i) such Non-Paying Guarantors Maximum Liability as of such date (without giving
effect to any right to receive, or obligation to make, any contribution hereunder) or, if such
Non-Paying Guarantors Maximum Liability has not been determined, the aggregate amount of all
monies received by such Non-Paying Guarantor from the Borrower after the date hereof (whether by
loan, capital infusion or by other means) to (ii) the aggregate Maximum Liability of all Guarantors
hereunder (including such Paying Guarantor) as of such date (without giving effect to any right to
receive, or obligation to make, any contribution hereunder), or to the extent that a Maximum
Liability has not been determined for any Guarantor, the aggregate amount of all monies received by
such Guarantors from the Borrower after the date hereof (whether by loan, capital infusion or by
other means). Nothing in this provision shall affect any Guarantors several liability for the
entire amount of the Guaranteed Obligations (up to such Guarantors Maximum Liability). Each of
the Guarantors covenants and agrees that its right to receive any contribution under this Guaranty
from a Non-Paying Guarantor shall be subordinate and junior in right of payment to the payment in
full in cash of the Guaranteed Obligations. This provision is for the benefit of the Agent, the
Issuing Bank, the Lenders and the Guarantors and may be enforced by any one, or more, or all of
them in accordance with the terms hereof.
Third Amended and Restated Credit Agreement
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SECTION 11.12
Lending Installations
.
The Guaranteed Obligations may be booked at any
office, branch, subsidiary or Affiliate of Lenders. All terms of this Guaranty apply to and may be
enforced by or on behalf of any office, branch, subsidiary or Affiliate of Lenders.
SECTION 11.13
Liability Cumulative
.
The liability of each Loan Party as a Guarantor
under this
Article XI
is in addition to and shall be cumulative with all liabilities of
each Loan Party to the Agent, the Issuing Bank and the Lenders under this Agreement and the other
Loan Documents to which such Loan Party is a party or in respect of any obligations of liabilities
of the other Loan Parties, without any limitation as to amount (except as set forth in
Section
11.10
hereof), unless the instrument or agreement evidencing or creating such other liability
specifically provides to the contrary.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01
Amendments
.
No amendment or waiver of any provision of this Agreement,
any Note or any other Loan Document, nor consent to any departure by the Borrower herefrom or
therefrom, shall in any event be effective unless the same shall be in writing and signed by the
Borrower and any Loan Party, as to amendments, and by the Requisite Lenders in all cases, and then,
in any case, such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given provided, no such amendment shall be effective unless signed by
(a) all of the Lenders if it attempts to: (i) change the definition of
Commitment
,
Designated Payment Date
,
Margin
,
Maturity Date
or
Requisite
Lenders
,; (ii) increase the amount or alter the terms of the Commitment of any Lender or
subject any Lender to additional obligations; (iii) modify this
Section 12.01;
(iv) waive
any Default under
Section 9.01(a)
; (v) in any manner change the amount of, or any date
fixed for, any payment of principal or interest on the Notes or any Fee or the reimbursement
obligations of the Borrower under any Letter of Credit; (vi) modify or waive the mandatory and
voluntary prepayment requirements set forth in
Section 2.06
and
Section 2.07
hereof
or the allocation of such prepayments to the Lenders; (vii) except as expressly permitted hereby,
release any collateral pledged as security for the Obligations or release any Guarantor from its
obligations under the Guaranty; or (viii) modify
Section 2.09
and (b) Lenders holding more
than 50% of the Total Revolving Credit Commitment and Loans thereunder if it attempts to affect any
conditions to funding obligations set forth in
Section 5.02
in a manner adverse to the
Revolving Credit Lenders. Notwithstanding anything to the contrary in the foregoing, no consent
shall be required in connection with a Senior Facilities Reallocation.
SECTION 12.02
Notices
.
Except with respect to telephone notifications specifically
permitted pursuant to
Article II
all notices, consents, requests, approvals, demands and
other communications provided for herein shall be in writing (including telecopy communications)
and mailed, telecopied, sent by overnight courier or delivered:
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(a)
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If to any Loan Party:
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Cardtronics, Inc.
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3110 Hayes, Suite 300
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Third Amended and Restated Credit Agreement
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Houston, Texas 77082
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Telecopy No: (281) 892-0088
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Attention: J. Chris Brewster, Chief Financial
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Officer
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with copies to:
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Vinson & Elkins LLP
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1001 Fannin, Suite 2300
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Houston, Texas 77002
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Telecopy No.: (713) 615-5929
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Attention: Robert R. Rabalais, Esq.
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and to:
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The CapStreet Group, LLC
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600 Travis Street, Suite 6110
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Houston, Texas 77002
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Telecopy No.: (713) 332-2701
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Attention: Frederick W. Brazelton
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and to:
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TA Associates, Inc.
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High Street Tower, Suite 2500
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125 High Street
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Boston, MA 02110
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Telecopy No. (617) 574-6728
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Attention: Mike Wilson
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(b)
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If to the Agent:
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BNP Paribas
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12201 Merit Drive, Suite 860
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Dallas, Texas 75251
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Telecopy No. (214) 969-0260
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Attention: Christopher S. Goodwin, Managing Director
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with copies to:
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BNP Paribas
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180 Montgomery Street, 4
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Floor
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San Francisco, California 94104
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Telecopy No. (415) 398-6811
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Attention: Susan Bowes
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and to:
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Bank of America, N.A.
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700 Louisiana, 7th floor
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Houston, Texas 77002
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Attention: William Griffin
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and to:
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Shearman & Sterling LLP
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599 Lexington Avenue
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New York, NY 10022
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Telecopy No. (212) 848-7179
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Attention: Ronald M. Bayer, Esq.
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(c)
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If to any Lender:
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To the address specified by such Lender (or the
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Agent on behalf of such Lender) to the Borrower.
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or, in the case of any party hereto, such other address or telecopy number as such party may
hereafter specify for such purpose by notice to the other parties.
All communications to the Agent shall, when mailed, telecopied or delivered, be effective when
mailed by certified mail, return receipt requested to such party at its address specified above, or
telecopied to any party to the telecopy number set forth above, or delivered personally to such
party at its address specified above;
provided
,
that communications to the Agent pursuant
to
Article II
shall not be effective until actually received by the Agent.
SECTION 12.03
No Waiver, Remedies
.
No failure on the part of any Lender or the Agent
to exercise, and no delay in exercising, any right hereunder, under any Note or under any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any
such right, or any abandonment or discontinuance of any steps to enforce such right, preclude any
other or further exercise thereof or the exercise of any other right. No notice to or written
demand on the Borrower in any case shall entitle the Borrower to any other or further notice or
demand in similar or other circumstances. The remedies herein are cumulative and not exclusive of
any other remedies provided by law, at equity or in any other agreement.
SECTION 12.04
Costs, Expenses and Taxes
.
The Borrower agrees to pay on demand: (a)
all reasonable out-of-pocket costs and expenses of the Agent in connection with the preparation,
execution and delivery of this Agreement, the Notes, the other Loan Documents and the other
documents to be delivered hereunder, including the reasonable fees and out-of-pocket expenses of
counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights
and responsibilities under this Agreement, the Notes and the other Loan Documents, and any
modification, supplement or waiver of any of the terms of this Agreement or any other Loan
Document, (b) all reasonable costs and expenses of any Lender, including reasonable legal fees and
expenses, in connection with the enforcement of or preservation of rights under this Agreement, the
Notes and the other Loan Documents and (c) reasonable costs and expenses incurred in connection
with third party professional services required by the Agent such as appraisers, environmental
consultants, accountants or similar Persons,
provided
that prior to any Event of Default
hereunder, the Agent will first obtain the consent of the Borrower to such expense, which consent
shall not be unreasonably withheld. Without prejudice to the survival of any other obligations of
the Borrower hereunder and under the Notes, the obligations of the Borrower under this
Section
12.04
shall survive the termination of this Agreement or the replacement of the Agent and each
assignment of the Notes.
SECTION 12.05
Indemnity
.
(a) The Borrower shall indemnify the Agent and each Lender and each Affiliate thereof
and their respective directors, officers, employees and agents
(other than with respect to any claim by the Agent and/or any Lender or Affiliate, director,
Third Amended and Restated Credit Agreement
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owner, employee or agent thereof against the Agent or any Lender, or any Affiliate,
director, officer, employee or agent thereof)
(such indemnified Persons called the
Indemnitees
) from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages (including reasonable legal fees and expenses) to which any
of them may become subject, insofar as such losses, liabilities, claims or damages arise out
of or result from (i) this Agreement, the Notes or any other Loan Document or any actual or
proposed use by the Borrower of the proceeds of any extension of credit hereunder, (ii) any
investigation, litigation, claims, or demands under any Environmental Laws, or (iii) any
other proceeding (including any threatened investigation or proceeding) relating to the
foregoing clauses (i) and (ii), whether in each such case arising as a result of this
Agreement or any of the other Loan Documents or the transactions contemplated hereby, and
the Borrower shall reimburse such Indemnitees, upon written demand for any expenses
(including legal fees) reasonably incurred in connection with any such investigation or
proceeding; but excluding any such losses, liabilities, claims, lines or expenses incurred
by reason of the gross negligence or willful misconduct of the Indemnitees.
Without
limiting any provision of this Agreement, it is the express intention of the parties hereto
that each Indemnitee shall be indemnified and held harmless against all such losses,
liabilities, claims or damages arising out of or resulting from the sole ordinary or
contributory negligence of such Indemnitee, but not from the gross negligence or willful
misconduct of such Indemnitee.
Without prejudice to the survival of any other obligations
of the Borrower hereunder and under the other Loan Documents, the obligations of the
Borrower under this
Section 12.05
shall survive the termination of this Agreement
and the other Loan Documents and the payment of the Obligations or the assignment of the
Notes.
(b) Notwithstanding anything set forth herein to the contrary, the Borrower shall not,
in connection with any one legal proceeding or claim, or separate but related proceedings or
claims arising out of the same general allegations of circumstances, in which the interest
of the Indemnitees (in the reasonable judgment of such Indemnitees) does not differ in any
material respect, be liable to the Indemnities (or any of them) under any of the provisions
set forth herein for the fees or expenses of more than one separate firm of attorneys in
each jurisdiction in which legal action is being taken or may be taken at any time, which
firm shall be selected by the Agent (or, if the Agent fails to so select after notice from
the Indemnitees involved, such firm shall be selected by such Indemnitees), except for any
additional firms reasonably recommended by such firm in good faith for purposes of obtaining
special expertise in any area of law or for purposes of having local counsel in each court
in which such proceeding or proceedings are pending. In any litigation or other proceeding
in which the interests of the Borrower and any Indemnitee affected thereby are not adverse
(in the reasonable judgment of such Indemnitee) and with respect to which such Indemnitee
may seek indemnification or reimbursement from the Borrower hereunder, the Borrower shall be
entitled to participate (in conjunction with counsel for the Indemnitees), at the Borrowers
expense, in the defense of such litigation or proceeding with its own counsel. No
Indemnitee shall consent to entry of any judgment or enter into any settlement of any action
or proceeding that would give rise to any liability of the Borrower hereunder without the
prior written consent of the Borrower (which consent shall not be unreasonably withheld).
Third Amended and Restated Credit Agreement
89
SECTION 12.06
Right of Setoff
.
If any Event of Default shall have occurred and be
continuing, each Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits held and other obligations owing
by such Lender, or any branch, subsidiary or Affiliate of such Lender, to or for the credit or the
account of the Borrower against any and all the Obligations of the Borrower now or hereafter
existing under this Agreement and the other Loan Documents and other obligations of the Borrower
held by such Lender, irrespective of whether or not such Lender shall have made any demand under
this Agreement, its Note or the Obligations and although the Obligations may be unmatured. The
rights of each Lender under this
Section 12.06
are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
SECTION 12.07
Governing Law
.
This Agreement, all Notes, the other Loan Documents and
all other documents executed in connection herewith shall be deemed to be contracts and agreements
executed by the Borrower, the Guarantors, the Agent and each Lender under the laws of the State of
New York and of the United States of America and for all purposes shall be construed in accordance
with, and governed by, the laws of said state and of the United States of America. Without
limitation of the foregoing, nothing in this Agreement, or in the Notes or in any other Loan
Document shall be deemed to constitute a waiver of any rights which any Lender may have under
applicable federal legislation relating to the amount of interest which such Lender may contact
for, take, receive or charge in respect of the Loan and the Loan Documents, including any right to
take, receive, reserve and charge interest at the rate allowed by the law of the state where any
Lender is located.
SECTION 12.08
Interest
.
It is the intention of the parties hereto that the Agent and each Lender shall conform
strictly to usury laws applicable to it, if any. Notwithstanding anything to the contrary set
forth herein, in any other Loan Document or in any other document or instrument, no provision of
any of the Loan Documents or any other instrument or document furnished pursuant hereto or in
connection herewith is intended or shall be construed to require the payment or permit the
collection of interest in excess of the maximum non-usurious rate permitted by applicable law.
Each provision in this Agreement and each other Loan Document, agreement or writing is expressly
limited so that in no event whatsoever shall the amount paid, or otherwise agreed to be paid, to
the Agent or any Lender, or charged, contracted for, reserved, taken or received by the Agent or
any Lender, for the use, forbearance or detention of the money to be loaned under this Agreement or
any Loan Document or otherwise (including any sums paid as required by any covenant or obligation
contained herein or in any other Loan Document which is for the use, forbearance or detention of
such money), exceed that amount of money which would cause the effective rate of interest to exceed
the Highest Lawful Rate, and all amounts owed under this Agreement and each other Loan Document
shall be held to be subject to reduction to the effect that such amounts so paid or agreed to be
paid, charged, contracted for, reserved, taken or received which are for the use, forbearance or
detention of money under this Agreement or such Loan Document shall in no event exceed that amount
of money which would cause the effective rate of interest to exceed the Highest Lawful Rate. If
the transactions with any Lender contemplated hereby would be usurious under applicable law then,
in that event, notwithstanding anything to the contrary in any Note payable to such Lender, this
Agreement, any other Loan Document or any other document or instrument, it is agreed that in the
event that the maturity of any Note payable to such Lender is accelerated or in the event of any
required or permitted prepayment, then such consideration that constitutes interest under law
applicable to
Third Amended and Restated Credit Agreement
90
such Lender may never include more than the maximum amount allowed by such applicable
law and excess interest, if any, to such Lender provided for in this Agreement or otherwise shall
be canceled automatically as of the date of such acceleration or prepayment and, if theretofore
paid, shall be credited by such Lender on the principal amount of the indebtedness owed to such
Lender by the Borrower and any excess refunded by such Lender to the Borrower. Anything in any
Note or any other Loan Document to the contrary notwithstanding, the Borrower shall not be required
to pay unearned interest on any Note and the Borrower shall not be required to pay interest on the
Obligations at a rate in excess of the Highest Lawful Rate, and if the effective rate of interest
which would otherwise be payable under such Note and such Loan Documents would exceed the Highest
Lawful Rate, or if the holder of such Note shall receive any unearned interest or shall receive
monies that are deemed to constitute interest which would increase the effective rate of interest
payable by the Borrower under such Note and the other Loan Documents to a rate in excess of the
Highest Lawful Rate, then (a) the amount of interest which would otherwise be payable by the
Borrower shall be reduced to the amount allowed under applicable law and (b) any unearned interest
paid by the Borrower or any interest paid by the Borrower in excess of the Highest Lawful Rate
shall in the first instance be credited on the principal of the Obligations of the Borrower (or if
all such Obligations shall have been paid in full refunded to the Borrower). It is further agreed
that, without limitation of the foregoing, all calculations of the rate of interest contracted for,
reserved, taken, charged or received by any Lender under the Notes, the Obligations and the other
Loan Documents or made for the purpose of determining whether such rate exceeds the Highest Lawful
Rate, shall be made, to the extent permitted by usury laws applicable to such Lender, by amortizing, prorating and spreading in equal parts during the
period of the full stated term of the Notes and this Agreement.
SECTION 12.09
Survival of Representations and Warranties
.
All representations and
warranties contained herein or made in writing by the Loan Parties in connection herewith and the
other Loan Documents shall survive the execution and delivery of this Agreement, the Notes and the
other Loan Documents, and the termination of the Total Commitment of the Lenders and will bind and
inure to the benefit of the respective successors and assigns of the parties hereto, whether so
expressed or not,
provided
,
that the Total Commitment of the Lenders shall not inure to the
benefit of any non-approved successor or assign of the Borrower.
SECTION 12.10
Successors and Assigns; Participations
.
(a) All covenants, promises and agreements by or on behalf of the Loan Parties or the
Lenders that are contained in this Agreement shall bind and inure to the benefit of their
respective permitted successors and assigns. The Loan Parties may not assign or offer any
of its rights or obligations hereunder without the consent of the Lenders.
(b) Any of the Lenders may assign to an Eligible Assignee or sell participations to any
Person (other than a natural person or the Borrower or any of the Borrowers Subsidiaries) a
portion of its rights and obligations under this Agreement and the other Loan Documents
(including a portion of its share of the Total Commitment, the Advances and the Obligations
of the Borrower owing to it and the Notes);
provided
,
that, in the case of
participations (i) such participant shall be entitled to the cost protection
Third Amended and Restated Credit Agreement
91
provisions contained in
Article II
and
Section 12.04
to the extent the Lender selling
the participation is so entitled, (ii) the Borrower shall continue to deal solely and
directly with the Agent in connection with its rights and obligations under this Agreement
and the other Loan Documents and (iii) each Lender shall retain the sole right and
responsibility to enforce the Obligations relating to the Loans including, without
limitation, the right to approve any amendment, modification or waiver of any provision of
this Agreement; but such Lender may grant a participant rights only to the extent such
amendments, modifications or waivers would effect such participant interests in any fees
payable hereunder (including, without limitation, the amount and the dates fixed for payment
of any such fees) or the amount of principal or the rate of interest payable on, or the
dates fixed for any payment of principal or of interest on, the Loans. Except with respect
to cost protections provided to a participant pursuant to this paragraph hereof, no
participant shall be a third party beneficiary of this Agreement nor shall it be entitled to
enforce any rights provided to the Lenders against the Borrower under this Agreement.
(c) A Lender may assign to one or more other Eligible Assignees all or a portion of its
interests, rights, and obligations under this Agreement and the other Loan Documents
(including all or a portion of its share of the Total Commitment and the same portion of the Loans and other obligations of the Borrower at the time owing to it and
the Note held by it); provided, however, that each such assignment (i) shall be in a minimum
principal amount of not less than $5,000,000 in the case of any Revolving Credit Commitment
or $1,000,000 in the case of any Term Loan Commitment, or such Lenders remaining Commitment
unless otherwise agreed to by Agent and, so long as no Default or Event of Default has
occurred or is continuing, the Borrower, (ii) shall not reduce any Lenders Commitment to an
amount less than $5,000,000 (other than to zero), and shall be of a constant, and not a
varying, percentage of the assigning Lenders Revolving Credit Commitment and Term Loan
Commitment, and the rights and obligations attendant to such under this Agreement, (iii) the
parties to each such assignment shall execute and deliver to the Agent, for its acceptance,
an Assignment and Acceptance in form and substance satisfactory to the Agent (an
Assignment and Acceptance
) substantially in the form of
Exhibit 12.10
hereto, and any Note subject to such assignment, (iv) the assignee, if it is not a Lender
immediately prior to such assignment, have delivered to the Agent an Administrative
Questionnaire, (v) so long as the Borrower is reasonably satisfied with the allocation of
proposed Commitments among all proposed Lenders in connection with the primary syndication
of the Commitments and Loans after the Effective Date, the consent of the Borrower shall not
be required in any Assignment and Acceptance entered into in connection with such primary
syndication, and (vi) no assignment shall be effective until receipt by the Agent of a
reasonable service fee in respect of said assignment equal to $2,500 from the assignee;
provided
,
however
, that if two or more concurrent assignments to members of
the same Assignee Group (which may be effected by a suballocation of an assigned amount
among members of such Assignee Group) or two or more concurrent assignments by members of
the same Assignee Group to a single Eligible Assignee (or to an Eligible Assignee and
members of its Assignee Group), the Assignment Fee will be $2,500 plus the amount set forth
below:
Third Amended and Restated Credit Agreement
92
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Transaction:
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Additional Assignment Fee:
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First four concurrent assignments or
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-0-
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suballocations to members of an Assignee Group
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(or from members of an Assignee Group, as
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applicable)
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Each additional concurrent assignment or
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$
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500
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suballocation to a member of such Assignee
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Group (or from a member of such Assignee Group,
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as applicable)
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Upon such execution, delivery, acceptance and recording in the Register as set forth in
Section 12.10(c)
, and Agents receipt of such assignees completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the service fee and
any written consent to such assignment required under this
Section 12.10(c)
, from
and after the later of the date upon which the foregoing conditions have been satisfied and
the effective date specified in each Assignment and Acceptance (which effective date shall be at least five (5) Business Days after the execution
thereof unless otherwise agreed to by the assigning Lender, the Eligible Assignee thereunder
and the Agent), (x) the Eligible Assignee thereunder shall be a party hereto and to the
other Loan Documents and to the extent provided in such Assignment and Acceptance, have the
rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the
assignor Lender thereunder shall to the extent provided in such Assignment and Acceptance,
be released from its obligations under this Agreement and the other Loan Documents (and, in
the case of an Assignment and Acceptance covering all of the remaining portion of an
assigning Lenders rights and obligations under this Agreement and the other Loan Documents,
such Lender shall cease to be a party hereto except, in the case of an Issuing Bank, with
respect to Letters of Credit issued by such Issuing Bank which are then outstanding).
(d) The Agent shall maintain at its office (i) a copy of each Assignment and Acceptance
delivered to it and (ii) a register (the
Register
) for the recordation of the
names and addresses (and taxpayer identification numbers, if any) of the Lenders and the
principal amount and types of Loans owing to each Lender pursuant to the terms hereof from
time to time. The entries in the Register shall be conclusive in the absence of manifest
error, and the Borrower, the Agent, the Swing Line Lender and the Lenders shall treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement and the Loan Documents. The Register shall be
available for inspection by the Borrower, the Agent, the Syndication Agent and the Swing
Line Lender at any reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a copy of (or copies of signed counterparts of) a duly
completed and fully executed Assignment and Acceptance, together with the existing Note or
Notes of the assigning Lender subject to such Assignment and Acceptance, the Agent shall (i)
accept such Assignment and Acceptance, (ii) record the information
Third Amended and Restated Credit Agreement
93
contained therein in the Register and (iii) give prompt notice thereof to the Borrower and the affected Lenders. Not
later than five (5) Business Days after the receipt of the notice from the Agent referred to
in clause (iii) above, the Borrower, at its own expense shall execute and deliver to the
Agent, in exchange for the Note or Notes of the assigning Lender surrendered to the Agent
pursuant to this paragraph, a new Note or Notes payable to the order of the assignee Lender
and its registered assigns in the principal amount of the Loans assigned to it. Any such
new Note shall be substantially in the form of
Exhibit 2.03
hereto. Canceled Notes
shall be promptly returned to the Borrower.
(f) Notwithstanding any other provision herein but subject to
Section 12.11
,
any Lender may, in connection with any assignment or participation or proposed assignment or
participation pursuant to this
Section 12.10(f)
disclose to the assignee or
participant or proposed assignee or participant, any information relating to the Borrower or
any Subsidiary furnished to such Lender by or on behalf of the Borrower or any Subsidiary.
(g) Anything in this
Section 12.10
to the contrary notwithstanding, any Lender
may at any time, without the consent of the Borrower or the Agent, assign and pledge all or any portion of its Commitments and the Loans owing to it to any Federal
Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the
Board and any Operating Circular issued by such Federal Reserve Bank. No such assignment
shall release the assigning Lender from its obligations hereunder.
(h) Anything contained herein to the contrary notwithstanding, if (i) any Lender as
defined in the Original Credit Agreement (an
Original Lender
) shall have assigned
its rights and obligations under the Original Credit Agreement and the Loan Documents as
defined in the Original Credit Agreement to Bank of America and/or BNP Paribas within five
(5) Business Days prior to the Execution Date, and (ii) at the time of such assignment, any
Derivative between the Borrower and such Original Lender and/or any Affiliate of such
Original Lender shall exist, then (A) the Obligations of the Borrower under such Derivative
(and the Obligations of each Guarantor under the Guaranty in respect of such Obligations)
shall continue in full force and effect, and such Obligations shall continue to be secured
by the Security Documents to the same extent as though such assignment had not occurred, and
(B) each Loan Party hereby grants to the Agent, for the benefit of such Original Lender and
any such Affiliate, on the terms and conditions set forth in the Security Documents, a
security interest in all Collateral as security for such Obligations owing by it in respect
of such Derivative.
SECTION 12.11
Confidentiality
.
Each Lender agrees to exercise its best efforts to
keep any information delivered or made available by the Borrower confidential from anyone other
than Persons employed or retained by such Lender who are or are expected to become engaged by such
Lender in evaluating, approving, structuring or administering the Loans and who are subject to this
confidentiality provision; provided that nothing herein shall prevent any Lender from disclosing
such information (a) to any other Lender, (b) pursuant to subpoena or upon the order of any court
or administrative agency, (c) upon the request or demand of any regulatory agency (including
self-regulatory agencies) or authority having jurisdiction over such Lender, (d) which has been
publicly disclosed, (e) to the extent reasonably required in
Third Amended and Restated Credit Agreement
94
connection with any litigation to which the Agent, any Lender, the Borrower or its respective Affiliates may be a party, (f) to the
extent reasonably required in connection with the exercise of any remedy hereunder, (g) to such
Lenders legal counsel and independent auditors (who are subject to this confidentiality provision
or similar confidentiality provision), (h) to any actual or proposed participant or assignee of all
or part of its rights hereunder which has agreed in writing to be bound by the provisions of this
Section 12.11
and (i) which is clearly not confidential. To the extent legally permitted,
each Lender will use its best reasonable efforts to promptly notify the Borrower of any information
that it is required or requested to deliver pursuant to
clause (b)
,
(c)
or
(e)
of this
Section 12.11
;
provided
that no notice shall be required for
any review of information by representatives of regulators at any Lenders places of business.
SECTION 12.12
Pro Rata Treatment
.
(a) Except as otherwise specifically permitted hereunder, each payment or prepayment of
principal, if permitted under this Agreement, and each payment of interest with respect to
an Advance shall be made pro rata among the Lenders on the basis of their respective
percentage participations in the Total Revolving Credit Commitment or the Term Loan
Commitment.
(b) Each Lender agrees that if, through the exercise of a right of bankers lien,
setoff or claim of any kind against the Borrower as a result of which the unpaid principal
portion of the Notes and the Obligations held by it shall be proportionately less than the
unpaid principal portion of the Notes and Obligations held by any other Lender, it shall be
deemed to have simultaneously purchased from such other Lender a participation in the Notes
and Obligations held by such other Lender, in the amount required to render such amounts
proportional;
provided
,
however
, that if any such purchase or purchases or
adjustments shall be made pursuant to this
Section 12.12(b)
and the payment giving
rise thereto shall thereafter be recovered, such purchase or purchases or adjustments shall
be rescinded to the extent of such recovery and the purchase price or prices or adjustments
restored without interest.
SECTION 12.13
Severability
.
Should any clause, sentence, paragraph or section of this
Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have
the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree
that the part or parts of this Agreement so held to be invalid, unenforceable or void will be
deemed to have been stricken herefrom and the remainder will have the same force and effectiveness
as if such part or parts had never be included herein.
SECTION 12.14
Execution in Counterparts
.
This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall constitute one and
the same agreement.
SECTION 12.15
Interpretation
.
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(a)
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In this Agreement, unless a clear contrary intention appears:
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(i)
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the singular number includes the plural number and vice versa;
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Third Amended and Restated Credit Agreement
95
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(ii)
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reference to any gender includes each other gender;
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(iii)
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the words herein, hereof, and hereunder and other words of similar
import refer to this Agreement as a whole and not to any particular Article, section
or other subdivision;
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(iv)
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reference to any Person includes such Persons successors and assigns but,
if applicable, only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any other
capacity or individually, provided that nothing in this clause is intended to
authorize any assignment not otherwise permitted by this Agreement;
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(v)
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except as expressly provided to the contrary herein, reference to any
agreement, document or instrument (including this Agreement) means such agreement,
document or instrument as amended, supplemented or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the terms hereof
and reference to any Note or other note includes any Note issued pursuant hereto in
extension or renewal thereof and in substitution or replacement therefor;
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(vi)
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unless the context indicates otherwise, reference to any Article, section,
Schedule or Exhibit means such Article or section hereof or such Schedule or Exhibit
hereto;
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(vii)
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the words including (and with correlative meaning include) means
including, without limiting the generality of any description preceding such term;
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(viii)
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with respect to the determination of any period of time except as
expressly provided to the contrary, the word from means from and including and
the word to means to but excluding; and
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(ix)
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reference to any law, rule or regulation means such as amended, codified
or reenacted, in whole or in part, and in effect from time to time.
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(b)
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The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
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(c)
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No provision of this Agreement shall be interpreted or construed against any Person
solely because that Person or its legal representative drafted such provision.
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SECTION 12.16
Limitation by Law
.
All rights, remedies and powers provided in this
Agreement and the other Loan Documents may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions of this Agreement
and the other Loan Documents are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that they will not render
this Agreement or any other Loan Document invalid, unenforceable, in whole or
Third Amended and Restated Credit Agreement
96
in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.
SECTION 12.17
Judgment
.
(a) If for the purposes of obtaining judgment in any court it is necessary to convert a
sum due hereunder in Dollars into Sterling, the parties hereto agree, to the fullest extent
that they may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase Dollars with Sterling at
the BNP Paribas principal office in New York at 3:00 p.m. (New York time) on the Business
Day preceding that on which final judgment is given.
(b) If for the purposes of obtaining judgment in any court it is necessary to convert a
sum due hereunder in Sterling into Dollars, the parties agree to the fullest extent that
they may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Agent could purchase Sterling with Dollars at
BNP Paribas principal office in New York at 3:00 p.m. (New York time) on the Business Day
preceding that on which final judgment is given.
(c) The obligation of the Borrower in respect of any sum due from it in any currency
(the
Primary Currency
) to any Lender or the Agent hereunder shall, notwithstanding
any judgment in any other currency, be discharged only to the extent that on the Business
Day following receipt by such Lender or the Agent (as the case may be), of any sum adjudged
to be so due in such other currency, such Lender or the Agent (as the case may be) may in
accordance with normal banking procedures purchase the applicable Primary Currency with such
other currency; if the amount of the applicable Primary Currency so purchased is less than
such sum due to such Lender or the Agent (as the case may be) in the applicable Primary
Currency, the Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Lender or the Agent (as the case may be) against such loss, and
if the amount of the applicable Primary Currency so purchased exceeds such sum due to any
Lender or the Agent (as the case may be) in the applicable Primary Currency, such Lender or
the Agent (as the case may be) agrees to remit to the Borrower such excess.
SECTION 12.18
Substitution of Currency
. If a change in Sterling occurs pursuant to
any applicable law, rule or regulation of any governmental, monetary or multi-national authority,
this Agreement (including, without limitation, the definitions of LIBOR Rate) will be amended to
the extent determined by the Agent (acting reasonably and in consultation with the Borrower) to be
necessary to reflect the change in currency and to put the Lenders and the Borrower in the same
position, so far as possible, that they would have been in if no change in Sterling had occurred.
SECTION 12.19
Submission to Jurisdiction
.
(a)
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK IN THE
Third Amended and Restated Credit Agreement
97
BOROUGH OF MANHATTAN, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, THE LOAN PARTIES HEREBY IRREVOCABLY ACCEPT IN RESPECT OF
THEIR PROPERTY, UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS WITH RESPECT TO
ANY SUCH ACTION OR PROCEEDING. THE LOAN PARTIES FURTHER IRREVOCABLY CONSENT TO THE SERVICE
OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE
MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL POSTAGE PREPAID), TO IT AT ITS
ADDRESS PROVIDED IN
SECTION 12.02
, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION.
(b)
TO THE MAXIMUM EXTENT PERMITTED BY LAW, EACH OF THE LOAN PARTIES HEREBY IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT
IN THE COURTS REFERRED TO IN THE FIRST SENTENCE OF CLAUSE (a) ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
SECTION 12.20
Waiver of Jury Trial
.
EACH OF THE LOAN PARTIES, THE AGENT, THE ISSUING
BANK AND EACH LENDER HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR UNDER
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED
IN CONNECTION HEREWITH OR ARISING FROM OR RELATING TO ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT, AND AGREES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 12.21
Final Agreement of the Parties
. THIS AGREEMENT (INCLUDING THE SCHEDULES
AND EXHIBITS HERETO), THE NOTES AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO WRITTEN OR ORAL AGREEMENTS BETWEEN THE PARTIES.
Third Amended and Restated Credit Agreement
98
SECTION 12.22
USA PATRIOT Act
. Each Lender and the Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the
Act
),
it is required to obtain, verify and record information that identifies each Loan Party, which
information includes the name and address of each Loan Party and other information that will allow
such Lender or the Agent, as applicable, to identify each Loan Party in accordance with the Act.
SECTION 12.23
Amendment and Restatement
.
This Agreement and the Notes are given in
amendment, consolidation, restatement, renewal and extension (but not in novation, extinguishment
or satisfaction) of the Original Credit Agreement and the promissory notes issued in connection
therewith. All Liens securing payment of the obligations under the Original Agreement and such
promissory notes are hereby collectively renewed, extended, rearranged, ratified and brought
forward as security for the payment and performance of the Obligations. With respect to matters
relating to the period prior to the date hereof, all of the provisions of the Original Credit
Agreement and the promissory notes, security agreements and other documents, instruments or
agreements executed in connection therewith are hereby ratified and confirmed and shall remain in
force and effect.
[Remainder of Page Intentionally Blank; Signature Page Follows]
Third Amended and Restated Credit Agreement
99
IN WITNESS WHEREOF,
the Borrower, the other Loan Parties, the Agent, and the Lenders have
caused this Agreement to be duly executed by their respective authorized officers as of the day and
year first above written.
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BORROWER
:
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CARDTRONICS, INC.
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By:
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/s/ J. Chris Brewster
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J. Chris Brewster
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Chief Financial Officer
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LOAN PARTIES
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CARDTRONICS, LP
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By:
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CARDTRONICS GP, INC.,
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its general partner
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By:
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/s/ J. Chris Brewster
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J. Chris Brewster
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Chief Financial Officer
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CARDTRONICS GP, INC.
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By:
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/s/ J. Chris Brewster
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J. Chris Brewster
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Chief Financial Officer
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Third Amended and Restated Credit Agreement
100
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CARDTRONICS LP, INC.
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By:
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/s/ Peter J. Winnington
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Peter J. Winnington
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President
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AGENT
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BNP PARIBAS, as Agent
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By:
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/s/ Sean Davenport
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Name: Sean Davenport
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Title: Director
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By:
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/s/ Mathew R. Wyatt
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Name: Mathew R. Wyatt
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Title: Vice President
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Third Amended and Restated Credit Agreement
101
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LENDERS
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BNP PARIBAS, as Lender
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By:
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/s/ Sean Davenport
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Name: Sean Davenport
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Title: Director
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By:
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/s/ Mathew R. Wyatt
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Name: Mathew R. Wyatt
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Title: Vice President
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Percentage of Total
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Facility
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Commitment
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Commitment
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Revolving Credit Commitment
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$50,000,000
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50%
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Term Loan Commitment
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$62,500,000
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50%
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Third Amended and Restated Credit Agreement
102
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BANK OF AMERICA, N.A.
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By:
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/s/ David A. Batson
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Name: David A. Batson
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Title: Vice President
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Percentage of Total
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Facility
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Commitment
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Commitment
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Revolving Credit Commitment
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$
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50,000,000
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50
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%
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Term Loan Commitment
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$
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62,500,000
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50
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%
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Third Amended and Restated Credit Agreement
103
THIRD AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT
Dated as of May 17, 2005
among
CARDTRONICS, INC.
as the Borrower,
The Guarantors Parties Hereto,
BNP PARIBAS,
as Agent, Swing Line Lender and
an Issuing Bank,
The Other Lenders Parties Hereto,
and
BANK OF AMERICA, N.A.,
as Syndication Agent
BNP PARIBAS SECURITIES CORP. and BANC OF AMERICA SECURITIES LLC
as Joint Lead Arrangers and Joint Bookrunning Managers
Third Amended and Restated Credit Agreement
104
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS; ACCOUNTING TERMS
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2
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SECTION 1.01
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Definitions
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2
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SECTION 1.02
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Loss of Advances
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20
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SECTION 1.03
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Accounting Terms
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20
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ARTICLE II THE LOANS
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21
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SECTION 2.01
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The Revolving Credit, Swing Line and Term Loans
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21
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SECTION 2.02
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Notice of Advance
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23
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SECTION 2.03
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The Notes
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24
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SECTION 2.04
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Disbursement of Funds
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25
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SECTION 2.05
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Conversions and Continuances
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26
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SECTION 2.06
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Mandatory Repayments
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27
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SECTION 2.07
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Voluntary Prepayments
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30
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SECTION 2.08
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Method and Place of Payments
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30
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SECTION 2.09
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Pro Rata Advances/Payments
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32
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SECTION 2.10
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Interest
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32
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SECTION 2.11
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Interest Periods
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33
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SECTION 2.12
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Interest Rate Not Ascertainable
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34
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SECTION 2.13
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Change in Legality
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34
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SECTION 2.14
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Increased Costs, Taxes or Capital Adequacy Requirements
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35
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SECTION 2.15
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LIBOR Advance Prepayment and Default Penalties
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36
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SECTION 2.16
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Taxes
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37
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SECTION 2.17
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Replacement Lenders
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38
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ARTICLE III LETTERS OF CREDIT
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39
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SECTION 3.01
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Letters of Credit
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39
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SECTION 3.02
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Letter of Credit Requests
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39
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SECTION 3.03
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Letter of Credit Participations
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40
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SECTION 3.04
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Increased Costs
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42
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SECTION 3.05
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Conflict between Applications and Agreement
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42
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ARTICLE IV FEES; COMMITMENTS
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43
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SECTION 4.01
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Fees
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43
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SECTION 4.02
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Reduction of Total Commitment
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43
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SECTION 4.03
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Reallocation of Commitments
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44
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ARTICLE V CONDITIONS PRECEDENT
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44
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SECTION 5.01
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Conditions Precedent to the Initial Advance
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44
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SECTION 5.02
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Conditions Precedent to All Credit Events
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47
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SECTION 5.03
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Delivery of Documents
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48
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SECTION 5.04
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Permitted Acquisition Advances
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48
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Third Amended and Restated Credit Agreement
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Page
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ARTICLE VI REPRESENTATIONS AND WARRANTEES
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50
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SECTION 6.01
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Organization and Qualification
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50
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SECTION 6.02
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Authorization and Validity
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51
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SECTION 6.03
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Governmental Consents
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51
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SECTION 6.04
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Conflicting or Adverse Agreements or Ratifications
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51
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SECTION 6.05
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Title to Assets; Licenses and Permits
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51
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SECTION 6.06
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Litigation
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52
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SECTION 6.07
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Financial Statements
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52
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SECTION 6.08
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No Defaults
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52
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SECTION 6.09
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Investment Company Act
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53
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SECTION 6.10
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Utility Regulation
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53
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SECTION 6.11
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ERISA
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53
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SECTION 6.12
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Environmental Matters
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54
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SECTION 6.13
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Purpose of Loans
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54
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SECTION 6.14
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Subsidiaries
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55
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SECTION 6.15
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Solvency
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55
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SECTION 6.16
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Accuracy of Information
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55
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SECTION 6.17
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Insurance
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55
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SECTION 6.18
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Indebtedness and Contingent Liabilities
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56
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SECTION 6.19
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Compliance with Laws
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56
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SECTION 6.20
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Security Interests
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56
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SECTION 6.21
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Material Contracts
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56
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SECTION 6.22
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Taxes
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56
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SECTION 6.23
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Intellectual Property; Licenses, Etc
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57
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ARTICLE VII AFFIRMATIVE COVENANTS
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57
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SECTION 7.01
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Information Covenants
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57
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SECTION 7.02
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Books, Records and Inspections
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60
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SECTION 7.03
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Insurance and Maintenance of Properties
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60
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SECTION 7.04
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Payment of Taxes
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60
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SECTION 7.05
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Corporate Existence
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61
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SECTION 7.06
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Compliance with Statutes
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61
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SECTION 7.07
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ERISA
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61
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SECTION 7.08
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Utility Regulation
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61
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SECTION 7.09
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Subsidiaries
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61
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SECTION 7.10
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Material Contracts
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62
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SECTION 7.11
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Interest Rate Protection
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62
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ARTICLE VIII NEGATIVE COVENANTS
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62
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SECTION 8.01
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Change in Business
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62
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SECTION 8.02
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Consolidation, Merger or Sale of Assets
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62
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SECTION 8.03
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Indebtedness
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64
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SECTION 8.04
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Liens
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66
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SECTION 8.05
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Investments
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67
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SECTION 8.06
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Guaranties
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68
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SECTION 8.07
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Restricted Payments
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68
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SECTION 8.08
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Change in Accounting
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69
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Third Amended and Restated Credit Agreement
ii
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Page
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SECTION 8.09
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Prepayment of Other Indebtedness and Seller Notes
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69
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SECTION 8.10
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Transactions with Affiliates
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69
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SECTION 8.11
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Material Contracts and Seller Notes
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70
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SECTION 8.12
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Financial Ratios
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70
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SECTION 8.13
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Capital Expenditures
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72
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SECTION 8.14
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Fiscal Year
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73
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SECTION 8.15
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Sale/Leaseback Transactions
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73
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SECTION 8.16
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Assets and Business Operations
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73
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SECTION 8.17
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Modification of Second Lien Loan Documents
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73
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ARTICLE IX EVENTS OF DEFAULT AND REMEDIES
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73
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SECTION 9.01
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Events of Default
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74
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SECTION 9.02
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Primary Remedies
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76
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SECTION 9.03
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Other Remedies
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76
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SECTION 9.04
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Application of Proceeds
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77
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ARTICLE X THE AGENT
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77
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SECTION 10.01
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Authorization and Action
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77
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SECTION 10.02
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Agents Reliance
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77
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SECTION 10.03
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Agent and Affiliates
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78
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SECTION 10.04
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Lender Credit Decision
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79
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SECTION 10.05
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Agents Indemnity
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79
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SECTION 10.06
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Successor Agent
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80
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SECTION 10.07
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Notice of Default
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80
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SECTION 10.08
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Release of Collateral and Guarantors
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80
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SECTION 10.09
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Intercreditor Agreement
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80
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ARTICLE XI GUARANTY
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81
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SECTION 11.01
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Guaranty
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81
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SECTION 11.02
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Guaranty of Payment
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81
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SECTION 11.03
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No Discharge or Diminishment of Guaranty
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81
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SECTION 11.04
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Defenses Waived
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83
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SECTION 11.05
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Subordination; Subrogation
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83
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SECTION 11.06
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Reinstatement; Stay of Acceleration
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84
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SECTION 11.07
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Information
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84
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SECTION 11.08
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Termination
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84
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SECTION 11.09
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Taxes
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84
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SECTION 11.10
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Severability and Limitation on Liability
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85
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SECTION 11.11
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Contribution
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85
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SECTION 11.12
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Lending Installations
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86
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SECTION 11.13
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Liability Cumulative
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86
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ARTICLE XII MISCELLANEOUS
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86
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SECTION 12.01
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Amendments
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86
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SECTION 12.02
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Notices
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86
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SECTION 12.03
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No Waiver, Remedies
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88
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SECTION 12.04
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Costs, Expenses and Taxes
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88
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Third Amended and Restated Credit Agreement
iii
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Page
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SECTION 12.05
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Indemnity
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88
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SECTION 12.06
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Right of Setoff
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90
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SECTION 12.07
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Governing Law
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90
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SECTION 12.08
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Interest
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90
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SECTION 12.09
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Survival of Representations and Warranties
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91
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SECTION 12.10
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Successors and Assigns; Participations
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91
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SECTION 12.11
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Confidentiality
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94
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SECTION 12.12
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Pro Rata Treatment
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95
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SECTION 12.13
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Severability
|
|
|
95
|
|
|
|
SECTION 12.14
|
|
Execution in Counterparts
|
|
|
95
|
|
|
|
SECTION 12.15
|
|
Interpretation
|
|
|
95
|
|
|
|
SECTION 12.16
|
|
Limitation by Law
|
|
|
96
|
|
|
|
SECTION 12.17
|
|
Judgment
|
|
|
97
|
|
|
|
SECTION 12.18
|
|
Substitution of Currency
|
|
|
97
|
|
|
|
SECTION 12.19
|
|
Submission to Jurisdiction
|
|
|
97
|
|
|
|
SECTION 12.20
|
|
Waiver of Jury Trial
|
|
|
98
|
|
|
|
SECTION 12.21
|
|
Final Agreement of the Parties
|
|
|
98
|
|
|
|
SECTION 12.22
|
|
USA PATRIOT Act
|
|
|
99
|
|
|
|
SECTION 12.23
|
|
Amendment and Restatement
|
|
|
99
|
|
EXHIBITS
|
|
|
|
|
|
|
|
|
Exhibit 1.01A
|
|
|
|
Administrative Questionnaire
|
|
|
Exhibit 2.02
|
|
|
|
Notice of Advance
|
|
|
Exhibit 2.03(a)
|
|
|
|
Form of Revolving Credit Note
|
|
|
Exhibit 2.03(b)
|
|
|
|
Form of Swing Line Note
|
|
|
Exhibit 2.03(c)
|
|
|
|
Form of Term Note
|
|
|
Exhibit 3.02
|
|
|
|
Form of Credit Request
|
|
|
Exhibit 5.01(f)
|
|
|
|
Form of Intercreditor Agreement
|
|
|
Exhibit 12.10
|
|
|
|
Assignment and Acceptance Agreement
|
SCHEDULES
|
|
|
|
|
|
|
|
|
Schedule 6.04
|
|
|
|
Adverse Agreements
|
|
|
Schedule 6.06
|
|
|
|
Litigation
|
|
|
Schedule 6.12
|
|
|
|
Environmental Matters
|
|
|
Schedule 6.14
|
|
|
|
Subsidiaries
|
|
|
Schedule 6.18
|
|
|
|
Permitted Indebtedness
|
|
|
Schedule 7.03
|
|
|
|
Insurance
|
|
|
Schedule 8.04(a)
|
|
|
|
Liens
|
|
|
Schedule 8.05(b)
|
|
|
|
Investments
|
Third Amended and Restated Credit Agreement
iv